NAVI Unveils High-Growth Phase 2 Strategy, Focuses on Scaling Earnest

Navient Corporation NAVI has entered the next chapter of its multi-year turnaround, unveiling a Phase 2 strategy built around turning its Earnest unit into a fast-growing, capital-efficient fintech lending platform. After completing an extensive Phase 1 overhaul, marked by divestitures, outsourcing, and deep cost cuts, the company is now pursuing meaningful expansion in digital consumer lending.

A Flashback at NAVI’s Phase 1 Strategy

Navient’s Phase 1, launched after a detailed business review in early 2024, was all about simplification, efficiency, and freeing up capital. 

Outsourcing Student Loan Servicing: Navient outsourced its student-loan servicing business in July 2024 to a third-party partner in order to move to a variable expense model — giving them more flexibility and controlling costs as legacy loan portfolios amortize. The company sold its healthcare services business in September 2024 and its government services business in February 2025. 

$400 Million Expense Reduction Goal: Navient set a clear path to reduce approximately $400 million from its 2023 shared and corporate expenses through these restructurings. In phase 1, the company achieved a shared and corporate expense reduction of $119 million.

Financial Impact: Phase 1 is expected to boost the lifetime cash flows of its legacy loan portfolio by roughly $1.5 billion, with a net income benefit of approximately $1 per share annually. The company says it has lowered the fixed-cost burden in its Consumer Lending business by about $120 million annually, which is “equivalent” to adding $10 billion in new consumer loans.

NAVI Phase 2 Strategy Update

With the heavy lifting of restructuring largely done in Phase 1, Navient is now fully committed to Phase 2, focusing on scaling its Earnest business into a high-growth, capital-efficient fintech-style operation.

Restructuring Sets Stage for Growth: Navient reported that its Phase 1 restructuring program has materially enhanced future cash flows, generating an estimated $2 billion in incremental net cash flow available for investment or shareholder distributions. The company projects $119 million in pre-tax savings over the remaining 17-year life of its legacy loan portfolios. These savings stem primarily from streamlined operations and expected reductions in variable servicing expenses as older portfolios continue to wind down.

Betting Big on Earnest: Phase 2 shifts Navient’s strategic focus to accelerating growth at Earnest, the company’s digital lending arm. Earnest is now benchmarked against fintech peers, with a target of higher recurring-fee income, lower capital intensity, and stronger return on equity. Navient projects that by 2025, Earnest will generate $219 million in total revenues and $75 million in operating profit. Notably, the Earnest customer base is robust, with more than 375,000 unique customer relationships and over 40,000 new ones expected to be added in 2026. 

Earnest 2025 Expectation

Significant Gains in Efficiency & Origination Volume: Navient sees a massive opportunity for Earnest to expand beyond student-loan refinancing. The company outlines a combined $47 billion total addressable market in 2026, growing to $101 billion by 2028, across student loan refinancing, personal loans, and related financial products. Originations are expected to grow from $971 million in 2023 to $2.4 billion in 2025, a 2.5X increase.

Growing Total Addressable Market

Earnest’s balance sheet currently carries equity equal to 7% of assets, but Navient expects future lending to rely more heavily on securitizations or loan sales, significantly reducing equity requirements. The firm says that equity released from existing loans, combined with Navient's broader capital resources, will support Earnest’s projected growth without requiring meaningful new capital injections.

Final Words on Navient’s Strategic Update

Navient’s strategic development reflects a company that has successfully stabilized its foundation and is now poised to pursue meaningful long-term growth. Phase 1 delivered substantial structural benefits, streamlining operations, reducing costs, and unlocking billions in future cash flow. These actions not only strengthened the balance sheet but also positioned NAVI to shift away from dependence on its maturing legacy portfolios and toward more agile, scalable business lines.

With Phase 2, Navient is leaning fully into that pivot by elevating Earnest as its primary growth engine. Backed by improving efficiency, expanding originations, and a sizable total addressable market, Earnest gives Navient a pathway into higher-margin digital lending markets that offer room to scale with lower capital intensity. If execution aligns with expectations, Navient’s transformation may ultimately redefine its identity from a legacy loan servicer to a competitive fintech-focused financial services platform.

NAVI Price Performance & Zacks Rank

Over the past six months, shares of Navient have declined 8.2% against the industry’s growth of 32.5%.

Price Performance

Currently, the company has a Zacks Rank #4 (Sell).

Stocks Worth Considering

A few better-ranked stocks are Enova International, Inc. ENVA and Encore Capital Group ECPG.

ENVA’s earnings estimates for 2025 have been revised upward to $12.77 per share in the past 30 days. Its shares have gained 31.5% over the past six months. At present, it carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (strong Buy) stocks here.

ECPG’s 2025 earnings estimates have also been revised upward to $9.85 per share in the past 30 days. Its shares have gained 24.4% over the past six months. At present, it sports a Zacks Rank #1. 

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This article originally published on Zacks Investment Research (zacks.com).

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