USA TODAY International Edition
ATTENTION BORROWERS:
Navient continues to grow and soon could be your student loan servicer
The nation’s largest student loan servicing company is eyeing new acquisitions and soon could be handling your loan repayments.
The day after disclosing plans to buy a $ 6.9 billion education loan portfolio from JPMorgan Chase, Navient said it continues to explore new acquisitions. Potential targets include “a number of banks” with portfolios of federally guaranteed student loans as well as private loans, company CEO and President Jack Remondi told financial analysts during a Wednesday conference call.
The prospect of Navient growing even bigger was counterbalanced by downbeat first- quarter earnings the Wilmington, Del.based company announced after financial markets closed Tuesday. Shares of Navient closed 0.4% higher at $ 15.11 Wednesday after recovering from earlier declines.
The deal with JPMorgan is expected to push the cumulative total of federal loans serviced by Navient to nearly $ 300 billion, the highest in the company’s 40year history of servicing such debts, said Christian Lown, the company’s newly- appointed chief financial officer.
The transaction follows Navient’s 2014 similar acquisition of an $ 8.5 billion portfolio of federally- guaranteed student loans from Wells Fargo.
The package consists of roughly $ 3.7 billion in federally guaranteed student loans, including $ 1.6 billion that have been securitized, plus $ 3.2 billion in private education loans. The transaction will be financed by existing lines of credit, excess capital and new borrowing, the company said.
Expected to close during this year’s second quarter, the deal will boost Navient’s earnings per share by 9 cents in 2017, Lown predicted.
Servicing contracts for borrowers in the JPMorgan Chase port-
After disclosing plans to buy a $ 6.9B education loan portfolio from JPMorgan Chase, the nation’s largest student loan servicing company continues to explore new acquisitions.
folio remain unchanged, and borrowers don’t need to take any action at this time, Navient said. The company plans to shift the loans to its servicing platforms in the future and anticipates providing additional information at that time.
Details of the transaction and plans for additional acquisitions came as Navient battles a Consumer Financial Protection Bureau lawsuit that accused the company of systematically failing student loan borrowers by providing incorrect payment information, processing payments incorrectly and failing to act when borrowers complained.
Coordinated with the January CFPB action, the attorneys general of Illinois and Washington filed separate actions that accused Navient of putting student borrowers into costly subprime loans the company knew would fail. Navient has denied the allegations. Wednesday, Remondi pushed back against public perceptions and media reports critical of the company’s handling of student loans.
“The noise level these past few weeks has been higher than normal, and the coverage has often been inaccurate and misleading,” Remondi said. “For the 10 million federal loan borrowers we service, they are 31% less likely to default. In fact, if all services were as effective as Navient, 300,000 fewer borrowers would have defaulted in 2015.”
For the quarter ending March 31, Navient reported net income of $ 88 million, or 30 cents per share, down from $ 181 million, or 53 cents per share a year earlier.
Core earnings, which don’t conform with generally accepted accounting principles, totaled $ 107 million, or 36 cents per share. On a per- share basis analysts surveyed by S& P Capital IQ had expected a profit of 42 cents per share.
The company attributed the bulk of the earnings decline to an $ 82 million reduction in net interest income primarily due to the amortization of the firm’s portfolio.