Results of Operations
GAAP Income Statements (Unaudited)
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Three Months Ended June 30, |
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|
Increase
(Decrease) |
|
|
Six Months Ended June 30, |
|
|
Increase
(Decrease) |
|
(In millions, except per share data) |
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
Interest income |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private Education Loans |
|
$ |
273 |
|
|
$ |
273 |
|
|
$ |
— |
|
|
|
— |
% |
|
$ |
550 |
|
|
$ |
562 |
|
|
$ |
(12 |
) |
|
|
(2 |
)% |
FFELP Loans |
|
|
391 |
|
|
|
483 |
|
|
|
(92 |
) |
|
|
(19 |
) |
|
|
791 |
|
|
|
975 |
|
|
|
(184 |
) |
|
|
(19 |
) |
Cash and investments |
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|
18 |
|
|
|
22 |
|
|
|
(4 |
) |
|
|
(18 |
) |
|
|
35 |
|
|
|
43 |
|
|
|
(8 |
) |
|
|
(19 |
) |
Total interest income |
|
|
682 |
|
|
|
778 |
|
|
|
(96 |
) |
|
|
(12 |
) |
|
|
1,376 |
|
|
|
1,580 |
|
|
|
(204 |
) |
|
|
(13 |
) |
Total interest expense |
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|
560 |
|
|
|
650 |
|
|
|
(90 |
) |
|
|
(14 |
) |
|
|
1,123 |
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|
|
1,322 |
|
|
|
(199 |
) |
|
|
(15 |
) |
Net interest income |
|
|
122 |
|
|
|
128 |
|
|
|
(6 |
) |
|
|
(5 |
) |
|
|
253 |
|
|
|
258 |
|
|
|
(5 |
) |
|
|
(2 |
) |
Less: provisions for loan losses |
|
|
26 |
|
|
|
37 |
|
|
|
(11 |
) |
|
|
(30 |
) |
|
|
54 |
|
|
|
67 |
|
|
|
(13 |
) |
|
|
(19 |
) |
Net interest income (loss) after
provisions for loan losses |
|
|
96 |
|
|
|
91 |
|
|
|
5 |
|
|
|
5 |
|
|
|
199 |
|
|
|
191 |
|
|
|
8 |
|
|
|
4 |
|
Other income (loss): |
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|
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|
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|
|
Servicing revenue |
|
|
10 |
|
|
|
14 |
|
|
|
(4 |
) |
|
|
(29 |
) |
|
|
21 |
|
|
|
27 |
|
|
|
(6 |
) |
|
|
(22 |
) |
Asset recovery and business
processing revenue |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
23 |
|
|
|
(23 |
) |
|
|
(100 |
) |
Other income |
|
|
17 |
|
|
|
19 |
|
|
|
(2 |
) |
|
|
(11 |
) |
|
|
22 |
|
|
|
33 |
|
|
|
(11 |
) |
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|
(33 |
) |
Gains (losses) on derivative and
hedging activities, net |
|
|
1 |
|
|
|
(5 |
) |
|
|
6 |
|
|
|
120 |
|
|
|
6 |
|
|
|
(30 |
) |
|
|
36 |
|
|
|
120 |
|
Total other income |
|
|
28 |
|
|
|
28 |
|
|
|
— |
|
|
|
— |
|
|
|
49 |
|
|
|
53 |
|
|
|
(4 |
) |
|
|
(8 |
) |
Expenses: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
82 |
|
|
|
100 |
|
|
|
(18 |
) |
|
|
(18 |
) |
|
|
171 |
|
|
|
227 |
|
|
|
(56 |
) |
|
|
(25 |
) |
Goodwill and acquired intangible
assets impairment and
amortization expense |
|
|
— |
|
|
|
1 |
|
|
|
(1 |
) |
|
|
(100 |
) |
|
|
4 |
|
|
|
2 |
|
|
|
2 |
|
|
|
100 |
|
Restructuring/other
reorganization expenses |
|
|
3 |
|
|
|
— |
|
|
|
3 |
|
|
|
100 |
|
|
|
2 |
|
|
|
3 |
|
|
|
(1 |
) |
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|
(33 |
) |
Total expenses |
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|
85 |
|
|
|
101 |
|
|
|
(16 |
) |
|
|
(16 |
) |
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|
177 |
|
|
|
232 |
|
|
|
(55 |
) |
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|
(24 |
) |
Income before income tax
expense |
|
|
39 |
|
|
|
18 |
|
|
|
21 |
|
|
|
117 |
|
|
|
71 |
|
|
|
12 |
|
|
|
59 |
|
|
|
492 |
|
Income tax expense |
|
|
14 |
|
|
|
4 |
|
|
|
10 |
|
|
|
250 |
|
|
|
29 |
|
|
|
1 |
|
|
|
28 |
|
|
|
2,800 |
|
Net income |
|
$ |
25 |
|
|
$ |
14 |
|
|
$ |
11 |
|
|
|
79 |
% |
|
$ |
42 |
|
|
$ |
11 |
|
|
$ |
31 |
|
|
|
282 |
% |
Basic earnings per
common share |
|
$ |
.27 |
|
|
$ |
.14 |
|
|
$ |
.13 |
|
|
|
93 |
% |
|
$ |
.44 |
|
|
$ |
.11 |
|
|
$ |
.33 |
|
|
|
300 |
% |
Diluted earnings per
common share |
|
$ |
.26 |
|
|
$ |
.13 |
|
|
$ |
.13 |
|
|
|
100 |
% |
|
$ |
.44 |
|
|
$ |
.11 |
|
|
$ |
.33 |
|
|
|
300 |
% |
Dividends per common share |
|
$ |
.16 |
|
|
$ |
.16 |
|
|
$ |
— |
|
|
|
— |
% |
|
$ |
.32 |
|
|
$ |
.32 |
|
|
$ |
— |
|
|
|
— |
% |
GAAP Comparison of Second-Quarter 2026 Results with Second-Quarter 2025
Three Months Ended June 30, 2026 Compared with Three Months Ended June 30, 2025
For the three months ended June 30, 2026, net income was $25 million, or $0.26 diluted earnings per common share, compared with net income of $14 million, or $0.13 diluted earnings per common share, for the year-ago period.
The primary contributors to the change in net income are as follows:
• Net interest income decreased by $6 million primarily due to the paydown of the FFELP portfolio and the Private Education Loan portfolio's changing product mix with Refinance Loans increasing as a percentage of the portfolio. The Refinance Loan portfolio earns a lower net interest margin compared to the non-refinance portfolio, due to lower expected credit losses, which reduces the overall net interest margin.
• Provisions for loan losses decreased $11 million from $37 million to $26 million.
○ The provision for Private Loan losses decreased $11 million from $29 million to $18 million.
○ The provision for FFELP Loan losses remained unchanged at $8 million.
The provision for Private Loan losses of $18 million in the current period included $14 million associated with loan originations and $23 million related to a general reserve build primarily as a result of portfolio performance trends. While credit performance improved on a sequential basis during the quarter, delinquency and default levels in the Private Education Loan portfolio remain elevated. This was partially offset by a $19 million decrease as a result of classifying $528 million of loans as held for sale as of June 30, 2026. When loans are classified as held for sale the corresponding allowance for loan losses is reversed through provision for loan losses and such loans are carried at the lower of fair value or cost basis. These loans are carried at their cost basis as of June 30, 2026. The provision of $29 million in the year-ago quarter included $7 million associated with loan originations and $22 million related to a general reserve build primarily as a result of an increase in delinquency balances as well as a weakening in the forecasted macroeconomic metrics used to estimate expected losses.
The provision for FFELP Loan losses of $8 million in the current period was primarily the result of increased charge-offs due to prior disaster forbearance volume, as well as the continued extension of the portfolio. The provision of $8 million in the year-ago quarter was primarily the result of an increase in delinquency balances.
• Other income decreased $2 million primarily related to a $13 million decrease in transition services revenue we had earned related to our various strategic initiatives. The transition services related to the outsourcing of loan servicing and the sale of our healthcare services business ended in May 2025. The transition services related to the sale of our government services business ended in October 2025. This $13 million decrease was partially offset by a $12 million gain on an investment in the current period.
• Net gains on derivative and hedging activities increased $6 million due primarily to interest rate fluctuations. Valuations of derivative instruments fluctuate based upon many factors including changes in interest rates and other market factors. As a result, net gains and losses on derivative and hedging activities may vary significantly in future periods.
• Operating expenses decreased $18 million, $13 million of which was due to a decline in expenses in connection with providing transition services related to our various strategic initiatives. As of October 2025 we had no further obligations to provide these transition services. There was a $5 million increase in marketing and other expenses associated with the growth of our consumer lending businesses. The remaining $10 million decrease primarily relates to cost saving initiatives implemented, which have reduced our operating costs mostly in connection with our shared service functions and corporate footprint.
• Restructuring and other reorganization expenses increased $3 million primarily due to an increase in severance-related costs incurred in connection with the various strategic initiatives that have been and continue to be implemented to simplify the company, continue to reduce our expense base and enhance our flexibility.
We repurchased 0.3 million and 1.9 million shares of our common stock during the second quarters of 2026 and 2025, respectively. As a result of repurchases, our average outstanding diluted shares decreased by 6 million common shares (or 6%) from the year-ago period.
GAAP Comparison of Six Months Ended June 30, 2026 Results with Six Months Ended June 30, 2025
For the six months ended June 30, 2026, net income was $42 million, or $0.44 diluted earnings per common share, compared with net income of $11 million, or $0.11 diluted earnings per common share, for the year-ago period.
The primary contributors to the change in net income are as follows:
• Net interest income decreased by $5 million primarily due to the paydown of the FFELP portfolio and the Private Education Loan portfolio's changing product mix with Refinance Loans increasing as a percentage of the portfolio. The Refinance Loan portfolio earns a lower net interest margin compared to the non-refinance portfolio, due to lower expected credit losses, which reduces the overall net interest margin. This was partially offset by a $14 million increase in mark-to-market gains on fair value hedges recorded in interest expense.
• Provisions for loan losses decreased $13 million from $67 million to $54 million.
○ The provision for Private Loan losses decreased $14 million from $51 million to $37 million.
○ The provision for FFELP Loan losses increased $1 million from $16 million to $17 million.
The provision for Private Loan losses of $37 million in the current period included $26 million associated with loan originations and $30 million related to a general reserve build primarily as a result of portfolio performance trends. While credit performance improved on a sequential basis during the period, delinquency and default levels in the Private Education Loan portfolio remain elevated. This was partially offset by a $19 million decrease as a result of classifying $528 million of loans as held for sale as of June 30, 2026. When loans are classified as held for sale the corresponding allowance for loan losses is reversed through provision for loan losses and such loans are carried at the lower of fair value or cost basis. These loans are carried at their cost basis as of June 30, 2026. The provision of $51 million in the year-ago quarter included $14 million associated with loan originations and $37 million related to a general reserve build primarily as a result of an increase in delinquency balances as well as a weakening in the forecasted macroeconomic metrics used to estimate expected losses.
The provision for FFELP Loan losses of $17 million in the current period was primarily the result of increased charge-offs due to prior disaster forbearance volume, as well as the continued extension of the portfolio. The provision of $16 million in the year-ago quarter was primarily the result of an increase in delinquency balances.
• Asset recovery and business processing revenue decreased $23 million as a result of the sale of our government services business in February 2025. With the sale of our government services business, Navient no longer provides business processing segment services.
• Other income decreased $11 million primarily related to a $24 million decrease in transition services revenue we had earned related to our various strategic initiatives. The transition services related to the outsourcing of loan servicing and the sale of our healthcare services business ended in May 2025. The transition services related to the sale of our government services business ended in October 2025. This $24 million decrease was partially offset by a $12 million gain on an investment in the current period.
• Net gains on derivative and hedging activities increased $36 million due primarily to interest rate fluctuations. Valuations of derivative instruments fluctuate based upon many factors including changes in interest rates and other market factors. As a result, net gains and losses on derivative and hedging activities may vary significantly in future periods.
• Operating expenses decreased $56 million, $23 million of which was due to a decline in business processing expenses as a result of the sale of our government services business in February 2025 ($20 million of the reduction is in the Business Processing segment and $3 million of the reduction is in the Other segment). In addition, there was a $23 million decline in expenses in connection with providing transition services related to our various strategic initiatives. As of October 2025 we had no further obligations to provide these transition services. There was an $11 million increase in marketing and other expenses associated with the growth of our consumer lending businesses. The remaining $21 million decrease primarily relates to cost saving initiatives implemented, which have reduced our operating costs mostly in connection with our shared service functions and corporate footprint.
• Restructuring and other reorganization expenses decreased $1 million primarily due to a decrease in severance-related costs incurred in connection with the various strategic initiatives that have been and continue to be implemented to simplify the company, continue to reduce our expense base and enhance our flexibility.
• The effective income tax rates for the current year and year-ago periods were 41% and 9%, respectively. The movement in the effective income tax rate was primarily driven by state tax expense in connection with uncertain tax positions as well as changes in the valuation allowance attributed to disallowed interest expense carryovers.
We repurchased 2.6 million and 4.5 million shares of our common stock during the six months ended June 30, 2026 and June 30, 2025, respectively. As a result of repurchases, our average outstanding diluted shares decreased by 7 million common shares (or 7%) from the year-ago period.
Segment Results
Consumer Lending Segment
The following table presents Core Earnings results for our Consumer Lending segment.
