Loans Held for Investment

3 Months Ended

Mar. 31, 2022

Loans held for investment consist of Private Education Loans, FFELP Loans, and Credit Cards. 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 “Credit Cards” to refer to our suite of Credit Cards with bonus rewards.

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, the London interbank offered rate, or SOFR, the Secured Overnight Financing Rate. As of March 31, 2022 and December 31, 2021, 51 percent and 52 percent, respectively, of all of our Private Education Loans were indexed to LIBOR or SOFR. We provide incentives for customers to include a cosigner on the loan, and the vast majority of Private Education Loans in our portfolio are cosigned. We also encourage customers to make payments while in school.

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.

In the first quarter of 2022, we recognized $10 million in gains from the sale of approximately $95 million of our Private Education Loans, including $89 million of principal and $6 million in capitalized interest, to an unaffiliated third party. In the first quarter of 2021, we recognized $399 million in gains from the sale of approximately $3.16 billion of our Private Education Loans, including $2.97 billion of principal and $193 million in capitalized interest, to an unaffiliated third party. There were VIEs created in the execution of certain of these loan sales; however, based on our consolidation analysis, we are not the primary beneficiary of these VIEs. These transactions qualified for sale treatment and removed the balance of the loans from our balance sheet on the respective settlement dates. We remained the servicer of these loans pursuant to applicable servicing agreements executed in connection with the sales. For additional information, see Notes to Consolidated Financial Statements, Note 8, “Borrowings - Unconsolidated VIEs.”

Loans held for investment are summarized as follows:


	March 31,		December 31,
(Dollars in thousands)	2022		2021
Private Education Loans:
Fixed-rate	$	10,685,053	$	9,920,547
Variable-rate	11,050,316		10,796,316
Total Private Education Loans, gross	21,735,369		20,716,863
Deferred origination costs and unamortized premium/(discount)	71,907		67,488
Allowance for credit losses	(1,221,053)		(1,158,977)
Total Private Education Loans, net	20,586,223		19,625,374

FFELP Loans	682,273		695,216
Deferred origination costs and unamortized premium/(discount)	1,770		1,815
Allowance for credit losses	(3,999)		(4,077)
Total FFELP Loans, net	680,044		692,954

Credit Cards (fixed-rate)	27,547		25,014
Deferred origination costs and unamortized premium/(discount)	171		222
Allowance for credit losses	(2,310)		(2,281)
Total Credit Cards, net	25,408		22,955
Loans held for investment, net	$	21,291,675	$	20,341,283

The estimated weighted average life of education loans in our portfolio was approximately 4.8 years and 4.7 years at March 31, 2022 and December 31, 2021, respectively.

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


	2022				2021
Three Months Ended March 31, (dollars in thousands)	Average Balance		Weighted Average Interest Rate		Average Balance		Weighted Average Interest Rate
Private Education Loans	$	21,858,270	8.38	%	$	20,984,491	8.22	%
FFELP Loans	690,540		3.51		734,289		3.41
Credit Cards	26,622		3.95		11,841		0.78
Total portfolio	$	22,575,432			$	21,730,621