Sallie Mae's (NYSE:SLM) shares plunged $4.37 to $42.09 Monday after President George W. Bush proposed further cuts in federal payments to lenders for his fiscal 2008 budget.

The administration's proposal, which requires U.S. Congressional approval, would cut loan reimbusement rates, default repayment rates and other operations that subzidize banks that provide college student loans, beginning Oct. 1, the start of the federal government's fiscal year.

The cuts differ from the Congressional Democrats' proposal, which would impose smaller cuts.

Investment Category: A moderate-risk consumer financial stock, SLM's share price has suffered in recent months, based on the possibility of reduced subsidies for the student lending sector, including both changes in the student lender rate and loan insurance rate. Sallie Mae's shares have fallen from the $55.00-range to $42.00 in the last 7 months. Further, although the demand for students loans, like other consumer essentials, is likely to remain solid, SLM's margins may be pressured if the proposed cuts are passed by Congress and become law, hampering SLM's earnings growth, moving forward.