NEW YORK - Moody's Investors Service is reviewing debt of Sallie Mae (SLM.N), the largest U.S. student loan provider, for a possible ratings downgrade due to concerns about future earnings and cash flow, the rating firm said on Thursday.

Sallie Mae, the fifth most-sold stock by the top 30 hedge funds in the second quarter, had its Ba1 rating, the highest junk rating, placed on review for a possible cut.

Sallie Mae faces significant uncertainties related to the political and consumer lending environment for student lenders, Moody's said in a statement. These issues could challenge the company's liquidity and funding position as it nears large unsecured debt maturities in 2010 and particularly in 2011.

Reston, Virginia-based Sallie Mae manages about $188 billion in education loans and serves 10 million students and parents.

Moody's said cash flow generation is taking on greater importance in the lender's credit profile because the firm's unsecured debt balance exceeds its unencumbered earning assets.

Moody's cut Sallie Mae's ratings to junk on May 13, prompting the student loan provider to call the action premature.

This seems to us inappropriately speculative and very premature, Sallie Mae Chief Executive Albert Lord said in May. (Reporting by Walden Siew; Editing by Diane Craft)