Sallie Mae looking to extend funding sources

NEW YORK (Reuters) - Student lender SLM Corp (SLM.N) said on Tuesday it is looking to expand its funding sources to better cope with difficult market conditions.

Speaking at Lehman Brothers' financial services conference, Chief Executive Albert Lord said the lender's financing costs have risen in the corporate bond and asset-backed security markets and it is investigating forms of funding that may be cheaper.

The lender, better known as Sallie Mae, is looking at funding methods it has not used this year, including securitizing its private loans.

The securitization markets have largely been frozen as investors have shied away from the securities, which have seen large losses during the credit crunch.

Sallie Mae will also significantly increase its broker deposits next year, which will provide cheap funding with long durations, Lord said.

There had been concerns earlier in the year that the company might not be able to meet its lending commitments. Sallie Mae was given a boost in May, however, when the U.S. Education Department agreed to temporarily buy up federally backed student loans, allowing the lender to keep offering government-guaranteed loans.

Lord said, "we're hearing rumors" that this program may be extended.

Even with this support Lord warned conditions would remain difficult for the company next year.

He said Sallie Mae will be keeping its reserves against losses high and, although charge-offs for this year are a little below expectations, the company is beginning to see indications of payments on loans slowing.

"At the moment, dividends are not on the radar screen," he concluded.

(Reporting by Elinor Comlay; Editing by Steve Orlofsky)