Student Loan Growth Fuels M&A Growth

The $160 billion U.S. student lending industry is set for more consolidation as big banks and others are drawn to the sector's renewed growth and as cheap valuations throw up attractive targets.

Others already in the business, but with shrinking Federal Family Education Loan Program (FFELP) portfolios, may look to monetize assets and get out.

Although private student lending and fees from processing government loans to students are growing, lenders such as Sallie Mae (SLM.N), Nelnet (NNI.N) and First Marblehead Corp (FMD.N) still trade at relatively cheap levels.

"You could buy Sallie Mae at mid-to-high teens (dollars per share) and you're still getting it at an attractive price," said Keefe, Bruyette and Woods analyst Sameer Gokhale. "I have a $16 share price target and it's trading at about $12."

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