Before the Call: Ride, Sallie Mae, Ride

Many of us were probably first introduced to Sallie Mae, now known as SLM (NYSE: SLM), when we took out our first student loans. She was kind enough to finance our educations for a fee, and many of us have been in debt to her since. SLM is the largest student loan provider in the country, with $150 billion in loans under management and more than 10 million customers.

After earnings are released, we'll be able to wade through the data, but many people will be listening in to find out what's going on with the take-private deal that may be unraveling. The student loan company agreed to be acquired by private equity firm J.C. Flowers, with stakes also being assumed by Bank of America (NYSE: BAC) and JPMorgan (NYSE: JPM). Yet it could be that Flowers is getting cold feet before having to walk down the aisle and may be using the recent proposed Congressional legislation to call off the wedding.

Benefiting from this ennui is First Marblehead (NYSE: FMD), which processes student loans for banks and private lenders, and has had Bank of America and JPMorgan as long-time customers. Its stock hit some headwinds when the SLM-Flowers deal was first announced and speculation rose that it might lose a major source of funding.

Before the announcement, however, let's review what investors think about SLM as a long-term investment. To get the pulse of the community, I tap into Motley Fool CAPS where more than 60,000 investors have weighed in on 4,700 stocks, SLM among them. Here's what Fools have to say about the company.

Up or down?
Nearly 160 CAPS investors shared their opinion on SLM, with almost 90% believing there won't be any default in its performance. Equally impressive is that 40% of those investors rating SLM an outperform are considered All-Stars, meaning they consistently outperform their peers over time.

Among companies considered peers or rivals of SLM, the student loan provider finds itself decidedly in the middle of the class.

Credit Services	CAPS Rating
First Marblehead	*****
Wells Fargo (NYSE: WFC)	***
SLM	***
Bank of America	***
JPMorgan	***
Student Loan	**
Nelnet (NYSE: NNI)	**
MRU Holdings (Nasdaq: UNCL)	*

Wall St. vs. Main St.
Of the 11 analysts covering SLM, eight say to hold, undoubtedly awaiting the outcome of the acquisition deal. Three, though, have rated it a buy. Over on CAPS, the two analysts we track that are covering the company are equally divided between outperform and underperform.

Second-quarter earnings are expected to inch up a little more than 1% to $0.73 per share on a 14% increase in revenues to $988.6 million.

My take
The merger deal is the wild card here, and SLM's stock currently hangs in the balance. While it has recovered some since the initial sell-off, following news the deal might be in trouble, it still risks being weighed down until the merger either closes or is called off. If it's cemented or better terms are reached, the stock will once again climb toward the $60 deal price. Should the deal fall through, investors will likely see their shares slide back towards the pre-deal price of the mid-to-low $40s. On the bright side, SLM would receive a $900 million break-up fee from the takeover group if it were to bail out, which would offset a good bit of the fall towards the pre-bid price.

It doesn't make much sense to take a position in SLM right now, since there might be such limited upside left in the stock. Investors will only need to revisit this stock if the deal ultimately falls through.

Your pitch
Add your thoughts to those of the wise Fools above and explore the multitude of financial data that's been compiled on the company, just click here.

First Marblehead is a recommendation of Motley Fool Hidden Gems. Bank of America and JPMorgan are recommendations of  Motley Fool Income Investor. Try any of our market-beating newsletter products free for 30 days.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.