Sallie Mae Re-Branding: This Rose By Any Other Name Still Has Thorns
NEW YORK ( MainStreet) The spin-off of Sallie Mae's student loan servicing arm from its consumer banking business seemed designed to suggest that nothing drastic was happening. Just as innocuous--or mysterious--is the servicer's new name: Navient. Punch that into a search engine and you'll find that Navient is also a surgical system that lets a doctor peer into a patent's skull while performing ear, nose and throat surgery. It's also the Instagram handle for a dude who digs old cars, among other things.
"Helping our customers navigate the path to financial security is everything we stand for," said CEO Jack Remondi in a February press release. "Our new name, Navient, symbolizes the expertise, experience and dedication we consistently deliver for our clients and customers."
As though there was a critical mass of people not willing to take Sallie Mae's word for what it was doing, the Department of Education's Information for Financial Professionals Website (iFap) Website posted a guidance on the name change along with a Q&A. New loans it originates will continue to be expensive and cost more than similar Federal loans. There's nothing to suggest that its debt collection practices will change.
And the old name lingers as business done by the company known as Sallie Mae collides with the Navient brand. In the Department of Justice's complaint that Sallie Mae violated the Servicemen's Civil Relief Act buy overcharging veterans on its loans, it identified the defendants through the names "Sallie Mae, Inc." and "Navient Delaware Corp." Even though Navient is publicly traded, there's the risk that it will still being tarred by the Sallie Mae brush.
"Sallie Mae needed a distinct name for the servicing business since they were splitting into two companies," said Mark Kantrowitz, senior vice president and publisher of Edvisors.com and author of Filing the FAFSA . "The theory was that this would release value for their shareholders because one part of the business was a drag on the other."
Above all, Navient is in business to turn a profit, which is too frequently at odds with the goals of higher education.
"A lot of Sallie Mae's business moves can be interpreted in the context of a belief that the company was undervalued," said Kantrowitz. "For example, the deal with JC Flowers fell through, because Al Lord thought the company was worth more than JC Flowers wanted to pay. In hindsight, he should have taken the money that was offered."
New York City-based private equity firm JC Flowers attempted to take over Sallie Mae, offering $60 per share in April 2007. With Lord calling the shots, Sallie Mae rejected the offer in what became a divisive struggle for this company amid the burgeoning credit freeze that marked the financial crisis.