It didn't take long for the Pennsylvania Higher Education Assistance Agency to reject a $1 billion offer from rival SLM Corp., more commonly known as Sallie Mae.

Reston, Va.-based Sallie Mae, which manages more than $98 billion in student loans, wants to take over most of PHEAA's operations. The slimmed-down PHEAA could then use the $1 billion to fund new student aid programs, Sallie Mae contends.

PHEAA was created in 1964 by the Pennsylvania General Assembly and manages more than $45 billion in assets. In addition to originating, guaranteeing and servicing student loans, PHEAA administers the state's education grant program. It does all of this without taxpayer money and says it provides more than $100 million annually in aid programs and services normally paid for with government funds.

From PHEAA's point of view, the episode is a remake of Frank Capra's "It's A Wonderful Life." Sallie Mae reprises Lionel Barrymore's role as Mr. Potter, Bedford Falls' greedy banker, and PHEAA, like the Bailey Brothers Building and Loan run by Jimmy Stewart, is a selfless public servant protecting the little people from the clutches of evil. It doesn't help that Sallie Mae's offer comes as a similar organization, mortgage banker Fannie Mae, is embroiled in an accounting scandal.

"PHEAA is not now and never will be for sale, especially to a profit-driven corporation with a track record of overcharging borrowers, laying off workers and gobbling up any organization that stands between students and a quest for bigger profits," says state Rep. Elinor Z. Taylor, the Chester Republican who serves as chairman of PHEAA's board.

Taylor's staff got a little carried away preparing its "Top 10 reasons to hate Sallie Mae" list. The agency's 60-page defense identifies Sallie Mae Chief Executive Officer Albert L. Lord as the sixth-highest paid CEO in the world, a litany of layoffs following previous Sallie Mae acquisitions and Sallie Mae's habit of outsourcing jobs overseas. All by way of saying the $1 billion gift horse is a mule.

A look at the books reveals why PHEAA and others are concerned that Sallie Mae, already criticized for monopolizing the business, would be calling even more shots with PHEAA in its fold. Sallie Mae posted profits of $1.3 billion for the first nine months of 2004, $1.5 billion in 2003 and $792 million in 2002. PHEAA's profits are puny by comparison. The agency earned $68.3 million on revenue of $342.4 million in the fiscal year ended June 30, vs. earnings of $32.5 million and revenue of $269.3 million in the prior fiscal year.

Lord was paid $8.6 million last year -- enough to rank him as the sixth-highest paid CEO in the Pittsburgh region, based on the PG's analysis -- while PHEAA President and CEO Richard E. Willey receives a $260,078 salary. Throw in incentive pay for which he's eligible and Willey still makes less than $400,000 a year, says PHEAA spokesman Keith New.

Much of Sallie Mae's growth has come through acquisitions, such as the $770 million purchase of USA Group, an Indianapolis firm that at the time was the nation's largest student loan guarantee agency. The 2000 purchase gave Sallie Mae the ability to control the entire student loan process, from making the loan, guaranteeing it and collecting payments.

The USA Group deal and others like it contributed to the threefold increase in Sallie Mae's stock [Ticker: SLM] over the last five years, including more than a 40 percent advance this year. It closed Friday at $53. 39.

Some financial aid administrators and a few of PHEAA's counterparts in other states have rushed to the agency's defense. It seems Lord, a Penn State alum, is someone a lot of people love to hate.

"While the quick buck being dangled is substantial, I submit that it is not in the long-term interests of your state or our industry," Mark Spender, executive director of the Utah Higher Education Assistance Authority, wrote Willey.

Iowa Student Loan Liquidity Corp. President Steven McCullough says the $1 billion offer is "an attempt to take the much greater future earnings of PHEAA and divert them to its shareholders and away from Pennsylvania's students."

Selling out to Sallie Mae would have devastating effects on Pennsylvania student loan borrowers, says Susan Bogart, director of financial aid at Penn State's Dickinson School of Law. Helen Nunn, Susquehanna University's financial aid director, says Sallie Mae's practice of selling credit cards and other debt products to students "is the antithesis of what we hope to accomplish by promoting responsible borrowing."

Lord wrote Willey last week that the $1 billion could increase state student aid programs "very significantly for the foreseeable future." He also pledged to maintain PHEAA's work force at or above current levels and promised that employees "would enjoy the same generous package of benefits and stock options" Sallie Mae workers receive.

PHEAA still isn't budging. As far as the agency is concerned, its Dec. 27 rejection of the offer closes the matter. But "from Sallie Mae's standpoint, it's still an open issue," says Sallie Mae spokeswoman Martha Holler. The $1 billion Sallie Mae is offering "is hard to ignore," she adds.

The quick dismissal by PHEAA's 20-member board, which includes 16 state lawmakers, would have us believe Sallie Mae is as evil as PHEAA says it is -- and that PHEAA is as good as it says it is. If that's the case, what's the harm in allowing a little more public scrutiny before telling Lord what he can do with his $1 billion? After all, this isn't the movies -- it's Pennsylvania.