In spite of a government plan to do more direct education lending, the Student Loan Marketing Association is spending $55 million on a computer system to meet growing business requirements.

When fully operational in 1996, Washington, D.C.-based Sallie Mae said the new system using image processing technology would be one of the biggest ever installed by a private company for the electronic storage of forms, letters, and other paper documents.

"Implementation of this technology will revolutionize our entire loan-servicing operation to the benefit of our borrowers, their schools and lenders, and ultimately to our shareholders," said Robert D. Friedhoff, a Sallie Mae executive vice president.

Sorted by Hand

In 1992 alone, more than 24 million forms and letters were mailed to Sallie Mae by students, requesting such things as account information or payment deferments. Now these letters are sorted by hand and must be manually retrieved from files and microfiche.

The plan is for the computer system to handle the sorting and storing of these documents. When the letters and forms arrive, they will be scanned and their images stored on magnetic and optical disks. Customer service representatives will use Microsoft Corp. Windows-equipped personal computers to retrieve the document images.

Faster Response Foreseen

About 1,500 Sallie Mae employees will use the computer system in seven loan-servicing centers around the country, said Donald J. Coleman, a Sallie Mae vice president in Herndon, Va., who is leading the project.

Mr. Coleman said the document-image management system will make it possible for customer-service representatives to respond to inquiries faster than ever before, since they will be able to retrieve documents on their computers within seconds, rather than taking an hour or a couple of days to retrieve documents by hand.

The document-image system should also make it possible for Sallie Mae to service more loans without adding more staff, Mr. Coleman said. Depending on volume growth, the productivity improvements are expected to pay for the system in three to five years.

Sallie Mae officials expect lending volume to increase despite new legislation that calls for the government to directly fund 60% of all student loans by the 1998-99 school year, bypassing banks and Sallie Mae.

Four Million Accounts

Sallie Mae services four million borrower accounts, representing a fourth of all borrowers with loans backed by the Federal Family Education Loan Program.

Sallie Mae spokesman Ross Kleinman said that FFELP loan volume would grow over the next few years, despite the expansion of direct lending, because of growth in demand for student loans, and new legislation that makes more students eligible for FFELP-backed loans.

The document-image management system will be installed for Sallie Mae by Price Waterhouse. The software underlying the system will be supplied by Recognition International Inc., of Irving, Tex. Sun Microsystems Inc., will supply nearly 100 Unix computers that will act as network servers, and Bell Atlantic Corp. will maintain the system.

The loan servicing centers that will use the system are in Herndon; Wilkes-Barre, Pa.; Killeen, Tex.; Panama City, Fla.; Lawrence, Kan.; Waltham, Mass.; and Tampa, Fla.

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