On a crisp November morning, hundreds of Sallie Mae employees gathered here in a scene reminiscent of a high-school pep rally. They filed into rows of folding chairs, wearing matching blue-and-white “Protect Indiana Jobs” T-shirts, as John Mellencamp’s rock ‘n’ roll played over the speakers. They cheered as an official of the student-loan company praised their dedication and told them how important they were to the local economy.
For two weeks, at grocery stores, nursing homes, and soccer games, employees of Sallie Mae’s loan-service and data center in Fishers had tried to persuade their neighbors to join them in signing a petition urging Congress to consider alternatives to the Obama administration’s plan to end bank-based student lending. The company official, Jon Kroehler, a senior vice president, told the crowd that one employee had handed around the petition in a hospital delivery room as his wife was giving birth.
As he finished reciting a few last facts about the company’s Fishers location (its $148-million payroll has the economic impact of 7,000 local jobs, he said), about 20 employees ran out from behind him, clapping and grinning and carrying stacks of petitions. Above, a banner dropped to reveal the total number of signatures: 81,437, greater than the population of Fishers.
“As my daughter would say, OMG,” Mr. Kroehler said, as the crowd before him cheered.
The U.S. House of Representatives has already voted to end bank-based student lending, approving a bill in September that would move all federal loans to the Education Department’s direct-loan program. The legislation, which largely mirrors President Obama’s plan, would use the estimated $87-billion in savings to increase student aid, provide grants to community colleges, and finance other college programs. But the Senate has yet to introduce its version of the legislation, and lenders are seizing on the delay.
Sallie Mae, the nation’s largest student lender, has lobbied Congress and put forward its own proposal for overhauling the federal student-loan system. That plan, too, would move all federal loans to direct lending, but it would continue to allow student-loan companies to originate loans before they were sold to the government. After the House vote didn’t go their way, company executives accelerated their use of another tactic, one based on the adage that all politics is local.
The student-loan giant began drumming up grass-roots opposition to the legislation in the towns where its largest facilities are located: Fishers and Muncie, Ind.; Lynn Haven, Fla.; and Wilkes-Barre, Pa., among others. Thousands of employees at those locations donned T-shirts with slogans protesting Congress’s move to end bank-based lending and solicited signatures on petitions.
If bank-based lending ends, Sallie Mae employees told their neighbors and friends, the company would face a major downsizing. Many of its 26 U.S. locations would probably close, putting hundreds of people in those towns out of work, employees were told. Sallie Mae’s argument against the legislation is a simple one and, with the national unemployment rate at its highest level in 26 years, perhaps a powerful one, too.
The question is whether the argument, and the 186,092 signatures gathered nationwide in the just-ended petition campaign, will be enough to change the outcome when the Senate takes up the measure, later this year or early next year. Sallie Mae officials say they hope that, in the meantime, some moderate Democrats, such as Sen. Evan Bayh, of Indiana, can be swayed to vote against the bill.
Job Fears in Fishers
“There’s Washington, and then there’s the rest of the country,” Albert L. Lord, Sallie Mae’s chief executive officer, told the crowd in Fishers. “This is the rest of the country.”
In Washington, Sallie Mae has spent $5.8-million in the past year and a half on lobbying. In Fishers, company executives criticized Congress and the administration as being out of touch with ordinary workers.
Fishers, just northeast of Indianapolis, is a fast-growing suburb of about 69,000 people that is dotted with SuperTargets and megachurches amid the large parking lots, strip malls, and young trees that mark new development. Overwhelmingly white and solidly middle-class, it was ranked 10th in Money magazine’s 2008 “Best Places to Live” survey, which lauded its high education level and low home prices. The county unemployment rate, which was 6.1 percent in September, is far below the national average of 10.2 percent but has almost doubled in the past year.
Sallie Mae’s facility here stretches for nearly a quarter-mile in an office park. Only about 100 loan originators, the jobs that are the most at risk if bank-based lending ends, work here. Far more of its 1,600 employees work in default prevention, calling customers who are behind on their payments, or in the data center, a windowless expanse of servers with data for Sallie Mae offices all over the country.
Still, that does not mean those jobs are safe. “If we have to do a downsizing, every job is going to be rated,” said Mary Eure, a senior vice president. “Every job is at stake.”
Brenda Marino, 42, found work as a systems analyst at Sallie Mae five months ago, after being laid off from a job she had kept for 19 years. Afraid she would be jobless again, she posted the Sallie Mae petition on Facebook every few days and kept a copy in her purse to pull out at every opportunity, eventually gathering 47 signatures.
“My daughter will need a student loan, and if she can’t get one, I’ll have to support her at home,” Ms. Marino says, echoing company executives who had cast doubt on whether a direct-loan program would be able to efficiently lend money to students who need it.
Barbara Foust, 57, a loan-reconciliation processor—she helps work out problems with loans—has worked at Sallie Mae for 18 years. Talking about the possibility of losing her job, she has tears in her eyes. Her husband has health problems that left him hospitalized for two months this year, and her 26-year-old son is unemployed. “I am the sole supporter of our income,” she says.
During the Fishers rally, Mr. Lord accused Congress of creating “enormous anxiety” regarding student loans among people like Ms. Foust and Ms. Marino as well as in colleges worried about switching loan systems.
