Powerhouse student loan provider Sallie Mae tells Fox News that as a direct result of President Obama's new student loan overhaul, it will have to start cutting jobs... and soon.
"This legislation will force Sallie Mae to reduce our 8,600 person workforce by 2,500," Conwey Casillas, Vice President of Sallie Mae Public Affairs, told Fox in a statement.
The President was at Northern Virginia Community College in Alexandria Tuesday to sign student loan changes into law. The new bill includes a provision for the government to begin directly lending to students. The loans will bypass financial institutions which have traditionally provided the loans and, Mr. Obama says, soaked up billions in subsidies.
"Now, it probably won't surprise you to learn that the big banks and financial institutions hired a army of lobbyists to protect the status quo," the President said. "In fact, Sallie Mae, America's biggest student lender, spent more than $3 million on lobbying last year alone."
Indeed, Sallie Mae has been outspoken on the plan, calling it a "government takeover" just last month.
"The student loan provisions buried in the health care legislation intentionally eliminate valuable default prevention services and private sector jobs at a time when our country can least afford to lose them," Casillas told Fox.
But the White House says the provisions will have the opposite effect on jobs, “The Department of Education’s contract for private sector loan servicing requires that the processing be done in the United States. As a result, we are already seeing thousands of loan servicing jobs that had been sent overseas return to this country,” White House Spokesman Tommy Vietor tells Fox.
Sallie Mae had been trying to garner support for an alternative to the Obama plan, which the company said was roundly rejected. "We are profoundly disappointed that a reform plan that would have achieved more savings for students was ignored and now thousands of student loan experts will unnecessarily lose their jobs."
The administration is confident that along with the increasing volume of federal loans will come an increase in jobs to service those loans. “While work at lending institutions will shift as a result of the legislation, the net domestic jobs impact will in all likelihood be positive,” Vietor says.
Mr. Obama says he's merely looking out for those in need, "I didn't stand with the banks and the financial industries in this fight. That's not why I came to Washington. And neither did any of the members of Congress who are here today. We stood with you. We stood with America's students. And together, we finally won that battle."
The President says the move will save billions; money which can be geared to supporting education programs, therefore indirectly creating new jobs.
But the student loan industry says a bipartisan alternative could have saved billions more by tackling the student loan default rate.
Sallie Mae does not know when jobs will start getting slashed, but, Casillas said, "The job loss will start soon."