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Three Months Ended June 30, |
|
|
% Increase
(Decrease) |
|
|
Six Months Ended June 30, |
|
|
% Increase
(Decrease) |
|
(Dollars in millions) |
|
2026 |
|
|
2025 |
|
|
2026 vs. 2025 |
|
|
2026 |
|
|
2025 |
|
|
2026 vs. 2025 |
|
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private Education Loans |
|
$ |
273 |
|
|
$ |
273 |
|
|
|
— |
% |
|
$ |
550 |
|
|
$ |
562 |
|
|
|
(2 |
)% |
Cash and investments |
|
|
5 |
|
|
|
5 |
|
|
|
— |
|
|
|
9 |
|
|
|
10 |
|
|
|
(10 |
) |
Interest income |
|
|
278 |
|
|
|
278 |
|
|
|
— |
|
|
|
559 |
|
|
|
572 |
|
|
|
(2 |
) |
Interest expense |
|
|
185 |
|
|
|
183 |
|
|
|
1 |
|
|
|
365 |
|
|
|
364 |
|
|
|
— |
|
Net interest income |
|
|
93 |
|
|
|
95 |
|
|
|
(2 |
) |
|
|
194 |
|
|
|
208 |
|
|
|
(7 |
) |
Less: provision for loan
losses |
|
|
18 |
|
|
|
29 |
|
|
|
(38 |
) |
|
|
37 |
|
|
|
51 |
|
|
|
(27 |
) |
Net interest income
after provision for loan
losses |
|
|
75 |
|
|
|
66 |
|
|
|
14 |
|
|
|
157 |
|
|
|
157 |
|
|
|
— |
|
Total other income |
|
|
2 |
|
|
|
3 |
|
|
|
(33 |
) |
|
|
4 |
|
|
|
6 |
|
|
|
(33 |
) |
Direct operating expenses |
|
|
42 |
|
|
|
36 |
|
|
|
17 |
|
|
|
81 |
|
|
|
70 |
|
|
|
16 |
|
Income before income
tax expense |
|
|
35 |
|
|
|
33 |
|
|
|
6 |
|
|
|
80 |
|
|
|
93 |
|
|
|
(14 |
) |
Income tax expense |
|
|
8 |
|
|
|
7 |
|
|
|
14 |
|
|
|
18 |
|
|
|
21 |
|
|
|
(14 |
) |
Net income |
|
$ |
27 |
|
|
$ |
26 |
|
|
|
4 |
% |
|
$ |
62 |
|
|
$ |
72 |
|
|
|
(14 |
)% |
Comparison of Second-Quarter 2026 Results with Second-Quarter 2025
•Originated $815 million of Private Education Loans, a 63% increase compared to $500 million.
oRefinance Loan originations were $735 million compared to $443 million.
oIn-school loan originations were $80 million compared to $57 million.
•Net income was $27 million compared to $26 million.
•Net interest income decreased $2 million, primarily due to the changing product mix with Refinance Loans increasing as a percentage of the portfolio. The Refinance Loan portfolio earns a lower net interest margin compared to the non-refinance portfolio, due to lower expected credit losses, which reduces the overall net interest margin.
•Provision for loan losses decreased $11 million. The provision for loan losses of $18 million in the current quarter included $14 million associated with loan originations and $23 million related to a general reserve build primarily as a result of portfolio performance trends. While credit performance improved on a sequential basis during the quarter, delinquency and default levels in the Private Education Loan portfolio remain elevated. This was partially offset by a $19 million decrease as a result of classifying $528 million of loans as held for sale as of June 30, 2026. When loans are classified as held for sale the corresponding allowance for loan losses is reversed and such loans are carried at the lower of fair value or cost basis. These loans are carried at their cost basis as of June 30, 2026. The provision for loan losses of $29 million in the year-ago quarter included $7 million in connection with loan originations and $22 million related to a general reserve build (primarily as a result of an increase in delinquency balances as well as a weakening in the forecasted macroeconomic metrics used to estimate expected losses).
oNet charge-offs were $71 million, down $9 million compared to $80 million in the year-ago quarter.
oPrivate Education Loan delinquencies greater than 90 days: $349 million, down $110 million from $459 million.
oPrivate Education Loan forbearances: $271 million, up $21 million from $250 million.
•Expenses increased $6 million primarily reflecting marketing and other expenses associated with the growth of our consumer lending businesses.
Key performance metrics are as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
(Dollars in millions) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
Segment net interest margin |
|
|
2.26 |
% |
|
|
2.32 |
% |
|
|
2.37 |
% |
|
|
2.54 |
% |
Private Education Loans (including Refinance Loans): |
|
|
|
|
|
|
|
|
|
|
|
|
Private Education Loan spread |
|
|
2.38 |
% |
|
|
2.42 |
% |
|
|
2.48 |
% |
|
|
2.64 |
% |
Provision for loan losses |
|
$ |
17 |
|
|
$ |
29 |
|
|
$ |
35 |
|
|
$ |
51 |
|
Net charge-offs |
|
$ |
71 |
|
|
$ |
80 |
|
|
$ |
143 |
|
|
$ |
152 |
|
Net charge-off rate(1) |
|
|
1.84 |
% |
|
|
2.08 |
% |
|
|
1.87 |
% |
|
|
1.98 |
% |
Greater than 30-days delinquency rate(1) |
|
|
5.4 |
% |
|
|
6.4 |
% |
|
|
5.4 |
% |
|
|
6.4 |
% |
Greater than 90-days delinquency rate(1) |
|
|
2.4 |
% |
|
|
3.0 |
% |
|
|
2.4 |
% |
|
|
3.0 |
% |
Forbearance rate(1) |
|
|
1.8 |
% |
|
|
1.6 |
% |
|
|
1.8 |
% |
|
|
1.6 |
% |
Average Private Education Loans |
|
$ |
15,985 |
|
|
$ |
15,992 |
|
|
$ |
15,971 |
|
|
$ |
16,075 |
|
Ending Private Education Loans, net |
|
$ |
15,674 |
|
|
$ |
15,530 |
|
|
$ |
15,674 |
|
|
$ |
15,530 |
|
Private Education Refinance Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs |
|
$ |
18 |
|
|
$ |
18 |
|
|
$ |
34 |
|
|
$ |
33 |
|
Greater than 90-days delinquency rate |
|
|
.8 |
% |
|
|
.8 |
% |
|
|
.8 |
% |
|
|
.8 |
% |
Average balance of Private Education Refinance Loans |
|
$ |
9,271 |
|
|
$ |
8,531 |
|
|
$ |
9,145 |
|
|
$ |
8,497 |
|
Ending balance of Private Education Refinance Loans |
|
$ |
9,258 |
|
|
$ |
8,469 |
|
|
$ |
9,258 |
|
|
$ |
8,469 |
|
Private Education Refinance Loan originations |
|
$ |
735 |
|
|
$ |
443 |
|
|
$ |
1,513 |
|
|
$ |
914 |
|
(1)Second-quarter 2026 excludes $528 million of loans, and the corresponding delinquencies, forbearances, and charge-offs, that were classified as held for sale as of June 30, 2026.
Net Interest Margin
The following table details the net interest margin.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
Private Education Loan yield |
|
|
6.85 |
% |
|
|
6.85 |
% |
|
|
6.94 |
% |
|
|
7.05 |
% |
Private Education Loan cost of funds |
|
|
(4.47 |
) |
|
|
(4.43 |
) |
|
|
(4.46 |
) |
|
|
(4.41 |
) |
Private Education Loan spread |
|
|
2.38 |
|
|
|
2.42 |
|
|
|
2.48 |
|
|
|
2.64 |
|
Other interest-earning asset spread impact |
|
|
(.12 |
) |
|
|
(.10 |
) |
|
|
(.11 |
) |
|
|
(.10 |
) |
Net interest margin(2) |
|
|
2.26 |
% |
|
|
2.32 |
% |
|
|
2.37 |
% |
|
|
2.54 |
% |
|
|
(2)The average balances of the interest-earning assets for the respective periods are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
(Dollars in millions) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
Private Education Loans |
|
$ |
15,985 |
|
|
$ |
15,992 |
|
|
$ |
15,971 |
|
|
$ |
16,075 |
|
Other interest-earning assets |
|
|
551 |
|
|
|
482 |
|
|
|
542 |
|
|
|
485 |
|
Total Private Education Loan interest-earning assets |
|
$ |
16,536 |
|
|
$ |
16,474 |
|
|
$ |
16,513 |
|
|
$ |
16,560 |
|
The 6 basis point decrease in the net interest margin in second-quarter 2026 is primarily the result of the continued shift of the Refinance Loan portfolio becoming a higher percentage of the overall Private Education Loan portfolio. The Refinance Loan portfolio earns a lower net interest margin compared to the non-refinance loan portfolio, due to lower expected credit losses, which reduces the overall net interest margin.
As of June 30, 2026, our Private Education Loan portfolio totaled $15.7 billion, comprised of $9.3 billion of refinance loans and $6.4 billion of non-refinance loans. The weighted-average life of these portfolios as of June 30, 2026 was 5 years and 4 years, respectively, assuming a Constant Prepayment Rate (CPR) of 10% and 8%, respectively.
Provision for Loan Losses
The provision for loan losses decreased $11 million. The provision for loan losses of $18 million in second quarter 2026 included $14 million associated with loan originations and $23 million related to a general reserve build primarily as a result of portfolio performance trends. While credit performance improved on a sequential basis during the quarter, delinquency and default levels in the Private Education Loan portfolio remain elevated. This was partially offset by a $19 million decrease as a result of classifying $528 million of loans as held for sale as of June 30, 2026. When loans are classified as held for sale the corresponding allowance for loan losses is reversed through provision for loan losses and such loans are carried at the lower of fair value or cost basis. These loans are carried at their cost basis as of June 30, 2026. The provision for loan losses of $29 million in the year-ago period included $7 million in connection with loan originations and $22 million related to a general reserve build primarily as a result of an increase in delinquency balances as well as a weakening in the forecasted macroeconomic metrics used to estimate expected losses.
Operating Expenses
Operating expenses for our consumer lending segment include costs to originate, acquire, service and collect on our consumer loan portfolio. Operating expenses increased $6 million primarily reflecting marketing and other expenses associated with the growth of our consumer lending businesses.
Federal Education Loans Segment
The following table presents Core Earnings results for our Federal Education Loans segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
% Increase
(Decrease) |
|
|
Six Months Ended June 30, |
|
|
% Increase
(Decrease) |
|
(Dollars in millions) |
|
2026 |
|
|
2025 |
|
|
2026 vs. 2025 |
|
|
2026 |
|
|
2025 |
|
|
2026 vs. 2025 |
|
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFELP Loans |
|
$ |
391 |
|
|
$ |
483 |
|
|
|
(19 |
)% |
|
$ |
791 |
|
|
$ |
975 |
|
|
|
(19 |
)% |
Cash and investments |
|
|
8 |
|
|
|
10 |
|
|
|
(20 |
) |
|
|
17 |
|
|
|
20 |
|
|
|
(15 |
) |
Total interest income |
|
|
399 |
|
|
|
493 |
|
|
|
(19 |
) |
|
|
808 |
|
|
|
995 |
|
|
|
(19 |
) |
Total interest expense |
|
|
351 |
|
|
|
438 |
|
|
|
(20 |
) |
|
|
714 |
|
|
|
892 |
|
|
|
(20 |
) |
Net interest income |
|
|
48 |
|
|
|
55 |
|
|
|
(13 |
) |
|
|
94 |
|
|
|
103 |
|
|
|
(9 |
) |
Less: provision for loan
losses |
|
|
8 |
|
|
|
8 |
|
|
|
— |
|
|
|
17 |
|
|
|
16 |
|
|
|
6 |
|
Net interest income after
provision for loan losses |
|
|
40 |
|
|
|
47 |
|
|
|
(15 |
) |
|
|
77 |
|
|
|
87 |
|
|
|
(11 |
) |
Total other income |
|
|
8 |
|
|
|
10 |
|
|
|
(20 |
) |
|
|
17 |
|
|
|
20 |
|
|
|
(15 |
) |
Direct operating expenses |
|
|
15 |
|
|
|
17 |
|
|
|
(12 |
) |
|
|
31 |
|
|
|
37 |
|
|
|
(16 |
) |
Income before income tax expense |
|
|
33 |
|
|
|
40 |
|
|
|
(18 |
) |
|
|
63 |
|
|
|
70 |
|
|
|
(10 |
) |
Income tax expense |
|
|
7 |
|
|
|
10 |
|
|
|
(30 |
) |
|
|
15 |
|
|
|
16 |
|
|
|
(6 |
) |
Net income |
|
$ |
26 |
|
|
$ |
30 |
|
|
|
(13 |
)% |
|
$ |
48 |
|
|
$ |
54 |
|
|
|
(11 |
)% |
Comparison of Second-Quarter 2026 Results with Second-Quarter 2025
•Net income was $26 million compared to $30 million.
•Net interest income decreased $7 million primarily due to the paydown of the loan portfolio.
•Provision for loan losses remained unchanged at $8 million. The provision for loan losses of $8 million in the current period was primarily the result of increased charge-offs due to prior disaster forbearance volume, as well as the continued extension of the portfolio. The $8 million of provision for loan losses in the year-ago quarter was primarily the result of an increase in delinquency balances.
oNet charge-offs were $10 million compared to $8 million.
oDelinquencies greater than 90 days were $1.8 billion compared to $2.5 billion.
oForbearances were $3.3 billion compared to $3.7 billion.
•Expenses were $2 million lower primarily as a result of the outsourcing of the loan servicing of our portfolio to a third party in 2024. This created a variable cost structure resulting in a reduction in expenses as the portfolio paid down.
Key performance metrics are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
(Dollars in millions) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
Segment net interest margin |
|
|
.68 |
% |
|
|
.70 |
% |
|
|
.67 |
% |
|
|
.66 |
% |
FFELP Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
FFELP Loan spread |
|
|
.76 |
% |
|
|
.75 |
% |
|
|
.74 |
% |
|
|
.71 |
% |
Provision for loan losses |
|
$ |
8 |
|
|
$ |
8 |
|
|
$ |
17 |
|
|
$ |
16 |
|
Net charge-offs |
|
$ |
10 |
|
|
$ |
8 |
|
|
$ |
27 |
|
|
$ |
14 |
|
Net charge-off rate |
|
|
.18 |
% |
|
|
.14 |
% |
|
|
.24 |
% |
|
|
.12 |
% |
Greater than 30-days delinquency rate |
|
|
14.7 |
% |
|
|
19.0 |
% |
|
|
14.7 |
% |
|
|
19.0 |
% |
Greater than 90-days delinquency rate |
|
|
8.0 |
% |
|
|
10.1 |
% |
|
|
8.0 |
% |
|
|
10.1 |
% |
Forbearance rate |
|
|
12.8 |
% |
|
|
12.8 |
% |
|
|
12.8 |
% |
|
|
12.8 |
% |
Average FFELP Loans |
|
$ |
27,045 |
|
|
$ |
30,327 |
|
|
$ |
27,469 |
|
|
$ |
30,619 |
|
Ending FFELP Loans, net |
|
$ |
26,575 |
|
|
$ |
29,618 |
|
|
$ |
26,575 |
|
|
$ |
29,618 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Margin
The following table details the net interest margin.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
FFELP Loan yield |
|
|
5.54 |
% |
|
|
6.13 |
% |
|
|
5.56 |
% |
|
|
6.17 |
% |
Floor Income |
|
|
.25 |
|
|
|
.25 |
|
|
|
.25 |
|
|
|
.25 |
|
FFELP Loan net yield |
|
|
5.79 |
|
|
|
6.38 |
|
|
|
5.81 |
|
|
|
6.42 |
|
FFELP Loan cost of funds |
|
|
(5.03 |
) |
|
|
(5.63 |
) |
|
|
(5.07 |
) |
|
|
(5.71 |
) |
FFELP Loan spread |
|
|
.76 |
|
|
|
.75 |
|
|
|
.74 |
|
|
|
.71 |
|
Other interest-earning asset spread impact |
|
|
(.08 |
) |
|
|
(.05 |
) |
|
|
(.07 |
) |
|
|
(.05 |
) |
Net interest margin(1) |
|
|
.68 |
% |
|
|
.70 |
% |
|
|
.67 |
% |
|
|
.66 |
% |
(1)The average balances of the interest-earning assets for the respective periods are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
(Dollars in millions) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
FFELP Loans |
|
$ |
27,045 |
|
|
$ |
30,327 |
|
|
$ |
27,469 |
|
|
$ |
30,619 |
|
Other interest-earning assets |
|
|
977 |
|
|
|
861 |
|
|
|
949 |
|
|
|
875 |
|
Total FFELP Loan interest-earning assets |
|
$ |
28,022 |
|
|
$ |
31,188 |
|
|
$ |
28,418 |
|
|
$ |
31,494 |
|
As of June 30, 2026, our FFELP Loan portfolio totaled $26.5 billion. The weighted-average life of this portfolio as of June 30, 2026 was 8 years assuming a CPR of 3% through 2028 and 5% thereafter.
