A federal judge in New York has certified a class action against SLM Corporation, popularly known as “Sally Mae,” by persons who purchased stock in it.  As described by the Courthouse News blog, the stockholders claim that management’s disclosure of difficulties Sally Mae was having with its private loan portfolio was insufficient under the securities laws, notably that the company was making many more bad loans than what one could tell from its disclosure documents.

If the claims are true, they point to another dangerous instance of the capital markets being duped to keep rolling the stupendous growth in the volume of student loans. Also, if true, they illustrate who can be motivated to worsen the problem of large loans to people who cannot pay them back.

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