Nelnet to Cut 300 Jobs, Halt Some Student Loans

NEW YORK (Reuters) - Nelnet Inc (NNI.N), a large U.S. provider of student loans, said on Wednesday it will eliminate 300 jobs, stop offering loan consolidations, and cut back other lending to cope with market disruptions and a new federal law reducing subsidies for student lenders.

The job cuts will affect about 10 percent of Nelnet's 3,000-person work force, the Lincoln, Nebraska-based company said. Nelnet expects the restructuring to result in a $15 million to $17 million after-tax charge and to lower pretax operating costs by $15 million to $20 million a year.

On Jan. 4, SLM Corp (SLM.N) or Sallie Mae, the largest U.S. student lender, also said it planned to make fewer loans, saying last year's College Cost Reduction and Access Act could make it impossible to make money from the Federal Family Education Loan Program.

"Ongoing turmoil in the credit markets is much worse than we anticipated," Nelnet Chief Executive Mike Dunlap said in a statement. "The reduced economics of student loans created by the legislative changes and credit market disruption has forced us to make difficult decisions about our level of participation in the (FFELP) program."

Nelnet said it has liquidity to make and buy loans, but its cost to fund FFELP and private student loans has increased significantly because of tighter credit markets.

The lender said the charge includes $4 million for severance, up to $2 million to end contracts, and $9 million to $11 million to write down property, equipment and goodwill.

Separately, Sallie Mae on Wednesday posted a $1.6 billion fourth-quarter loss, citing weakened credit markets.

Shares of Nelnet rose 22 cents to $10.64 in afternoon trading on the New York Stock Exchange.

(Reporting by Jonathan Stempel; Editing by Phil Berlowitz and Gerald E. McCormick)