Navient Co. SR NT 6% 121543 (NASDAQ:JSM) used its fourth-quarter 2025 earnings call to highlight accelerating loan originations at Earnest, continued progress on cost reductions across the legacy business, and a 2026 outlook calling for sizable growth funded largely through capital released from the existing portfolio.
Management changes and operating structure
Chief Executive Officer David Yowan opened the call by noting leadership changes, including the departure of long-time executive Joe Fisher after more than 20 years with the company. Yowan also introduced Steve Hauber, a more than 20-year company veteran, who was appointed Chief Financial Officer earlier in the month and previously served as chief administrative officer.
Fourth-quarter results and legacy credit provisioning
Hauber said the company’s reported fourth-quarter results reflected additional provision for expected credit losses in the private legacy portfolio and restructuring costs tied to expense reduction efforts. He reported core earnings per share of $0.02 for the fourth quarter and a full-year 2025 core loss per share of $0.35.
In consumer lending, Hauber said fourth-quarter net income was $25 million, down from $37 million in the prior-year quarter, with net interest income declining year-over-year due mostly to lower outstanding balances and portfolio mix. He said private charge-offs declined sequentially to 2.24% from 2.48% in the third quarter, while delinquencies rose modestly: 31+ day delinquencies increased to 6.3% from 6.1% and 91+ delinquencies increased to 2.9% from 2.8%. The company recorded $43 million of provision in the quarter, including $9 million related to new originations, with the remainder primarily tied to a weaker macroeconomic outlook and delinquency trends “largely within” the legacy private loan portfolio.
On the call’s first question, management attributed the quarter’s “back book” provision primarily to the private legacy portfolio, with Yowan saying approximately 20% of the back book provision reflected deterioration in the macroeconomic scenario affecting all portfolios, and the remainder was “almost exclusively” focused on older private legacy loans. Hauber said the company ended the year with reserve coverage in the “mid-3% range,” later characterizing it as about 3.5%, while noting that portfolio mix is shifting over time toward refinance loans.
Yowan also emphasized that the additional provision had a significant impact on reported earnings per share but said the effect on expected life-of-loan cash flows from the legacy portfolios was “immaterial.”
Earnest originations and efficiency trends
Management pointed to strong momentum at Earnest. Yowan said Earnest posted its strongest quarter of the year, with refinance originations of approximately $634 million in the fourth quarter. For the full year, he reported $2.1 billion of refinance originations—more than double the prior year—and in-school originations of $401 million, the highest level for that product. Hauber said total originations for 2025 were $2.5 billion.
Hauber added that “refi rate check” volume—prospective customers completing a soft credit pull to receive a rate quote—rose nearly threefold from 2024 to 2025. He said expense efficiency improved meaningfully, with sales and marketing and other operating expenses as a percentage of originations down 29% and 35%, respectively, year-over-year. Hauber also said capital efficiency improved as Earnest shifted toward vertical securitization structures, reducing the equity required to finance loans.
In-school lending growth included borrowers pursuing graduate degrees, which Hauber said represented about half of 2025 in-school originations. Yowan said the company is approaching graduate market expansion with “discipline and strong momentum.”
Cost reductions, financing activity, and capital returns
Both executives stressed continued progress on the company’s expense reduction program. Yowan said the company completed “phase one” of its transformation in 2025 and expects to exceed its $400 million expense reduction objective. He said those reductions increase future life-of-loan cash flows by $2 billion cumulatively, which he described as providing added flexibility and capital for growth.
Hauber reported fourth-quarter core operating expenses of $88 million, a 40% improvement versus the prior-year quarter, and $11 million of restructuring expense in the quarter, including $6 million tied to earlier-than-expected retirement of significant components of former technology infrastructure. Full-year 2025 total expenses were $438 million, down close to 50% compared with 2023, which Hauber attributed to divesting the BPS business, moving to a variable servicing expense structure, and reducing corporate expenses.
On financing, Hauber said the company completed its fourth securitization of 2025 in the fourth quarter, bringing total 2025 issuance to nearly $2.2 billion of term asset-backed securities financing. He said investor demand remained strong and the company achieved high effective cash advance rates.
The company also returned capital to shareholders. Hauber said Navient repurchased 2.1 million shares in the fourth quarter at an average price of $12.67 and returned $41 million through buybacks and dividends, ending the quarter with an adjusted tangible equity ratio of 9.1%. Yowan said repurchases would remain “opportunistic” in 2026, and in response to a question, he said the company is not signaling a change in strategy, adding that its board authorization is scaled to the company’s current share count and market capitalization.
2026 outlook: originations, expenses, and earnings
For 2026, the company guided to $4 billion of total loan originations, representing about 60% growth over 2025. Management said it expects refinance and in-school originations to grow more than 50% each, while personal lending remains a pilot with less than $100 million of originations expected.
Hauber said the company expects 2026 expenses of $350 million, which would be $88 million lower than 2025 total expenses. He guided to 2026 core EPS of $0.65 to $0.80, noting the range is net of a $0.35 to $0.40 per share impact from upfront CECL charges and operating expenses associated with an expected $1.5 billion year-over-year increase in originations. Yowan said the company believes it can fund that loan growth with lower total expenses and improved capital efficiency by using capital released from the existing back book portfolio.
Additional topics discussed on the call included:
- Private refinance credit: Management acknowledged a modest uptick in delinquencies but said absolute levels remain low and reiterated expectations for lifetime losses below 2% on a life-of-loan basis.
- FFELP trends: Hauber said FFELP prepayments remained historically low at $225 million in the fourth quarter, supporting expectations for relatively stable net interest income in 2026, “barring unexpected macro events.”
- Macro assumptions: In response to a question, management said guidance is based on consensus-type assumptions for unemployment and interest rates, referencing “Blue Chip” style forecasts.
- Accounting considerations: Management said fair value accounting is “on our radar screen,” but it was not ready to make announcements.
Management closed by reiterating optimism for 2026, citing origination momentum, ongoing operating leverage from prior investments, and continued expense reductions.
About Navient Co. SR NT 6% 121543 (NASDAQ:JSM)
Navient Co SR NT 6% 121543 (NASDAQ:JSM) is a series of senior unsecured notes issued by Navient Corporation. The notes carry a fixed annual interest rate of 6.00% and mature on December 15, 2043. As unsecured obligations, they rank pari passu with all of Navient’s other unsubordinated debt and are structurally subordinated to any secured borrowings.
Interest on these notes is payable semi-annually on June 15 and December 15 of each year. Beginning December 15, 2023, Navient has the option to redeem the notes, in whole or in part, at a specified redemption price plus accrued interest, subject to the terms set forth in the governing indenture under which the notes were issued and trade under the ticker symbol JSM.
Navient Corporation, the issuer behind this debt issue, provides asset management and business processing solutions to education loan portfolios in the United States.
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