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Navient to transfer shrinking student loan portfolio

Katie Tabeling
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Navient headquarters Wilmington Delaware Riverfront

Navient’s portfolio of student loans has shrunk over the decade, in part due to settlements and offloading federal loan services to other firms.| DBT PHOTO BY JACOB OWENS

WILMINGTON — Looking at ways to address $400 million in expenses, Navient will outsource its student loan portfolio as part of an in-depth review of its operations.

The Riverfront headquartered student loan servicing firm has signed a binding letter of intent to transition private and federal loans to Missouri Higher Education Loan Authority (MOHELA), as announced on Jan. 31. The process may take up to two years, and may impact roughly 2.7 million borrowers with active loans. That includes private and Federal Family Education Loan Program, or FFELP loans. Navient officials said that it will retain ownership of the loans under the terms of the agreement with MOHELA. 

Navient is also considering selling its business processing division as well as taking steps to streamline corporate functions and its footprint. 

“Over the longer-term, we believe these actions will increase the value shareholders derive from our loan portfolios and the returns we can achieve on business-building investments,” Navient President and CEO David Yowan said in a prepared statement. “As we embark on this important work, we also remain focused on running and growing our business and meeting the needs of our borrowers and clients. We look forward to continuing to provide updates as we establish a new foundation for Navient’s future success.”

In early February, Navient filed notices with the New York Labor Department that it could cut 989 jobs in May. As of press time, Navient has not filed a notice with the Delaware Department of Labor.

Navient spokesman Matt Ford said that the potential layoffs in New York regard employees that support a government program backed by public funding, and many work from home. While the program runs out of Navient’s New York office, about 116 live and work in the state. Ford said that 800 of the employees impacted by the WARN notice joined Navient with the understanding that the position was temporary.  Navient remains hopeful that the job reductions is lower than ones listed in the WARN notice, and Navient officials have said that there will be no similar notice in Delaware about these potential layoffs.

Navient spun off from Sallie Mae in 2014, and a major driver of its financial performance since was the student loan portfolio it inherited. About a decade ago, that was $135 billion in student loans from 12 million borrowers. 

At the end of 2023, that portfolio shrunk to $46 billion in student loans with $9 billion new loans added over the course of the year. The student loan portfolio shrunk in part due to a settlement that canceled $1.7 billion in private loan balance in January 2022. The year before, the company announced it would exit the federal student loan servicing business as a whole, transferring the accounts of 6 million borrowers to Virginia-based federal loan servicer Maximus. 

Over time, Navient has bought business processing services and financial technology and online student loan lender Earnest, as well as buying back 75% of its shares. But as Navient’s legacy business of loans continues to shrink, its costs are shouldered by other arms of the company, Navient Board of Directors Vice Chair Edward Bramson said.

“I think the more subtle issue is that our major future asset is the businesses we’re trying to grow. And in an allocated environment, as the legacy businesses shrink, their allocated costs get reallocated to new businesses, which are the ones you’re trying to grow, which can’t afford them. So they had the effect of smothering that effort,” Bramson told investors on an earnings call on Jan. 31.

Navient has weathered multi-state lawsuits over alleged predatory loan practices for $1.85 billion in early 2022. That came amid an activist takeover threat from Sherborne Investors Management LP, founded by activist investor Bramson. That ended a few months later when Bramson joined Navient’s board. The settlement canceled loan balances for about 66,000 borrowers, with virtually the most originating between 2002 and 2010. 

MOHELA is a college loan agency created by Missouri law that has grown to service loans across the nation. In 2022, it became the servicer for the public student loan program, growing its operating revenue to $358.6 million in Fiscal Year 2023.

The future of Navient’s business processing solutions division is also up for consideration, as many of its operations overlap with its student loan services. That division has two distinct operations: health care through the Xtend brand, and government services and transportation through various brands. 

The Xtend brand brought in $121 million in revenue, while government services brought in $200 million in revenue.

Navient’s stock price closed on Jan. 31 at $17.22 per share, and in the weeks since, it has been trading under $17 per share.

Editor’s Note: This story has been updated to clarify the nature of the jobs impacted in the New York WARN notice as well as the information about the previous settlement.

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