Nelnet, one of the nation’s largest servicer of student loans headquartered in Lincoln, Nebraska, has received the approval of both the Federal Deposit Insurance Corp. (FDIC) and the Utah Department of Financial Institutions (UDFI) to establish a chartered industrial bank located in Salt Lake City. Named Nelnet Bank, the institution will operate as an Internet bank and will function primarily in the educational finance arena.
The approval from UDFI is the second such charter granted by the state in the past few weeks. Online payment provider Square was approved to start a new bank, called Square Financial Services, in 2021 to provide loans and deposit products for small businesses.
“We are excited to have earned both the FDIC’s and UDFI’s approval,” said Tim Tewes, president of Nelnet. “This is an important milestone and brings us a step closer to launching Nelnet Bank and being able to combine our experience in education and lending to help students and families make informed education funding decisions. With a chartered bank, we will have a better opportunity to bring new borrower-focused solutions to market that leverage our superior customer experience, tuition payment plans, and education lending and servicing.”
Nelnet’s roots go back more than 40 years as a federal student loan servicer and more than 30 years as a private education loan originator and servicer. The company’s bank subsidiary “will offer a financially secure, experienced and FDIC-insured lender to the private education loan marketplace. With diversified sources of funding that include deposits and securitizations, Nelnet Bank will act as a reliable and affordable source of funding for creditworthy, education-seeking consumers throughout all credit markets,” the company said in a release. Nelnet Bank will also offer consumer loans and refinance options to help borrowers obtain better interest rates, Nelnet said
“We appreciate the working relationship we have established with the FDIC and UDFI and are eager to continue with the bank formation process,” said Andrea Moss, CEO and president of Nelnet Bank. “Our next steps will prepare us to open Nelnet Bank, including fully developing our product suite, technology systems and operational processes and controls. While we have a lot of work to do, we are excited to launch Nelnet Bank and begin fulfilling our purpose of serving students and families.”
The approvals from the FDIC and UDFI are subject to a number of conditions, including a capital adequacy and liquidity management agreement and a parent company agreement with the FDIC and compliance with the terms of the orders from the FDIC and UDFI. Nelnet did not offer a timeline for the compliance measures or an opening date for the bank.
Nelnet Bank will be funded with an initial capital commitment of $100 million from Nelnet. Nelnet Bank will operate as a subsidiary of Nelnet and the industrial bank charter will allow the company to maintain its other diversified business offerings. Nelnet Bank will be governed by a board of directors that is independent of the parent company, consistent with the requirements of the Utah industrial bank charter.