Navient Corp. expects to step up the pace of private student loan origination and securitization this year.

On a conference call discussing fourth-quarter results, company executives noted that the refinance student loans made through Earnest, which Navient acquired in the fourth quarter of 2017, do not require same seasoning as new in-school loans, and so can be bundled into collateral for bonds much sooner.

“We expect to more actively securitize this portfolio,” Chief Executive John F. Remondi said.
Navient also expects the refinance loans to perform much better than private student loans made to borrowers while they are still in school. It’s projecting cumulative net losses over the lifetime of Earnest’s loans to be under 2%, compared with 6% to 7% for in-school private student loans.

And that’s a conservative estimate. CFO Christian Lown noted on the call that net losses to date are around 30 to 40 basis points.

Navient, which was spun off from Sallie Mae in 2014, is one of the largest servicers of both federally guaranteed and private student loans. To date it has largely securitized loans acquired in the secondary market. During 2017, it issued $5.7 billion in federally guaranteed loan ABS and $662 million in private student loan ABS.

Acquiring Earnest allows the company to boost its own origination to borrowers that are highly coveted: those with advanced degrees and high-paying jobs.

Remondi said the company will continue to fund refinance loans with asset-backed commercial paper before eventually terming them out. It has $900 million of available capacity under its private loan secured facilities and $2.4 billion available under its secured facilities for federally guaranteed loans.

Navient acquired a total of $10 billion of student loans in 2017, $5.7 billion of which were federally guaranteed and $4.3 billion of which were private. Of the private student loans, $822 million were refinance loans. Navient expects originations of refinance loans to grow to $1.15 billion this year.

The company completed one securitization of Federal Family Education Program (FFELP) loans in the fourth quarter of 2017, bringing its total for the year to $5.7 billion.

Its first FFELP deal of 2018 priced Tuesday at a spread over Libor that was 41 basis points tighter than a deal it completed a year earlier, in the first quarter of 2017.

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