Navient is moving into the student lending business with the announcement that it has entered into a $155 million deal to acquire Earnest, an online based student and personal company based in San Francisco.
Navient is headquartered in Wilmington.
“Combining Earnest’s best-in-class data science, digital marketing, and technology with Navient’s industry and capital markets experience create an exciting platform to deliver value for consumers and investors,” said Jack Remondi, CEO, Navient. “Together, we will create and deliver consumer-centric education credit products for the digital age.”
Founded in 2013, Earnest serves digitally savvy consumers who have been underserved by traditional banks, according to a release.
The company is expected to originate nearly $1 billion in student loan refinancing loans in 2017.
As part of Navient, Earnest will continue as a distinct brand and will be led by its current management team, including founders Louis Beryl and Ben Hutchinson. Earnest clients will continue to enjoy the same customer service, rates, terms and benefits, a release stated.
Under the terms of the agreement, Navient will acquire Earnest for $155 million in cash. Effective this week, Navient will suspend its remaining share repurchase program through year-end 2018 to allocate capital towards growing the education lending business and building book value.
The company’s annual dividend of $0.64 per share is unchanged. Closing of the transaction is expected in the fourth quarter of 2017.
Navient was spun off from student lender Sallie Mae and handles student loan servicing and other activities. It has been acquiring companies as part of an effort to broaden its services.
TechCrunch reported that the sales price of Earnest was less than half of the amount investors had plowed into the company. Ernest had reportedly been seeking capital or a partner.
The fintecharena that includes companies like Earnest and SoFi, has been a popular investment area for venture capitalists who see opportunities in taking on the conventional banking system.
Navient, meanwhile faces a federal lawsuit from the Pennsylvania Attorney General over its student loan business practices. Navient vowed to fight the lawsuit. The lawsuit contributed to a double-digit drop in Navient’s stock price in recent days.
The lawsuit contributed to a 13 percent drop in Navient’s stock price in recent days.