Borrowings

6 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

Borrowings

Borrowings

Outstanding borrowings consist of unsecured debt and secured borrowings issued through our term asset-backed securitization (“ABS”) program and our Private Education Loan multi-lender secured borrowing facility (the “Secured Borrowing Facility”). For additional information regarding our borrowings, see Notes to Consolidated Financial Statements, Note 11, “Borrowings” in our 2021 Form 10-K. The following table summarizes our borrowings at June 30, 2022 and December 31, 2021.

	June 30, 2022						December 31, 2021
(Dollars in thousands)	Short-Term		Long-Term		Total		Short-Term		Long-Term		Total
Unsecured borrowings:
Unsecured debt (fixed-rate)	$	—	$	987,384	$	987,384	$	—	$	986,138	$	986,138
Total unsecured borrowings	—		987,384		987,384		—		986,138		986,138
Secured borrowings:
Private Education Loan term securitizations:
Fixed-rate	—		3,368,758		3,368,758		—		3,897,996		3,897,996
Variable-rate	—		863,168		863,168		—		1,046,856		1,046,856
Total Private Education Loan term securitizations	—		4,231,926		4,231,926		—		4,944,852		4,944,852
Secured Borrowing Facility	—		—		—		—		—		—
Total secured borrowings	—		4,231,926		4,231,926		—		4,944,852		4,944,852
Total	$	—	$	5,219,310	$	5,219,310	$	—	$	5,930,990	$	5,930,990

Short-term Borrowings

On May 17, 2022, we amended our Secured Borrowing Facility to extend the maturity of the facility. The amount that can be borrowed under the facility is $2 billion. We hold 100 percent of the residual interest in the Secured Borrowing Facility trust. Under the Secured Borrowing Facility, we incur financing costs on unused borrowing capacity and on outstanding advances. The amended Secured Borrowing Facility extended the revolving period, during which we may borrow, repay, and reborrow funds, until May 16, 2023. The scheduled amortization period, during which amounts outstanding under the Secured Borrowing Facility must be repaid, ends on May 16, 2024 (or earlier, if certain material adverse events occur). At both June 30, 2022, and December 31, 2021, there were no secured borrowings outstanding under the Secured Borrowing Facility.

Long-term Borrowings

Secured Financings at Issuance

The following table summarizes our secured financings issued in 2021. There were no secured financings issued in the six months ended June 30, 2022.

Issue	Date Issued	Total Issued		Weighted Average Cost of Funds(1)	Weighted Average Life  (in years)
(Dollars in thousands)
Private Education Loans:
2021-B	May 2021	$	531,000	1-month LIBOR plus 0.77%	4.26
2021-D	August 2021	527,000		1-month LIBOR plus 0.69%	4.22
2021-E	November 2021	534,000		1-month LIBOR plus 0.69%	4.15
Total notes issued in 2021		$	1,592,000
Total loan and accrued interest amount securitized at inception in 2021(2)		$	1,656,263

(1) Represents LIBOR equivalent cost of funds for floating and fixed-rate bonds, excluding issuance costs.

(2) At June 30, 2022, $1.39 billion of our Private Education Loans, including $1.31 billion of principal and $86 million in capitalized interest, were encumbered related to these transactions.

Consolidated Funding Vehicles

We consolidate our financing entities that are VIEs as a result of our being the entities’ primary beneficiary. As a result, these financing VIEs are accounted for as secured borrowings.

As of June 30, 2022 (dollars in thousands)	Debt Outstanding						Carrying Amount of Assets Securing Debt Outstanding
	Short-Term		Long-Term		Total		Loans		Restricted Cash		Other Assets(1)		Total
Secured borrowings:
Private Education Loan term securitizations	$	—	$	4,231,926	$	4,231,926	$	5,337,560	$	147,104	$	308,918	$	5,793,582
Secured Borrowing Facility	—		—		—		—		—		2,483		2,483
Total	$	—	$	4,231,926	$	4,231,926	$	5,337,560	$	147,104	$	311,401	$	5,796,065

As of December 31, 2021 (dollars in thousands)	Debt Outstanding						Carrying Amount of Assets Securing Debt Outstanding
	Short-Term		Long-Term		Total		Loans		Restricted Cash		Other Assets(1)		Total
Secured borrowings:
Private Education Loan term securitizations	$	—	$	4,994,852	$	4,994,852	$	6,029,034	$	210,741	$	357,982	$	6,597,757
Secured Borrowing Facility	—		—		—		—		—		867		867
Total	$	—	$	4,994,852	$	4,994,852	$	6,029,034	$	210,741	$	358,849	$	6,598,624

(1) Other assets primarily represent accrued interest receivable.

