Arrangements with Navient Corporation

9 Months Ended

Sep. 30, 2016

Related Party Transactions [Abstract]

Arrangements with Navient Corporation

Arrangements with Navient Corporation

In connection with the separation of Navient from SLM in the Spin-Off, we entered into a separation and distribution agreement (the “Separation and Distribution Agreement”) and other ancillary agreements with Navient. Please refer to Note 16, “Arrangements with Navient Corporation” in our 2015 Form 10-K for a full discussion of these agreements.

Amended Loan Participation and Purchase Agreement

Prior to the Spin-Off, Sallie Mae Bank, a Utah industrial bank subsidiary of the Company (the “Bank”), sold substantially all its Private Education Loans to several former affiliates, now subsidiaries of Navient (collectively, the “Purchasers”), pursuant to a Loan Participation and Purchase Agreement. This agreement predated the Spin-Off, but was significantly amended and reduced in scope in connection with the Spin-Off. Post-Spin-Off, the Bank retains only the right to require the Purchasers to purchase loans (at fair value) for which the borrower also has a separate lending relationship with Navient (“Split Loans”) when the Split Loans either (1) are more than 90 days past due; (2) have been restructured; (3) have been granted a hardship forbearance or more than six months of administrative forbearance; or (4) have a borrower or cosigner who has filed for bankruptcy. At September 30, 2016, we held approximately $71 million of Split Loans.

During the three months ended September 30, 2016, the Bank sold loans to the Purchasers in the amount of $3.6 million in principal and $0.1 million in accrued interest income. During the three months ended September 30, 2015, the Bank sold loans to the Purchasers in the amount of $6.6 million in principal and $0.2 million in accrued interest income.

During the nine months ended September 30, 2016, the Bank sold loans to the Purchasers in the amount of $13.1 million in principal and $0.3 million in accrued interest income. During the nine months ended September 30, 2015, the Bank sold loans to the Purchasers in the amount of $21.1 million in principal and $0.4 million in accrued interest income.

There was no gain as a result of the loans sold to the Purchasers in the three and nine months ended September 30, 2016 and September 30, 2015. Total write-downs to fair value for loans sold with a fair value lower than par totaled $1.4 million and $1.9 million in the three months ended September 30, 2016 and September 30, 2015, respectively. Total write-downs to fair value for loans sold with a fair value lower than par totaled $5.0 million and $5.6 million in the nine months ended September 30, 2016 and September 30, 2015, respectively. Navient is the servicer for all of these loans.