First Marblehead Cuts Jobs as Student Lending Falters

[OhioChick]

May 5 (Bloomberg) -- First Marblehead Corp., an arranger of securities backed by student loans, fired more than half its workforce and will ``reposition'' itself after its relationship with lender Bank of America Corp. ended.

The company, based in Boston, has eliminated 500 jobs and expects to cut costs by about $200 million a year, First Marblehead said today in a statement. There were 920 fulltime employees in February, according to the company.

Bank of America, whose student loans were packaged into securities by First Marblehead, said last month it would no longer make private student loans. Such lenders have faced rising costs and shrinking demand for the related securities. First Marblehead today also said it was responding to the recent bankruptcy petition of the Education Resources Institute, the nonprofit entity that provided default guarantees for the company's packaged loans.

``This has been an extraordinarily challenging business environment for our company,'' said Chief Executive Officer Jack Kopinsky, in today's statement.

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