Nelnet CEO Says Student Loan Debt Is ‘Too Much’ | Local business news
It might sound strange to hear the CEO of one of America’s largest student loan companies say that student debt is a problem, but that’s exactly what Jeff Noordhoek sees.
The CEO of Nelnet showed shareholders a chart at Thursday’s annual meeting in Lincoln that illustrated how the amount of student debt outstanding has increased more than fivefold in less than 20 years – from $330 million in 2003 to $1.75 trillion last year.
“That’s a big number,” Noordhoek said. “Actually, it’s too big.”
He and other Nelnet officials expect President Joe Biden to use an executive order to write off some level of student loan debt, but as far as Noordhoek is concerned, that won’t solve the problem of the exorbitant cost of Higher Education.
“Even if they cancel debt at any level, there will be $160 billion more borrowed next year and the year after and the year after,” he said. declared.
Jacque Mosely, the company’s director of government relations, said “the likelihood is quite high” that Biden will provide student loan forgiveness through executive action of $10,000 per borrower, possibly within the next few weeks.
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Jim Krueger, Nelnet’s chief financial officer, estimated that a loan forgiveness program of $10,000 per borrower would reduce the company’s expected future cash flow from its loan portfolio by about $600 million, from $1.8 billion to $1.2 billion.
Nelnet, which has a portfolio of older federal loans and also manages billions of dollars in federal student loans, would not be liable for the canceled debt, but it would lose servicing fees as well as future interest payments if the loans are reimbursed sooner. .
On the other hand, those early payments would mean more revenue than expected in the near term, Krueger said, which the company could choose to roll out to existing businesses or new ones.
Cancellation of student loans is not the only threat facing Nelnet. Rising interest rates and rising inflation are both likely to have mixed effects on the business.
Mike Dunlap, executive chairman of Nelnet, said the company could benefit from higher interest rates in its payments division and could also earn higher rates on the cash it holds. On the other hand, higher interest rates could hurt Allo Communications, in which Nelnet has a minority stake, as the company is highly leveraged due to recent expansions.
Noordhoek said one of the effects of inflation is raising wages for its roughly 8,000 employees, although Dunlap said this could be somewhat offset by the ability to raise prices.
Overall, 2021 was a good year for Nelnet, with total earnings per share of $8.37, its second-best performance yet. As for 2022, Noordhoek said “it’s shaping up to be another crazy year-long rush.”
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