Education loan provider Navient Corp. (NAVI), which was spun-off from Sallie Mae (SLM), agreed Thursday to purchase a portfolio of federally guaranteed student loans totaling $8.5 billion in principal balance from Wells Fargo & Co. (WFC).
"We're delighted to offer our deep expertise to benefit more than half a million new customers. We're also pleased to deliver on a key business objective to leverage our servicing scale and grow our portfolio," Navient president and CEO Jack Remondi said in a statement.
Newark, Delaware-based Navient provides financial products and services focusing on the education sector. It will service more than $310 billion in student loans after the current acquisition of federal student loans from Wells Fargo.
Navient said it is looking to convert a majority of the purchased loans to its servicing platform in 2015, with the rates, terms, and benefits remaining unchanged.
The company added that customers will receive personalized communications to ensure a smooth transition in the coming months.
The purchase of the federal student loans from Wells Fargo in expected to be completed in a series of transactions, most of which will be completed in the fourth quarter of 2014.
Navient noted that the transaction would be funded partly by a new asset-backed commercial paper facility arranged by Wells Fargo Bank N.A.
The company said the purchase includes whole loans originated under the Federal Family Education Loan Program or FFELP before it ended in 2010. Wells Fargo has not issued federal student loans since June 30, 2010 as a result of a change in federal law.
Since 2011, these FFELP loans have been serviced by American Education Services (AES) and XEROX Education Services (ACS).
Separately, Wells Fargo noted that the sale supports Wells Fargo's ongoing strategic focus on its private student lending business.
"By selling these FFELP loans to Navient, Wells Fargo will be in a position to focus more on meeting the needs of our private student loan customers. We are deeply committed to the private student loan business because next to purchasing a home or saving for retirement, paying for an education is one of the most important financial events for our customers," said John Rasmussen, head of Wells Fargo's Education Financial Services.
Navient was the loan management, servicing and asset recovery business of Sallie Mae, and was separated from the consumer banking business of Sallie Mae as an independent company in late April. It began trading as an independent company on May 1, 2014.
Navient in mid-October reported its second earnings results after its spin off as an independent company. It reported a 38 percent increase in profit for the third quarter to $359 million or $0.85 per share from last year on higher revenues as well as improvements in delinquencies and defaults.
Net interest income for the quarter declined 22 percent to $624 million from $799 million last year, while total other income quadrupled to $288 million from $69 million a year ago.
NAVI closed Wednesday's regular trading session at $20.13, down $0.19 on a volume of 2.18 million shares.
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