Navient: Much-Needed Push for Sallie Mae? - Analyst Blog

By Zacks Equity Research,

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SLM Corporation ( SLM ), also known as Sallie Mae, has coined a new name for its loan management and servicing company - Navient. This is the next step toward the company's completion of the strategic plan to split its business into an education loan management business and a consumer banking business. However, the news failed to have a significant impact on the share price in the trading session on Wednesday.

It was in May 2013 that Sallie Mae announced its board of directors' decision to split the company's present business into two parts. The decision was driven by suspension of the new federal student loan origination, in compliance with the legislation passed by both the Houses as well as the Senate in 2012. This legislation did away with the federal subsidy for the company.

The split is expected to be completed in the second half of this year. After the division, Sallie Mae will operate only as a consumer banking business and will continue to trade under the same ticker.

Navient, having 6,000 employees and more than $2 billion of revenues, is expected to help almost 12 million clients to pay their education loans, on completion of the separation. Moreover, Navient is expected to service nearly $300 billion in student loans and aid the government as well as higher education and business clients in asset recovery. It will also manage a portfolio of FFELP and private loans.

Navient will be headquartered in Wilmington, Del. and will trade on the NASDAQ stock exchange under the ticker NAVI. Navient will operate through offices in Washington, D.C., Indiana, Virginia and Pennsylvania. Additionally, Pioneer Credit Recovery Inc. and General Revenue Corp. - Sallie Mae's current debt recovery subsidiaries - will operate under Navient in New York, New Jersey, Ohio and Florida.

We believe that Sallie Mae will be able to navigate the regulatory pressure by splitting itself into two separate entities. Further, Sallie Mae's leading position in the student lending market, efforts at diversification and steadily increasing private student loan originations will be growth drivers going forward. Moreover, by creating a separate bank, the company can look forward to finance new streams of loans.

Sallie Mae currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the same sector include Discover Financial Services ( DFS ), World Acceptance Corp. ( WRLD ) and The First Marblehead Corp. ( FMD ). All of these carry a Zacks Rank #2 (Buy).

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SLM CORP (SLM): Free Stock Analysis Report

WORLD ACCEPTANC (WRLD): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: DFS , FMD , SLM , WRLD

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