U.S. student lender Sallie Mae plans loan cuts

NEW YORK (Reuters) - Sallie Mae shares fell 13 percent on Friday to their lowest level in more than seven years after the largest U.S. student lender said it plans to make fewer loans and may face higher borrowing costs.

Shares of Sallie Mae closed down $2.49 at $16.67 on the New York Stock Exchange. They earlier fell to $16.35, their lowest level since October 2000.

The company, whose formal name is SLM Corp (SLM.N: Quote, Profile, Research), said in a Thursday regulatory filing it plans to be "more selective" in making government-backed and private loans, in the wake of federal legislation last year to reduce subsidies for student lenders.

It said the College Cost Reduction and Access Act of 2007 "could possibly eliminate the profitability of new FFELP (Federal Family Education Loan Program) loan originations, while increasing our risk sharing from our FFELP loan portfolio."

Sallie Mae, based in Reston, Virginia, also said it is trying to refinance a $30 billion asset-backed commercial paper facility, following the collapse of a $25 billion buyout by a consortium led by private equity firm J.C. Flowers & Co.

It said that the facility terminates on May 16, but that funding costs will increase "substantially" if it cannot refinance the facility by February 15.

Sallie Mae, nevertheless, said it expects "to partially offset declining loan volumes caused by our more selective lending policies with increased market share taken from participants exiting the industry."

Sallie Mae's market value is now about $6.8 billion. The Flowers-led buyout valued the company at $60 per share.

(Reporting by Jonathan Stempel; Editing by Leslie Gevirtz)