Nelnet has teamed up with a competitor to bid on a new federal student loan servicing contract.
The Lincoln-based student financial services company disclosed in a securities filing last week that its Nelnet Servicing subsidiary has partnered in a joint venture with Great Lakes Educational Loan Services Inc. to bid on the federal contract, which seeks to create a single servicing solution for student loans.
The joint venture, called GreatNet Solutions LLC, is equally owned by the two companies. Nelnet said in its filing that GreatNet was one of three companies that made it through phase one of the bidding process. The others are Navient and the Pennsylvania Higher Education Assistance Agency.
Nelnet, Great Lakes, Navient and PHEAA are the four private companies with current contracts to do the servicing of federal student loans. Those vendors' current contracts expire on June 16, 2019.
It is not clear what the status of the contracts will be going forward. The U.S. Department of Education in April sought bids for the creation of a "single servicing solution" that would create a "common borrower experience" and establish "common servicing practices." The department also hopes to improve the experience of borrowers, improve oversight of services and increase cost efficiency.
Now, students with federal loans work with the servicer that is designated for their loan, and new loans are doled out to the four companies based on how they perform on certain metrics, with better performers getting a higher percentage of loans to service.
In a blog post on its website earlier this month, the department said the company chosen will be building a servicing platform that the department essentially will be buying the rights to. That company will not be the only one that gets to service federal student loans.
"In the future, (the department) will be seeking additional vendors to provide direct customer service to borrowers," the blog post said.
The department said it hopes to choose a company to build the system before the end of the year.
Nelnet spokesman Ben Kiser said the company decided to partner with Great Lakes, "with the idea of bringing the nation’s top servicers together to transform student loan servicing for borrowers."
In 2015, Nelnet had revenue of $133.2 million from its Department of Education contract, which made up more than half of its loan and guaranty servicing revenue and more than 10 percent of its overall revenue.
Kiser declined to comment on how much the new contract could be worth to Nelnet nor how the company might be affected financially if its bid is not the one chosen.