With the national student loan industry in financial turmoil, the Helena-based Student Assistance Foundation on Thursday issued layoff notices to 23 employees as part of more aggressive cost-reduction steps this week.

SAF services federal loans for Montana students and some in other states.

The savings from these layoffs and related employment expenses, plus other cuts already made in professional services, travel and consulting, are projected to save $2.5 million annually.

The layoffs will reduce SAF’s workforce to 195. It had 254 employees in May 2007, but lost 36 employees through attrition when jobs weren’t filled because of SAF concerns over uncertain financial times.

Among those laid off were people involved in SAF sales and marketing, loan consolidation, loan origination and records management, said Jim Stipcich, SAF’s president and chief executive officer. He said they have been offered a severance package, “consistent with SAF’s philosophy that its employees are its most important asset.”

Stipcich declined to say where the laid-off employees worked. Most of SAF’s employees work in Helena, but SAF has also had remote sales offices, with one representative in Idaho, one in Miles City, one in Bozeman and two in Minnesota, all working out of their homes.

The layoffs come after the combined impact of federal legislation in October 2007 that cut lender returns by 0.5 percent to student loan companies and the current turmoil in national financial markets that is affecting the student loan industry, among others.

“Today, SAF joined the number of companies in the student loan industry forced to lose valued employees,” Stipcich said. “While today’s losses in our work place — 23 people — may seem small in comparison to the more than 3,500 student loan related jobs already lost nationally, this was an extremely painful and difficult decision to make.”

Stipcich thanked the affected employees “for their tremendous contributions and service to Montanans.”

The layoffs came two weeks after SAF’s board of directors endorsed a management initiative to reduce SAF’s costs. SAF’s largest client, the Montana Higher Education Student Assistance Corp., or MHESAC, had asked it to re-evaluate its operation to find ways to cut its operating costs.

Montana Higher Education Commissioner Sheila Stearns, who sits on both the SAF and MHESAC boards, said the decision is “something we really regret.” She said the board tried to create as generous a severance package as possible for the laid-off employees.

“It’s just something every board member has been dreading, fearing it might have to come to that,” Stearns said, “ but knowing that the obligation is to make sure you keep the organization solid so you can make loans to future students.

MHESAC also has taken some steps, including suspending its federal student loan consolidation program and no longer paying the borrower origination and default fees, which amount to 2 percent of the amount of the loan.

Stipcich said the MHESAC directive didn’t come as a surprise to SAF’s management team, which has been “right-sizing” SAF’s business practices for several months.

He said SAF’s management team began cutting expenses last summer when Congress debated and eventually passed the College Cost Reduction and Access Act. The act, part of the federal budget reconciliation act, cut lenders’ returns to student loan companies by 50 basis points or 0.5 percent.

The credit and liquidity crisis that occurred on Wall Street last fall further compounded the problem and negatively affected SAF’s third-party servicing clients, Stipcich said.

Despite the cuts, Stipcich said SAF has taken steps to ensure that the staffing levels are adequate to continue “the outstanding level of service and customer-centric focus” on its current loan-serviced portfolio of nearly $3.9 billion.

He said SAF remains committed to delivering $3 million in public benefits to Montana students this year through access grants, college access programs and campus and community outreach programs.

SAF officials are continuing to monitor the national situation and “an effective and efficient solution can be found to assure that all Americans can get access to federal student loans this fall,” Stipcich said.