* Q1 core shr $0.39 vs est $0.29
* Originates $7.7 bln fed student loans
* To cut 2,500 jobs
* Stock up 1 pct after the bell
(Adds details, background)
BANGALORE, April 21 Sallie Mae SLM.N posted a
quarterly profit trumping analysts' expectations, but the
largest U.S. student loan provider said it will cut 2,500 jobs
as the company was forced to restructure its operations.
Congress recently approved a bill to end the 45-year-old
Federal Family Education Loan Program (FFELP), which has
supported private student lending with federal subsidies.
As a result, the company lost a key business, and had to
realign its business model completely, making massive job cuts
"Ironically, one quarter before the government takes over
loan originations, Sallie Mae broke its own FFELP origination
record," Chief Executive Albert Lord said in a statement.
The FFELP consisted of private lender student loans and was
guaranteed by the federal government.
Sallie Mae originated $7.7 billion in federal student loans
for the first quarter, an increase of 16 percent from a year
For the first quarter, the company earned $221.5 million,
or 46 cents a share, compared with a loss of $47.8 million, or
10 cents a share, a year earlier.
The company, which trades under the formal name of SLM
Corp, earned 39 cents a share, excluding items.
Analysts were looking for a profit of 29 cents a share,
according to Thomson Reuters I/B/E/S.
The student loan industry was in disarray for a couple of
years, as secured and unsecured markets have at various times
been closed to non-bank lenders.
Sallie Mae suffered last year because its assets generate
interest based on commercial paper rates, while its liabilities
are linked to the London Interbank Offered Rate, or Libor. The
shrinking gap between those rates trimmed its net interest
Shares of the Virginia-based company were up 4 percent at
$13.70 after the bell. The stock closed at $13.12 Wednesday on
the New York Stock Exchange.
(Reporting by Anurag Kotoky in Bangalore; Editing by Anil
D'Silva, Unnikrishnan Nair)