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Allowance for Loan Losses
 9 Months Ended
Sep. 30, 2015
Receivables [Abstract]  
Allowance for Loan Losses
Allowance for Loan Losses
Our provision for loan losses represents the periodic expense of maintaining an allowance sufficient to absorb incurred probable losses in the held-for-investment loan portfolios. The evaluation of the allowance for loan losses is inherently subjective, as it requires material estimates that may be susceptible to significant changes. We believe the allowance for loan losses is appropriate to cover probable losses incurred in the loan portfolios.

Allowance for Loan Losses Metrics

 
 
Allowance for Loan Losses
 
 
Three Months Ended September 30, 2015
 
 
FFELP Loans
 
Private Education
Loans
 
Total
Allowance for Loan Losses
 
 
 
 
 
 
Beginning balance
 
$
4,556

 
$
87,310

 
$
91,866

Total provision
 
143

 
27,354

 
27,497

Net charge-offs:
 
 
 
 
 
 
Charge-offs
 
(529
)
 
(14,121
)
 
(14,650
)
Recoveries
 
—

 
1,361

 
1,361

Net charge-offs
 
(529
)
 
(12,760
)
 
(13,289
)
Loan sales(1)
 
—

 
(1,871
)
 
(1,871
)
Ending Balance
 
$
4,170

 
$
100,033

 
$
104,203

Allowance:
 
 
 
 
 
 
Ending balance: individually evaluated for impairment
 
$
—

 
$
43,001

 
$
43,001

Ending balance: collectively evaluated for impairment
 
$
4,170

 
$
57,032

 
$
61,202

Loans:
 
 
 
 
 
 
Ending balance: individually evaluated for impairment
 
$
—

 
$
231,286

 
$
231,286

Ending balance: collectively evaluated for impairment
 
$
1,143,595

 
$
10,608,975

 
$
11,752,570

Net charge-offs as a percentage of average loans in repayment (annualized)(2)
 
0.25
%
 
0.83
%
 
 
Allowance as a percentage of the ending total loan balance
 
0.36
%
 
0.92
%
 
 
Allowance as a percentage of the ending loans in repayment(2)
 
0.50
%
 
1.50
%
 
 
Allowance coverage of net charge-offs (annualized)
 
1.97

 
1.96

 
 
Ending total loans, gross
 
$
1,143,595

 
$
10,840,261

 
 
Average loans in repayment(2)
 
$
839,090

 
$
6,118,678

 
 
Ending loans in repayment(2)
 
$
836,585

 
$
6,657,228

 
 

____________
(1) Represents fair value write-downs on loans sold.
(2) Loans in repayment include loans making interest only and fixed payments as well as loans that have entered full principal and interest repayment status.

     
 
 
Allowance for Loan Losses
 
 
Three Months Ended September 30, 2014
 
 
FFELP Loans
 
Private Education
Loans
 
Total
Allowance for Loan Losses
 
 
 
 
 
 
Beginning balance
 
$
6,212

 
$
54,315

 
$
60,527

Total provision
 
291

 
14,607

 
14,898

Net charge-offs:
 
 
 
 
 
 
Charge-offs
 
(761
)
 
(4,378
)
 
(5,139
)
Recoveries
 
—

 
—

 
—

Net charge-offs
 
(761
)
 
(4,378
)
 
(5,139
)
Loan sales(1)
 
—

 
(4,571
)
 
(4,571
)
Ending Balance
 
$
5,742

 
$
59,973

 
$
65,715

Allowance:
 
 
 
 
 
 
Ending balance: individually evaluated for impairment
 
$
—

 
$
2,966

 
$
2,966

Ending balance: collectively evaluated for impairment
 
$
5,742

 
$
57,007

 
$
62,749

Loans:
 
 
 
 
 
 
Ending balance: individually evaluated for impairment
 
$
—

 
$
13,115

 
$
13,115

Ending balance: collectively evaluated for impairment
 
$
1,317,963

 
$
7,816,305

 
$
9,134,268

Net charge-offs as a percentage of average loans in repayment (annualized)(2)
 
