RESTON, Va. – Sallie Mae, reeling from the pending elimination of the federally guaranteed student loan program, yesterday announced it plans to eliminate 2,500 of its 8,000 workers as a result of the new law.
The largest provider of guaranteed loans has told 1,200 staffers in service centers in Killeen, Texas, and Panama City, Fla., they will lose their jobs by year end. The remaining cuts will follow in 2011.
As a result of the new law, which will eliminate the guaranteed Federal Family Education Loan Program and replace it with direct loans from the federal government, Sallie Mae will refocus on making private student loans, in competition with credit unions and banks.
Sallie Mae reported strong first quarter net income of a $240.1 million, after posting a loss in first quarter 2009, mostly because of a new stream of interest from its private loans. The company reported a 46%, or $178.1 million, increase in private loan interest, to $565.2 million for the first quarter of 2010. At the same time, interest earned on guaranteed loans declined by 17% or $59.4 million.
