NEW YORK -(Dow Jones)- SLM Corp.'s (SLM) fourth-quarter earnings rose 45%, boosted by a big jump in interest income, and the company showed signs its private student-loan business is emerging from a prolonged slump.

The country's largest student lender, commonly known as Sallie Mae, lost a major revenue stream in July when the federal government barred private lenders from originating federally guaranteed student loans on the government's behalf. That change upended the industry, leaving Sallie Mae and other lenders to streamline operations in response to a dramatically smaller student-loan marketplace.

Sallie Mae was one of four recipients of a U.S. Department of Education loan-servicing contract expected to cushion some of the blow. On Wednesday, Sallie Mae said it serviced about 3.3 million accounts on behalf of the federal government in the fourth quarter, compared with 2.5 million in the prior period.

Net interest income from existing federal loans, the company's largest source of income alongside servicing and collection operations, rose 43% to $856.8 million excluding the provision for loan losses.

Meanwhile, Sallie Mae indicated it may have turned a corner in its private student-loan business, originating $413 million in loans, up 8.5% from the prior year. The company had faced slowing demand for its private student loans as the federal government offered more generous financial aid and students chose cheaper schools during the recession. Sallie Mae posted origination-volume declines of more than 40% in the first half of 2010 from the prior year, though losses moderated to a 6.5% decline in the third quarter.

As higher-risk loans to non-traditional students and students at non-traditional schools mature, Sallie Mae has boasted a stronger loan portfolio. Private-loan delinquencies declined to 10.6% in the fourth quarter from 12.1% a year earlier, while charge-offs fell to 4.8% from 5.1%.

Sallie Mae last week issued $2 billion in five-year unsecured debt, the first time it's tapped the market in nearly a year. That move has fueled already-intense speculation the company may reinstitute a dividend or repurchase shares. Chief Executive Albert Lord in November said Sallie Mae could start paying a dividend in the "not too distant future."

In October, Sallie Mae said it planned to keep its $147 billion portfolio of federal student loans. Since then, the company closed its $28 billion purchase of government-backed student loans from Citigroup Inc.'s (C) Student Loan Corp.

Sallie Mae reported a fourth-quarter profit of $447 million, or 84 cents a share, compared with $309 million, or 52 cents a share, a year earlier. Core profit without unhedged floor income, which excludes accounting treatment for derivatives and securitizations and other items, rose to 74 cents a share from 41 cents a share. Analysts on average expected 71 cents a share, according to a survey by Thomson Reuters.

Sallie Mae shares were off 0.3% to $13.78 after hours.

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