Floor Income
The following table analyzes, on a Core Earnings basis, the ability of the FFELP Loans in our portfolio to earn Floor Income after June 30, 2026 and 2025, based on interest rates as of those dates.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in billions) |
|
June 30, 2026 |
|
|
June 30, 2025 |
|
Education loans eligible to earn Floor Income |
|
$ |
26.4 |
|
|
$ |
29.4 |
|
Less: post-March 31, 2006 disbursed loans required to rebate
Floor Income |
|
|
(12.8 |
) |
|
|
(14.2 |
) |
Less: economically hedged Floor Income |
|
|
(.6 |
) |
|
|
(.7 |
) |
Education loans eligible to earn Floor Income after rebates and
economically hedged |
|
$ |
13.0 |
|
|
$ |
14.5 |
|
Education loans earning Floor Income |
|
$ |
5.1 |
|
|
$ |
4.9 |
|
The following table presents a projection of the average balance of FFELP Consolidation Loans for which Fixed Rate Floor Income has been economically hedged with derivatives for the period July 1, 2026 to December 31, 2028.
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in billions) |
|
July 1, 2026
to
December 31, 2026 |
|
|
2027 |
|
|
2028 |
|
Average balance of FFELP Consolidation Loans
whose Floor Income is economically hedged |
|
$ |
.6 |
|
|
$ |
.3 |
|
|
$ |
.2 |
|
|
|
|
|
|
|
|
|
|
|
Provision for Loan Losses
Provision for loan losses remained unchanged at $8 million. The $8 million in the current period was the result of increased charge-offs due to prior disaster forbearance volume, as well as the continued extension of the portfolio. The $8 million of provision for loan losses in the year-ago quarter was primarily the result of an increase in delinquency balances.
Operating Expenses
Operating expenses for the Federal Education Loans segment primarily include costs incurred to perform servicing on our FFELP Loan portfolio and federal education loans held by other institutions. Expenses were $2 million lower primarily as a result of the outsourcing of the loan servicing of our portfolio to a third party in 2024. This created a variable cost structure resulting in a reduction in expenses as the portfolio paid down.
Other Segment
The following table presents Core Earnings results for our Other segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
% Increase
(Decrease) |
|
|
Six Months Ended June 30, |
|
|
% Increase
(Decrease) |
|
(Dollars in millions) |
|
2026 |
|
|
2025 |
|
|
2026 vs. 2025 |
|
|
2026 |
|
|
2025 |
|
|
2026 vs. 2025 |
|
Net interest loss after provision for
loan losses |
|
$ |
(21 |
) |
|
$ |
(19 |
) |
|
|
11 |
% |
|
$ |
(42 |
) |
|
$ |
(36 |
) |
|
|
17 |
% |
Other revenue |
|
|
17 |
|
|
|
20 |
|
|
|
(15 |
) |
|
|
22 |
|
|
|
34 |
|
|
|
(35 |
) |
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated shared services
operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated information
technology costs |
|
|
6 |
|
|
|
20 |
|
|
|
(70 |
) |
|
|
16 |
|
|
|
41 |
|
|
|
(61 |
) |
Unallocated corporate costs |
|
|
19 |
|
|
|
27 |
|
|
|
(30 |
) |
|
|
43 |
|
|
|
59 |
|
|
|
(27 |
) |
Total unallocated shared
services operating
expenses |
|
|
25 |
|
|
|
47 |
|
|
|
(47 |
) |
|
|
59 |
|
|
|
100 |
|
|
|
(41 |
) |
Restructuring/other
reorganization expenses |
|
|
3 |
|
|
|
— |
|
|
|
100 |
|
|
|
2 |
|
|
|
3 |
|
|
|
(33 |
) |
Total expenses |
|
|
28 |
|
|
|
47 |
|
|
|
(40 |
) |
|
|
61 |
|
|
|
103 |
|
|
|
(41 |
) |
Loss before income tax benefit |
|
|
(32 |
) |
|
|
(46 |
) |
|
|
(30 |
) |
|
|
(81 |
) |
|
|
(105 |
) |
|
|
(23 |
) |
Income tax benefit |
|
|
(6 |
) |
|
|
(11 |
) |
|
|
(45 |
) |
|
|
(18 |
) |
|
|
(24 |
) |
|
|
(25 |
) |
Net loss |
|
$ |
(26 |
) |
|
$ |
(35 |
) |
|
|
(26 |
)% |
|
$ |
(63 |
) |
|
$ |
(81 |
) |
|
|
(22 |
)% |
Net Interest Loss after Provision for Loan Losses
Net interest loss after provision for loan losses is due to the negative carrying cost of our corporate liquidity portfolio. The amount of the net interest loss is primarily a result of the size of the liquidity portfolio as well as the cost of funds of the debt funding the corporate liquidity portfolio.
Other Revenue
All revenue and expense in connection with the transition services we performed related to the outsourcing of loan servicing and divestiture of our Business Processing segment are included in the Other segment. The transition services related to the outsourcing of loan servicing and the sale of our healthcare services business ended in May 2025. The transition services related to the sale of our government services business ended in October 2025. Other revenue decreased $3 million primarily related to a $13 million decrease in this transition services revenue. This $13 million decrease was partially offset by a $12 million gain on an investment in the current period.
Unallocated Shared Services Operating Expenses
Unallocated shared services operating expenses are costs primarily related to information technology costs related to infrastructure and operations, stock-based compensation expense, accounting, finance, legal, compliance and risk management, regulatory-related expenses, human resources, certain executive management, the Board of Directors, and transition services discussed above under "Other Revenue." Regulatory-related expenses include actual settlement amounts as well as third-party professional fees we incur in connection with such regulatory matters and are presented net of any insurance reimbursements for covered costs related to such matters. Operating expenses decreased $22 million from second-quarter 2025, as a result of a $13 million decline in expenses in connection with providing transition services discussed in “Other revenue” above with the remaining decrease primarily related to the cost reduction efforts in connection with the various strategic initiatives that have been and continue to be implemented to simplify the Company, reduce our expense base and enhance our flexibility. Regulatory-related expenses were $1 million and $1 million in second quarters 2026 and 2025, respectively.
See “Note 10 – Commitments, Contingencies and Guarantees” for a discussion of legal and regulatory matters where it is reasonably possible that a loss contingency exists. The Company is unable to anticipate the timing of a resolution or the impact that certain matters may have on the Company’s consolidated financial position, liquidity, results of operation or cash flows. As a result, it is not possible at this time to estimate a range of potential exposure, if any, for amounts that may be payable in connection with certain matters and reserves have not been established. It is possible that an adverse ruling or rulings may have a material adverse impact on the Company.
Restructuring/Other Reorganization Expenses
These expenses increased $3 million primarily due to an increase in severance-related costs incurred in connection with the various strategic initiatives that have been and continue to be implemented to simplify the Company, reduce our expense base and enhance our flexibility.
Business Processing Segment
The following table presents Core Earnings results for our Business Processing segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
% Increase
(Decrease) |
|
|
Six Months Ended June 30, |
|
|
% Increase
(Decrease) |
|
(Dollars in millions) |
|
2026 |
|
|
2025 |
|
|
2026 vs. 2025 |
|
|
2026 |
|
|
2025 |
|
|
2026 vs. 2025 |
|
Business processing revenue |
|
$ |
— |
|
|
$ |
— |
|
|
|
— |
% |
|
$ |
— |
|
|
$ |
23 |
|
|
|
(100 |
)% |
Direct operating expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
20 |
|
|
|
(100 |
) |
Income before income tax
expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3 |
|
|
|
(100 |
) |
Income tax expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
(100 |
) |
Net income |
|
$ |
— |
|
|
$ |
— |
|
|
|
— |
% |
|
$ |
— |
|
|
$ |
2 |
|
|
|
(100 |
)% |
Comparison of Second-Quarter 2026 Results with Second-Quarter 2025
With the sale of our government services business in February 2025, Navient no longer provides business processing segment services. Navient provided certain transition services in connection with the sale of our business processing businesses. As of October 2025, we had no further obligations to provide these transition services.
Key performance metrics are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
(Dollars in millions) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
Revenue from government services |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
23 |
|
Revenue from healthcare services |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total fee revenue |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
23 |
|
Financial Condition
This section provides information regarding the balances, activity and credit performance metrics of our education loan portfolio.
Summary of Our Education Loan Portfolio
Ending Education Loan Balances, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2026 |
|
(Dollars in millions) |
|
Private
Education
Loans |
|
|
FFELP
Loans |
|
|
Total
Portfolio |
|
Total education loan portfolio: |
|
|
|
|
|
|
|
|
|
In-school(1) |
|
$ |
94 |
|
|
$ |
7 |
|
|
$ |
101 |
|
Grace, repayment and other(2) |
|
|
15,843 |
|
|
|
26,731 |
|
|
|
42,574 |
|
Total |
|
|
15,937 |
|
|
|
26,738 |
|
|
|
42,675 |
|
Allowance for loan losses |
|
|
(263 |
) |
|
|
(163 |
) |
|
|
(426 |
) |
Total education loan portfolio |
|
$ |
15,674 |
|
|
$ |
26,575 |
|
|
$ |
42,249 |
|
% of total |
|
|
37 |
% |
|
|
63 |
% |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2025 |
|
(Dollars in millions) |
|
Private
Education
Loans |
|
|
FFELP
Loans |
|
|
Total
Portfolio |
|
Total education loan portfolio: |
|
|
|
|
|
|
|
|
|
In-school(1) |
|
$ |
108 |
|
|
$ |
7 |
|
|
$ |
115 |
|
Grace, repayment and other(2) |
|
|
15,707 |
|
|
|
28,307 |
|
|
|
44,014 |
|
Total |
|
|
15,815 |
|
|
|
28,314 |
|
|
|
44,129 |
|
Allowance for loan losses |
|
|
(364 |
) |
|
|
(173 |
) |
|
|
(537 |
) |
Total education loan portfolio |
|
$ |
15,451 |
|
|
$ |
28,141 |
|
|
$ |
43,592 |
|
% of total |
|
|
35 |
% |
|
|
65 |
% |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2025 |
|
(Dollars in millions) |
|
Private
Education
Loans |
|
|
FFELP
Loans |
|
|
Total
Portfolio |
|
Total education loan portfolio: |
|
|
|
|
|
|
|
|
|
In-school(1) |
|
$ |
88 |
|
|
$ |
8 |
|
|
$ |
96 |
|
Grace, repayment and other(2) |
|
|
15,790 |
|
|
|
29,792 |
|
|
|
45,582 |
|
Total |
|
|
15,878 |
|
|
|
29,800 |
|
|
|
45,678 |
|
Allowance for loan losses |
|
|
(348 |
) |
|
|
(182 |
) |
|
|
(530 |
) |
Total education loan portfolio |
|
$ |
15,530 |
|
|
$ |
29,618 |
|
|
$ |
45,148 |
|
% of total |
|
|
34 |
% |
|
|
66 |
% |
|
|
100 |
% |
(1)Loans for customers still attending school and are not yet required to make payments on the loan.
(2)Includes loans in deferment or forbearance.
Education Loan Activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2026 |
|
(Dollars in millions) |
|
Private
Education
Loans |
|
|
FFELP
Loans |
|
|
Total
Portfolio |
|
Beginning balance |
|
$ |
15,649 |
|
|
$ |
27,237 |
|
|
$ |
42,886 |
|
Acquisitions (originations and purchases)(1) |
|
|
772 |
|
|
|
— |
|
|
|
772 |
|
Capitalized interest and premium/discount amortization |
|
|
33 |
|
|
|
205 |
|
|
|
238 |
|
Refinancings and consolidations to third parties |
|
|
(112 |
) |
|
|
(204 |
) |
|
|
(316 |
) |
Repayments and other |
|
|
(668 |
) |
|
|
(663 |
) |
|
|
(1,331 |
) |
Ending balance |
|
$ |
15,674 |
|
|
$ |
26,575 |
|
|
$ |
42,249 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2025 |
|
(Dollars in millions) |
|
Private
Education
Loans |
|
|
FFELP
Loans |
|
|
Total
Portfolio |
|
Beginning balance |
|
$ |
15,690 |
|
|
$ |
30,244 |
|
|
$ |
45,934 |
|
Acquisitions (originations and purchases)(1) |
|
|
472 |
|
|
|
— |
|
|
|
472 |
|
Capitalized interest and premium/discount amortization |
|
|
42 |
|
|
|
259 |
|
|
|
301 |
|
Refinancings and consolidations to third parties |
|
|
(54 |
) |
|
|
(222 |
) |
|
|
(276 |
) |
Repayments and other |
|
|
(620 |
) |
|
|
(663 |
) |
|
|
(1,283 |
) |
Ending balance |
|
$ |
15,530 |
|
|
$ |
29,618 |
|
|
$ |
45,148 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2026 |
|
(Dollars in millions) |
|
Private
Education
Loans |
|
|
FFELP
Loans |
|
|
Total
Portfolio |
|
Beginning balance |
|
$ |
15,451 |
|
|
$ |
28,141 |
|
|
$ |
43,592 |
|
Acquisitions (originations and purchases)(1) |
|
|
1,719 |
|
|
|
— |
|
|
|
1,719 |
|
Capitalized interest and premium/discount amortization |
|
|
81 |
|
|
|
403 |
|
|
|
484 |
|
Refinancings and consolidations to third parties |
|
|
(215 |
) |
|
|
(409 |
) |
|
|
(624 |
) |
Repayments and other |
|
|
(1,362 |
) |
|
|
(1,560 |
) |
|
|
(2,922 |
) |
Ending balance |
|
$ |
15,674 |
|
|
$ |
26,575 |
|
|
$ |
42,249 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2025 |
|
(Dollars in millions) |
|
Private
Education
Loans |
|
|
FFELP
Loans |
|
|
Total
Portfolio |
|
Beginning balance |
|
$ |
15,716 |
|
|
$ |
30,852 |
|
|
$ |
46,568 |
|
Acquisitions (originations and purchases)(1) |
|
|
1,103 |
|
|
|
— |
|
|
|
1,103 |
|
Capitalized interest and premium/discount amortization |
|
|
91 |
|
|
|
519 |
|
|
|
610 |
|
Refinancings and consolidations to third parties |
|
|
(109 |
) |
|
|
(424 |
) |
|
|
(533 |
) |
Repayments and other |
|
|
(1,271 |
) |
|
|
(1,329 |
) |
|
|
(2,600 |
) |
Ending balance |
|
$ |
15,530 |
|
|
$ |
29,618 |
|
|
$ |
45,148 |
|
(1)Includes the origination of $122 million and $73 million of Private Education Refinance Loans in the second-quarters of 2026 and 2025, respectively, and $242 million and $146 million in the six months ended June 30, 2026 and 2025, respectively, that refinanced FFELP and Private Education Loans that were on our balance sheet.
