Nelnet will keep a significant piece of business that it had been in danger of losing for at least two more years.
The Lincoln-based financial services company revealed Monday in a securities filing that the U.S. Department of Education has extended its loan servicing contract until Dec. 14, 2023. The contract had been scheduled to end Dec. 15 of this year.
Nelnet, which has serviced federal student loans since the government took over their origination in 2009, was set to lose the business after the department under the Trump administration had sought to reorganize the way servicing has done.
By granting the two-year extension, the Department of Education exercised a clause in existing contracts. It's not clear what Nelnet's long-term prospects are in relation to federal student loan servicing, but CEO Jeff Noordhoek said the two-year extension gives President Joe Biden's administration time to decide how it wants to proceed after it canceled the planned reorganization.
As of June 30, Nelnet said it was servicing more than $506 billion worth of student loans, the vast majority of which are government-insured loans. Though the company has greatly diversified itself over the past decade, loan servicing made up about 14% of its net income in the second quarter.
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Now, Nelnet could be in line to service even more federally insured borrowers going forward because two other servicers have voluntarily ended their contracts.
The Department of Education has said it will transfer borrowers who were serviced by FedLoan Servicing and Granite State Management by next year. Granite State has already announced that its borrowers will be transferred to another company, but FedLoan Servicing has not yet said where its borrowers will be transferred.
Navient, the former Sallie Mae, also on Tuesday announced it plans to end its servicing contract and is seeking to transfer its borrowers to another company called Navient.
Noordhoek said Nelnet, however, has no plans to get out of the servicing business
"We've been in the servicing business for 40 years," he said. "It's a business that we really love. It's the core of what we do."
"So, yeah, we're all in, and we're very happy to extend the contract."
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