Running From Pressure: Sallie Mae Moves Jobs To U.S. After Questions About Student Safety, Contracts

April 6, 2009

By Jim Ross:

Sallie Mae announced it would stop shipping student loan jobs to offshore processing centers just days after the Consumer Warning Network reported that the student lender serviced loans subsidized by American taxpayers in India and the Philippines.

Sallie Mae’s sudden change of heart about offshore outsourcing came as it battles for a federal contract it was unlikely to win if it continued processing student loans offshore.  The contract is worth at least $200 million a year.

It is unlikely that companies with offshore operations could win the work, given the “challenging” personnel and system security requirements, said Chris Greene, a spokesman for the U.S. Department of Education in response to questions from the Consumer Warning Network.

Approval from the Secretary of Education

“Ultimately, any offshore contract performance would require the approval of the Secretary or his authorized agent,” Greene said.

Bid documents for the contract require federal background checks on “all personnel” working on the project and extensive computer system security. The education department plans to award the contract this spring.

Sallie Mae has been contracting with overseas companies, particularly those in India for years.

Student borrowers long have complained about being uncomfortable with talking to foreigners about their financial information. Offshore call and processing centers, particularly those in India, are regularly accused of selling personal and financial information.

But Sallie Mae didn’t change its stance until the Consumer Warning Network publicly disclosed its operations and peppered the U.S. Department of Education with questions about the loan servicing contract.

Albert Lord, the chief executive officer of Sallie Mae, said at an April 6 town hall meeting at the company’s Wilkes-Barre, Pennsylvania facility that it “broke my heart” to see those jobs go overseas and that “it has weighed on my mind ever since we moved the jobs offshore.”

‘Penny wise and pound foolish’

Lord said it would cost the company $35 million to move the jobs back to the United States before adding that the move will “enhance our franchise for many years to come.”  According to Lord, the decision to move offshore was “penny wise and pound foolish.”

His comments met with applause from an audience which included Sen. Robert Casey, Jr., D-PA and  Congressman Paul Kanjorski, D-PA.

Lord recounted a previous conversation with Kanjorksi, in which the Congressman told Lord: “You have a friend in Congress and Sallie Mae has a friend.”

Kanjorski praised Lord for moving the jobs back to the United States. He added that President Obama’s proposed increased in education spending “can’t exist without Sallie Mae.”

2,000 Jobs

Sallie Mae didn’t disclose how many jobs it has overseas or what role they play in originating, servicing or collecting student loans subsidized by American taxpayers.

Despite record unemployment in the United States, Sallie Mae, the country’s largest student lender, routes payments, complaints and applications for these loans as well as their sensitive personal and financial information to processing centers in Bangalore and Pune, India. It also directs loan questions to Baguio in the Philippines.

In an April 6 news release, Sallie Mae said it “will create 2,000 jobs by returning its overseas operations to the U.S.”

The company said it will hire call center, information technology and operations support in various communities throughout the country over the next 18 months.

It is unclear whether all of the overseas jobs will be moved back to the United States. Sallie Mae didn’t provide details.  Its most recent annual report doesn’t use the words India or the Philippines.

Under scrutiny

Sallie Mae’s overseas operations came under scrutiny only after questions from the Consumer Warning Network and the spotlight a lucrative federal contract can bring.

President Obama recently proposed fundamental changes to the education system that would increase the number and volume of federal student loans that need servicing.  The servicing will likely be done by the private sector, said Mike Whisler, the administrator overseeing the new education contract.

The Consumer Warning Network will continue to investigate whether Sallie Mae complied with all personnel and security checks while it outsourced its work and whether the Department of Education adequately monitored Sallie Mae’s servicing of federal student loans in the past.

To follow our investigation, please visit our Facebook Group, “Final Six: Student Loan Servicing Job Up for Grabs” at