New York, NY. ( TheStreet) -- Spin off or sell out?SLM Corp. ( SLM), better known as Sallie Mae, is apparently considering both. The student lender is reportedly mulling its strategic options with several media reports saying it's hired Goldman Sachs ( GS) to assist with the process earlier this week. Morningstar analyst Jim Sinegal tells TheStreet he thinks the more likely scenario for Sallie Mae is two or even three spin-offs than a full-blown merger, primarily because it's doubtful the company would be able to find an interested suitor. "It definitely makes sense to separate some of the legacy business from the businesses with the growth: the collection businesses, The private student lending business, and loan servicing," Sinegal says. He doesn't believe bidders would be lining up for the other businesses, such as the government-subsidized loan portfolio because it is essentially runoff. Sinegal notes that Citigroup Inc.'s ( C)recent attempt to sell off its 80% stake in Student Loan Corp. ( STU) was a bust. "They just couldn't find any bidders," he said. On Wednesday, The New York Post reported Sallie Mae could, sell or spin-off its student-loan servicing business and its $145 billion government-subsidized loan portfolio; it would then essentially become a traditional deposit-taking bank. Sallie Mae's private student loan business, which accounts for most of its income, made $219 million during the second quarter compared to $387 million in the same period a year earlier. So a spin-off of the private student loan business from the government student loan business would likely get a favorable reception from the markets. Overall, the company earned $338 million, or 63 cents a share, in the second quarter ended June 30, up from a year-ago loss of $123 million, or 32 cents a share. The student lender missed a key opportunity to be purchased by private equity firm J.C. Flowers & Co. in mid-2007 for almost $60 a share by playing hard ball with the bidder. "That was a big mistake," says Sinegal. "You could see the avalanche starting to build at that time." Since turning down Flowers, Sallie Mae has struggled as the securitization market essentially shut down with the onset of the financial crisis. It look another blow in March when President Obama signed the Federal Family Education Loan Program, which cut private lenders off from the federal student loan program. Sallie Mae competes with Bank of America ( BAC), Key Corp. ( KEY) and Student Loan Corp. Like many of its competitors it runs several businesses: a government-subsidized loan portfolio, private student lending, a collections business and a bank. It would take some doing for Sallie Mae to morph into a traditional deposit-taking bank anytime soon. Its Sallie Mae Bank affiliate is an industrial bank based in Utah with about $5 billion in deposits and $200 billion in total liabilities. The bank makes educational loans to students largely through interest rate CDs. "That sort of bank is typically at a disadvantage in picking up deposits," says Sinegal. "If they really want to grow their loan business they will have to expand it a lot it is a pretty big change to take a wholesale loan business and shift to a deposit business." Sallie Mae shares jumped in Wednesday's session following the media reports of Goldman's hiring. The stock rose as high as $12.10 at one point in the session, but closed at $11.53, up a little less than 3% for the day. Volume was 7.5 million, almost 40% above the issue's three-month trailing daily average. On Thursday, shares rose again, adding another 3% to finish at $11.86. The gains of the past two sessions have been enough to push the stock into positive territory for the year, putting it up 2.3% so far in 2010; although the shares are still down 15% from a 52-week high of $13.96 reached in late April. -- Written by Maria Woehr in New York.