Navient, one of the country’s largest financial lending institutions, saw its stock shoot to the top of the S&P 500 soon after Donald Trump was declared President-Elect of the United States. In addition to potential student loan changes, it would seem that Donald Trump’s presence means changes for the market. This sudden rise in the stock price was mainly due to many insiders believing that the outcome of the election would benefit the company.
Navient, formally known as Sallie Mae, is an education loan management business that was officially launched in the spring of 2014 after it separated from Sallie Mae. The company attracted attention from numerous organizations including the Women’s Forum of New York and the New York Stock Exchange Governance Services for its gender diverse board of directors. It currently holds the largest portfolio of education loans insurance as well as the largest portfolio of private education loans.
Speculation Surrounds Navient Stock
The speculation surrounding the student loan industry saw the company’s stock price rise 17% to close at $15.77 on the day after the election, while the S&P 500 Index rose 1.1% to close at 2.163.26. Throughout the Obama administration, for-profit educational institutions have been the focus of many Department of Justice investigations.
This led to a drop in the number of student loans that companies such as Navient could finance. However, with Donald Trump at the helm of the country, there is reason to believe that the pressure on these institutions will subside, especially since he has been under scrutiny in the past for his own higher education institution, the Trump University.
In addition, it is also expected that any legislation that is meant to target educational institutions is likely to push for laxer regulations on private student loans and more federal financing for skills-based training institutions under the Trump administration. This will help institutions like Navient, which will be able to capitalize on the increased need for student loans.
There is also a belief that the Trump administration, along with a Republican-held congress, will change their stance and revert to credit risk of bank-based student loans vs. the federal direct loan program. However, there is little to show that this will be a very high priority to the new administration since there are more pressing issues than the problem of higher education.
The speculation surrounding the new administration and the way it will handle the issue of higher education could not come at a better time for Navient. The company just announced that it made a net income of $966 million dollars on revenue of just $5.4 billion in 2015. In addition, thanks to the spike in their stock price, the company’s market capitalization rose by $900 million, from $4.1 billion on November 8th, to $5 billion the next day.
There is still time to see whether all the speculation surrounding Navient, and financial institutions like it, bears any fruit; however, if it does, then it looks like it is going to be a very profitable four years for student loan financiers.
Author: Jeff Gitlen
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