Sallie Mae might have mislead and hurt investors by knowingly understating exposure to losses from subprime borrowers.

This is a securities fraud class action lawsuit against SLM Corporation, also known as Sallie Mae, and certain officers and directors. Investors relied on Sallie Mae's false and misleading statements and bought its securities at artifically inflated prices. Those false and misleading statements include:

1. Sallie Mae's loan loss provisions for its subprime borrowers attending non-traditional schools were inadequate.
2. Sallie Mae failed to engage in proper due diligence in originating student loans to subprime borrowers, particularly those attending non-traditional institutions.
3. Sallie Mae was not adequately reserving for uncollectible loans in its non-traditional portfolio in violation of generally accepted accounting principles, causing its financial results to be materially misstated.
4. Sallie Mae had far greater exposure to anticipated losses and defaults related to its non-traditional loan portfolio than it had previously disclosed.
4. Given the deterioration and the increased volatility in the subprime market and reductions in federal subsidies, Sallie Mae would be forced to tighten its lending standards on both its federal loans and private education loans which would have a direct material negative impact on its loan originations going forward.

Sallie Mae disclosed in an SEC filing that it would be cutting back on its core business of lending to students by being "more selective" in making students loans due to turmoil in the credit markets and a new federal law that slashed subsidies to the private companies that make government-backed student loans. On this news, Salle Mae's stock dropped $2.49 per share to close at $16.67 per share, a one-day decline of 15%.