Every year the American taxpayers provide close to $9 billion in subsidies to banks in the student loan business, and guaranteed losses when former students were unable to pay.  Sounds like a great deal for the banks, not so much for taxpayers and students.

That’s why the Obama administration is looking to cut out the middleman and as a result cut out the legs of the financial institutions who have both provided access to college funding for millions of students but also have been accused of serious abuses in search of the golden fleece.

So with the proposed government takeover of the student loan business looming, 800 pound gorilla Sallie Mae needed to find a new profit gravy train and fast. And it has chosen, not surprisingly, retail banking.

Leveraging its excellent name recognition, Sallie’s first foray into the online banking business is a savings account with a 1.35 percent annual interest rate to go along with online certificates of deposit paying higher rates. According to their website, their High-Yield Savings Account boasts an Annual Percentage Yield (APY) that is five times the national average and charges no monthly fees. It’s even FDIC-insured to boot.

To sweeten the deal, Sallie has teamed up with the college savings site UPromise to boost the returns with a 10% match bonus on Upromise earnings if a customer links these two accounts within 90 days of opening a Sallie Mae High-Yield Savings Account with either set up of an Automatic Savings Plan with a monthly deposit of $25 or more, or an initial funding of $5,000 or more.

Salle Mae has had a banking charter for about five years, and they’re finally putting it to good (at least for them) use.