Unfunded Loan Commitments

9 Months Ended

Sep. 30, 2020

When we approve a Private Education Loan at the beginning of an academic year, that approval may cover the borrowing for the entire academic year. As such, we do not always disburse the full amount of the loan at the time of such approval, but instead have a commitment to fund a portion of the loan at a later date (usually at the start of the second semester or subsequent trimesters). We estimate expected credit losses over the contractual period in which we are exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by us. See Note 1, “Significant Accounting Policies — Allowance for Credit Losses — Off-Balance Sheet Exposure for Contractual Loan Commitments” for additional information.

At September 30, 2020, we had $1.8 billion of outstanding contractual loan commitments that we expect to fund during the remainder of the 2020/2021 academic year. The tables below summarize the activity in the allowance recorded to cover lifetime expected credit losses on the unfunded commitments, which is recorded in “Other Liabilities” on the consolidated balance sheets, as well as the activity in the unfunded commitments balance.


	Three Months Ended September 30,
	2020						2019
	Allowance		Unfunded Commitments		Allowance		Unfunded Commitments

Beginning Balance	$	85,958	$	1,119,042	$	755	$	1,335,755
Provision/New commitments - net⁽¹⁾	129,290		2,542,390		3,382		3,140,432
Transfer - funded loans⁽²⁾	(100,470)		(1,890,305)		(2,170)		(2,242,077)
Ending Balance	$	114,778	$	1,771,127	$	1,967	$	2,234,110

	Nine Months Ended September 30,
	2020						2019
	Allowance		Unfunded Commitments		Allowance		Unfunded Commitments

Beginning Balance	$	2,481	$	1,910,603	$	2,165	$	2,010,744
Day 1 adjustment for the adoption of CECL	115,758		—		—		—
Provision/New commitments - net⁽¹⁾	276,094		4,542,560		5,516		5,122,672
Transfer - funded loans⁽²⁾	(279,555)		(4,682,036)		(5,714)		(4,899,306)
Ending Balance	$	114,778	$	1,771,127	$	1,967	$	2,234,110

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⁽¹⁾ Net of expirations of commitments unused.

⁽²⁾ When a loan commitment is funded, its related allowance for credit losses is transferred to the allowance for credit losses.

The unfunded commitments disclosed above represent the total amount of outstanding unfunded commitments at each period end. However, historically not all of these commitments are funded prior to the expiration of the commitments. We estimate the amount of commitments expected to be funded in calculating the reserve for unfunded commitments. The amount we expect to fund and use in our calculation of the reserve for unfunded commitments will change period to period based upon the loan characteristics of the underlying commitments.

- Definition

The entire disclosure for credit loss on financial instrument measured at amortized cost basis, net investment in lease, off-balance sheet credit exposure, and available-for-sale debt security.

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