Nelnet Learns & Earns

One thing we can count on: College tuition will only get more and more expensive. Though many parents are wisely saving for this big event, the reality is that little Johnny or Jane will probably need to take out a loan to finish school.

This is obviously good news for college lenders such as SLM (NYSE: SLM  ) , Student Loan Corporation (NYSE: STU  ) , and Citigroup (NYSE: C  ) . But another beneficiary is Nelnet (NYSE: NNI  ) . Last week, the company reported its quarterly financials, and investors handed out a grade of "A," as the stock price increased 5.4% to $29.31.

In the fourth quarter, Nelnet posted net income of $47.2 million, or $0.88 per share. This compares with $10.3 million, or $0.22 per share, in the previous year's same quarter.

On its books, Nelnet has about $13.5 billion in loan assets, up 29% from 2003. Loan growth is a critical factor for the success of a student-loan provider, and Nelnet has achieved this growth through innovative products, services, marketing, and a strong sales team. According to the CEO, the investments made in 2004 will provide the "foundation for continued growth" in 2005.

Over the years, Nelnet has built a comprehensive student-loan platform through a variety of acquisitions, including InTuition (loan servicing and financing), MELMAC (student-loan generation and funding services), GuaranTec (student-loan guarantor servicer), IFA (student-loan software), and so on.

Educational loans make up a roughly $300 billion market that's growing 10% to 12% per year. The market has already attractedCIT Group (NYSE: CIT  ) , which in January plunked down $318 million for Education Lending Group (Nasdaq: EDLG  ) . Expect more such deals within the sector -- deals that will no doubt be a boost to Nelnet.

Fool contributor Tom Taulli does not own shares in the companies mentioned in this article.