Sallie Mae expects split to have ‘limited’ effect in Indiana

SLM Corp., the student lender known as Sallie Mae, is seeking to separate its education loan management and consumer bank businesses into two publicly traded entities.

The Delaware-based firm is a major employer in Indiana, with more than 2,600 employees at offices in Indianapolis, Fishers and Muncie. The company promised last year to add 200 more workers in Muncie as part of a $5 million expansion there.

But Sallie Mae spokeswoman Martha Holler said the separation plan would have only a "limited" impact on its work force size and its facility locations.

“In general, we expect this strategic plan to have limited impact on our total work force size as our intention is to grow each business going forward,” Holler wrote in an email to IBJ. She added, “With regard to facility locations, we expect minimal changes to our geographical configuration.”

Holler also said Sallie Mae needs to sort out which employees will be assigned to each of the two companies, especially in some of the shared services divisions, such as a large IT unit based in Fishers.

"Some of our business areas do provide shared services, and we will need to determine how best to separate or, in some cases, duplicate those functions in the two businesses,” she wrote.

The company’s board of directors appointed Jack Remondi chief executive officer to replace Albert Lord, who will retire from the board and executive management, Sallie Mae said Wednesday in a regulatory filing. The lender announced Lord’s departure in November.

Legislation passed in 2010 cut companies out of the government-guaranteed student loan market, forcing the lender to remake its business to focus on private debt. Sallie Mae made $1.4 billion in education loans in the first quarter, a 22-percent increase from the year-ago period, the company said in an April 17 statement.

The split will “create a better structure for the increasingly different regulatory environment that each of these businesses will operate under in the future,” Remondi said Wednesday on a conference call with investors. “These entities can see better success as two distinct and separate entities rather than as one.”

Both companies will initially be owned by existing shareholders, according to the filing. Assets under the education loan management business will consist of about $118.1 billion in debt under the government’s FFELP program, $31.6 billion in private education loans and $7.9 billion of other assets.

The consumer banking business, to be called Sallie Mae Bank, is projected to have about $9.9 billion of total assets, including private education loans and related origination and servicing platforms, according to the filing.

Soaring student-loan delinquency rates in 2012 were highest among borrowers under age 30 who are repaying debt, according to the Federal Reserve Bank of New York. Thirty-five percent were 90 or more days behind, compared with 21 percent in 2004.

Delinquencies in Sallie Mae’s portfolio are “starting to feel a lot better” since the lender stopped making loans for non-traditional schools such as for-profit institutions, Lord said in an April 18 conference call with investors.

Sallie Mae expects the separation to be completed within 12 months, following approval from its board of directors and reviews from the Internal Revenue Service and the Securities and Exchange Commission, according to the filing.