Navient holds the largest portfolio of education loans insured or guaranteed
under the Federal Family Education Loan Program (“FFELP”), as well
as the largest portfolio of Private Education Loans. FFELP Loans are insured
or guaranteed by state or not-for-profit agencies based on guaranty agreements
among the United States Department of Education (“ED”) and these
agencies. Private Education Loans are education loans to students or their families
that bear the full credit risk of the customer and any cosigner. Private Education
Loans are made primarily to bridge the gap between the cost of higher education
and the amount funded through financial aid, federal loans or students’
and families’ resources.
Navient services its own portfolio of education loans, as well as education
loans owned by banks, credit unions, other financial institutions, non-profit
education lenders and ED. Navient is one of four Title IV Additional Servicers
(“TIVAS”) to ED under its Direct Student Loan Program (“DSLP”).
Navient also provides asset recovery services on its own portfolio (consisting
of both education loans and other asset classes), and on behalf of guaranty
agencies, higher education institutions, and federal, state, court and municipal
clients. In addition, we provide business processing services on behalf of municipalities,
public authorities and hospitals.
Navient possesses a number of competitive advantages that distinguish it from
its competitors, including:
Large, high quality asset base generating significant and predictable cash flows.
Navient’s $96.5 billion portfolio of FFELP Loans bears a maximum 3 percent
loss exposure due to the federal guaranty. Navient expects that cash flows from
its FFELP Loan and Private Education Loan portfolios will significantly exceed
future debt service obligations.
Efficient and large scale operating platforms. Navient has demonstrated scalable
infrastructure with capacity to add volume at a low cost. Navient’s premier
market share and tested infrastructure make it well-positioned to expand its
businesses to additional clients and asset types.
Superior performance. Navient has demonstrated superior default prevention performance
and industry leading asset recovery services. The combined portfolio of federal
loans serviced by Navient experienced a Cohort Default Rate (“CDR”)
of 8 percent, which is 38 percent lower than their peers, as calculated from
the most recent CDR released by ED in September 2015. We are consistently a
top performer in our asset recovery business and deliver superior service to
our public and private sector clients.
Commitment to compliance and customer centricity. Navient fosters a robust compliance
culture driven by a “customer first” approach. We invest in rigorous
training programs, internal and external auditing, escalated service tracking
and analysis, and customer research to enhance our compliance and customer service.
Strong capital return. As a result of our significant cash flow and capital
generation, Navient expects to return excess capital to stockholders through
dividends and share repurchases.
Meaningful growth opportunities. Navient will pursue opportunistic acquisitions
of FFELP and Private Education Loan portfolios. In February 2015, Navient completed
the acquisition of Gila LLC (commonly known as Municipal Services Bureau, or
MSB), an asset recovery and business processing firm. The firm provides receivables
management services and account processing solutions for state governments,
agencies, court systems and municipalities. In October 2015, Navient completed
the acquisition of Xtend Healthcare, a health care revenue cycle management
company. The firm provides health insurance claims billing and account resolution,
as well as patient billing and customer service. The acquisition leverages Navient’s
asset recovery and business processing capabilities into the health care payments
sector. Navient intends to leverage its large-scale operating platforms, superior
default prevention and asset recovery performance, operating efficiency and
regulatory compliance and risk management infrastructure in growing these businesses
and in pursuing other growth opportunities.
Navient’s Approach to Helping Education Loan Borrowers Achieve Success
Navient services loans for more than 12 million DSLP Loan, FFELP Loan and Private
Education Loan customers, including 6.3 million customers whose accounts are
serviced under Navient’s contract with ED. We help our customers navigate
the path to financial success through proactive outreach and emphasis on identifying
the payment plan that best fits their individual budgets and financial goals.
We understand managing repayment of education loans is critical for students
to achieve their educational goals, recognize their full earning potential and
develop a strong credit profile.
In our experience, customer success means making steady progress toward repayment,
instead of falling behind on or putting off payments. This experience has taught
us that the transition from school to full repayment requires customer contact
and counseling. For many customers, education loans are their first borrowing
experience. For new graduates, salaries grow over time, typically making payments
easier to handle as their career progresses. It is also not uncommon for some
borrowers to seek payment deferments if they return to school or encounter temporary
interruptions in earnings.
To help customers manage these realities, Navient makes customer success and
default prevention top priorities. We customize our outreach using data-driven
approaches that draw from our more than 40 years of experience in helping customers
successfully manage their loans. As a result, our customers experience higher
rates of repayment success as evidenced by lower delinquencies and defaults.
We have been a partner in ED’s campaign to inform federal education loan
customers about various income-driven repayment (“IDR”) plans, and
have played a leadership role in helping customers understand their options
so they can make an informed choice. We promote awareness of federal repayment
plan options through more than 170 million communications annually, including
mail, email, phone calls, videos, and text messages.
We also find that customers who have fallen behind benefit from our outreach
and assistance. In fact, nine times out of ten when we can reach federal loan
customers who have missed payments, we can identify a solution to help them
avoid default.
We have three primary reportable business segments: FFELP Loans, Private Education
Loans and Business Services.
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