Student loan company Sallie Mae plans to move its overseas operations back to the United States, creating 2,000 domestic jobs, in what analysts called an attempt to curry favor with the Obama administration.
SLM Corp, as the company is legally known, said on Monday it plans to add staff over the next 18 months in call centers, information technology and operations support across the United States. A spokeswoman said the company will pull jobs from India, Mexico and the Philippines.
The move will cost about $35 million per year, Chief Executive Albert Lord said at a press conference attended by Rep. Paul Kanjorski and Sen. Robert Casey, both Democrats from Pennsylvania, where the new jobs will be located.
We have reversed our decision to move people offshore, Lord said at a press conference at the company's facility in Wilkes-Barre, Pennsylvania, which will gain 600 new jobs.
Analysts called the move a bid to build political capital in Washington as the Obama administration plots major changes to the student loan market.
The administration has proposed a 2010 budget that could hurt Sallie Mae's business by shifting all federal student loans into a program administered by the Department of Education.
Michael Taiano, analyst at Sandler O'Neill & Partners in New York, said of Sallie Mae's maneuver, Will it help them overturn Obama's budget proposal? I don't think so.
The company is likely hoping that moving jobs back to the United States will earn it goodwill from the administration, Taiano said, putting Sallie Mae in a better position when the details of the student loan program are worked out.
It probably doesn't hurt to build up political capital, and bringing jobs back to the U.S. certainly does that, he said.
Sallie Mae, the largest U.S. student loan company, employs more than 8,000 people in the United States. It has struggled during the credit crunch to finance the loans it makes to students.
We were at a point where we could not make a student loan at a profit, Lord said of late 2007 and early 2008, adding that Obama's education plan sparked the company's jobs reversal.
The president's budget is often portrayed as bad for our business, but I don't see it that way, he said.
He said the White House wants student loans administered, serviced and collected by the private sector, which bodes well for Sallie Mae.
The current loan system may need a few tweaks but it essentially works and will yield the budget savings the president wants, Lord said. If I didn't feel that was going to happen, we surely wouldn't be bringing 2,000 jobs back to this country.
The company reported a net loss of $216 million in the fourth quarter, in which it made $4.8 billion in student loans.
Last month, rating agency Standard & Poor's said Sallie Mae, with $33.9 billion of rated debt, was at risk for a cut to junk status from investment grade. Its shares have fallen 39 percent this year.
The shares were up 17 cents or 3.2 percent at $5.52 on the New York Stock Exchange on Monday afternoon, off an earlier high at $5.85.
(Reporting by Elinor Comlay, additional reporting by Jonathan Spicer; Editing by Derek Caney, John Wallace and Matthew Lewis)