Private Education Loan Portfolio Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
|
June 30, 2025 |
|
(Dollars in millions) |
|
Balance |
|
|
% |
|
|
Balance |
|
|
% |
|
|
Balance |
|
|
% |
|
Loans in-school/grace/deferment(1) |
|
$ |
357 |
|
|
|
|
|
$ |
395 |
|
|
|
|
|
$ |
361 |
|
|
|
|
Loans in forbearance(2) |
|
|
271 |
|
|
|
|
|
|
236 |
|
|
|
|
|
|
250 |
|
|
|
|
Loans in repayment and percentage of each status: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans current |
|
|
13,985 |
|
|
|
94.6 |
% |
|
|
14,230 |
|
|
|
93.7 |
% |
|
|
14,296 |
|
|
|
93.6 |
% |
Loans delinquent 31-60 days(3) |
|
|
279 |
|
|
|
1.9 |
|
|
|
326 |
|
|
|
2.1 |
|
|
|
335 |
|
|
|
2.2 |
|
Loans delinquent 61-90 days(3) |
|
|
168 |
|
|
|
1.1 |
|
|
|
194 |
|
|
|
1.3 |
|
|
|
177 |
|
|
|
1.2 |
|
Loans delinquent greater than 90 days(3) |
|
|
349 |
|
|
|
2.4 |
|
|
|
434 |
|
|
|
2.9 |
|
|
|
459 |
|
|
|
3.0 |
|
Total Private Education Loans in repayment |
|
|
14,781 |
|
|
|
100 |
% |
|
|
15,184 |
|
|
|
100 |
% |
|
|
15,267 |
|
|
|
100 |
% |
Total Private Education Loans, gross(5) |
|
|
15,409 |
|
|
|
|
|
|
15,815 |
|
|
|
|
|
|
15,878 |
|
|
|
|
Private Education Loan allowance for losses |
|
|
(263 |
) |
|
|
|
|
|
(364 |
) |
|
|
|
|
|
(348 |
) |
|
|
|
Private Education Loans, net |
|
$ |
15,146 |
|
|
|
|
|
$ |
15,451 |
|
|
|
|
|
$ |
15,530 |
|
|
|
|
Percentage of Private Education Loans in
repayment |
|
|
|
|
|
95.9 |
% |
|
|
|
|
|
96.0 |
% |
|
|
|
|
|
96.2 |
% |
Delinquencies as a percentage of Private Education
Loans in repayment |
|
|
|
|
|
5.4 |
% |
|
|
|
|
|
6.3 |
% |
|
|
|
|
|
6.4 |
% |
Loans in forbearance as a percentage of loans in
repayment and forbearance |
|
|
|
|
|
1.8 |
% |
|
|
|
|
|
1.5 |
% |
|
|
|
|
|
1.6 |
% |
Percentage of Private Education Loans with a
cosigner(4) |
|
|
|
|
|
29 |
% |
|
|
|
|
|
32 |
% |
|
|
|
|
|
32 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)Loans for customers who are attending school or are in other permitted educational activities and are not yet required to make payments on their loans, e.g., loans for customers who have requested and qualify for other permitted program deferments such as various military eligible deferments.
(2)Loans for customers who have requested extension of grace period generally during employment transition or who have temporarily ceased making full payments due to hardship or other factors such as disaster relief consistent with established loan program servicing policies and procedures.
(3)The period of delinquency is based on the number of days scheduled payments are contractually past due.
(4)Excluding Private Education Refinance Loans, the cosigner rate was 66%, 67% and 66% for second-quarter 2026, fourth-quarter 2025 and second-quarter 2025, respectively.
(5)June 30, 2026 excludes $528 million of loans classified as held for sale as of June 30, 2026.
FFELP Loan Portfolio Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
|
June 30, 2025 |
|
(Dollars in millions) |
|
Balance |
|
|
% |
|
|
Balance |
|
|
% |
|
|
Balance |
|
|
% |
|
Loans in-school/grace/deferment(1) |
|
$ |
1,131 |
|
|
|
|
|
$ |
1,210 |
|
|
|
|
|
$ |
1,280 |
|
|
|
|
Loans in forbearance(2) |
|
|
3,283 |
|
|
|
|
|
|
3,532 |
|
|
|
|
|
|
3,653 |
|
|
|
|
Loans in repayment and percentage of each status: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans current |
|
|
19,040 |
|
|
|
85.3 |
% |
|
|
19,441 |
|
|
|
82.4 |
% |
|
|
20,145 |
|
|
|
81.0 |
% |
Loans delinquent 31-60 days(3) |
|
|
904 |
|
|
|
4.1 |
|
|
|
1,075 |
|
|
|
4.6 |
|
|
|
1,333 |
|
|
|
5.4 |
|
Loans delinquent 61-90 days(3) |
|
|
590 |
|
|
|
2.6 |
|
|
|
706 |
|
|
|
3.0 |
|
|
|
863 |
|
|
|
3.5 |
|
Loans delinquent greater than 90 days(3) |
|
|
1,790 |
|
|
|
8.0 |
|
|
|
2,350 |
|
|
|
10.0 |
|
|
|
2,526 |
|
|
|
10.1 |
|
Total FFELP Loans in repayment |
|
|
22,324 |
|
|
|
100 |
% |
|
|
23,572 |
|
|
|
100 |
% |
|
|
24,867 |
|
|
|
100 |
% |
Total FFELP Loans |
|
|
26,738 |
|
|
|
|
|
|
28,314 |
|
|
|
|
|
|
29,800 |
|
|
|
|
FFELP Loan allowance for losses |
|
|
(163 |
) |
|
|
|
|
|
(173 |
) |
|
|
|
|
|
(182 |
) |
|
|
|
FFELP Loans, net |
|
$ |
26,575 |
|
|
|
|
|
$ |
28,141 |
|
|
|
|
|
$ |
29,618 |
|
|
|
|
Percentage of FFELP Loans in repayment |
|
|
|
|
|
83.5 |
% |
|
|
|
|
|
83.3 |
% |
|
|
|
|
|
83.4 |
% |
Delinquencies as a percentage of FFELP Loans in
repayment |
|
|
|
|
|
14.7 |
% |
|
|
|
|
|
17.5 |
% |
|
|
|
|
|
19.0 |
% |
FFELP Loans in forbearance as a percentage of
loans in repayment and forbearance |
|
|
|
|
|
12.8 |
% |
|
|
|
|
|
13.0 |
% |
|
|
|
|
|
12.8 |
% |
(1)Loans for customers who may still be attending school or engaging in other permitted educational activities and are not yet required to make payments on their loans, e.g., residency periods for medical students or a grace period for bar exam preparation, as well as loans for customers who have requested and qualify for other permitted program deferments such as military, unemployment, or economic hardships.
(2)Loans for customers who have used their allowable deferment time or do not qualify for deferment, who need additional time to obtain employment or who have temporarily ceased making payments due to hardship or other factors such as disaster relief.
(3)The period of delinquency is based on the number of days scheduled payments are contractually past due.
Allowance for Loan Losses – Education Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
|
2026 |
|
|
2025 |
|
(Dollars in millions) |
|
Private Education Loans |
|
|
FFELP Loans |
|
|
Total |
|
|
Private Education Loans |
|
|
FFELP Loans |
|
|
Total |
|
Allowance at beginning of period |
|
$ |
314 |
|
|
$ |
165 |
|
|
$ |
479 |
|
|
$ |
397 |
|
|
$ |
182 |
|
|
$ |
579 |
|
Total provision |
|
|
17 |
|
|
|
8 |
|
|
|
25 |
|
|
|
29 |
|
|
|
8 |
|
|
|
37 |
|
Charge-offs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross charge-offs |
|
|
(82 |
) |
|
|
(10 |
) |
|
|
(92 |
) |
|
|
(93 |
) |
|
|
(8 |
) |
|
|
(101 |
) |
Expected future recoveries on current period gross
charge-offs |
|
|
11 |
|
|
|
— |
|
|
|
11 |
|
|
|
13 |
|
|
|
— |
|
|
|
13 |
|
Net charge-offs(1) |
|
|
(71 |
) |
|
|
(10 |
) |
|
|
(81 |
) |
|
|
(80 |
) |
|
|
(8 |
) |
|
|
(88 |
) |
Decrease in expected future recoveries on previously
fully charged-off loans(2) |
|
|
3 |
|
|
|
— |
|
|
|
3 |
|
|
|
2 |
|
|
|
— |
|
|
|
2 |
|
Allowance at end of period (GAAP) |
|
|
263 |
|
|
|
163 |
|
|
|
426 |
|
|
|
348 |
|
|
|
182 |
|
|
|
530 |
|
Plus: expected future recoveries on previously fully
charged-off loans(2) |
|
|
163 |
|
|
|
— |
|
|
|
163 |
|
|
|
172 |
|
|
|
— |
|
|
|
172 |
|
Allowance at end of period excluding expected future
recoveries on previously fully charged-off loans
(Non-GAAP Financial Measure)(3) |
|
$ |
426 |
|
|
$ |
163 |
|
|
$ |
589 |
|
|
$ |
520 |
|
|
$ |
182 |
|
|
$ |
702 |
|
Net charge-offs as a percentage of average loans
in repayment (annualized)(4) |
|
|
1.84 |
% |
|
|
.18 |
% |
|
|
|
|
|
2.08 |
% |
|
|
.14 |
% |
|
|
|
Allowance coverage of charge-offs (annualized)(3)(4) |
|
|
1.6 |
|
|
|
4.0 |
|
|
(Non-GAAP) |
|
|
|
1.6 |
|
|
|
5.2 |
|
|
(Non-GAAP) |
|
Allowance as a percentage of the ending total loan
balance(3)(4) |
|
|
2.8 |
% |
|
|
.6 |
% |
|
(Non-GAAP) |
|
|
|
3.3 |
% |
|
|
.6 |
% |
|
(Non-GAAP) |
|
Allowance as a percentage of the ending loans in
repayment(3)(4) |
|
|
2.9 |
% |
|
|
.7 |
% |
|
(Non-GAAP) |
|
|
|
3.4 |
% |
|
|
.7 |
% |
|
(Non-GAAP) |
|
Ending total loans(4) |
|
$ |
15,409 |
|
|
$ |
26,738 |
|
|
|
|
|
$ |
15,878 |
|
|
$ |
29,800 |
|
|
|
|
Average loans in repayment(4) |
|
$ |
14,803 |
|
|
$ |
22,478 |
|
|
|
|
|
$ |
15,375 |
|
|
$ |
25,133 |
|
|
|
|
Ending loans in repayment(4) |
|
$ |
14,781 |
|
|
$ |
22,324 |
|
|
|
|
|
$ |
15,267 |
|
|
$ |
24,867 |
|
|
|
|
(1)Charge-offs are reported net of expected recoveries. For Private Education Loans, we charge off the estimated loss of a defaulted loan balance by charging off the entire defaulted loan balance and estimating recoveries on a pool basis. These estimated recoveries are referred to as "expected future recoveries on previously fully charged-off loans." For FFELP Loans, the recovery is received at the time of charge-off.
(2)At the end of each month, for Private Education Loans that are 212 days past due, we charge off the estimated loss of a defaulted loan balance by charging off the entire loan balance and estimating recoveries on a pool basis. These estimated recoveries are referred to as “expected future recoveries on previously fully charged-off loans.” If actual periodic recoveries are less than expected, the difference is immediately reflected as a reduction to expected future recoveries on previously fully charged-off loans. If actual periodic recoveries are greater than expected, they will be reflected as a recovery through the allowance for Private Education Loan losses once the cumulative recovery amount exceeds the cumulative amount originally expected to be recovered. The following table summarizes the activity in the expected future recoveries on previously fully charged-off loans.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
(Dollars in millions) |
|
2026 |
|
|
2025 |
|
Beginning of period expected future recoveries on
previously fully charged-off loans |
|
$ |
166 |
|
|
$ |
174 |
|
Expected future recoveries of current period defaults |
|
|
11 |
|
|
|
13 |
|
Recoveries (cash collected) |
|
|
(10 |
) |
|
|
(11 |
) |
Charge-offs (as a result of lower recovery expectations) |
|
|
(4 |
) |
|
|
(4 |
) |
End of period expected future recoveries on previously
fully charged-off loans |
|
$ |
163 |
|
|
$ |
172 |
|
Change in balance during period |
|
$ |
(3 |
) |
|
$ |
(2 |
) |
(3)The allowance used for these metrics excludes the expected future recoveries on previously fully charged-off loans to better reflect the current expected credit losses remaining in the portfolio.
