Loans Held for Investment

6 Months Ended

Jun. 30, 2018

Receivables [Abstract]

Loans Held for Investment

Loans Held for Investment

Loans held for investment consist of Private Education Loans, FFELP Loans and Personal Loans. We use “Private Education Loans” to mean education loans to students or their families that are not made, insured or guaranteed by any state or federal government. Private Education Loans do not include loans insured or guaranteed under the previously existing Federal Family Education Loan Program (“FFELP”). We use “Personal Loans” to mean those unsecured loans to individuals that may be used for non-educational purposes. We began acquiring Personal Loans from third parties in the fourth quarter of 2016 and originating Personal Loans in the first quarter of 2018.

Our Private Education Loans are made largely to bridge the gap between the cost of higher education and the amount funded through financial aid, government loans and customers’ resources. Private Education Loans bear the full credit risk of the customer. We manage this risk through risk-performance underwriting strategies and qualified cosigners. Private Education Loans may be fixed rate or may carry a variable interest rate indexed to LIBOR. As of June 30, 2018, and December 31, 2017, 73 percent and 77 percent, respectively, of all of our Private Education Loans were indexed to LIBOR. We provide incentives for customers to include a cosigner on the loan, and the vast majority of loans in our portfolio are cosigned. We also encourage customers to make payments while in school.

In connection with the separation of Navient Corporation (“Navient”) from SLM (the “Spin-Off”), we retained the right to require Navient to purchase delinquent loans (at fair value) when the borrower has a lending relationship with both us and Navient (“Split Loans”). In the second quarter of 2018, we sold our remaining $43 million portfolio of Split Loans (both current and non-current loans) to Navient and recognized a net gain of $2 million.

FFELP Loans are insured as to their principal and accrued interest in the event of default, subject to a risk-sharing level based on the date of loan disbursement. These insurance obligations are supported by contractual rights against the United States. For loans disbursed on or after July 1, 2006, we receive 97 percent reimbursement on all qualifying claims. For loans disbursed after October 1, 1993, and before July 1, 2006, we receive 98 percent reimbursement on all qualifying claims. For loans disbursed prior to October 1, 1993, we receive 100 percent reimbursement on all qualifying claims.

Loans held for investment are summarized as follows:

	June 30,			December 31,
	2018			2017
Private Education Loans:
Fixed rate	$	5,086,329		$	4,000,447
Variable rate	13,601,698			13,431,720
Total Private Education Loans, gross	18,688,027			17,432,167
Deferred origination costs and unamortized premium/(discount)	61,908			56,378
Allowance for loan losses	(261,695		)	(243,715		)
Total Private Education Loans, net	18,488,240			17,244,830
FFELP Loans	885,357			927,660
Deferred origination costs and unamortized premium/(discount)	2,496			2,631
Allowance for loan losses	(1,073		)	(1,132		)
Total FFELP Loans, net	886,780			929,159
Personal Loans (fixed rate)	966,080			400,280
Deferred origination costs and unamortized premium/(discount)	(10		)	—
Allowance for loan losses	(32,509		)	(6,628		)
Total Personal Loans, net	933,561			393,652
Loans held for investment, net	$	20,308,581		$	18,567,641

The estimated weighted average life of education loans in our portfolio was approximately 5.3 years and 5.5 years at June 30, 2018 and December 31, 2017, respectively.

The average balance and the respective weighted average interest rates of loans in our portfolio are summarized as follows:

	Three Months Ended
	June 30,
	2018				2017
	Average Balance		Weighted Average Interest Rate		Average Balance		Weighted Average Interest Rate
Private Education Loans	$	18,764,768	9.03	%	$	15,687,803	8.33	%
FFELP Loans	898,095		4.51		980,478		3.87
Personal Loans	815,356		10.65		60,910		9.28
Total portfolio	$	20,478,219			$	16,729,191

	Six Months Ended
	June 30,
	2018				2017
	Average Balance		Weighted Average Interest Rate		Average Balance		Weighted Average Interest Rate
Private Education Loans	$	18,712,533	8.93	%	$	15,569,337	8.30	%
FFELP Loans	908,846		4.38		991,740		3.78
Personal Loans	672,792		10.65		48,464		9.24
Total portfolio	$	20,294,171			$	16,609,541