0.32
%
 
0.39
%
 
 
Allowance as a percentage of the ending total loan balance
 
0.44
%
 
0.77
%
 
 
Allowance as a percentage of the ending loans in repayment(2)
 
0.61
%
 
1.31
%
 
 
Allowance coverage of net charge-offs (annualized)
 
1.89

 
3.42

 
 
Ending total loans, gross
 
$
1,317,963

 
$
7,829,420

 
 
Average loans in repayment(2)
 
$
953,620

 
$
4,453,775

 
 
Ending loans in repayment(2)
 
$
945,230

 
$
4,575,143

 
 
____________
    
(1) Represents fair value write-downs on loans sold.
(2) Loans in repayment include loans making interest only and fixed payments as well as loans that have entered full principal and interest repayment status.



 
 
Allowance for Loan Losses
 
 
Nine Months Ended September 30, 2015
 
 
FFELP Loans
 
Private Education
Loans
 
Total
Allowance for Loan Losses
 
 
 
 
 
 
Beginning balance
 
$
5,268

 
$
78,574

 
$
83,842

Total provision
 
1,044

 
58,629

 
59,673

Net charge-offs:
 
 
 
 
 
 
Charge-offs
 
(2,142
)
 
(36,127
)
 
(38,269
)
Recoveries
 
—

 
4,529

 
4,529

Net charge-offs
 
(2,142
)
 
(31,598
)
 
(33,740
)
Loan sales(1)
 
—

 
(5,572
)
 
(5,572
)
Ending Balance
 
$
4,170

 
$
100,033

 
$
104,203

Allowance:
 
 
 
 
 
 
Ending balance: individually evaluated for impairment
 
$
—

 
$
43,001

 
$
43,001

Ending balance: collectively evaluated for impairment
 
$
4,170

 
$
57,032

 
$
61,202

Loans:
 
 
 
 
 
 
Ending balance: individually evaluated for impairment
 
$
—

 
$
231,286

 
$
231,286

Ending balance: collectively evaluated for impairment
 
$
1,143,595

 
$
10,608,975

 
$
11,752,570

Net charge-offs as a percentage of average loans in repayment (annualized)(2)
 
0.33
%
 
0.72
%
 
 
Allowance as a percentage of the ending total loan balance
 
0.36
%
 
0.92
%
 
 
Allowance as a percentage of the ending loans in repayment(2)
 
0.50
%
 
1.50
%
 
 
Allowance coverage of net charge-offs (annualized)
 
1.46

 
2.37

 
 
Ending total loans, gross
 
$
1,143,595

 
$
10,840,261

 
 
Average loans in repayment(2)
 
$
868,649

 
$
5,848,345

 
 
Ending loans in repayment(2)
 
$
836,585

 
$
6,657,228

 
 

____________
(1) Represents fair value write-downs on loans sold.
(2) Loans in repayment include loans making interest only and fixed payments as well as loans that have entered full principal and interest repayment status.
 
 
Allowance for Loan Losses
 
 
Nine Months Ended September 30, 2014
 
 
FFELP Loans
 
Private Education
Loans
 
Total
Allowance for Loan Losses
 
 
 
 
 
 
Beginning balance
 
$
6,318

 
$
61,763

 
$
68,081

Total provision
 
1,482

 
53,589

 
55,071

Charge-offs
 
(2,058
)
 
(4,378
)
 
(6,436
)
Loan sales(1)
 
—

 
(51,001
)
 
(51,001
)
Ending Balance
 
$
5,742

 
$
59,973

 
$
65,715

Allowance:
 
 
 
 
 
 
Ending balance: individually evaluated for impairment
 
$
—

 
$
2,966

 
$
2,966

Ending balance: collectively evaluated for impairment
 
$
5,742

 
$
57,007

 
$
62,749

Loans:
 
 
 
 
 
 
Ending balance: individually evaluated for impairment
 
$
—

 
$
13,115

 
$
13,115

Ending balance: collectively evaluated for impairment
 
$
1,317,963

 
$
7,816,305

 
$
9,134,268

Charge-offs as a percentage of average loans in repayment (annualized)(2)
 
