Sallie Mae execs want to save jobs

WILKES-BARRE -- Sallie Mae executives Monday said they don’t necessarily oppose President Barack Obama’s plan for student loans, they just want to make changes the company’s CEO says would reduce profitability but save thousands of jobs.

Five company executives – including vice chairman and chief executive officer Al Lord, met with The Times Leader’s editorial board to explain their side of what is becoming a hot topic in Washington D.C. and in college financial aid offices.

Obama has proposed saving $94 billion over 10 years by issuing all federal college loans directly instead of using private lenders such as Sallie Mae. Lord’s company is pushing a counter-proposal that wouldn’t reduce its loan business as much.

Sallie Mae proposes allowing the private lenders to continue to market federal student loans – through the Department of Education rather than financing them through capital markets – and collect a fee from the government for each loan purchased.

Lord said that if Obama’s plan is adopted as is, it could mean significant cutbacks, or job losses, for the company and its 10,000 employees.

The company employs nearly 800 people at its payment processing center in Hanover Township, and Lord announced on April 6 the company was returning 2,000 overseas jobs to the U.S. – with 600 of them coming to the local operation.

Lord said Sallie Mae’s 35 years of experience in the industry should count. He said the company’s ability to help students avoid defaulting on their loans is 30 percent better than a direct loan program.

“Our default management is second to none,” Lord said. “We think our proposal enhances what President Obama has proposed.”

The $94 billion projected savings was estimated by the non-partisan Congressional Budget Office. CBO claims the government’s ability to finance loans at lower interest rates than private lenders will result in the significant savings.

Lord said Sallie Mae will show its plan will at least match CBO’s savings projection and, he said, it might exceed $94 billion. Lord said Sallie Mae is awaiting CBO’s analysis of the plan.

The Obama administration plans to use the money saved to increase Pell Grants, which help low-income families afford college.

Martha Holler, Sallie Mae spokeswoman, said the company would earn “significantly less” under either plan – Obama’s or Sallie Mae’s.

“Many expected Sallie Mae to fight the president’s proposal, but we didn’t,” Holler said. “Some in the industry are fighting the president -- Sallie Mae is not among them because we know that the goal is to find savings to increase financial aid for needy students.”

Holler said Sallie Mae has identified key elements to achieve those savings: using federal funding; having the government own the loans and own the interest income; and eliminating subsidies and compensating servicers on a fee-for-service basis.

Accompanying Lord and Holler to Wilkes-Barre were Judy Grassi, president of the Northeast region for Sallie Mae; Conwey Casillas, management director of public affairs; and Tom Adams, vice president of servicing at Sallie Mae’s Hanover Township facility.

Adams said 300 people will be hired by the end of the year and the full 600 new positions will be filled by the fall of 2010.

Most of the jobs will be entry-level positions that pay around $20,000 per years, Adams said, and about 10 percent will be professional/management positions that pay $50,000 to $60,000 per year.

The Hanover Township facility opened in 1987, Adams said, and the workforce is made up of 40 percent back-office processing people, 40 percent call center employees and 20 percent support positions. The facility’s annual budget is around $63.1 million – of that, $24.6 million is for salaries and $8.2 million for employee benefits, he said.

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Student loan co. concerned that president’s plan would hurt private lenders.

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