Higher One Buys Services Business From Sallie Mae for $47M

by Categorized: Financial Services, Technology Date:

Higher One, the New Haven-based educational financial services firm, has acquired the Campus Solutions business of Sallie Mae in a $47.25 million deal that boosts the company’s offerings to schools and students.

The business from Sallie Mae, the student loan giant, includes e-commerce, bill payment systems, refund disbursement and administration of tuition payment plans, Higher One and Sallie Mae said in a joint release.

For Higher One, which ran afoul of regulators last year over fees and agreed to pay $11 million in restitution to students, the cash deal solidifies its standing as a dominant player in student financial services. The company is increasing its size and offerings at a time when investor confidence in the industry has been shaken by default rates, stricter federal regulations and other factors.

“Sallie Mae Campus Solutions has been a trusted business partner to institutions,” said Mark Volchek, CEO and co-founder of Higher One. “The Campus Solutions team is talented and possesses a profound knowledge of financial assistance and payment solutions. We are excited to increase the breadth of Higher One’s offerings and expect to continue to bring best practices for refund disbursement services, payment processing services, and data analytics now to more than 1,600 campuses and more than 13 million students nationwide.”

Higher One Holdings Inc. is a Connecticut success story that’s becoming a more established force in its industry. The firm was founded by Yale friends in 2000 with the idea of helping students receive and manage refunds from colleges, and helping colleges lower the cost of handing out the refunds by tying the money to a bank card that students could use for general purchases. The company branched out to a variety of technology-based services, including checking accounts.

Higher One came under criticism last year for charging multiple fees when students tried to make purchases with insufficient funds. After an FDIC investigation, it agreed last August to make restitution to 60,000 students and pay a $110,000 fine. Later in the year, the company offered an account with a flat monthly fee.

Higher One maintained it did not violate any laws or ethical standards, and in an interview last August, chairman and president Miles Lasater said the student charges at issue stemmed from practices in 2008 to 2010, which had already ended.

Higher One also reported first-quarter results Tuesday, with revenues of $57.4 million, slightly down from the same quarter a year earlier, and net income of $9.8 million, or 21 cents a diluted share, compared with $13.4 million, or 24 cents a share. Expenses were higher in several areas but Volchek said revenue sources were further diversified.

Shares have been trending downward since the start of 2012, when they traded at around $18. Shares closed at $9.87 Tuesday before the late-day announcement of the merger and earnings.

Sallie Mae is the nickname for SLM Corp., which was founded in 1972 as the Student Loan Marketing Association, federally chartered to administer government-backed student loans. The company became fully private in 2004 and issues private student loans, but also administers remaining federal loans under a program that is winding down. Direct federal loans to students have hurt profits at Sallie Mae, which is based in Newark, Del.

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3 thoughts on “Higher One Buys Services Business From Sallie Mae for $47M

  1. P. Alfieri

    This company continues with questionable ethical practices. I was recently mailed a card from them. It appears to only need to be activated and I can be in debt. I have no idea what the interest rate is or where the funds to pay the card come from, other than increasing my debt load.

  2. Lauren

    Hi, thanks for expressing your concern! If you received a card it means your college or university officially partnered with Higher One to disburse your financial aid refund dollars to you more efficiently. It is not a credit card, so it cannot put you into debt. The instructions that come along with the card explain that you can receive the financial aid refund owed to you via electronic transfer to your own bank account, via paper check, or you may open an optional checking account that would be linked to the card you received. The choice is yours. This process is similar to U.S. government programs that disburse dollars for tax refunds, Social Security, or Supplemental Security Income benefits through electronic payments.

  3. bruce

    Chris Hayes examined Sallie Mae this week and basically exposed how this now private firm is riding high on the backs of students. Interesting that educationally institutions have invested heavily in the fund and profit more when their student costs go higher since students need to borrow more, and there are just not alot of lenders around. Enter Senator Warren who has a bill proposing that the Federal Reserve offer loans to students at the same rate it offers money to large banking institutions. Wouldn’t that be neat. Wouldn’t that be fair and a great national investment. Bet that won’t happen since too many big time players will suffer.

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