This past Thursday, Nelnet announced that it has agreed to buy Great Lakes Educational Loan Services, Inc. for $150 million. If the sale is approved by the FDIC, it will be the largest acquisition in the company’s history. Great Lakes is located in Madison, Wisconsin and currently employs 1,800 people.
Nelnet’s CEO, Jeff Noordhoek, put out a news release expressing the company’s optimism over the sale. Noordhoek also expressed his belief that this would allow the two companies to provide “a consistent and unmatched borrower experience and the best technology for student loan servicing.”
Both companies have contracts that go through June 2019, so they will continue to operate separately until that time and Great Lakes will still be run by its current CEO Jeff Crosby. The plan is for the two companies to eventually combine some of their services.
In the past eight years, Nelnet has grown to over 2,400 employees through various acquisitions. Nelnet has bought and invested in several companies over the years, and it has invested in local real estate developments as well. This is in addition to its growing federal student loan business.
This is not the first time Nelnet and Great Lakes have collaborated. Last year, the two companies joined together to bid on a new federal contract; that project is set to continue. If all goes according to plan, the sale should be completed in January 2018.
This acquisition was welcome news to Nelnet investors; their stock prices reached an all-time high of $56.55 a share. However, it remains to be seen what effect this will have on the student loan industry and whether the average consumer, or student loan borrower, will benefit from this acquisition.
There are currently four major student loan servicers in the United States, and once Nelnet and Great Lakes merge, that will bring the number down to three. When the two companies consolidate, it will mean fewer options for the consumer. Less competition in the industry means that there will be fewer options for borrowers to receive the best service.
In the marketplace, if a consumer is receiving poor service, they have the option to leave and go to another company. But when a borrower takes out a federal loan, they are assigned to a student loan servicer by the Department of Education. While it is possible that the Department of Education could switch a borrower’s servicer through a consolidation loan, borrowers don’t have the option to switch servicers on demand on a whim. Thus, having fewer servicers work with more people could lead to more students being negatively impacted.
However, the two companies do not plan to merge immediately, so the experience for borrowers is unlikely to change right away. And the sale still has to be approved by regulators, although most experts believe the odds of the acquisition being rejected are fairly low.