Citigroup Selling $2.5 billion in Student Loans to Discover

Discover Financial Services (NYSE: DFS) announced Wednesday that its Discover Bank unit had entered into an agreement to purchase $2.5 billion in student loans from Citibank (NYSE: C).

Discover said in an SEC filing that it would be paying 99 percent of the face value of the private education loans. The company said that it would finance the deal with existing cash and current funding channels. The deal is expected to close by the end of September.

Discover noted that approximately 80 percent of the portfolio consists of school-certified loans issued to four-year college or graduate student borrowers. The remainder of the portfolio is comprised of primarily private consolidation loans and professional study loans, such as for medical residency and bar study. The average FICO score on the portfolio is 740. Approximately 80 percent of the loans are in active repayment, and nearly 70 percent are cosigned.