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ACS education loan contract on the books

The Department of Education decides to stick with its original plan of extending Affiliated Computer Services' largest contract.

Affiliated Computer Services is letting out a sigh of relief now that the U.S. Department of Education has confirmed it will extend the company's largest contract until late 2007.

Thursday, the Education Department announced that stretching out a student loan processing contract with the Dallas-based computer services company was "appropriate." Back in November 2001, the Education Department agreed to extend the deal to Sept. 30, 2007, but reviewed its decision after student-loan services provider Sallie Mae protested, according to Affiliated's Chief Marketing Officer, Lesley Pool.

Pool on Friday welcomed the Department's move to stick with Affiliated. "It removes the cloud," she said. "It affirms the original extension."

The Education Department contract accounts for about 4 percent of Affiliated's revenue, which totaled $3.1 billion in the year ended June 2002. Affiliated's initial contract with the department began in 1994 and was set to expire in September 2003.

Under the contract, Affiliated handles tasks such as customer service and payment collection for roughly 5 million borrowers.

In its statement Thursday, the Education Department said it "has conducted extensive market research to fulfill its loan servicing needs between Oct. 1, 2003, and Sept. 30, 2007. In performing this market research, the Department has determined that the extension to the Direct Loan Servicing System with ACS contract is appropriate."

Affiliated processes student loans for individual universities, as well. Overall, it handles student loans worth a total of $8 billion, Pool said.