He also dismissed Education Department officials’ arguments that little net job loss would result from the proposed changes. The department points to an analysis by the Council of Economic Advisers that said direct-loan servicing contracts, which Sallie Mae will still get if bank-based lending ends, would create new jobs to help offset job loss.
“Many of these jobs are likely to be at the very same banks and loan-servicing companies that will be affected by the elimination” of bank-based lending, Christina Romer, the council’s chair, wrote to Sen. Tom Harkin, a Democrat of Iowa and chairman of the Senate education committee.
Mr. Lord, however, was not buying it. “We don’t want just any old jobs,” he told the crowd. “We want our jobs.”
Forecasting Job Losses
Should bank-based lending end, Sallie Mae has been chosen as one of four companies to service federal loans under a contract with the Education Department. And Sallie Mae’s borrowers will still be repaying their existing loans, which will have to continue to be serviced for years, until they are all paid off.
A switch to direct lending would require a vast restructuring of the company, says Martha E.H. Holler, vice president for corporate communications. Sallie Mae would need to lay off about 30 percent of its 8,500 employees, she warns, and most of the company’s 26 U.S. facilities would close, consolidating operations at five or six remaining locations.
Some industry analysts, though, have cast doubt on how many jobs would actually be lost if the bank-based federal loan program is eliminated.
Tim Ranzetta, president of Student Lending Analytics, an independent research company, predicted in August that there would be a net loss of 4,750 jobs related to federal student loans over the next several years if direct lending prevails. In his analysis, he assumed that Sallie Mae would bring back to the United States 3,400 jobs that it has outsourced to other countries. He also projected that some jobs would be created by the pending legislation’s College Access and Completion Innovation Fund, which would give grants to states and programs that work to help more students attend and complete college.
Regardless of the exact figure, the threat of job losses has been potent. At the Sallie Mae facility in Lynn Haven, Fla., the 700 employees work almost exclusively in loan origination. “Obviously it’s a critical issue,” says Renee Mang, a senior vice president there.
A petition circulated around Lynn Haven got 23,000 signatures. In Wilkes-Barre, Pa., where Sallie Mae employs about 1,000 people, employees gathered more than 31,000 signatures.
Aiming at Moderate Democrats
The petition drive in Indiana is the biggest by far, in part because more than a quarter of Sallie Mae employees work in Fishers and Muncie. The petition’s appeals to fight the bill also found fertile political ground there.
Arguments against the policies of President Obama and the Democrats, and against a big federal government, play well in the solidly Republican county where Fishers is located. In 2008, Hamilton County residents gave John McCain, the Republican nominee for president, 60.8 percent of the vote.
Scott Faultless, president of the Fishers Town Council, is one of the petition’s most active supporters. In a speech at the rally, he cast the House bill as part of a series of “government takeovers,” linking it to the bailouts of the banking and auto industries and the proposed health-care overhaul.
“You can’t do everything from Washington,” he said. “Private industry has a place.”
Influencing the votes of moderate Democratic senators from Florida, Indiana, Pennsylvania, and Virginia could help to change the outcome of the bill, although the Democrats’ sizable majority in the Senate means a larger shift would be necessary to defeat the administration’s proposal altogether.
Time is the biggest weapon on the side of the student-loan companies, higher-education lobbyists have said: The longer the Senate waits to debate, the longer the lenders’ arguments have to gain traction. And the closer the 2010 elections loom, one higher-education lobbyist says, the more wary lawmakers will be of voting for any proposal that, like the loan overhaul, would make broad changes to the federal government’s role.
Sen. Ben Nelson, a Democrat of Nebraska, has publicly raised concerns about job losses that would be created by the version of the bill that passed the House. He has spoken out against the measure, saying it would restrict options for students seeking loans.
Armed with the petitions from Muncie and Fishers, representatives of Sallie Mae have met with Senator Bayh. Mr. Lord says the senator was responsive to Sallie Mae’s concerns.
A spokesman for Mr. Bayh says his vote will depend on the specifics of the Senate bill. He “will evaluate the Senate’s version of student-lending legislation when it comes out of committee, looking at the legislation’s overall impact on students and families, as well as the impact on jobs in Indiana,” the spokesman says.
Direct Lending Still Growing
The direct-loan program has grown in popularity among colleges in the past year. It now carries 42 percent of federal student-loan volume, up from 29 percent a year ago. Some of the colleges that have already moved to direct lending are in Sallie Mae’s backyard: Indiana University-Purdue University at Indianapolis, a 30-minute drive from Fishers, switched in the summer of 2008, along with the rest of the Indiana’s public colleges.
Officials of Indiana-Purdue say they chose direct lending when they were told that fees charged to students in the federal bank-based system would increase to a level higher than for students in the direct-loan program.
“There was a sense that things were going to become a bit more unstable” in the bank-based program, says Rebecca E. Porter, associate vice chancellor and executive director for enrollment services. And the switch to direct lending went smoothly, she says.
The university “never had any problems” with Sallie Mae, Ms. Porter says, but in the end the decision came down to saving students money. The campus administration takes no position on the student-loan legislation.
But for the Sallie Mae employees just up the road, the stakes appear high as they await Congress’s next move.
“I love my job, and I’ve had it for 18 years,” says Ms. Foust, the loan-reconciliation processor whose income supports her disabled husband. “If Sallie Mae would close their doors today, it would devastate my family.”
