updated 4/25/2007 12:40:21 PM ET 2007-04-25T16:40:21

The Securities and Exchange Commission is investigating trading in the stock of SLM Corp. in connection with a plan by the nation's largest student lender to be acquired and taken private in a $25 billion deal, the company has disclosed.

The SEC probe includes an examination of trades by some unnamed directors at SLM, or Sallie Mae, and the agency issued subpoenas earlier this month, the company said Tuesday in a regulatory filing.

Sallie Mae also reported Tuesday that its first-quarter profit shrank 24 percent as more students missed payments on loans. Sallie Mae earned $116 million, or 26 cents a share, in the January-March period, compared with $152 million, or 34 cents a share, a year ago.

It was previously known that the SEC was investigating sales of company stock by SLM chairman Albert L. Lord a few days before the Bush administration's 2008 budget proposal was made public on Feb. 5. The proposed budget contained cuts in student-loan subsidies that could crimp Sallie Mae's profits.

Lord sold $18.3 million of Sallie Mae stock on Feb. 1 and Feb. 2. After the budget proposal was announced three days later, the stock plummeted 9 percent.

A Senate and a House committee also have been examining Lord's stock sales.

The company said in Tuesday's filing that the SEC "is conducting an investigation into trading of SLM stock by certain directors of the company." The agency requested documents in that inquiry on Feb. 16 and issued subpoenas for documents and testimony by company officials on April 13, Sallie Mae said.

The SEC's other investigation touches on stock trading "relating to" Sallie Mae's April 16 announcement of the buyout deal, according to the filing. It said documents were requested from the company on April 18, but did not say what people were the focus of the inquiry.

SEC spokesman John Heine declined to comment Wednesday.

In the deal, which would be one of the largest private buyouts ever, Reston, Va.-based Sallie Mae agreed to be sold to private-equity firm J.C. Flowers & Co. and three other investors for $25 billion.

If company insiders used advance knowledge of the buyout deal to profit from the stock sales, that trading may have been illegal.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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