I was captivated to try and unravel a mystery by this simple sentence in a recent Wall Street Journal article:
As a former consultant, who once developed plans to streamline operations, I thought I would interesting to try and figure out which 5-7 locations they would be consolidating their operations into.
A logical place to start is their 10-K which lists the following 22 owned and leased facilities (sorted by square footage) as of December 31, 2009 (see page 15):
Type | City/State | State | Description | Sq. Footage |
Owned | Fishers | IN | Lending/Loan Servicing and Data Center | 450,000 |
Leased | Reston | VA | Corporate and Other/Headquarters | 240,000 |
Owned | Newark | DE | Lending/Credit and Collections Center | 160,000 |
Owned | Wilkes-Barre | PA | Lending/Loan Servicing Center | 133,000 |
Owned | Lynn Haven | FL | Lending/Loan Servicing Center | 133,000 |
Owned | Killeen | TX (1) | Lending/Loan Servicing Center | 133,000 |
Owned | Indianapolis | IN | APG/Collections Center | 100,000 |
Leased | Niles | IL | APG/Collections Center | 84,000 |
Leased | Newton | MA | Corporate and Other/Upromise | 78,000 |
Owned | Big Flats | NY | APG/Collections Center | 60,000 |
Leased | Cincinnati | OH | APG/Collections Center | 59,000 |
Leased | Muncie | IN | APG/Collections Center | 54,000 |
Owned | Arcade | NY (2) | APG/Collections Center | 46,000 |
Owned | Perry | NY (2) | APG/Collections Center | 45,000 |
Owned | Swansea | MA | Corporate and Other/AMS Headquarters | 36,000 |
Leased | Moorestown | NJ | APG/Collections Center | 30,000 |
Leased | White Plains | NY | APG/Collections Center | 26,000 |
Leased | Las Vegas | NV | APG/Collections Center | 16,000 |
Leased | Whitewater | WI | APG/Collections Center | 16,000 |
Leased | Newark | DE | Lending/Loan Servicing Center | 15,000 |
Leased | Seattle | WA | Corporate and Other/Guarantor Servicing | 13,000 |
Leased | Perry | NY | APG/Collections Center | 12,000 |
TOTAL | 1,939,000 |
Notes:
(1) | Excludes approximately 30,000 square feet Class B single story building located across the street from the Loan Servicing Center. | |
(2) | In the first quarter of 2003, the Company entered into a ten year lease with the Wyoming County Industrial Development Authority with a right of reversion to the Company for the Arcade and Perry, New York facilities. |
Three other facilities that SLM has been leasing are currently vacant:
- Mt. Laurel, NJ
- Novi, MI
- Gaithersburg, MD
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It would seem pretty easy to put together a short list of 5-7, based on the information provided above as well as research into employee counts at these facilities:
- Fishers, Indiana: the data center (own the facility): 1,600 employees
- Reston, Virginia: the headquarters: about 700 employees (from 2008 so may be lower)
- Newark, Delaware: the new credit and collections center (own the facility and also lease 15,000 sq. feet nearby): 1100 jobs planned
- Employee counts at three lending/loan servicing centers suggest that one or even two could be shuttered if the company reduces the total company locations to five (own each of the three facilities):
- Wilkes-Barre, PA: 1100 employees
- Lynn Haven, FL: 700 employees (350-420 involved in originations)
- Killeen, TX: 480 employees (source: Killeen Chamber of Commerce)
- Newton, MA (the home of the Fig Newton): headquarters of Upromise, which seems an area of investment for the company.
- Indianapolis, IN: APG/Collections Center
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A few insights:
- Assuming that Sallie Mae plans to reduce staff from 8,500 to 6,000 in a post-FFEL world (the 2,500 job losses) and reduce locations to 5-7, the losses would appear to be dispersed in New Jersey, New York, Nevada, Wisconsin, Illinois, Ohio and Indiana. Florida and Texas could also be impacted if their service centers in those states were closed too.
- To get to the 6,000 employee count, each of the five to seven facilities would seem to have to maintain or increase staffing:
- Five to seven facility scenario (4,800 to 6,000)
- Fishers: 1,600 employees
- Reston: 700
- Newark: 1,100
- Wilkes-Barre: 1,100
- Lynn Haven: 700
- Killeen: 480
- Newton: 350
- Five to seven facility scenario (4,800 to 6,000)
- In looking at the description of the facilities, this appears to be much more of a consolidation of their credit and collection operations than a change being driven by the loss of the origination function that would occur if FFELP is eliminated. Perhaps the loss of the profits that came from the origination function (costs $20-$30 to originate and government is now paying $75 through ECASLA programs) is forcing management to tighten up their operations. One could argue that this consolidation of credit/collection operations would make sense regardless of what the Senate decides on federal student loan originations.
- When you look at where Sallie Mae is hiring based on recent postings (see SLA post here) the top four locations were:
City | State | Number |
Newark | DE | 29 |
Fishers | IN | 25 |
Newton | MA | 25 |
Reston | VA | 16 |
- And then there is still that lingering issue of the 2,000 jobs that Sallie Mae is returning to the US (from overseas) and how far along in the 18 month timetable they are...
Update:
I went back and reviewed SLM's 2007 10-K and found that the company had 2.1 million sq. ft. to accommodate their 11,000 employees or 191 sq. ft. per employee at the end of 2007.
- At the end of 2009, SLM had 1.94 million sq. ft. for their 8,000 employees or 243 sq. ft. per employee, a 27% increase over 2007 levels. This statistic demonstrates their current overcapacity of office space and their need regardless of the outcome of student loan legislation to consolidate their office space.
- Should SLM staffing post-FFELP drop to 6,000 (as they have recently noted) and should they seek to get back to the 2007 sq. footage/employee ratios, they would cut their overall sq. footage by 41% to 1.14 million sq. ft. from 1.939 million today.
How will employment at Sallie Mae owned collection agencies such as Arrow, Pioneer and GRC be affected? Mostly they rehab or AWG loans placed by Sallie Mae's guarantor, USAF. Will FFELP loans placed with collection agencies by guarantors still be able to use the AWG program after 6/30/10? Will they be able to use William D. Ford consolidations? Will guarantors still be paid a fee for rehabs? Yes, some student loan collection agency business is also direct lending, but more is FFELP, and I have not been able to find obvious answers to FFELP collection agency procedure post 6/30/10 just by reading SAFRA or the news.
Posted by: Curious Adam | March 24, 2010 at 08:27 PM
Who cares?
Sallie Mae was the biggest pig at the trough. Feeding time's over boys.
If they cut the fat off the top they probably wouldn't have to lay off thousands of people, just a dozen or so.
Posted by: Katie Dunneback | April 16, 2010 at 05:42 PM
Katie, It's apparent to me that you never went to college and the comment you wrote actually says a lot about you. Adam, good questions but I don't think even sallie mae has the answers to them.
Posted by: kc | May 18, 2010 at 08:18 AM