0.28
%
 
0.13
%
 
 
Allowance as a percentage of the ending total loan balance
 
0.44
%
 
0.77
%
 
 
Allowance as a percentage of the ending loans in repayment(2)
 
0.61
%
 
1.31
%
 
 
Allowance coverage of charge-offs (annualized)
 
2.09

 
10.27

 
 
Ending total loans, gross
 
$
1,317,963

 
$
7,829,420

 
 
Average loans in repayment(2)
 
$
980,733

 
$
4,408,852

 
 
Ending loans in repayment(3)
 
$
945,230

 
$
4,575,143

 
 
____________
    
(1) Represents fair value write-downs on loans sold.
(2) Loans in repayment include loans making interest only and fixed payments as well as loans that have entered full principal and interest repayment status.


Troubled Debt Restructurings (“TDRs”)
All of our loans are collectively assessed for impairment, except for loans classified as TDRs (where we conduct individual assessments of impairment). We modify the terms of loans for certain borrowers when we believe such modifications may increase the ability and willingness of a borrower to make payments and thus increase the ultimate overall amount collected on a loan. These modifications generally take the form of a forbearance, a temporary interest rate reduction or an extended repayment plan. In the first nine months after a loan enters full principal and interest repayment, the loan may be in forbearance for up to six months without it being classified as a TDR. Once the initial nine-month period described above is over, however, any loan that receives more than three months of forbearance in a twenty-four month period is classified as a TDR. Also, a loan becomes a TDR when it is modified to reduce the interest rate on the loan (regardless of when such modification occurs and/or whether such interest rate reduction is temporary). The majority of our loans that are considered TDRs involve a temporary forbearance of payments and do not change the contractual interest rate of the loan. Approximately 22 percent and 10 percent of the loans granted forbearance as of September 30, 2015 and December 31, 2014, respectively, have been classified as TDRs due to their forbearance status.
Prior to the Spin-Off, we did not have TDR loans because the loans generally were sold to a now unrelated affiliate in the same month that the terms were restructured. Subsequent to May 1, 2014, we have individually assessed $251 million of Private Education Loans as TDRs. When these TDR loans are determined to be impaired, we provide for an allowance for losses sufficient to cover life-of-loan expected losses through an impairment calculation based on the difference between the loan's basis and the present value of expected future cash flows (which would include life-of-loan default and recovery assumptions) discounted at the loan's original effective interest rate.
Within the Private Education Loan portfolio, loans greater than 90 days past due are considered to be nonperforming. FFELP Loans are at least 97 percent guaranteed as to their principal and accrued interest by the federal government in the event of default, and therefore, we do not deem FFELP Loans as nonperforming from a credit risk perspective at any point in their life cycle prior to claim payment, and we continue to accrue interest on those loans through the date of claim.
At September 30, 2015 and December 31, 2014, all our TDR loans had a related allowance recorded. The following table provides the recorded investment, unpaid principal balance and related allowance for our TDR loans.
 
 
Recorded Investment
 
Unpaid Principal Balance
 
Allowance
 
 
 
 
 
 
 
September 30, 2015
 
 
 
 
 
 
TDR Loans
 
$
234,360

 
$
231,286

 
$
43,001

 
 
 
 
 
 
 
December 31, 2014
 
 
 
 
 
 
TDR Loans
 
$
60,278

 
$
59,402

 
$
9,815



The following table provides the average recorded investment and interest income recognized for our TDR loans.
 
 
Three Months Ended
 
Three Months Ended
 
 
September 30, 2015
 
September 30, 2014
 
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
 
 
 
 
 
 
 
 
TDR Loans
 
$
210,039

 
$
4,198

 
$
8,740

 
$
129



 
 
Nine Months Ended
 
Nine Months Ended
 
 
September 30, 2015
 
September 30, 2014
 
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
 
 
 
 
 
 
 
 
TDR Loans
 
$
150,240

 
$
9,314

 
$
3,958

 
$
160


    


The following table provides information regarding the loan status of TDR loans and the aging of TDR loans that are past due.
 
