CIT Group Inc., the commercial bank run by John Thain, agreed to sell its student lending business to Nelnet Inc. for about $1.1 billion.
Most of the proceeds will be used to repay debt secured by student loans, leading to a net gain in the second quarter, New York-based CIT said today in a regulatory filing. Completion is expected by April 25, CIT said. Nelnet is a consumer finance company based in Lincoln, Nebraska.
CIT had been shrinking its portfolio of student loans and said the business was for sale. The deal covers all of CIT’s government-guaranteed student loan assets and servicing rights, the firm said. While Chief Financial Officer Scott Parker described the current holdings as low-risk, “long term, they don’t kind of fit with the business,” he told analysts in October.
Student lending in the years leading up to the 2008 global financial crisis contributed to CIT’s spiral into bankruptcy, before Thain arrived to lead a turnaround. The company had racked up at least $120 million in losses from the business, citing loans to students left stranded when a helicopter pilot training school failed.