Discover Financial Services has agreed to sell its private student loan portfolio to investment firms Carlyle Group and KKR for approximately $10.8 billion.
Why it matters: This sale marks a significant step in Discover’s efforts to streamline its operations ahead of its pending $35.3 billion acquisition by Capital One. The sale also serves as another sign of the growing interest in student loans from private equity firms.
By the numbers:
- The portfolio’s principal balance was about $10.1 billion as of June 30.
- The sale price represents a premium over the principal balance.
Details:
- The portfolio will be purchased by partnerships managed by Carlyle and KKR’s credit businesses.
- Firstmark Services, a division of Nelnet, will handle servicing of the portfolio upon sale completion.
- The transaction is expected to close through multiple closings by the end of the year.
What They Said: “This transaction demonstrates the value that scaled private lenders can bring to key areas of the economy as the priorities of traditional lenders continue to evolve,” RJ Madden, a managing director at KKR.
Interest in Student Loans: In January, Carlyle bought a $415 million private student loan portfolio that reportedly came from Truist, and invested in Monogram, a platform that works with financial institutions to help them offer student loans.