(4)Second-quarter 2026 excludes $528 million of loans, and the corresponding charge-offs, that were classified as held for sale as of June 30, 2026.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
2026 |
|
|
2025 |
|
(Dollars in millions) |
|
Private Education Loans |
|
|
FFELP Loans |
|
|
Total |
|
|
Private Education Loans |
|
|
FFELP Loans |
|
|
Total |
|
Allowance at beginning of period |
|
$ |
364 |
|
|
$ |
173 |
|
|
$ |
537 |
|
|
$ |
441 |
|
|
$ |
180 |
|
|
$ |
621 |
|
Total provision |
|
|
35 |
|
|
|
17 |
|
|
|
52 |
|
|
|
51 |
|
|
|
16 |
|
|
|
67 |
|
Charge-offs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross charge-offs |
|
|
(165 |
) |
|
|
(27 |
) |
|
|
(192 |
) |
|
|
(175 |
) |
|
|
(14 |
) |
|
|
(189 |
) |
Expected future recoveries on current period
gross charge-offs |
|
|
22 |
|
|
|
— |
|
|
|
22 |
|
|
|
23 |
|
|
|
— |
|
|
|
23 |
|
Net charge-offs(1) |
|
|
(143 |
) |
|
|
(27 |
) |
|
|
(170 |
) |
|
|
(152 |
) |
|
|
(14 |
) |
|
|
(166 |
) |
Decrease in expected future recoveries on
previously fully charged-off loans(2) |
|
|
7 |
|
|
|
— |
|
|
|
7 |
|
|
|
8 |
|
|
|
— |
|
|
|
8 |
|
Allowance at end of period (GAAP) |
|
|
263 |
|
|
|
163 |
|
|
|
426 |
|
|
|
348 |
|
|
|
182 |
|
|
|
530 |
|
Plus: expected future recoveries on previously
fully charged-off loans(2) |
|
|
163 |
|
|
|
— |
|
|
|
163 |
|
|
|
172 |
|
|
|
— |
|
|
|
172 |
|
Allowance at end of period excluding expected
future recoveries on previously fully charged-off
loans (Non-GAAP Financial Measure)(3) |
|
$ |
426 |
|
|
$ |
163 |
|
|
$ |
589 |
|
|
$ |
520 |
|
|
$ |
182 |
|
|
$ |
702 |
|
Net charge-offs as a percentage of average loans
in repayment (annualized)(4) |
|
|
1.87 |
% |
|
|
.24 |
% |
|
|
|
|
|
1.98 |
% |
|
|
.12 |
% |
|
|
|
Allowance coverage of charge-offs (annualized)(3)(4) |
|
|
1.5 |
|
|
|
3.0 |
|
|
(Non-GAAP) |
|
|
|
1.7 |
|
|
|
6.1 |
|
|
(Non-GAAP) |
|
Allowance as a percentage of the ending total
loan balance(3)(4) |
|
|
2.8 |
% |
|
|
.6 |
% |
|
(Non-GAAP) |
|
|
|
3.3 |
% |
|
|
.6 |
% |
|
(Non-GAAP) |
|
Allowance as a percentage of the ending loans in
repayment(3)(4) |
|
|
2.9 |
% |
|
|
.7 |
% |
|
(Non-GAAP) |
|
|
|
3.4 |
% |
|
|
.7 |
% |
|
(Non-GAAP) |
|
Ending total loans(4) |
|
$ |
15,409 |
|
|
$ |
26,738 |
|
|
|
|
|
$ |
15,878 |
|
|
$ |
29,800 |
|
|
|
|
Average loans in repayment(4) |
|
$ |
14,792 |
|
|
$ |
22,850 |
|
|
|
|
|
$ |
15,423 |
|
|
$ |
25,295 |
|
|
|
|
Ending loans in repayment(4) |
|
$ |
14,781 |
|
|
$ |
22,324 |
|
|
|
|
|
$ |
15,267 |
|
|
$ |
24,867 |
|
|
|
|
(1)Charge-offs are reported net of expected recoveries. For Private Education Loans, we charge off the estimated loss of a defaulted loan balance by charging off the entire defaulted loan balance and estimating recoveries on a pool basis. These estimated recoveries are referred to as "expected future recoveries on previously fully charged-off loans." For FFELP Loans, the recovery is received at the time of charge-off.
(2)At the end of each month, for Private Education Loans that are 212 days past due, we charge off the estimated loss of a defaulted loan balance by charging off the entire loan balance and estimating recoveries on a pool basis. These estimated recoveries are referred to as “expected future recoveries on previously fully charged-off loans.” If actual periodic recoveries are less than expected, the difference is immediately reflected as a reduction to expected future recoveries on previously fully charged-off loans. If actual periodic recoveries are greater than expected, they will be reflected as a recovery through the allowance for Private Education Loan losses once the cumulative recovery amount exceeds the cumulative amount originally expected to be recovered. The following table summarizes the activity in the expected future recoveries on previously fully charged-off loans.
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
(Dollars in millions) |
|
2026 |
|
|
2025 |
|
Beginning of period expected future recoveries on
previously fully charged-off loans |
|
$ |
170 |
|
|
$ |
179 |
|
Expected future recoveries of current period defaults |
|
|
22 |
|
|
|
23 |
|
Recoveries (cash collected) |
|
|
(20 |
) |
|
|
(21 |
) |
Charge-offs (as a result of lower recovery expectations) |
|
|
(9 |
) |
|
|
(10 |
) |
End of period expected future recoveries on previously
fully charged-off loans |
|
$ |
163 |
|
|
$ |
172 |
|
Change in balance during period |
|
$ |
(7 |
) |
|
$ |
(8 |
) |
(3)The allowance used for these metrics excludes the expected future recoveries on previously fully charged-off loans to better reflect the current expected credit losses remaining in the portfolio.
(4)Six months ended June 30, 2026 excludes $528 million of loans, and the corresponding charge-offs, that were classified as held for sale as of June 30, 2026.
Liquidity and Capital Resources
Funding and Liquidity Risk Management
The following “Liquidity and Capital Resources” discussion concentrates primarily on our Consumer Lending and Federal Education Loans segments. Our Business Processing segment required minimal liquidity and funding.
We define liquidity as cash and high-quality liquid assets that we can use to meet our cash requirements. Our two primary liquidity needs are: (1) servicing our debt and (2) our ongoing ability to meet our cash needs for running the operations of our businesses (including derivative collateral requirements) throughout market cycles, including during periods of financial stress. Secondary liquidity needs, which can be adjusted as needed, include the origination of Private Education Loans, acquisitions of Private Education Loan portfolios, acquisitions of companies, the payment of common stock dividends and the repurchase of our common stock. To achieve these objectives, we analyze and monitor our liquidity needs and maintain excess liquidity and access to diverse funding sources including the issuance of unsecured debt and the issuance of secured debt primarily through asset-backed securitizations and/or other financing facilities.
We define our liquidity risk as the potential inability to meet our obligations when they become due without incurring unacceptable losses or inability to invest in future asset growth and business operations at reasonable market rates. Our primary liquidity risk relates to our ability to service our debt, meet our other business obligations and to continue to grow our business. The ability to access the capital markets is impacted by general market and economic conditions, our credit ratings, as well as the overall availability of funding sources in the marketplace. In addition, credit ratings may be important to customers or counterparties when we compete in certain markets and when we seek to engage in certain transactions.
Credit ratings and outlooks are opinions subject to ongoing review by the rating agencies and may change, from time to time, based on our financial performance, industry and market dynamics and other factors. Other factors that influence our credit ratings include the rating agencies’ assessment of the general operating environment, our relative positions in the markets in which we compete, reputation, liquidity position, the level and volatility of earnings, corporate governance and risk management policies, capital position and capital management practices. A negative change in our credit rating could have a negative effect on our liquidity because it might raise the cost and availability of funding and potentially require additional cash collateral or restrict cash currently held as collateral on existing borrowings or derivative collateral arrangements. It is our objective to improve our credit ratings so that we can continue to efficiently access the capital markets even in difficult economic and market conditions. We have unsecured debt totaling $5.3 billion at June 30, 2026. Three credit rating agencies currently rate our long-term unsecured debt at below investment grade.
We expect to fund our ongoing liquidity needs, including the repayment of $0.7 billion of senior unsecured notes that mature in the short term (i.e., over the next 12 months) and the remaining $4.6 billion of senior unsecured notes that mature in the long term (from 2027 to 2043 with 79% maturing by 2032), through a number of sources. These sources include our cash on hand, unencumbered Private Education Refinance Loan and FFELP Loan portfolios (see “Sources of Primary Liquidity” below), the predictable operating cash flows provided by operating activities, the repayment of principal on unencumbered education loan assets, and the distribution of overcollateralization from our securitization trusts. We may also, depending on market conditions and availability, draw down on our secured Private Education Loan and FFELP Loan asset-backed commercial paper (ABCP) facilities, issue term asset-backed securities (ABS), enter into additional Private Education Loan and FFELP Loan ABS repurchase facilities, or issue additional unsecured debt.
We originate Private Education Loans (a portion of which is obtained through a forward purchase agreement). We also have purchased and may purchase, in future periods, Private Education Loan portfolios from third parties. Those originations and purchases are part of our ongoing liquidity needs. We purchased 0.3 million shares of common stock for $2 million in the second quarter of 2026 and have $74 million of unused share repurchase authority as of June 30, 2026.
Sources of Primary Liquidity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
June 30, 2026 |
|
|
December 31, 2025 |
|
|
June 30, 2025 |
|
Ending Balances: |
|
|
|
|
|
|
|
|
|
Unrestricted cash |
|
$ |
770 |
|
|
$ |
637 |
|
|
$ |
712 |
|
Unencumbered Private Education
Refinance Loans |
|
|
314 |
|
|
|
529 |
|
|
|
510 |
|
Unencumbered FFELP
Loans |
|
|
42 |
|
|
|
83 |
|
|
|
51 |
|
Total |
|
$ |
1,126 |
|
|
$ |
1,249 |
|
|
$ |
1,273 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
(Dollars in millions) |
|
June 30, 2026 |
|
|
December 31, 2025 |
|
|
June 30, 2025 |
|
|
June 30, 2026 |
|
|
June 30, 2025 |
|
Average Balances: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrestricted cash |
|
$ |
686 |
|
|
$ |
589 |
|
|
$ |
743 |
|
|
$ |
620 |
|
|
$ |
658 |
|
Unencumbered Private
Education Refinance
Loans |
|
|
665 |
|
|
|
684 |
|
|
|
629 |
|
|
|
677 |
|
|
|
517 |
|
Unencumbered FFELP
Loans |
|
|
56 |
|
|
|
71 |
|
|
|
73 |
|
|
|
55 |
|
|
|
123 |
|
Total |
|
$ |
1,407 |
|
|
$ |
1,344 |
|
|
$ |
1,445 |
|
|
$ |
1,352 |
|
|
$ |
1,298 |
|
Sources of Additional Liquidity
Liquidity may also be available under our secured credit facilities. Maximum borrowing capacity under the Private Education Loan and FFELP Loan ABCP facilities will vary and be subject to each agreement’s borrowing conditions, including, among others, facility size, current usage and availability of qualifying collateral from unencumbered loans. The following tables detail the additional borrowing capacity of these facilities with maturity dates ranging from October 2026 to April 2029.
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
June 30, 2026 |
|
|
December 31, 2025 |
|
|
June 30, 2025 |
|
Ending Balances: |
|
|
|
|
|
|
|
|
|
Private Education Loan ABCP facilities |
|
$ |
1,841 |
|
|
$ |
1,689 |
|
|
$ |
1,754 |
|
FFELP Loan ABCP facilities |
|
|
— |
|
|
|
193 |
|
|
|
190 |
|
Total |
|
$ |
1,841 |
|
|
$ |
1,882 |
|
|
$ |
1,944 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
(Dollars in millions) |
|
June 30, 2026 |
|
|
December 31, 2025 |
|
|
June 30, 2025 |
|
|
June 30, 2026 |
|
|
June 30, 2025 |
|
Average Balances: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private Education Loan ABCP
facilities |
|
$ |
1,678 |
|
|
$ |
2,051 |
|
|
$ |
1,613 |
|
|
$ |
1,669 |
|
|
$ |
1,530 |
|
FFELP Loan ABCP facilities |
|
|
134 |
|
|
|
184 |
|
|
|
219 |
|
|
|
149 |
|
|
|
284 |
|
Total |
|
$ |
1,812 |
|
|
$ |
2,235 |
|
|
$ |
1,832 |
|
|
$ |
1,818 |
|
|
$ |
1,814 |
|
At June 30, 2026, we had a total of $2.7 billion of unencumbered tangible assets inclusive of those listed in the table above as sources of primary liquidity. Total unencumbered education loans comprised $1.0 billion of our unencumbered tangible assets of which $1.0 billion and $42 million related to Private Education Loans and FFELP Loans, respectively. In addition, as of June 30, 2026, we had $4.9 billion of encumbered net assets (i.e., overcollateralization) in our various financing facilities (consolidated variable interest entities). We enter into repurchase facilities at times to borrow against the encumbered net assets of these financing vehicles. As of June 30, 2026, $0.5 billion of repurchase facility borrowings were outstanding.
The following table reconciles encumbered and unencumbered assets and their net impact on total Tangible Equity.
|
|
|
|
|
|
|
|
|
(Dollars in billions) |
|
June 30, 2026 |
|
|
December 31, 2025 |
|
Net assets of consolidated variable interest entities
(encumbered assets) — Private Education Loans |
|
$ |
2.3 |
|
|
$ |
2.1 |
|
Net assets of consolidated variable interest
entities (encumbered assets) — FFELP Loans |
|
|
2.6 |
|
|
|
2.6 |
|
Tangible unencumbered assets(1) |
|
|
2.7 |
|
|
|
2.9 |
|
Senior unsecured debt |
|
|
(5.3 |
) |
|
|
(5.3 |
) |
Mark-to-market on unsecured hedged debt(2) |
|
|
— |
|
|
|
— |
|
Other liabilities, net |
|
|
(.3 |
) |
|
|
(.3 |
) |
Total Tangible Equity(3) |
|
$ |
2.0 |
|
|
$ |
2.0 |
|
(1)Excludes goodwill and acquired intangible assets.
(2)At June 30, 2026 and December 31, 2025, there were $(78) million and $(50) million, respectively, of net gains (losses) on derivatives hedging this debt in unencumbered assets, which partially offset these gains (losses).
(3)Item is a non-GAAP financial measure. For a description and reconciliation, see “Non-GAAP Financial Measures.”
