Nelnet (NNI) Q3 2026 earnings review
Nelnet's reported profit falls, but its loan business earns more
Nelnet, which services student loans and lends to consumers, reported lower profit but earned more from its loans. Net profit fell 29%, because a year ago it booked one-off gains, including a $33 million government contract payment. Without those items, profit almost doubled by our math. Interest income from its loans kept growing, and loss charges took a smaller share of it.
| Profit excluding one-offs | $70.9M $37.3M a year ago, by our math |
|---|---|
| Net profit | $76.2M −29% from a year ago |
| Department of Education borrowers serviced | 10.78 million 10.68 million last quarter |
| Quarterly dividend | Raised to $0.36 $0.33 last quarter |
⚖️ Verdict: 🟢 Bullish
The story got better, because profit from Nelnet's loans now makes up for weaker servicing, and servicing stopped losing government borrowers. Nelnet Bank also more than doubled its profit. One caution: losses on Pay Later debts, short-term consumer loans Nelnet buys from an unnamed partner, still run far above a year ago.
The question now is whether the Pay Later debts stay profitable after their losses. If losses hold steady, the program keeps adding profit; if they climb as the debts age, the gain could disappear. The fourth-quarter write-off rate will tell.
🐂 Bull Case
Loan Joint Ventures Nearly Tripled Their Income
Beside the loans on its own books, AGM (Asset Generation and Management), Nelnet's lending arm, owns stakes in joint ventures that buy and manage loan portfolios. Those stakes cover about $1.21 billion of loans, the company said.
- Joint-venture income, third quarter: $12.4 million, against $4.5 million a year ago
- Joint-venture income, first nine months: $36.4 million, against $9.6 million
- AGM profit after tax: up 22% from a year ago
This matters because the ventures earn money without the Pay Later partner that supplies AGM's short-term consumer debts, so AGM depends less on one contract. But Nelnet reports only its share of their profit, so readers cannot see the ventures' own loan losses.
What to watch: joint-venture income in the fourth quarter. A figure near $12 million again would show that the stakes give AGM a steady source of profit beside its own loans.
Nelnet Bank's Profit More Than Doubled
Nelnet Bank, the group's online bank in Utah, lends to students and consumers and funds those loans with deposits. Nelnet said "operating expenses have stabilized while loan and deposit balances have continued to expand".
- Profit after tax: $12.0 million, against $4.6 million a year ago
- Own new loans: $73 million, against $20 million last quarter
Part of the growth came from inside the group: AGM handed the bank $64 million of old student loans. But the bank also lent on its own and, since June, relied less on costly deposits bought through brokers. Its net interest margin, what its assets earn after deposit costs, still slipped to 2.66% from 3.32%.
What to watch: the bank's own new lending in the fourth quarter. Steady lending would show that it wins its own customers and does not just take over the group's loans.
Canada and India Deals Widen Nelnet's Customer Base
Nelnet bought businesses abroad this year. NDS Canada, bought in February, services student loans for Canadian governments. Chief executive Jeff Noordhoek described the deal for Entab, a school software provider in India, as "expanding our education technology business internationally".
- Canadian servicing revenue: $16.5 million in the quarter
- Canadian borrowers: 2.8 million
- Servicing revenue without Canada and one-off payments: $118.0 million, against $118.2 million, by our math
So Canada supplied all of the servicing division's growth, while the US business stood still. Entab serves more than 1,000 schools, Nelnet said, and its three software deals this year cost $30.9 million together.
What to watch: Canadian servicing revenue in the fourth quarter. A figure above $16.5 million would show that the deal keeps adding revenue while US government work shrinks.
🐻 Bear Case
Consumer Loan Losses Stay Far Above Last Year
Since last August, AGM, Nelnet's lending arm, has bought Pay Later receivables: short-term consumer debts it buys at a discount from a partner it does not name. These purchases lifted AGM's loan spread, what its loans earn above funding costs, to 2.40% from 1.27%.
Nelnet says losses climbed because it bought more debts and the loans aged, and that the rise was "not indicative of a deterioration in credit quality".
- Net write-offs on consumer loans outside the bank: 8.78% a year, against 5.75% a year ago
- Loans 31 days or more late: 3.2% of that book, against 1.3%
- Reserve for future losses: 7.55% of that book, against 5.11% in December
The write-off rate matched the second quarter's, so losses held steady over the summer. But by our math, the $33.7 million loss charge on these loans topped the $31.2 million that the discount and late fees earned. The partner also stays unnamed, so outsiders cannot judge how long the income lasts.
What to watch: the write-off rate on these loans in the fourth quarter. A rate above 8.78% would show losses still rising as the debts age, which Nelnet's explanation does not cover.
