2,500 Sallie Mae jobs to be cut thanks to ObamaCARE

drobamasteinObamaCARE was supposed to be a takeover only of the health care industry. But it also turned out to take over the student loan industry as well, which hardly anyone in the media even bothers to discuss. So today’s announcement from Sallie Mae fA that they will cut 2,500 jobs because of the takeover may come as a shocker to some. The AP surprisingly reported that the nation’s largest student lender 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, resulting in nearly a third of the company’s total work force of 8,000 losing their jobs.

The cuts result from changes made to the federal student loan program as part of the health care reform signed by President Obama last month.

The law strips the middleman role in student lending away from banks. It’s expected to save at least $60 billion in fees that went to banks to process government-backed student loans.

But it will also mean a drastic reshaping of Reston, Va.-based Sallie Mae, which wrote a record $7.7 billion in federal student loans in the first three months of the year.

“Ironically, one quarter before the government takes over loan originations, Sallie Mae broke its own (federal student loan) origination record,” Sallie Mae Chairman and CEO Albert L. Lord said in the company’s earnings announcement.

The law is “not good for the company and it’s certainly not good for the employees,” the CEO added during a conference call to discuss the results early Thursday. Losing federal student loans will result in a “draconian drop” in income from loan originations, Lord said.

Like other private lenders, Sallie Mae will still will make student loans that are not backed by the government. It wrote private education loans totaling $840 million during the first quarter, down from $1.5 billion a year ago. The reduction was due to tighter underwriting standards and increases in federal education programs.

Sallie Mae Chief Financial Officer John F. Remondi said during the conference call that there’s an “enormous increase” in federal lending and grants this year — he estimated the pool of funding available to students jumped $17 billion for the first half of the year alone.

“We strongly advocate that students take advantage of grants first, free money first, and federal loans second,” Remondi said. “And they are doing that appropriately, and as a result private credit demand is down.”

Sallie Mae is one of four companies that won contracts with the Education Department for servicing — or handling payments and collections — for some $550 billion in outstanding federally backed loans. The department said these companies will also service future loans.

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April 22, 2010 · Filed Under ObamaCARE


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