 
September 30,
 
December 31,
 
 
2015
 
2014
 
 
Balance
 
%
 
Balance
 
%
TDR loans in in-school/grace/deferment(1)
 
$
4,940

 
 
 
$
2,915

 
 
TDR loans in forbearance(2)
 
50,878

 
 
 
18,620

 
 
TDR loans in repayment and percentage of each status:
 
 
 
 
 
 
 
 
Loans current
 
154,984

 
88.3
%
 
34,554

 
91.2
%
Loans delinquent 31-60 days(3)
 
11,042

 
6.3

 
1,953

 
5.2

Loans delinquent 61-90 days(3)
 
6,336

 
3.6

 
983

 
2.6

Loans delinquent greater than 90 days(3)
 
3,106

 
1.8

 
377

 
1.0

Total TDR loans in repayment
 
175,468

 
100.0
%
 
37,867

 
100.0
%
Total TDR loans, gross
 
$
231,286

 
 
 
$
59,402

 
 
_____
(1) 
Deferment includes customers who have returned to school or are engaged in other permitted educational activities and are not yet required to make payments on the loans (e.g., residency periods for medical students or a grace period for bar exam preparation).
(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, 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.

    
The following tables provides the amount of modified loans (which includes forbearance and reductions in interest rates) that became TDRs in the periods presented. Additionally, for the periods presented, the table summarizes charge-offs occurring in the TDR portfolio, as well as TDRs for which a payment default occurred in the relevant period presented and within 12 months of the loan first being designated as a TDR. We define payment default as 60 days past due for this disclosure.
 
 
Three Months Ended
 
Three Months Ended
 
 
September 30, 2015
 
September 30, 2014
 
 
Modified Loans(1)
 
Charge-offs
 
Payment-
Default
 
Modified Loans(1)
 
Charge-offs
 
Payment-
Default
 
 
 
 
 
 
 
 
 
 
 
 
 
TDR Loans
 
$
49,975

 
$
3,456

 
$
16,719

 
$
7,840

 
$
87

 
$
252



 
 
Nine Months Ended
 
Nine Months Ended
 
 
September 30, 2015
 
September 30, 2014
 
 
Modified Loans(1)
 
Charge-offs
 
Payment-
Default
 
Modified Loans(1)
 
Charge-offs
 
Payment-
Default
 
 
 
 
 
 
 
 
 
 
 
 
 
TDR Loans
 
$
189,066

 
$
5,845

 
$
29,895

 
$
14,880

 
$
87

 
$
320

_____
(1) 
Represents the principal balance of loans that have been modified during the period and resulted in a TDR.



Key Credit Quality Indicators
For Private Education Loans, the key credit quality indicators are FICO scores, the existence of a cosigner, loan status, and loan seasoning. The FICO scores are assessed at origination and periodically refreshed/updated through the loan's term. The following table highlights the gross principal balance of our Private Education Loan portfolio stratified by key credit quality indicators.

 
 
Private Education Loans
 
 
Credit Quality Indicators
 
 
September 30, 2015
 
December 31, 2014
Credit Quality Indicators:
 
Balance(1)
 
% of Balance
 
Balance(1)
 
% of Balance
 
 
 
 
 
 
 
 
 
Cosigners:
 
 
 
 
 
 
 
 
With cosigner
 
$
9,748,371

 
90
%
 
$
7,465,339

 
90
%
Without cosigner
 
1,091,890

 
10

 
846,037

 
10

Total
 
$
10,840,261

 
100
%
 
$
8,311,376

 
100
%
 
 
 
 
 
 
 
 
 
FICO at Origination:
 
 
 
 
 
 
 
 
Less than 670
 
$
706,688

 
6
%
 
$
558,801

 
7
%
670-699
 
1,582,381

 
15

 
1,227,860

 
15

700-749
 
3,470,300

 
32

 
2,626,238

 
32

Greater than or equal to 750
 
5,080,892

 
47

 
3,898,477

 
46

Total
 
$
10,840,261

 
100
%
 
$
8,311,376

 
100
%
 
 
 
 
 
 
 
 
 
Seasoning(2):
 
 
 
 
 
 
 