Borrowings
Ending Balances
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
(Dollars in millions) |
|
Short
Term |
|
|
Long
Term |
|
|
Total |
|
|
Short
Term |
|
|
Long
Term |
|
|
Total |
|
Unsecured borrowings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior unsecured debt |
|
$ |
720 |
|
|
$ |
4,580 |
|
|
$ |
5,300 |
|
|
$ |
525 |
|
|
$ |
4,782 |
|
|
$ |
5,307 |
|
Total unsecured borrowings |
|
|
720 |
|
|
|
4,580 |
|
|
|
5,300 |
|
|
|
525 |
|
|
|
4,782 |
|
|
|
5,307 |
|
Secured borrowings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private Education Loan securitizations |
|
|
408 |
|
|
|
10,847 |
|
|
|
11,255 |
|
|
|
469 |
|
|
|
10,250 |
|
|
|
10,719 |
|
FFELP Loan securitizations |
|
|
— |
|
|
|
23,670 |
|
|
|
23,670 |
|
|
|
109 |
|
|
|
25,302 |
|
|
|
25,411 |
|
Private Education Loan ABCP facilities |
|
|
1,159 |
|
|
|
574 |
|
|
|
1,733 |
|
|
|
1,942 |
|
|
|
— |
|
|
|
1,942 |
|
FFELP Loan ABCP facilities |
|
|
1,752 |
|
|
|
499 |
|
|
|
2,251 |
|
|
|
1,869 |
|
|
|
299 |
|
|
|
2,168 |
|
Other |
|
|
186 |
|
|
|
38 |
|
|
|
224 |
|
|
|
160 |
|
|
|
39 |
|
|
|
199 |
|
Total secured borrowings |
|
|
3,505 |
|
|
|
35,628 |
|
|
|
39,133 |
|
|
|
4,549 |
|
|
|
35,890 |
|
|
|
40,439 |
|
Core Earnings basis borrowings(1) |
|
|
4,225 |
|
|
|
40,208 |
|
|
|
44,433 |
|
|
|
5,074 |
|
|
|
40,672 |
|
|
|
45,746 |
|
Adjustment for GAAP accounting treatment |
|
|
(11 |
) |
|
|
(85 |
) |
|
|
(96 |
) |
|
|
(1 |
) |
|
|
(39 |
) |
|
|
(40 |
) |
GAAP basis borrowings |
|
$ |
4,214 |
|
|
$ |
40,123 |
|
|
$ |
44,337 |
|
|
$ |
5,073 |
|
|
$ |
40,633 |
|
|
$ |
45,706 |
|
Average Balances
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
(Dollars in millions) |
|
Average
Balance |
|
|
Average
Rate |
|
|
Average
Balance |
|
|
Average
Rate |
|
|
Average
Balance |
|
|
Average
Rate |
|
|
Average
Balance |
|
|
Average
Rate |
|
Unsecured borrowings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior unsecured debt |
|
$ |
5,401 |
|
|
|
7.90 |
% |
|
$ |
5,512 |
|
|
|
8.48 |
% |
|
$ |
5,355 |
|
|
|
7.91 |
% |
|
$ |
5,419 |
|
|
|
8.50 |
% |
Total unsecured borrowings |
|
|
5,401 |
|
|
|
7.90 |
|
|
|
5,512 |
|
|
|
8.48 |
|
|
|
5,355 |
|
|
|
7.91 |
|
|
|
5,419 |
|
|
|
8.50 |
|
Secured borrowings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private Education Loan
securitizations |
|
|
10,781 |
|
|
|
3.97 |
|
|
|
10,690 |
|
|
|
3.68 |
|
|
|
10,718 |
|
|
|
3.93 |
|
|
|
10,714 |
|
|
|
3.65 |
|
FFELP Loan securitizations |
|
|
24,169 |
|
|
|
4.86 |
|
|
|
27,372 |
|
|
|
5.46 |
|
|
|
24,590 |
|
|
|
4.91 |
|
|
|
27,691 |
|
|
|
5.55 |
|
Private Education Loan ABCP
facilities |
|
|
1,915 |
|
|
|
5.61 |
|
|
|
2,105 |
|
|
|
6.34 |
|
|
|
1,937 |
|
|
|
5.64 |
|
|
|
2,204 |
|
|
|
6.33 |
|
FFELP Loan ABCP facilities |
|
|
2,137 |
|
|
|
5.07 |
|
|
|
1,820 |
|
|
|
5.76 |
|
|
|
2,154 |
|
|
|
5.10 |
|
|
|
1,772 |
|
|
|
5.82 |
|
Other |
|
|
217 |
|
|
|
3.86 |
|
|
|
105 |
|
|
|
1.57 |
|
|
|
208 |
|
|
|
3.95 |
|
|
|
98 |
|
|
|
.91 |
|
Total secured borrowings |
|
|
39,219 |
|
|
|
4.66 |
|
|
|
42,092 |
|
|
|
5.06 |
|
|
|
39,607 |
|
|
|
4.69 |
|
|
|
42,479 |
|
|
|
5.11 |
|
Core Earnings basis borrowings(1) |
|
|
44,620 |
|
|
|
5.05 |
|
|
|
47,604 |
|
|
|
5.45 |
|
|
|
44,962 |
|
|
|
5.07 |
|
|
|
47,898 |
|
|
|
5.50 |
|
Adjustment for GAAP
accounting treatment |
|
|
— |
|
|
|
(.02 |
) |
|
|
— |
|
|
|
.03 |
|
|
|
— |
|
|
|
(.03 |
) |
|
|
— |
|
|
|
.07 |
|
GAAP basis borrowings |
|
$ |
44,620 |
|
|
|
5.03 |
% |
|
$ |
47,604 |
|
|
|
5.48 |
% |
|
$ |
44,962 |
|
|
|
5.04 |
% |
|
$ |
47,898 |
|
|
|
5.57 |
% |
(1)Item is a non-GAAP financial measure. For a description and reconciliation, see “Non-GAAP Financial Measures.” The differences in derivative accounting give rise to the difference above.
Critical Accounting Policies and Estimates
Management’s Discussion and Analysis of Financial Condition and Results of Operations addresses our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP). A discussion of our critical accounting policies, which includes the allowance for loan losses, goodwill impairment assessment, and premium and discount amortization, can be found in our 2025 Form 10-K.
Non-GAAP Financial Measures
In addition to financial results reported on a GAAP basis, Navient also provides certain performance measures which are non-GAAP financial measures. We present the following non-GAAP financial measures: (1) Core Earnings, (2) Tangible Equity (as well as the Adjusted Tangible Equity Ratio), and (3) Allowance for Loan Losses Excluding Expected Future Recoveries on Previously Fully Charged-off Loans. Definitions for the non-GAAP financial measures and reconciliations are provided below, except that reconciliations of forward-looking non-GAAP financial measures are not provided because the Company is unable to provide such reconciliations without unreasonable effort due to the uncertainty and inherent difficulty of predicting the occurrence and financial impact of certain items, including, but not limited to, the impact of any mark-to-market gains/losses resulting from our use of derivative instruments to hedge our economic risks.
1. Core Earnings
We prepare financial statements and present financial results in accordance with GAAP. However, we also evaluate our business segments and present financial results on a basis that differs from GAAP. We refer to this different basis of presentation as Core Earnings. We provide this Core Earnings basis of presentation on a consolidated basis and for each business segment because this is what we review internally when making management decisions regarding our performance and how we allocate resources. We also refer to this information in our presentations with credit rating agencies, lenders and investors. Because our Core Earnings basis of presentation corresponds to our segment financial presentations, we are required by GAAP to provide certain Core Earnings disclosures in the notes to our consolidated financial statements for our business segments.
Core Earnings are not a substitute for reported results under GAAP. We use Core Earnings to manage our business segments because Core Earnings reflect adjustments to GAAP financial results for two items, discussed below, that can create significant volatility mostly due to timing factors generally beyond the control of management. Accordingly, we believe that Core Earnings provide management with a useful basis from which to better evaluate results from ongoing operations against the business plan or against results from prior periods. Consequently, we disclose this information because we believe it provides investors with additional information regarding the operational and performance indicators that are most closely assessed by management. When compared to GAAP results, the two items we remove to result in our Core Earnings presentations are:
(1)Mark-to-market gains/losses resulting from our use of derivative instruments to hedge our economic risks that do not qualify for hedge accounting treatment or do qualify for hedge accounting treatment but result in ineffectiveness; and
(2)The accounting for goodwill and acquired intangible assets.
While GAAP provides a uniform, comprehensive basis of accounting, for the reasons described above, our Core Earnings basis of presentation does not. Core Earnings are subject to certain general and specific limitations that investors should carefully consider. For example, there is no comprehensive, authoritative guidance for management reporting. Our Core Earnings are not defined terms within GAAP and may not be comparable to similarly titled measures reported by other companies. Accordingly, our Core Earnings presentation does not represent a comprehensive basis of accounting. Investors, therefore, may not be able to compare our performance with that of other financial services companies based upon Core Earnings. Core Earnings results are only meant to supplement GAAP results by providing additional information regarding the operational and performance indicators that are most closely used by management, our Board of Directors, credit rating agencies, lenders and investors to assess performance.
The following tables show our consolidated GAAP results, Core Earnings results (including for each reportable segment) along with the adjustments made to the income/expense items to reconcile the consolidated GAAP results to the Core Earnings results as required by GAAP and reported in “Note 11 — Segment Reporting.”
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2026 |
|
|
|
|
|
|
Adjustments |
|
|
|
|
|
Reportable Segments |
|
(Dollars in millions) |
|
Total
GAAP |
|
|
Reclassi-
fications |
|
|
Additions/
(Subtractions) |
|
|
Total
Adjustments (1) |
|
|
Total
Core
Earnings |
|
|
Consumer Lending |
|
|
Federal Education Loans |
|
|
Business Processing |
|
|
Other |
|
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Education loans |
|
$ |
664 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
273 |
|
|
$ |
391 |
|
|
$ |
— |
|
|
$ |
— |
|
Cash and investments |
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5 |
|
|
|
8 |
|
|
|
— |
|
|
|
5 |
|
Total interest income |
|
|
682 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
278 |
|
|
|
399 |
|
|
|
— |
|
|
|
5 |
|
Total interest expense |
|
|
560 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
185 |
|
|
|
351 |
|
|
|
— |
|
|
|
26 |
|
Net interest income
(loss) |
|
|
122 |
|
|
$ |
1 |
|
|
$ |
(3 |
) |
|
$ |
(2 |
) |
|
$ |
120 |
|
|
|
93 |
|
|
|
48 |
|
|
|
— |
|
|
|
(21 |
) |
Less: provisions for loan
losses |
|
|
26 |
|
|
|
|
|
|
|
|
|
|
|
|
26 |
|
|
|
18 |
|
|
|
8 |
|
|
|
— |
|
|
|
— |
|
Net interest income
(loss) after provisions
for loan losses |
|
|
96 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75 |
|
|
|
40 |
|
|
|
— |
|
|
|
(21 |
) |
Other income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Servicing revenue |
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
8 |
|
|
|
— |
|
|
|
— |
|
Asset recovery and
business processing
revenue |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other revenue |
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
17 |
|
Total other income |
|
|
28 |
|
|
|
(1 |
) |
|
|
— |
|
|
|
(1 |
) |
|
|
27 |
|
|
|
2 |
|
|
|
8 |
|
|
|
— |
|
|
|
17 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating
expenses |
|
|
57 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42 |
|
|
|
15 |
|
|
|
— |
|
|
|
— |
|
Unallocated shared
services expenses |
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
25 |
|
Operating expenses |
|
|
82 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
82 |
|
|
|
42 |
|
|
|
15 |
|
|
|
— |
|
|
|
25 |
|
Goodwill and acquired
intangible asset
impairment and
amortization |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Restructuring/other
reorganization
expenses |
|
|
3 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3 |
|
Total expenses |
|
|
85 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
85 |
|
|
|
42 |
|
|
|
15 |
|
|
|
— |
|
|
|
28 |
|
Income (loss) before
income tax expense
(benefit) |
|
|
39 |
|
|
|
— |
|
|
|
(3 |
) |
|
|
(3 |
) |
|
|
36 |
|
|
|
35 |
|
|
|
33 |
|
|
|
— |
|
|
|
(32 |
) |
Income tax expense
(benefit)(2) |
|
|
14 |
|
|
|
— |
|
|
|
(5 |
) |
|
|
(5 |
) |
|
|
9 |
|
|
|
8 |
|
|
|
7 |
|
|
|
— |
|
|
|
(6 |
) |
Net income (loss) |
|
$ |
25 |
|
|
$ |
— |
|
|
$ |
2 |
|
|
$ |
2 |
|
|
$ |
27 |
|
|
$ |
27 |
|
|
$ |
26 |
|
|
$ |
— |
|
|
$ |
(26 |
) |
(1)Core Earnings adjustments to GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2026 |
|
(Dollars in millions) |
|
Net Impact of
Derivative
Accounting |
|
|
Net Impact of
Goodwill and
Acquired
Intangibles |
|
|
Total |
|
Net interest income (loss) after provisions for loan losses |
|
$ |
(2 |
) |
|
$ |
— |
|
|
$ |
(2 |
) |
Total other income |
|
|
(1 |
) |
|
|
— |
|
|
|
(1 |
) |
Goodwill and acquired intangible asset impairment and amortization |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total Core Earnings adjustments to GAAP |
|
$ |
(3 |
) |
|
$ |
— |
|
|
|
(3 |
) |
Income tax expense (benefit) |
|
|
|
|
|
|
|
|
(5 |
) |
Net income (loss) |
|
|
|
|
|
|
|
$ |
2 |
|
(2)Income taxes are based on a percentage of net income before tax for the individual reportable segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2025 |
|
|
|
|
|
|
Adjustments |
|
|
|
|
|
Reportable Segments |
|
(Dollars in millions) |
|
Total
GAAP |
|
|
Reclassi-
fications |
|
|
Additions/
(Subtractions) |
|
|
Total
Adjustments (1) |
|
|
Total
Core
Earnings |
|
|
Consumer Lending |
|
|
Federal Education Loans |
|
|
Business Processing |
|
|
Other |
|
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Education loans |
|
$ |
756 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
273 |
|
|
$ |
483 |
|
|
$ |
— |
|
|
$ |
— |
|
Cash and investments |
|
|
22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5 |
|
|
|
10 |
|
|
|
— |
|
|
|
7 |
|
Total interest income |
|
|
778 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
278 |
|
|
|
493 |
|
|
|
— |
|
|
|
7 |
|
Total interest expense |
|
|
650 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
183 |
|
|
|
438 |
|
|
|
— |
|
|
|
26 |
|
Net interest income
