Sallie Mae lays off 100+ in Delaware in restructuring
NEWARK — Still contending with uncertainty from the pandemic, Sallie Mae has laid off 105 employees in Delaware through company-wide restructuring to reduce costs and boost operating efficiencies as the student loan giant prepares for the next year.
Sallie Mae did not elaborate what positions were eliminated, but spokeswoman Ashley Boucher said that impacted employees were notified last month and were given 60 days of advance notice. Restructuring expenses of $24 million were recorded in the three to nine months that ended Sept. 30.
The layoffs represent 6% of Sallie Mae’s total workforce of its estimated 1,900 across the company. Those who were affected were granted enhanced benefits which include severance pay, annual bones and extended health benefits coverage through the end of the year.
Departing employees have the option to extend coverage for another 18 months, and Sallie Mae will continue to pay the company position for a period of time, based on sewerage benefits, Boucher said.
Roughly 83% of the restructuring costs — to the tune of $20 million — were attributed to severance pay and benefits. The remaining $4 million was related to other related costs, primarily legal and consulting fees.
Sallie Mae is also actively hiring in Delaware at this time, with nearly 70 openings available, Boucher said.
The cuts come after Sallie Mae reported a loss of 23 cent per share in the second quarter, due to a $243 million increase to the provision of credit losses to endure the pandemic. The consumer banker also sold off its Personal Loan portfolio, leading to a $43 million drop in provisions for credit losses. The sale coupled with strong credit and reserve performance led to earnings of 45 cents per stock share, or $169 million, for this quarter.
However, Sallie Mae’s net interest income of $365 million was down 10%, compared to Q3 FY 2019 to FY 2020 Private education loan originations at $1.9 billion were also down 16% compared to this point last year.
Economic and consumer trends seem to be slightly improving, but Sallie Mae officials expressed caution when weighing forecasts and uncertainty and how it may affect future unemployment rates of recent grads and therefore, repayment on loans.
During the third quarter of 2020, economic and consumer trends appeared to be slightly improving and progress was made on vaccine trials and possible treatments to mitigate the spread of the COVID-19 virus. However, the absence of actions by the U.S. government to pass further economic relief legislation and the threat of a “second-wave” of COVID-19 infections in the fourth quarter of 2020 led to continued uncertainty in the economy.
For the quarter ended Sept. 30, 2020, the company considered the current economic forecasts as well as how the significant uncertainty may affect future unemployment rates and the economy in estimating the company’s allowance for credit losses.
In the third quarter earning report, Sallie Mae CEO Jonathan Witter said that he was heartened to see the country and people face the challenges triggered by the pandemic, notably colleges and universities that adapt to meet student’s needs during this time.
The restructuring of the company, he noted, will also bring opportunities for organizational realignment and expense savings and will allow Sallie Mae to come out of the crisis stronger than when it entered it.
“As we look to 2021, we are further aligning our business to strategic imperatives that will improve focus, alignment, and accountability and ultimately, build a stronger Sallie Mae. That means remaining laser-focused on our core business – offering high quality, private student loans,” Witter said.
By Katie Tabeling