 
1-12 payments
 
$
3,575,055

 
33
%
 
$
2,373,117

 
29
%
13-24 payments
 
1,729,120

 
16

 
1,532,042

 
18

25-36 payments
 
871,590

 
8

 
755,143

 
9

37-48 payments
 
411,596

 
4

 
411,493

 
5

More than 48 payments
 
281,508

 
2

 
212,438

 
3

Not yet in repayment
 
3,971,392

 
37

 
3,027,143

 
36

Total
 
$
10,840,261

 
100
%
 
$
8,311,376

 
100
%

(1) 
Balance represents gross Private Education Loans.
(2) 
Number of months in active repayment (whether interest only payment, fixed payment, or full principal and interest payment status) for which a scheduled payment was due.
FFELP Loans are at least 97 percent insured and guaranteed as to their principal and accrued interest in the event of default; therefore, there are no key credit quality indicators associated with FFELP Loans. Included within our FFELP portfolio as of September 30, 2015 are $700 million of FFELP rehabilitation loans. These loans have previously defaulted but have subsequently been brought current according to a loan rehabilitation agreement. The credit performance on rehabilitation loans is worse than the remainder of our FFELP portfolio. At September 30, 2015 and December 31, 2014, 61 percent and 62 percent, respectively, of our FFELP portfolio consisted of rehabilitation loans.

 The following tables provide information regarding the loan status of our Private Education Loans and the aging of our past due Private Education Loans. Loans in repayment include loans making interest only and fixed payments as well as loans that have entered full principal and interest repayment status.


 
 
Private Education Loans
 
 
 
September 30,
 
December 31,
 
 
 
2015
 
2014
 
 
 
Balance
 
%
 
Balance
 
%
 
Loans in-school/grace/deferment(1)
 
$
3,971,392

 
 
 
$
3,027,143

 
 
 
Loans in forbearance(2)
 
211,641

 
 
 
135,018

 
 
 
Loans in repayment and percentage of each status:
 
 
 
 
 
 
 
 
 
Loans current
 
6,529,855

 
98.1
%
 
5,045,600

 
98.0
%
 
Loans delinquent 31-60 days(3)
 
79,794

 
1.2

 
63,873

 
1.2

 
Loans delinquent 61-90 days(3)
 
34,743

 
0.5

 
29,041

 
0.6

 
Loans delinquent greater than 90 days(3)
 
12,836

 
0.2

 
10,701

 
0.2

 
Total loans in repayment
 
6,657,228

 
100.0
%
 
5,149,215

 
100.0
%
 
Total loans, gross
 
10,840,261

 
 
 
8,311,376

 
 
 
Deferred origination costs
 
26,283

 
 
 
13,845

 
 
 
Total loans
 
10,866,544

 
 
 
8,325,221

 
 
 
Allowance for loan losses
 
(100,033
)
 
 
 
(78,574
)
 
 
 
Total loans, net
 
$
10,766,511

 
 
 
$
8,246,647

 
 
 
Percentage of loans in repayment
 
 
 
61.4
%
 
 
 
62.0
%
 
Delinquencies as a percentage of loans in repayment
 
 
 
1.9
%
 
 
 
2.0
%
 
Loans in forbearance as a percentage of loans in repayment and forbearance
 
 
 
3.1
%
 
 
 
2.6
%
 
(1)
Deferment includes customers who have returned to school or are engaged in other permitted educational activities and are not yet required to make payments on the loans (e.g., residency periods for medical students or a grace period for bar exam preparation).
(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, 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.
 



 
 
Accrued Interest Receivable
The following table provides information regarding accrued interest receivable on our Private Education Loans. The table also discloses the amount of accrued interest on loans greater than 90 days past due as compared to our allowance for uncollectible interest. The allowance for uncollectible interest exceeds the amount of accrued interest on our 90 days past due portfolio for all periods presented.
 
 
Private Education Loan
 
 
Accrued Interest Receivable
 
 
Total Interest Receivable
 
Greater Than 90 Days Past Due
 
Allowance for Uncollectible Interest
 
 
 
 
 
 
 
September 30, 2015
 
$
606,218

 
$
489

 
$
2,979

December 31, 2014
 
$
445,710

 
$
443

 
$
3,517