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 March 31, 2016
	FFELP Loans			Private Education Loans			Total
Allowance for Loan Losses
Beginning balance	$	3,691		$	108,816		$	112,507
Total provision	321			33,839			34,160
Net charge-offs:
Charge-offs	(383		)	(19,004		)	(19,387		)
Recoveries	—			1,044			1,044
Net charge-offs	(383		)	(17,960		)	(18,343		)
Loan sales⁽¹⁾	—			(2,075		)	(2,075		)
Ending Balance	$	3,629		$	122,620		$	126,249
Allowance:
Ending balance: individually evaluated for impairment	$	—		$	49,212		$	49,212
Ending balance: collectively evaluated for impairment	$	3,629		$	73,408		$	77,037
Loans:
Ending balance: individually evaluated for impairment	$	—		$	318,094		$	318,094
Ending balance: collectively evaluated for impairment	$	1,088,026		$	11,793,776		$	12,881,802
Net charge-offs as a percentage of average loans in repayment (annualized)⁽²⁾	0.19		%	0.95		%
Allowance as a percentage of the ending total loan balance	0.33		%	1.01		%
Allowance as a percentage of the ending loans in repayment⁽²⁾	0.45		%	1.56		%
Allowance coverage of net charge-offs (annualized)	2.37			1.71
Ending total loans, gross	$	1,088,026		$	12,111,870
Average loans in repayment⁽²⁾	$	804,690		$	7,534,234
Ending loans in repayment⁽²⁾	$	803,378		$	7,843,076

____________

⁽¹⁾ Represents fair value adjustments on loans sold.

⁽²⁾ Loans in repayment include loans on which borrowers are 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 March 31, 2015
	FFELP Loans			Private Education Loans			Total
Allowance for Loan Losses
Beginning balance	$	5,268		$	78,574		$	83,842
Total provision	435			16,183			16,618
Net charge-offs:
Charge-offs	(1,134		)	(8,727		)	(9,861		)
Recoveries	—			1,387			1,387
Net charge-offs	(1,134		)	(7,340		)	(8,474		)
Loan sales⁽¹⁾	—			(2,181		)	(2,181		)
Ending Balance	$	4,569		$	85,236		$	89,805
Allowance:
Ending balance: individually evaluated for impairment	$	—		$	20,105		$	20,105
Ending balance: collectively evaluated for impairment	$	4,569		$	65,131		$	69,700
Loans:
Ending balance: individually evaluated for impairment	$	—		$	122,120		$	122,120
Ending balance: collectively evaluated for impairment	$	1,208,977		$	9,646,641		$	10,855,618
Net charge-offs as a percentage of average loans in repayment (annualized)⁽²⁾	0.50		%	0.51		%
Allowance as a percentage of the ending total loan balance	0.38		%	0.87		%
Allowance as a percentage of the ending loans in repayment⁽²⁾	0.52		%	1.42		%
Allowance coverage of net charge-offs (annualized)	1.01			2.90
Ending total loans, gross	$	1,208,977		$	9,768,761
Average loans in repayment⁽²⁾	$	898,360		$	5,705,067
Ending loans in repayment⁽²⁾	$	872,579		$	5,995,121

____________

⁽¹⁾ Represents fair value adjustments on loans sold.

⁽²⁾ Loans in repayment include loans on which borrowers 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. 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 23 percent of the loans granted forbearance as of March 31, 2016 and December 31, 2015, respectively, have been classified as TDRs due to their forbearance status. For additional information, see Note 6, “Allowance for Loan Losses” in our 2015 Form 10-K.

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 continue to accrue interest on those loans through the date of claim.

At March 31, 2016 and December 31, 2015, all of 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

March 31, 2016
TDR Loans	$	322,744	$	318,094	$	49,212

December 31, 2015
TDR Loans	$	269,628	$	265,831	$	43,480

The following table provides the average recorded investment and interest income recognized for our TDR loans.



	Three Months Ended				Three Months Ended
	March 31, 2016				March 31, 2015
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized

TDR Loans	$	297,315	$	5,583	$	88,120	$	2,396

The following table provides information regarding the loan status of TDR loans.



