Language
Country/Area
No result found
From Sallie Mae to Navient: What's the truth behind this corporate spinoff?
Navient Corporation, headquartered in Wilmington, Delaware, is an American student loan servicing company. The company estimates that it manages nearly $300 billion in student loans and serves more than 12 million borrowers. Navient was created in 2014 from the spinoff of Sallie Mae, which turned it into two separate entities: Sallie Mae Bank and Navient. Navient currently employs 6,000 people in offices across the United States, and in 2018, Navient serviced 25% of student loans in the United States.
Navient's history dates back to 1972, when it was certified as a government-sponsored enterprise (GSE) called Sallie Mae, which was established to support student loans under the Higher Education Act of 1965. plan.
Sallie Mae's primary mission is to purchase student loans for the secondary market and to securitize them to increase the value of the loans to the lender while reducing costs to the borrower. Over time, Sallie Mae was taken private and spun off in 2014 to form Navient.
With the evolution of various pieces of legislation, such as the Health Care and Education Restructuring Act passed in 2010, the federally guaranteed loan program was also terminated, meaning that federal loans are no longer issued by banks and companies like Sallie Mae, but by Issued directly by the U.S. Department of Education. This posed challenges to Navient's business model as it had to operate in an entirely new environment.
In 2013, Navient officially announced that it would split into two public companies: a Navient focused on education loan management, and a consumer banking business that would retain the Sallie Mae name.
Navient's history, however, is not simple. Over the course of its operations, the company has faced numerous lawsuits and investigations and paid $60 million in settlements to nearly 78,000 military service members for excessive interest charges on them. Additionally, in 2016, Senator Elizabeth Warren issued a strong condemnation of Navient's service, describing it as "a terrible disaster."
The controversies damaged Navient's image and sparked a class-action lawsuit against the company by shareholders. Navient received more than 6,700 federal complaints in 2017, far more than any other student loan company, according to the report.
According to the Consumer Financial Protection Bureau (CFPB), Navient systematically and unlawfully failed borrowers at every stage of loan servicing. They were accused of charging unreasonable interest and providing inaccurate credit reports on disabled military personnel.
In 2021, Navient announced plans to stop servicing federal student loans and transfer their responsibilities to Maximus Inc. The action attracted a lot of attention, and a subsequent $185 million settlement agreement also became the focus of public opinion. The settlements involved 39 states and Washington, D.C., and included $1.7 billion in loan cancellations.
In 2023, Navient subsidiary Earnest began offering loans to international students, a move seen as part of its expansion.
Currently, Navient is traded on the NASDAQ under the ticker symbol NAVI. The company holds the largest education loan portfolio and private education loan portfolio in the United States, and its operations rely primarily on the production of student loan asset-backed securities (SLABS). Reports indicate that the value of SLABS has been affected as more students opt for income-based repayment plans.
The decline in wages and cash flow caused Moody's to downgrade Navient's debt and corporate family ratings to Ba3, affecting not only the company itself but also the large number of borrowers that rely on its loans.
Many people still have doubts about Navient's future. As society becomes more aware of the education loan system and questions are raised about corporate practices, can Navient survive this challenging environment, or will it become a lesson in the history of American student loans?
As we look to the future, we can't help but wonder whether this corporate breakup and its aftermath will truly improve the situation for borrowers across the country?
