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Sallie Mae to cut 350 positions

January 19, 2008|From the Associated Press

WASHINGTON — A $25-billion collapsed buyout offer and higher borrowing costs have prompted Sallie Mae, the nation's largest student lender, to lay off about 3% of its workforce nationwide.

The embattled SLM Corp. said Friday that it would slash 350 jobs from a staff of 11,000 to help cut costs 20% by 2010.

"The tightening credit markets have made our costs higher," spokesman Tom Joyce said.

The company lost $344 million in its latest reported quarterly results and said additional layoffs were likely.

Sallie recently lowered its 2008 profit forecast more than 13%, blaming a credit market crunch that has driven up costs for borrowing the billions of dollars needed to finance student loans. The company also held a special sale of stock to raise $2.9 billion.

That pressure and a landmark student-loan law that took effect in October, cutting billions of dollars in federal subsidies for student lenders, "have forced us to take the unpleasant step of laying off staff," Joyce said.

The planned layoffs will affect the company's customer-service call centers in Fishers, Ind.; Wilkes-Barre, Pa.; and Killeen, Texas; as well as 14 of 697 employees at Sallie Mae's headquarters in Reston, Va. The layoffs were first reported Friday in the Washington Post.

Sallie Mae also said this month that it planned to cut back its core multibillion-dollar business of making student loans, both those backed by the federal government and higher-rate private loans.

Sallie Mae shares rose 32 cents to $18.85 on Friday. But they are a fraction of the $60-per-share buyout offer made last spring for the company by an investor group.

Sallie Mae failed late last year to revive interest from the investors, led by private equity firm J.C. Flowers & Co. and including Bank of America Corp. and JPMorgan Chase & Co. Both sides have filed lawsuits regarding the failed deal.

The investor group says it shouldn't have to pay a $900-million walkaway fee because of changes in economic or regulatory conditions that affected the company's value.

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