12:56 PM EDT, 10/30/2025 (MT Newswires) -- Navient ( NAVI ) is managing higher expected credit losses on older loan portfolios but is optimistic about opportunities arising from federal student loan reform, Morgan Stanley said in a Wednesday note.

The company's Q3 EPS missed expectations mainly due to increased loan loss reserves, which reflect its projection of a longer forward life for loan losses, especially on the legacy back book of loans from years ago, Morgan Stanley analysts said.

Navient ( NAVI ) was expecting credit performance to return to pre-Covid levels, which is no longer the case, and this partly drives an increase in current expected credit losses loss expectations of $151 million, the analysts said.

Net charge-offs, representing loans that are unlikely to be collected, increased slightly due borrowers exiting disaster forbearance from previous quarters, the analysts said. They noted that, on the positive side, early- and late-stage delinquency payments showed sequential improvement.

Navient's ( NAVI ) loan originations remain strong, with refinancing volume up 102% year over year, which could provide "significant" growth potential in 2026, according to the note. The company is optimistic about opportunities arising from federal student loan reform, which could add 9% to 10% of the top 200 schools to their customer base in the next two quarters, the note said.

Morgan Stanley kept the company's stock rating at equal-weight and reduced the price target to $13 from $14.

Price: 12.15, Change: +0.48, Percent Change: +4.11