Agreement Reached on Sallie Mae

WASHINGTON — Management and fractious shareholders of Sallie Mae, both unable to muster sufficient shareholder support, agreed to compromise Tuesday in their battle over the future of the giant marketer of student loans.

By an act of Congress, Sallie Mae--now a government-sponsored enterprise with $47 billion in assets--is due to go fully private by next spring. The two sides have proposed competing business plans for the future company and have been negotiating on and off for the last 12 days.

Under the new agreement, originally proposed by the dissidents, shareholders will vote on whether Sallie Mae should be privatized. A second vote, on two competing slates of 15 directors, would essentially decide the direction the privatized company should take.

The dissidents’ slate of directors includes eight current Sallie Mae directors.

No date for the new vote was set because the two sides must first submit a revised registration statement to the Securities and Exchange Commission. Spokesmen said the process could take 40 days or so.

“It’s a fresh start,” said Sallie Mae spokesman Ross Kleinman, noting that the new accord invalidates recent hotly contested shareholder votes.

Paul Carey, a spokesman for the dissidents, said, “We’re very pleased. . . . [Shareholders will] get to decide whom they want to run the company after privatization.”

On May 15, after a shareholders’ meeting called by the company, the two sides disagreed on the number of shareholder votes they had captured for their competing plans, though neither claimed enough to win.

The dissidents want Sallie Mae, once privatized, to compete with banks by making loans directly to students and schools rather than buying government-guaranteed loans from banks as it does now.

Sallie Mae, officially called the Student Loan Marketing Assn., benefits now from its special status by borrowing at below-market interest rates because the government is expected to jump in if the company were unable to repay.