Nelnet Acquires Great Lakes Student Loans in Industry Changing Move
The publicly-traded, Nebraska-based student loan servicer Nelnet has agreed to buy its competitor, the Great Lakes Higher Education Corp., for $150 million according to a press release from Nelnet from Thursday of this week.
The deal still needs to pass regulations to be approved, but it is set to close in January 2018. Both companies will continue operating as separate entities until 2019 due to ongoing contracts with the Department of Education.
Student borrowers working with Great Lakes and Nelnet should remain unaffected by the structural change according to Nelnet spokesperson Ben Kiser. But eventually, the operations of both companies will be consolidated moving forward, finalizing the acquisition.
Kiser also added that Great Lakes CEO Jeff Crosby will retain his position. Additionally, 1,800 out of the current 2,000 Great Lakes employees are included in the deal, meaning they will be working for Nelnet in the future.
The move certainly shakes up the dynamic of the student loan servicing industry. While it may not affect student loan borrowers immediately, the move is still a massive consolidation in the industry, potentially affecting the customer service experience of millions.
The Madison-based Great Lakes had a portfolio of over $238 billion in student loans spread over 8 million borrowers. It also services $77 billion in Federal Family Education Loan Program (FFEL) loans.
As for Nelnet, it had over $168 billion in government-owned student loans for 5.8 million borrowers. Its FFEL loans amounted to $23 billion for 1.2 million borrowers. In addition to that, the Lincoln-headquartered company services nearly $10 billion in private student loans.
The acquisition of Great Lakes Educational Loan Services is the largest in its Nelnet history. Nelnet CEO Jeff Noordhoek commented that both companies would remain customer-focused. They plan on working together and combining resources to offer top-notch services and looking for the best repayment plans for each borrower. Spokesman Kiser concluded the deal would have a positive effect on student borrowers in the United States.
This is big news for the average student loan borrower. Before, there were only four major players in federal student loan servicing. That number has been reduced to three.
Competition among servicers is a key driver for quality customer service. Several developments in the industry that have cast doubt on a student loan servicer’s capability to effectively help borrowers pay down debt cost-effectively.
Navient, the largest servicer and a prevalent example, has been called out several times for ineffective customer service under the claim of costing borrowers. Alleged malpractice by such a large company affects millions of borrowers.
The acquisition by Nelnet effectively creates another massive company with the potential to impact a larger portion of student loan borrowers
While student consumers can’t choose their loan servicer at the start of repayment, they do have the option to transfer to a different company for different customer service. This recent development reduces the number of choices for student loan borrowers.
It remains to be seen whether this will have a positive impact for student loan borrowers.