	March 31,				December 31,
	2016				2015
	Balance		%		Balance		%
TDR loans in in-school/grace/deferment⁽¹⁾	$	10,738			$	6,869
TDR loans in forbearance⁽²⁾	42,699				43,756
TDR loans in repayment⁽³⁾ and percentage of each status:
Loans current	232,720		88.0	%	185,936		86.4	%
Loans delinquent 31-60 days⁽⁴⁾	13,610		5.1		14,948		6.9
Loans delinquent 61-90 days⁽⁴⁾	11,109		4.2		9,239		4.3
Loans delinquent greater than 90 days⁽⁴⁾	7,218		2.7		5,083		2.4
Total TDR loans in repayment	264,657		100.0	%	215,206		100.0	%
Total TDR loans, gross	$	318,094			$	265,831

_____


⁽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⁾	Loans in repayment include loans on which borrowers are making interest only and fixed payments as well as loans that have entered full principal and interest repayment status.


⁽⁴⁾	The period of delinquency is based on the number of days scheduled payments are contractually past due.

The following table 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
	March 31, 2016						March 31, 2015
	Modified Loans⁽¹⁾		Charge-offs		Payment- Default		Modified Loans⁽¹⁾		Charge-offs		Payment- Default

TDR Loans	$	61,006	$	4,968	$	25,671	$	122,120	$	930	$	4,785

_____


⁽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, the 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
	March 31, 2016				December 31, 2015
Credit Quality Indicators:	Balance⁽¹⁾		% of Balance		Balance⁽¹⁾		% of Balance

Cosigners:
With cosigner	$	10,914,736	90	%	$	9,515,136	90	%
Without cosigner	1,197,134		10		1,081,301		10
Total	$	12,111,870	100	%	$	10,596,437	100	%

FICO at Origination:
Less than 670	$	781,804	6	%	$	700,779	7	%
670-699	1,768,651		15		1,554,959		15
700-749	3,909,444		32		3,403,823		32
Greater than or equal to 750	5,651,971		47		4,936,876		46
Total	$	12,111,870	100	%	$	10,596,437	100	%

Seasoning⁽²⁾:
1-12 payments	$	3,664,441	30	%	$	3,059,901	29	%
13-24 payments	2,255,999		19		2,096,412		20
25-36 payments	1,171,202		10		1,084,818		10
37-48 payments	549,855		4		513,125		5
More than 48 payments	443,041		4		414,217		4
Not yet in repayment	4,027,332		33		3,427,964		32
Total	$	12,111,870	100	%	$	10,596,437	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.

The following table provides information regarding the loan status of our 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
	March 31,					December 31,
	2016					2015
	Balance			%		Balance			%
Loans in-school/grace/deferment⁽¹⁾	$	4,027,332				$	3,427,964
Loans in forbearance⁽²⁾	241,462					241,207
Loans in repayment and percentage of each status:
Loans current	7,678,446			97.9	%	6,773,095			97.8	%
Loans delinquent 31-60 days⁽³⁾	78,242			1.0		91,129			1.3
Loans delinquent 61-90 days⁽³⁾	56,906			0.7		42,048			0.6
Loans delinquent greater than 90 days⁽³⁾	29,482			0.4		20,994			0.3
Total Private Education Loans in repayment	7,843,076			100.0	%	6,927,266			100.0	%
Total Private Education loans, gross	12,111,870					10,596,437
Private Education Loans deferred origination costs	31,772					27,884
Total Private Education Loans	12,143,642					10,624,321
Private Education Loans allowance for losses	(122,620		)			(108,816		)
Private Education Loans, net	$	12,021,022				$	10,515,505
Percentage of Private Education Loans in repayment				64.8	%				65.4	%
Delinquencies as a percentage of Private Education Loans in repayment				2.1	%				2.2	%
Loans in forbearance as a percentage of Private Education Loans in repayment and forbearance				3.0	%				3.4	%


⁽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 Private Education Loan portfolio for all periods presented.



	Private Education Loan
	Accrued Interest Receivable
	Total Interest Receivable		Greater Than 90 Days Past Due		Allowance for Uncollectible Interest

March 31, 2016	$	619,226	$	1,034	$	3,074
December 31, 2015	$	542,919	$	791	$	3,332