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Last Updated: Tuesday, 29 January 2008, 07:56 GMT
Sallie Mae drops takeover lawsuit
Sallie Mae is the largest student loan provider in the US
US student loan firm Sallie Mae has dropped its lawsuit against a private equity and banking consortium that walked away from taking it over.

Sallie Mae had been seeking a $900m (453m) cancellation fee from the JC Flowers and Bank of America-led group.

Instead, Sallie Mae said it had now secured a new $31bn financing deal from seven banks, including Bank of America.

Hit by rising loan defaults, last week Sallie Mae reported $1.6bn in losses for the last three months of 2007.

It said the losses included $575m to cover bad debt.

'Time to move on'

Analysts said Sallie Mae's lawsuit against the takeover consortium never stood much chance in light of a new law overhauling the US student loan market, and the squeeze in the credit markets since last summer.

Analyst Steven Davidoff of Wayne State University said Sallie May recognised "that it's time to move on".

"There's no sense being stuck in this deal, which has gone away and is never coming back," he said.

Sallie Mae is the largest provider of student loans in the US.

Created in 1972 as a government-backed firm to fund student loans, Sallie Mae began privatising its operations in 1997 and ended all ties with the federal government in 2004.

It manages $153bn in education loans for about 10 million students and parents.

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