(loss) |
|
|
128 |
|
|
$ |
5 |
|
|
$ |
(2 |
) |
|
$ |
3 |
|
|
$ |
131 |
|
|
|
95 |
|
|
|
55 |
|
|
|
— |
|
|
|
(19 |
) |
Less: provisions for loan
losses |
|
|
37 |
|
|
|
|
|
|
|
|
|
|
|
|
37 |
|
|
|
29 |
|
|
|
8 |
|
|
|
— |
|
|
|
— |
|
Net interest income
(loss) after provisions
for loan losses |
|
|
91 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66 |
|
|
|
47 |
|
|
|
— |
|
|
|
(19 |
) |
Other income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Servicing revenue |
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
11 |
|
|
|
— |
|
|
|
— |
|
Asset recovery and
business processing
revenue |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other revenue (loss) |
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
20 |
|
Total other income |
|
|
28 |
|
|
|
(5 |
) |
|
|
10 |
|
|
|
5 |
|
|
|
33 |
|
|
|
3 |
|
|
|
10 |
|
|
|
— |
|
|
|
20 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating
expenses |
|
|
53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36 |
|
|
|
17 |
|
|
|
— |
|
|
|
— |
|
Unallocated shared
services expenses |
|
|
47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
47 |
|
Operating expenses |
|
|
100 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
100 |
|
|
|
36 |
|
|
|
17 |
|
|
|
— |
|
|
|
47 |
|
Goodwill and acquired
intangible asset
impairment and
amortization |
|
|
1 |
|
|
|
— |
|
|
|
(1 |
) |
|
|
(1 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Restructuring/other
reorganization
expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total expenses |
|
|
101 |
|
|
|
— |
|
|
|
(1 |
) |
|
|
(1 |
) |
|
|
100 |
|
|
|
36 |
|
|
|
17 |
|
|
|
— |
|
|
|
47 |
|
Income (loss) before
income tax expense
(benefit) |
|
|
18 |
|
|
|
— |
|
|
|
9 |
|
|
|
9 |
|
|
|
27 |
|
|
|
33 |
|
|
|
40 |
|
|
|
— |
|
|
|
(46 |
) |
Income tax expense
(benefit)(2) |
|
|
4 |
|
|
|
— |
|
|
|
2 |
|
|
|
2 |
|
|
|
6 |
|
|
|
7 |
|
|
|
10 |
|
|
|
— |
|
|
|
(11 |
) |
Net income (loss) |
|
$ |
14 |
|
|
$ |
— |
|
|
$ |
7 |
|
|
$ |
7 |
|
|
$ |
21 |
|
|
$ |
26 |
|
|
$ |
30 |
|
|
$ |
— |
|
|
$ |
(35 |
) |
(1)Core Earnings adjustments to GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2025 |
|
(Dollars in millions) |
|
Net Impact of
Derivative
Accounting |
|
|
Net Impact of
Goodwill and
Acquired
Intangibles |
|
|
Total |
|
Net interest income (loss) after provisions for loan losses |
|
$ |
3 |
|
|
$ |
— |
|
|
$ |
3 |
|
Total other income |
|
|
5 |
|
|
|
— |
|
|
|
5 |
|
Goodwill and acquired intangible asset impairment and amortization |
|
|
— |
|
|
|
(1 |
) |
|
|
(1 |
) |
Total Core Earnings adjustments to GAAP |
|
$ |
8 |
|
|
$ |
1 |
|
|
|
9 |
|
Income tax expense (benefit) |
|
|
|
|
|
|
|
|
2 |
|
Net income (loss) |
|
|
|
|
|
|
|
$ |
7 |
|
(2)Income taxes are based on a percentage of net income before tax for the individual reportable segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2026 |
|
|
|
|
|
|
Adjustments |
|
|
|
|
|
Reportable Segments |
|
(Dollars in millions) |
|
Total
GAAP |
|
|
Reclassi-
fications |
|
|
Additions/
(Subtractions) |
|
|
Total
Adjustments (1) |
|
|
Total
Core
Earnings |
|
|
Consumer Lending |
|
|
Federal Education Loans |
|
|
Business Processing |
|
|
Other |
|
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Education loans |
|
$ |
1,341 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
550 |
|
|
$ |
791 |
|
|
$ |
— |
|
|
$ |
— |
|
Cash and investments |
|
|
35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9 |
|
|
|
17 |
|
|
|
— |
|
|
|
9 |
|
Total interest income |
|
|
1,376 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
559 |
|
|
|
808 |
|
|
|
— |
|
|
|
9 |
|
Total interest expense |
|
|
1,123 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
365 |
|
|
|
714 |
|
|
|
— |
|
|
|
51 |
|
Net interest income
(loss) |
|
|
253 |
|
|
$ |
3 |
|
|
$ |
(10 |
) |
|
$ |
(7 |
) |
|
$ |
246 |
|
|
|
194 |
|
|
|
94 |
|
|
|
— |
|
|
|
(42 |
) |
Less: provisions for loan
losses |
|
|
54 |
|
|
|
|
|
|
|
|
|
|
|
|
54 |
|
|
|
37 |
|
|
|
17 |
|
|
|
— |
|
|
|
— |
|
Net interest income
(loss) after provisions
for loan losses |
|
|
199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
157 |
|
|
|
77 |
|
|
|
— |
|
|
|
(42 |
) |
Other income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Servicing revenue |
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
17 |
|
|
|
— |
|
|
|
— |
|
Asset recovery and
business processing
revenue |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other revenue |
|
|
28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
22 |
|
Total other income |
|
|
49 |
|
|
|
(3 |
) |
|
|
(3 |
) |
|
|
(6 |
) |
|
|
43 |
|
|
|
4 |
|
|
|
17 |
|
|
|
— |
|
|
|
22 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating
expenses |
|
|
112 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81 |
|
|
|
31 |
|
|
|
— |
|
|
|
— |
|
Unallocated shared
services expenses |
|
|
59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
59 |
|
Operating expenses |
|
|
171 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
171 |
|
|
|
81 |
|
|
|
31 |
|
|
|
— |
|
|
|
59 |
|
Goodwill and acquired
intangible asset
impairment and
amortization |
|
|
4 |
|
|
|
— |
|
|
|
(4 |
) |
|
|
(4 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Restructuring/other
reorganization
expenses |
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
Total expenses |
|
|
177 |
|
|
|
— |
|
|
|
(4 |
) |
|
|
(4 |
) |
|
|
173 |
|
|
|
81 |
|
|
|
31 |
|
|
|
— |
|
|
|
61 |
|
Income (loss) before
income tax expense
(benefit) |
|
|
71 |
|
|
|
|
|
|
(9 |
) |
|
|
(9 |
) |
|
|
62 |
|
|
|
80 |
|
|
|
63 |
|
|
|
— |
|
|
|
(81 |
) |
Income tax expense
(benefit)(2) |
|
|
29 |
|
|
|
— |
|
|
|
(14 |
) |
|
|
(14 |
) |
|
|
15 |
|
|
|
18 |
|
|
|
15 |
|
|
|
— |
|
|
|
(18 |
) |
Net income (loss) |
|
$ |
42 |
|
|
$ |
— |
|
|
$ |
5 |
|
|
$ |
5 |
|
|
$ |
47 |
|
|
$ |
62 |
|
|
$ |
48 |
|
|
$ |
— |
|
|
$ |
(63 |
) |
(1)Core Earnings adjustments to GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2026 |
|
(Dollars in millions) |
|
Net Impact of
Derivative
Accounting |
|
|
Net Impact of
Goodwill and
Acquired
Intangibles |
|
|
Total |
|
Net interest income (loss) after provisions for loan losses |
|
$ |
(7 |
) |
|
$ |
— |
|
|
$ |
(7 |
) |
Total other income |
|
|
(6 |
) |
|
|
— |
|
|
|
(6 |
) |
Goodwill and acquired intangible asset impairment and amortization |
|
|
— |
|
|
|
(4 |
) |
|
|
(4 |
) |
Total Core Earnings adjustments to GAAP |
|
$ |
(13 |
) |
|
$ |
4 |
|
|
|
(9 |
) |
Income tax expense (benefit) |
|
|
|
|
|
|
|
|
(14 |
) |
Net income (loss) |
|
|
|
|
|
|
|
$ |
5 |
|
(2)Income taxes are based on a percentage of net income before tax for the individual reportable segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2025 |
|
|
|
|
|
|
Adjustments |
|
|
|
|
|
Reportable Segments |
|
(Dollars in millions) |
|
Total
GAAP |
|
|
Reclassi-
fications |
|
|
Additions/
(Subtractions) |
|
|
Total
Adjustments (1) |
|
|
Total
Core
Earnings |
|
|
Consumer Lending |
|
|
Federal Education Loans |
|
|
Business Processing |
|
|
Other |
|
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Education loans |
|
$ |
1,537 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
562 |
|
|
$ |
975 |
|
|
$ |
— |
|
|
$ |
— |
|
Cash and investments |
|
|
43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10 |
|
|
|
20 |
|
|
|
— |
|
|
|
13 |
|
Total interest income |
|
|
1,580 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
572 |
|
|
|
995 |
|
|
|
— |
|
|
|
13 |
|
Total interest expense |
|
|
1,322 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
364 |
|
|
|
892 |
|
|
|
— |
|
|
|
49 |
|
Net interest income
(loss) |
|
|
258 |
|
|
$ |
11 |
|
|
$ |
6 |
|
|
$ |
17 |
|
|
$ |
275 |
|
|
|
208 |
|
|
|
103 |
|
|
|
— |
|
|
|
(36 |
) |
Less: provisions for loan
losses |
|
|
67 |
|
|
|
|
|
|
|
|
|
|
|
|
67 |
|
|
|
51 |
|
|
|
16 |
|
|
|
— |
|
|
|
— |
|
Net interest income
(loss) after provisions
for loan losses |
|
|
191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
157 |
|
|
|
87 |
|
|
|
— |
|
|
|
(36 |
) |
Other income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Servicing revenue |
|
|
27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
21 |
|
|
|
— |
|
|
|
— |
|
Asset recovery and
business processing
revenue |
|
|
23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
23 |
|
|
|
— |
|
Other revenue (loss) |
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
34 |
|
Total other income |
|
|
53 |
|
|
$ |
(11 |
) |
|
$ |
41 |
|
|
|
30 |
|
|
|
83 |
|
|
|
6 |
|
|
|
20 |
|
|
|
23 |
|
|
|
34 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct operating
expenses |
|
|
127 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70 |
|
|
|
37 |
|
|
|
20 |
|
|
|
— |
|
Unallocated shared
services expenses |
|
|
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
100 |
|
Operating expenses |
|
|
227 |
|
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
|
227 |
|
|
|
70 |
|
|
|
37 |
|
|
|
20 |
|
|
|
100 |
|
Goodwill and acquired
intangible asset
impairment and
amortization |
|
|
2 |
|
|
|
— |
|
|
|
(2 |
) |
|
|
(2 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Restructuring/other
reorganization
expenses |
|
|
3 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3 |
|
Total expenses |
|
|
232 |
|
|
|
— |
|
|
|
(2 |
) |
|
|
(2 |
) |
|
|
230 |
|
|
|
70 |
|
|
|
37 |
|
|
|
20 |
|
|
|
103 |
|
Income (loss) before
income tax expense
(benefit) |
|
|
12 |
|
|
$ |
— |
|
|
$ |
49 |
|
|
$ |
49 |
|
|
|
61 |
|
|
|
93 |
|
|
|
70 |
|
|
|
3 |
|
|
|
(105 |
) |
Income tax expense
(benefit)(2) |
|
|
1 |
|
|
|
— |
|
|
|
13 |
|
|
|
13 |
|
|
|
14 |
|
|
|
21 |
|
|
|
16 |
|
|
|
1 |
|
|
|
(24 |
) |
Net income (loss) |
|
$ |
11 |
|
|
$ |
— |
|
|
$ |
36 |
|
|
$ |
36 |
|
|
$ |
47 |
|
|
$ |
72 |
|
|
$ |
54 |
|
|
$ |
2 |
|
|
$ |
(81 |
) |
(1)Core Earnings adjustments to GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2025 |
|
(Dollars in millions) |
|
Net Impact of
Derivative
Accounting |
|
|
Net Impact of
Goodwill and
Acquired
Intangibles |
|
|
Total |
|
Net interest income (loss) after provisions for loan losses |
|
$ |
17 |
|
|
$ |
— |
|
|
$ |
17 |
|
Total other income |
|
|
30 |
|
|
|
— |
|
|
|
30 |
|
Goodwill and acquired intangible asset impairment and amortization |
|
|
— |
|
|
|
(2 |
) |
|
|
(2 |
) |
Total Core Earnings adjustments to GAAP |
|
$ |
47 |
|
|
$ |
2 |
|
|
|
49 |
|
Income tax expense (benefit) |
|
|
|
|
|
|
|
|
13 |
|
Net income (loss) |
|
|
|
|
|
|
|
$ |
36 |
|
(2)Income taxes are based on a percentage of net income before tax for the individual reportable segment.
The following discussion summarizes the differences between Core Earnings and GAAP net income and details each specific adjustment required to reconcile our Core Earnings segment presentation to our GAAP earnings.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
(Dollars in millions) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
GAAP net income |
|
$ |
25 |
|
|
$ |
14 |
|
|
$ |
42 |
|
|
$ |
11 |
|
Core Earnings adjustments to GAAP: |
|
|
|
|
|
|
|
|
|
|
|
|
Net impact of derivative accounting |
|
|
(3 |
) |
|
|
8 |
|
|
|
(13 |
) |
|
|
47 |
|
Net impact of goodwill and acquired intangible assets |
|
|
— |
|
|
|
1 |
|
|
|
4 |
|
|
|
2 |
|
Net income tax effect |
|
|
5 |
|
|
|
(2 |
) |
|
|
14 |
|
|
|
(13 |
) |
Total Core Earnings adjustments to GAAP |
|
|
2 |
|
|
|
7 |
|
|
|
5 |
|
|
|
36 |
|
Core Earnings net income |
|
$ |
27 |
|
|
$ |
21 |
|
|
$ |
47 |
|
|
$ |
47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Derivative Accounting: Core Earnings exclude periodic gains and losses that are caused by the mark-to-market valuations on derivatives that do not qualify for hedge accounting treatment under GAAP, as well as the periodic mark-to-market gains and losses that are a result of ineffectiveness recognized related to effective hedges under GAAP. Under GAAP, for our derivatives that are held to maturity, the mark-to-market gain or loss over the life of the contract will equal $0. In our Core Earnings presentation, we recognize the economic effect of these hedges, which generally results in any net settlement cash paid or received being recognized ratably as an interest expense or revenue over the hedged item’s life.
The accounting for derivatives requires that changes in the fair value of derivative instruments be recognized currently in earnings, with no fair value adjustment of the hedged item, unless specific hedge accounting criteria are met. The gains and losses recorded in “Gains (losses) on derivative and hedging activities, net” and interest expense (for qualifying fair value hedges) are primarily caused by interest rate and foreign currency exchange rate volatility and changing credit spreads during the period as well as the volume and term of derivatives not receiving hedge accounting treatment. We believe that our derivatives are effective economic hedges, and as such, are a critical element of our interest rate and foreign currency risk management strategy. However, some of our derivatives do not qualify for hedge accounting treatment and the stand-alone derivative is adjusted to fair value in the income statement with no consideration for the corresponding change in fair value of the hedged item.