Servicing Profit Fell as Borrower Losses Paused
"We delivered strong operating performance this quarter, with continued progress diversifying our products and customer base," chief executive Jeff Noordhoek said. The servicing division, NDS, which collects student-loan payments for the US Department of Education and others, does not fit the first half of that claim.
- Profit before tax at NDS: $16.5 million, against $46.3 million a year ago
- Margin excluding one-offs and deal amortisation: 10.0%, against 11.0%
- Other costs, mainly software and professional fees: 14.7% of revenue, against 7.2%
- Department revenue excluding one-off payments: down 4%, by our math
One part did improve. The Department borrower count rose to 10.78 million from 10.68 million, the first gain after six quarterly declines. Nelnet said it "does not expect to transfer additional volume to this servicer", meaning the new servicer that took its borrowers in 2025.
What to watch: the Department borrower count in the fourth quarter. A second rise would show the losses have stopped, but the contract's five-year base period still ends in 2028.
Risks this quarter didn't answer
Four standing risks got little new evidence in this quarter's filings, so each item below names the reading that would move it.
- Solar tax-credit partnerships: Nelnet's own share of losses shrank to almost nothing, but it has not restated its 2025-2030 income target; the annual report will show it.
- School payments and software (NBS): margin excluding interest income reached 22.0%, against 20.8%, but education services revenue fell 6%; the fourth quarter will show if the gain holds.
- Interest-rate mismatch: swaps that cover $1.15 billion of student loans against a gap between two rate benchmarks expire in November and December; the next filing will show replacements.
- Funding lines: Nelnet cut its student-loan warehouse line to $475 million and still relies on Union Bank, a related party holding $532 million of loan stakes; renewal terms will show the risk.
👓 Other Themes
Nelnet Launches a Service for Scholarship Tax Credits
In October Nelnet announced FACTS Compass, which chief executive Jeff Noordhoek said will "help scholarship granting organizations support students in public and private schools" under the new Federal Scholarship Tax Credit. Its BenefitEd unit offers employers a payroll deduction option for the program. Nelnet gave no revenue figure, so nobody can yet judge what the product earns.
Lower Interest Rates Cut Nelnet's Funding Bill
Falling market rates helped Nelnet's lending this quarter. Its interest expense dropped 11% from a year ago, because it owed less debt and paid lower rates, the company said. But lower rates also trimmed interest on its cash and investments, to $42.4 million from $43.2 million.
💲 Other KPIs
Nelnet keeps cutting its share count: 35.4 million shares at September 30, 1.6% fewer than a year ago. It spent $53.1 million on buybacks in the quarter, about twice the year-ago sum. Another $37.0 million followed by November 5, and 3.8 million shares remain under its authority.
Debt keeps shrinking: bonds and notes payable fell 13.5% from a year ago. The old student loans pay off, and the bonds backed by them go too. Nelnet Bank now funds $781 million of moved loans with deposits instead. The $435 million unsecured credit line stays unused.
The reinsurance arm, which takes on part of other insurers' property and casualty risks, almost doubled its premiums, up 92%. Growth with existing carriers and a smaller share passed to other reinsurers drove it, the company said. Losses and costs took 80% of premiums, against 86% a year ago.
🔮 Guidance
Unchanged. Nelnet still expects a tax rate of 22.5% to 24.5% for the rest of the year. Its third-quarter rate came in at 24.57%, just above that range. So the plan points to a lower rate in the fourth quarter. Nelnet measures the rate on profit before its solar partners' share of losses.
New. The board raised the quarterly dividend 9%, to $0.36 a share, payable on December 15. Nelnet paid $0.33 in each of the last four quarters. That makes this the second increase in five quarters, and the payment still takes a small part of quarterly profit.
❓ Key Questions
Who sells Nelnet its Pay Later debts, and how long?
One unnamed partner supplies most of the consumer debts that lifted AGM's earnings. The contract's length and volume commitments decide how long that income lasts, and Nelnet has not disclosed them.
How much of the higher loss reserve is product mix?
Nelnet says the reserve rose because it bought riskier non-Pay Later loans and because Pay Later debts aged. It has not split the two, so readers cannot test its claim that credit quality held.
Does the $163 million solar income target still stand?
Nelnet once expected that pre-tax income from its solar partnerships over 2025-2030. A new law speeds the end of solar credits, and no later filing in these materials repeats the target.
Will the Department extend the servicing contract after 2028?
The Department of Education contract's five-year base period started in April 2023. Borrower numbers just rose after six quarterly declines, but extensions are the Department's choice.
Will AGM hand more student loans to Nelnet Bank?
Transfers from AGM supplied most of the bank's loan growth this year. A plan for further transfers, or a target for the bank's own lending, would show how much of its growth is new business.