Item 7.01. REGULATION FD DISCLOSURE
On September 13, 2022, at noon ET, Navient Corporation's ("Navient" or the
"Company") President and CEO Jack Remondi is scheduled to participate in a
fireside chat at the Barclays 2022 Global Financial Services Conference. Among
other topics, Mr. Remondi plans to address the possible range of impacts on the
Company from anticipated loan consolidation activity related to the Student Debt
Relief Plan (the "Plan") announced by the Biden-Harris Administration on August
24, 2022 and the additional information subsequently published on the Department
of Education's Federal Student Aid webpage. Specifically, the webpage states
that, "ED is assessing whether to expand eligibility to borrowers with privately
owned federal student loans, including FFEL and Perkins Loans. In the meantime,
borrowers with privately held federal student loans, such as through the FFEL,
Perkins, and HEAL programs, can receive this relief by consolidating these loans
into the Direct Loan program."
Navient has conducted a preliminary review of the impact that the possible
consolidation activity may have on its portfolio of FFELP loans. The Company's
impact will be dependent upon numerous contingencies including how many of its
FFELP borrowers qualify, how many elect to consolidate their loans to obtain the
benefits under the Plan, whether and how ED expands eligibility to borrowers
with privately owned FFELP loans, or the possibility that the Plan may be
subject to litigation or other delays in implementation. At this point in time,
the final impact of such possible consolidation won't be known for an extended
period of time primarily given that, currently, applications for debt
cancellation will be accepted through the end of 2023. We anticipate that the
principal components of the financial items whose recognition would be
accelerated through net income as a result of increased loan consolidations will
be the amortization of loan premiums and debt deferred financing fees, which
will reduce net income. These impacts will be partially offset by the benefit to
net income from the release of the related allowance for loan losses and revenue
generated from the assessed but previously unrecognized fees. As of June 30,
2022, our FFELP portfolio included associated loan premium of $427 million, debt
deferred financing fees of $364 million, allowance for loan losses of $245
million, and assessed but unrecognized fees of $125 million. In addition, the
Company had $232 million of goodwill related to the FFELP business on its
balance sheet. The goodwill may be impaired depending on the level of loan
consolidation activity. The Company serviced FFELP loans for its own portfolio
of approximately 2 million borrowers.
As an example, the Company currently estimates that, if 10% of the 2 million
FFELP borrowers were to immediately consolidate their loans under the Plan, the
impact to projected future cash flows1 would result in an acceleration of
approximately $340 million of cash flows and, over the life of the portfolio, a
net reduction of approximately $390 million. These projections are unaudited and
are based on preliminary internal estimates and assumptions which are subject to
the forward-looking cautionary provisions included in the Company's Form 10-Q
filed on July 27, 2022.
The information contained in, or incorporated into, this Item 7.01, is being
furnished and shall not be deemed "filed" for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated
by reference in any filing under the Securities Act of 1933, as amended, except
as shall be expressly set forth by specific reference in such filing.
1Projected future cash flows provided in Navient's 2022 2nd Quarter Investor
deck that was furnished with the Securities and Exchange Commission on July 28,
2022
2
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