The table below quantifies the adjustments for derivative accounting between GAAP and Core Earnings net income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
(Dollars in millions) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
Core Earnings derivative adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
(Gains) losses on derivative and hedging activities, net,
included in other income |
|
$ |
(1 |
) |
|
$ |
5 |
|
|
$ |
(6 |
) |
|
$ |
30 |
|
Plus: (Gains) losses on fair value hedging activity included
in interest expense |
|
|
(4 |
) |
|
|
(4 |
) |
|
|
(12 |
) |
|
|
2 |
|
Total (gains) losses in GAAP net income |
|
|
(5 |
) |
|
|
1 |
|
|
|
(18 |
) |
|
|
32 |
|
Plus: Reclassification of settlement income (expense) on
derivative and hedging activities, net(1) |
|
|
1 |
|
|
|
5 |
|
|
|
3 |
|
|
|
11 |
|
Mark-to-market (gains) losses on derivative and hedging
activities, net(2) |
|
|
(4 |
) |
|
|
6 |
|
|
|
(15 |
) |
|
|
43 |
|
Other derivative accounting adjustments(3) |
|
|
1 |
|
|
|
2 |
|
|
|
2 |
|
|
|
4 |
|
Total net impact of derivative accounting |
|
$ |
(3 |
) |
|
$ |
8 |
|
|
$ |
(13 |
) |
|
$ |
47 |
|
(1)Derivative accounting requires net settlement income/expense on derivatives that do not qualify as hedges to be recorded in a separate income statement line item below net interest income. Under our Core Earnings presentation, these settlements are reclassified to the income statement line item of the economically hedged item. For our Core Earnings net interest income, this would primarily include reclassifying the net settlement amounts related to certain of our interest rate swaps to debt interest expense. The table below summarizes these net settlements on derivative and hedging activities and the associated reclassification on a Core Earnings basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
(Dollars in millions) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
Reclassification of settlements on derivative and
hedging activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net settlement income (expense) on interest rate
swaps reclassified to net interest income |
|
$ |
1 |
|
|
$ |
5 |
|
|
$ |
3 |
|
|
$ |
11 |
|
Total reclassifications of settlement income
(expense) on derivative and hedging activities |
|
$ |
1 |
|
|
$ |
5 |
|
|
$ |
3 |
|
|
$ |
11 |
|
(2)“Mark-to-market (gains) losses on derivative and hedging activities, net” is comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
(Dollars in millions) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
Fair value hedges |
|
$ |
(1 |
) |
|
$ |
4 |
|
|
$ |
(3 |
) |
|
$ |
7 |
|
Foreign currency hedges |
|
|
(3 |
) |
|
|
(8 |
) |
|
|
(9 |
) |
|
|
(5 |
) |
Other (a) |
|
|
— |
|
|
|
10 |
|
|
|
(3 |
) |
|
|
41 |
|
Total mark-to-market (gains) losses on derivative
and hedging activities, net |
|
$ |
(4 |
) |
|
$ |
6 |
|
|
$ |
(15 |
) |
|
$ |
43 |
|
(a)Primarily derivatives that are used to economically hedge the origination of fixed rate Private Education Loans that don't qualify for hedge accounting. We believe that these derivatives are effective economic hedges, and as such, are a critical element of our interest rate risk management strategy.
(3)Other derivative accounting adjustments consist of adjustments related to certain terminated derivatives that did not receive hedge accounting treatment under GAAP but were economic hedges under Core Earnings and, as a result, such gains or losses are amortized into Core Earnings over the life of the hedged item.
Cumulative Impact of Derivative Accounting under GAAP compared to Core Earnings
As of June 30, 2026, derivative accounting has decreased GAAP equity by approximately $17 million as a result of cumulative net mark-to-market losses (after tax) recognized under GAAP, but not in Core Earnings. The following table rolls forward the cumulative impact to GAAP equity due to these after-tax mark-to-market net gains and losses related to derivative accounting.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
(Dollars in millions) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
Beginning impact of derivative accounting on
GAAP equity |
|
$ |
(28 |
) |
|
$ |
(22 |
) |
|
$ |
(39 |
) |
|
$ |
8 |
|
Net impact of net mark-to-market gains (losses)
under derivative accounting(1) |
|
|
11 |
|
|
|
(8 |
) |
|
|
22 |
|
|
|
(38 |
) |
Ending impact of derivative accounting on
GAAP equity |
|
$ |
(17 |
) |
|
$ |
(30 |
) |
|
$ |
(17 |
) |
|
$ |
(30 |
) |
(1)Net impact of net mark-to-market gains (losses) under derivative accounting is composed of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
(Dollars in millions) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
Total pre-tax net impact of derivative accounting
recognized in net income(2) |
|
$ |
3 |
|
|
$ |
(8 |
) |
|
$ |
13 |
|
|
$ |
(47 |
) |
Tax and other impacts of derivative accounting
adjustments |
|
|
(1 |
) |
|
|
2 |
|
|
|
(3 |
) |
|
|
12 |
|
Change in mark-to-market gains (losses) on
derivatives, net of tax recognized in other
comprehensive income |
|
|
9 |
|
|
|
(2 |
) |
|
|
12 |
|
|
|
(3 |
) |
Net impact of net mark-to-market gains (losses) under
derivative accounting |
|
$ |
11 |
|
|
$ |
(8 |
) |
|
$ |
22 |
|
|
$ |
(38 |
) |
(2)See “Core Earnings derivative adjustments” table above.
Hedging Embedded Floor Income
We use pay-fixed swaps and fixed rate debt to economically hedge embedded Floor Income in our FFELP Loans. Historically, we have used these instruments on a periodic basis and depending upon market conditions and pricing, we may enter into additional hedges in the future. Under GAAP, the pay-fixed swaps are accounted for as cash flow hedges. The table below shows the amount of hedged Floor Income that will be recognized in Core Earnings in future periods based on these hedge strategies.
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
June 30, 2026 |
|
|
June 30, 2025 |
|
Total hedged Floor Income, net of tax(1)(2) |
|
$ |
20 |
|
|
$ |
35 |
|
(1)$26 million and $46 million on a pre-tax basis as of June 30, 2026 and June 30, 2025, respectively.
(2)Of the $20 million as of June 30, 2026, approximately $7 million, $7 million and $6 million will be recognized as part of Core Earnings net income in the remainder of 2026, 2027 and 2028, respectively.
(2) Goodwill and Acquired Intangible Assets: Our Core Earnings exclude goodwill and intangible asset impairment and the amortization of acquired intangible assets. The following table summarizes the goodwill and acquired intangible asset adjustments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
(Dollars in millions) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
Core Earnings goodwill and acquired intangible
asset adjustments |
|
$ |
— |
|
|
$ |
1 |
|
|
$ |
4 |
|
|
$ |
2 |
|
2. Tangible Equity and Adjusted Tangible Equity Ratio
Adjusted Tangible Equity Ratio measures the ratio of Navient’s Tangible Equity to its tangible assets. We adjust this ratio to exclude the assets and equity associated with our FFELP Loan portfolio because FFELP Loans are no longer originated and the FFELP Loan portfolio bears a 3% maximum loss exposure under the terms of the federal guaranty. Management believes that excluding this portfolio from the ratio enhances its usefulness to investors. Management uses this ratio, in addition to other metrics, for analysis and decision making related to capital allocation decisions. The Adjusted Tangible Equity Ratio is calculated as:
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
June 30, 2026 |
|
|
June 30, 2025 |
|
Navient Corporation's stockholders' equity |
|
$ |
2,398 |
|
|
$ |
2,564 |
|
Less: Goodwill and acquired intangible assets |
|
|
430 |
|
|
|
436 |
|
Tangible Equity |
|
|
1,968 |
|
|
|
2,128 |
|
Less: Equity held for FFELP Loans |
|
|
133 |
|
|
|
148 |
|
Adjusted Tangible Equity |
|
$ |
1,835 |
|
|
$ |
1,980 |
|
Divided by: |
|
|
|
|
|
|
Total assets |
|
$ |
47,297 |
|
|
$ |
50,222 |
|
Less: |
|
|
|
|
|
|
Goodwill and acquired intangible assets |
|
|
430 |
|
|
|
436 |
|
FFELP Loans |
|
|
26,575 |
|
|
|
29,618 |
|
Adjusted tangible assets |
|
$ |
20,292 |
|
|
$ |
20,168 |
|
Adjusted Tangible Equity Ratio |
|
|
9.0 |
% |
|
|
9.8 |
% |
3. Allowance for Loan Losses Excluding Expected Future Recoveries on Previously Fully Charged-off
Loans
The allowance for loan losses on the Private Education Loan portfolio used for the three credit metrics below excludes the expected future recoveries on previously fully charged-off loans to better reflect the current expected credit losses remaining in connection with the loans on balance sheet that have not charged off. As of June 30, 2026, the $426 million Private Education Loan allowance for loan losses excluding expected future recoveries on previously fully charged-off loans represents the current expected credit losses that remain in connection with the $15,409 million Private Education Loan portfolio. The $163 million of expected future recoveries on previously fully charged-off loans, which is collected over an average 15-year period, mechanically is a reduction to the overall allowance for loan losses. However, it is not related to the $15,409 million Private Education Loan portfolio on our balance sheet and, as a result, management excludes this impact to the allowance to better evaluate and assess our overall credit loss coverage on the Private Education Loan portfolio. We believe this provides a more meaningful and holistic view of the available credit loss coverage on our non-charged-off Private Education Loan portfolio. We believe this information is useful to our investors, lenders and rating agencies.
Allowance for Loan Losses Metrics – Private Education Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
(Dollars in millions) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
Allowance at end of period (GAAP) |
|
$ |
263 |
|
|
$ |
348 |
|
|
$ |
263 |
|
|
$ |
348 |
|
Plus: expected future recoveries on previously fully
charged-off loans |
|
|
163 |
|
|
|
172 |
|
|
|
163 |
|
|
|
172 |
|
Allowance at end of period excluding expected future
recoveries on previously fully charged-off loans
(Non-GAAP Financial Measure) |
|
$ |
426 |
|
|
$ |
520 |
|
|
$ |
426 |
|
|
$ |
520 |
|
Ending total loans(1) |
|
$ |
15,409 |
|
|
$ |
15,878 |
|
|
$ |
15,409 |
|
|
$ |
15,878 |
|
Ending loans in repayment(1) |
|
$ |
14,781 |
|
|
$ |
15,267 |
|
|
$ |
14,781 |
|
|
$ |
15,267 |
|
Net charge-offs |
|
$ |
71 |
|
|
$ |
80 |
|
|
$ |
143 |
|
|
$ |
152 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance coverage of charge-offs (annualized)(1): |
|
|
|
|
|
|
|
|
|
|
|
|
GAAP |
|
|
1.0 |
|
|
|
1.1 |
|
|
|
.9 |
|
|
|
1.1 |
|
Adjustment(2) |
|
|
.6 |
|
|
|
.5 |
|
|
|
.6 |
|
|
|
.6 |
|
Non-GAAP Financial Measure(2) |
|
|
1.6 |
|
|
|
1.6 |
|
|
|
1.5 |
|
|
|
1.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance as a percentage of the ending total loan
balance(1): |
|
|
|
|
|
|
|
|
|
|
|
|
GAAP |
|
|
1.7 |
% |
|
|
2.2 |
% |
|
|
1.7 |
% |
|
|
2.2 |
% |
Adjustment(2) |
|
|
1.1 |
|
|
|
1.1 |
|
|
|
1.1 |
|
|
|
1.1 |
|
Non-GAAP Financial Measure(2) |
|
|
2.8 |
% |
|
|
3.3 |
% |
|
|
2.8 |
% |
|
|
3.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance as a percentage of the ending loans in
repayment(1): |
|
|
|
|
|
|
|
|
|
|
|
|
GAAP |
|
|
1.8 |
% |
|
|
2.3 |
% |
|
|
1.8 |
% |
|
|
2.3 |
% |
Adjustment(2) |
|
|
1.1 |
|
|
|
1.1 |
|
|
|
1.1 |
|
|
|
1.1 |
|
Non-GAAP Financial Measure(2) |
|
|
2.9 |
% |
|
|
3.4 |
% |
|
|
2.9 |
% |
|
|
3.4 |
% |
(1)Second-quarter 2026 excludes $528 million of loans, and the corresponding charge-offs, that were classified as held for sale as of June 30, 2026.
(2)The allowance used for these credit metrics excludes the expected future recoveries on previously fully charged-off loans. See discussion above.
Legal Proceedings
For a discussion of legal matters as of June 30, 2026, please refer to “Note 10 – Commitments, Contingencies and Guarantees” to our consolidated financial statements included in this report, which is incorporated into this item by reference.
Risk Factors
The risk factors disclosed in our 2025 Form 10-K should be considered together with information included in this Form 10-Q. Except as described below, we believe there have been no material changes to the risk factors previously disclosed in our 2025 10-K.
The Company previously disclosed that a failure by its service providers to adequately protect their systems and prevent cyber-attacks could compromise confidential or proprietary information. On June 8, 2026, the Company became aware of a cybersecurity incident involving a third-party law firm (the "Firm") that provides legal services to the Company (the "Incident"). The Incident involved a security breach in which an unauthorized actor obtained certain Company-related data maintained by the Firm in connection with the Firm's provision of legal services to the Company, including borrower information such as customer names, dates of birth, addresses, and Social Security numbers. Promptly after learning of the Incident, the Company initiated an investigation with the assistance of external advisors and began coordinating with the Firm on notifications to affected individuals and regulators as required by applicable federal and state laws. The Incident was limited to data maintained in the Firm's environment. The Company has not identified any evidence of unauthorized access to its own systems and has not experienced any disruption to its operations or customer services as a result of the Incident. The Company is not aware of any further disclosure or misuse of the affected personal information. As a result, the Incident did not have a material effect on the Company's results of operations for the period presented.
Notwithstanding the foregoing, on June 29, 2026, the Company determined the Incident to be material in light of the volume and sensitivity of the information involved and furnished a Current Report on Form 8-K under Item 1.05.
The Incident demonstrates the potential impact of service-provider risk on the Company. The Company has experienced, and may in the future experience, cybersecurity incidents affecting third-party systems that maintain Company or customer data in connection with services provided to the Company. Because the data involved in the Incident includes sensitive borrower information, the Company is subject to notification obligations and potential regulatory inquiry under federal and state data-protection laws and remains subject to various risks arising from the Incident, including potential litigation, regulatory action, and reputational harm.
The Company continues to evaluate the Incident with the assistance of external cybersecurity experts and in coordination with the Firm. The Company will provide updated disclosures as required if additional material information becomes available. As of the date of this report, the Company does not believe the Incident has had, or is reasonably likely to have, a material impact on its financial condition or result of operations; however, there is no assurance that any future cybersecurity incident affecting the Company or its third-party service providers will not materially affect the Company's operations, financial condition, or results of operations.
