- The Washington Times - Friday, September 1, 2000

Sallie Mae will lay off 1,700 employees, or 25 percent of its work force, including 200 employees in the Washington area, the Reston, Va.-based student-loan provider said yesterday.

The company said the cuts are the result of its $770 million purchase in June of USA Group Inc., an Indianapolis company that provides student-loan services on college campuses. Sallie Mae is the informal name for USA Education Inc., whose name was changed from SLM Holdings Inc. after the purchase.

It is the second round of layoffs this year for the company. In April, it laid off 300 employees, including 125 workers at its Reston headquarters.

Sallie Mae has offices nationwide, including in Dallas and Chicago.

The new round of cuts will take place over the next 15 months. Most of the 200 employees who will be laid off locally work for the company's information-technology department.

Joanna Acocella, a Sallie Mae spokeswoman, said the layoffs will help the company reduce "corporate redundancies" following its acquisition of USA Group.

"[The layoffs are] one small piece of an overall business-integration plan," Mrs. Acocella said.

Shares in Sallie Mae closed at $39.19 on the New York Stock Exchange yesterday, up 81 cents from Wednesday's close of $38.38.

The company buys student loans from banks and other lenders, relieving them of risk for defaults and protecting the loans from the volatility of the credit market.

The federal government founded Sallie Mae in 1973 and for years provided the company with protection from the cost of defaulted loans.

After the government began loaning money to college students directly in 1994, it forced Sallie Mae to go private, a process expected to be completed by 2008.

In recent years, the company has entered the insurance business and began originating student loans directly through its Nellie Mae Corp. subsidiary.

John Dean, a lawyer for the Consumer Bankers Association, a District of Colubmia-based trade group, said Sallie Mae remains competitive with the government, which has introduced a series of incentives in recent years to make its lending programs more appealing.

For example, the U.S. Education Department in August began offering lower interest rates and rebates to student borrowers who repay their loans on time.

Gary Gordon, a research analyst with Paine Webber Group Inc. in New York who follows the company, said Sallie Mae has started to reach out to colleges and universities, which have become more aggressive in linking students with financial-aid providers in recent years.

"The USA Group merger was a big help. They've done a lot of hard work to make themselves more appealing to the decision-makers at the schools," Mr. Gordon said.

Sallie Mae expects to take a one-time charge of $50 million in the third quarter, the result of costs associated with the USA Group purchase.

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