NAVI - Navient cut to Equal-Weight at Barclays as student loan forgiveness poses risk to earnings

• Navient ( NASDAQ: NAVI ) stock dipped 3.8% in early Friday afternoon trading after Barclays analyst Mark DeVries downgraded the education loan manager to Equal-Weight from Overweight, as the federal student debt forgiveness plan poses a material risk to earnings.
• The Biden administration may intend to include privately held Federal Family Education Loan Program (FFELP) loans in its forgiveness plan via consolidation into direct loans, according to a recent New York Times article .
• "If correct, this effectively puts FFELP loans that are held by private entities such as NAVI at risk to be consolidated away," DeVries wrote in a note to cleints.
• As a result, 60% to 80% of Navient's ( NAVI ) FFELP portfolio, which accounted for more than 50% of pre-tax income in Q2, could be consolidated away as loans held by the company would be qualified for the forgiveness program, DeVries warned. That would result in 20% to 28% hit to his 2023 EPS estimates at $3.10 a share compared with the consensus of $2.99.
• Previously, (Aug. 29) student loan forgiveness to impact Navient more than Nelnet .

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