The coronavirus pandemic swept up the world in 2020, upending life as we know it. One area feeling the pain was the college system. Last spring, students finished out the semester remotely across the nation. The change to remote learning also affected high school students’ decision to go to college, according to the National Student Clearinghouse Research Center, which reports college enrollment decreased 3% for the 2020-2021 academic year.
Meanwhile, the congressional relief packages included loan forbearance on student loans — and loan provider Navient (NASDAQ: NAVI) got caught in the middle of the storm. The company provided payment relief to its borrowers while also originating fewer private loans, hurting the company’s stock price. The result? The company is trading at a deep discount, with a price-to-earnings ratio around 6.5, even with the stock up 41% this year through Monday’s close. As conditions improve in 2021, is Navient a good value stock to include in your portfolio?
Navient had forbearance rates of 28.5% on federal loan borrowers and 14.7% on its private loan borrowers during the peak of the pandemic in last year’s second quarter. This, combined with fewer students enrolling at colleges for the 2020-2021 academic year, made 2020 a tough one for the lender. With college enrollment down 4%, Navient made 7% fewer private loans compared to the year before, totaling $4.6 billion. Its total educational loan portfolio dropped $6.5 billion, to $84 billion on the year.