Unconsolidated VIEs

Private Education Loan Securitizations

Unconsolidated VIEs include variable interests that we hold in certain securitization trusts created by the sale of our Private Education Loans to unaffiliated third parties. We remained the servicer of these loans pursuant to applicable servicing agreements executed in connection with the sales, and we are also the administrator of these trusts. Additionally, we own five percent of the securities issued by the trusts to meet risk retention requirements. We were not required to consolidate these entities because our servicer/administrator decision-maker fees are not variable interests and our other interests in the VIE, which are in the form of our five percent vertical interest, do not absorb more than an insignificant amount of the VIE’s expected losses or receive more than an insignificant amount of the VIE’s expected residual returns.

2022-A Transaction

On March 16, 2022, we closed an SMB Private Education Loan Trust 2022-A term ABS transaction (the “2022-A Transaction”), in which an unaffiliated third-party sold to the trust approximately $973 million of Private Education Loans that the third-party seller previously purchased from us on November 17, 2021. In the 2022-A Transaction, we were the sponsor, servicer and administrator, and the seller of an additional $95 million of Private Education Loans into the trust. The sale of such additional loans qualified for sale treatment and removed these loans from our balance sheet on the settlement date of the 2022-A Transaction and we recorded a $10 million gain on sale associated with this transaction. In connection with the 2022-A Transaction settlement, we retained a five percent vertical risk retention interest (i.e., five percent of each class issued in the securitization). We classified those vertical risk retention interests related to the 2022-A Transaction as available-for-sale investments, except for the interest in the residual class, which we classified as a trading investment recorded at fair value with changes recorded through earnings.

2022-B Transaction

On May 27, 2022, we closed an SMB Private Education Loan Trust 2022-B term ABS transaction (the “2022-B Transaction”), in which an unaffiliated third-party sold to the trust approximately $2.0 billion of Private Education Loans that the third-party seller previously purchased from us on April 27, 2022. In the 2022-B Transaction, we were the sponsor, servicer and administrator, and the seller of an additional $107 million of Private Education Loans into the trust. The sale of such additional loans qualified for sale treatment and removed these loans from our balance sheet on the settlement date of the 2022-B Transaction and we recorded an $11 million gain on sale associated with this transaction. In connection with the 2022-B Transaction settlement, we retained a five percent vertical risk retention interest (i.e., five percent of each class issued in the securitization). We classified those vertical risk retention interests related to the 2022-B Transaction as available-for-sale investments, except for the interest in the residual class, which we classified as a trading investment recorded at fair value with changes recorded through earnings.

The table below provides a summary of our exposure related to our unconsolidated VIEs.

	June 30, 2022						December 31, 2021
(Dollars in thousands)	Debt Interests(1)		Equity Interests(2)		Total Exposure		Debt Interests(1)		Equity Interests(2)		Total Exposure
Private Education Loan term securitizations	$	318,310	$	47,707	$	366,017	$	192,245	$	37,465	$	229,710

(1) Vertical risk retention interest classified as available-for-sale investment.

(2) Vertical risk retention interest classified as trading investment.

Other Borrowing Sources

We maintain discretionary uncommitted Federal Funds lines of credit with various correspondent banks, which totaled $125 million at June 30, 2022. The interest rate we are charged on these lines of credit is priced at Fed Funds plus a spread at the time of borrowing and is payable daily. We did not utilize these lines of credit in the six months ended June 30, 2022 or in the year ended December 31, 2021.

We established an account at the FRB to meet eligibility requirements for access to the Primary Credit borrowing facility at the FRB’s Discount Window (the “Window”). The Primary Credit borrowing facility is a lending program available to depository institutions that are in generally sound financial condition. All borrowings at the Window must be fully collateralized. We can pledge asset-backed and mortgage-backed securities, as well as FFELP Loans and Private Education Loans, to the FRB as collateral for borrowings at the Window. Generally, collateral value is assigned based on the estimated fair value of the pledged assets. At June 30, 2022 and December 31, 2021, the value of our pledged collateral at the FRB totaled $2.1 billion and $3.3 billion, respectively. The interest rate charged to us is the discount rate set by the FRB. We did not utilize this facility in the six months ended June 30, 2022 or in the year ended December 31, 2021.