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Why Nelnet's Stock Price Rose 13.3% in December

By Dave Kovaleski – Jan 5, 2022 at 12:47PM

Key Points

  • Nelnet beat the S&P 500 in December with a return of 13.3% for the month.
  • It has four primary business lines, including a bank, which launched in 2020.
  • Potential changes to student loans could alter the landscape in 2022.

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The student loan servicer finished 2021 up 38.7%.

What happened

Nelnet (NNI 1.55%) posted a 13.3% increase in December, according to data provided by S&P Global Market Intelligence

The student loan servicer beat the S&P 500, which returned roughly 5.6% in December. Nelnet is currently trading at about $97 per share. It finished the year up 38.7%, which topped the S&P 500's 26.9% return in 2021.

Students talking around a table in the library.

Image source: Getty Images.

So what

Nelnet is one of the largest student loan servicing companies in the country. It is one of a handful of companies that works with the federal government to help borrowers manage and repay their student loans. As of Sept. 30, 2021, Nelnet was servicing $513.5 billion in loans for 15.8 million borrowers.

The company has four business segments, including its asset generation and management arm. These are loans that Nelnet used to originate for the federal government up until 2010, when the federal government took them back in-house and used Nelnet and others to service them. While Nelnet doesn't originate the loans anymore, it still manages the loans and earns interest income on them. 

It also has a loan servicing arm, as well as an education technology, services, and payment processing business. The latter has been its fastest growing, as it provides technology solutions for schools and the education community.

The fourth business, Nelnet Bank, is its smallest and newest, having launched in October 2020. It is an online industrial loan bank that will focus on student loan refinancing at present. But down the road, it plans to expand to offer private student loans and deposits.

Now what

Nelnet spiked from about $86 per share on Dec. 1, 2021, to roughly $98 per share two weeks later on Dec. 14 -- then leveled off from there. The stock may have spiked on the news from Dec. 8 that Nelnet got high marks after an independent audit of its security, controls, and capabilities of its loan processing technology platform.

Also, it may have been helped by the news that Nelnet was reupped as a federal government loan servicer under the new administration starting in 2023, while some of its competitors, including Navient, are exiting the space.

As for 2022, there are a lot of changes coming. The Biden administration extended the pause on student loan repayment until May. Also, there is continued talk about some level of student loan forgiveness, potentially through executive order if not an act of Congress, so keep an eye on what this means for this space.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool owns and recommends Nelnet. The Motley Fool has a disclosure policy.

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