Bonds and Notes Payable

The following tables summarize the Company’s outstanding debt obligations by type of instrument:



	As of December 31, 2017
	Carrying amount			Interest rate range	Final maturity
Variable-rate bonds and notes issued in FFELP loan asset-backed securitizations:
Bonds and notes based on indices	$	20,352,045		1.47% - 3.37%	8/25/21 - 2/25/66
Bonds and notes based on auction	780,829			2.09% - 2.69%	3/22/32 - 11/26/46
Total FFELP variable-rate bonds and notes	21,132,874
FFELP warehouse facilities	335,992			1.55% / 1.56%	11/19/19 / 5/31/20
Variable-rate bonds and notes issued in private education loan asset-backed securitization	74,717			3.30%	12/26/40
Fixed-rate bonds and notes issued in private education loan asset-backed securitization	82,647			3.60% / 5.35%	12/26/40 / 12/28/43
Unsecured line of credit	10,000			2.98%	12/12/21
Unsecured debt - Junior Subordinated Hybrid Securities	20,381			5.07%	9/15/61
Other borrowings	70,516			2.44% - 3.38%	1/12/18 - 12/15/45
	21,727,127
Discount on bonds and notes payable and debt issuance costs	(370,554		)
Total	$	21,356,573



	As of December 31, 2016
	Carrying amount			Interest rate range	Final maturity
Variable-rate bonds and notes issued in FFELP loan asset-backed securitizations:
Bonds and notes based on indices	$	22,130,063		0.24% - 6.90%	6/25/21 - 9/25/65
Bonds and notes based on auction	998,415			1.61% - 2.28%	3/22/32 - 11/26/46
Total FFELP variable-rate bonds and notes	23,128,478
FFELP warehouse facilities	1,677,443			0.63% - 1.09%	9/7/18 - 12/13/19
Variable-rate bonds and notes issued in private education loan asset-backed securitization	112,582			2.60%	12/26/40
Fixed-rate bonds and notes issued in private education loan asset-backed securitization	113,378			3.60% / 5.35%	12/26/40 / 12/28/43
Unsecured line of credit	—			—	12/12/21
Unsecured debt - Junior Subordinated Hybrid Securities	50,184			4.37%	9/15/61
Other borrowings	18,355			3.38%	3/31/23 / 12/15/45
	25,100,420
Discount on bonds and notes payable and debt issuance costs	(431,930		)
Total	$	24,668,490

Secured Financing Transactions

The Company has historically relied upon secured financing vehicles as its most significant source of funding for loans. The net cash flow the Company receives from the securitized loans generally represents the excess amounts, if any, generated by the underlying loans over the amounts required to be paid to the bondholders, after deducting servicing fees and any other expenses relating to the securitizations. The Company’s rights to cash flow from securitized loans are subordinate to bondholder interests, and the securitized loans may fail to generate any cash flow beyond what is due to bondholders. The Company’s secured financing vehicles during the periods presented include loan warehouse facilities and asset-backed securitizations.

The majority of the bonds and notes payable are primarily secured by the loans receivable, related accrued interest, and by the amounts on deposit in the accounts established under the respective bond resolutions or financing agreements.

FFELP warehouse facilities

The Company funds a portion of its FFELP loan acquisitions using its FFELP warehouse facilities. Student loan warehousing allows the Company to buy and manage student loans prior to transferring them into more permanent financing arrangements.

As of December 31, 2017, the Company had two FFELP warehouse facilities as summarized below.



	NFSLW-I		NHELP-II	Total
Maximum financing amount	$	500,000	500,000	1,000,000
Amount outstanding	189,502		146,490	335,992
Amount available	$	310,498	353,510	664,008
Expiration of liquidity provisions	September 20, 2019		May 31, 2018
Final maturity date	November 19, 2019		May 31, 2020
Maximum advance rates	92.0 - 98.0%		85.0 - 95.0%
Minimum advance rates	84.0 - 90.0%		85.0 - 95.0%
Advanced as equity support	$	9,513	12,876	22,389

The FFELP warehouse facilities are supported by 364-day liquidity provisions, which are subject to the respective expiration date shown in the previous table. In the event the Company is unable to renew the liquidity provisions by such date, the facility would become a term facility at a stepped-up cost, with no additional student loans being eligible for financing, and the Company would be required to refinance the existing loans in the facility by the facility's final maturity date. The NFSLW-I warehouse facility provides for formula-based advance rates, depending on FFELP loan type, up to a maximum of the principal and interest of loans financed as shown in the table above. The advance rates for collateral may increase or decrease based on market conditions, but they are subject to minimums as disclosed above. The NHELP-II warehouse facility has a static advance rate that requires initial equity for loan funding, but does not require increased equity based on market movements.

The FFELP warehouse facilities contain financial covenants relating to levels of the Company’s consolidated net worth, ratio of recourse indebtedness to adjusted EBITDA, and unencumbered cash. Any noncompliance with these covenants could result in a requirement for the immediate repayment of any outstanding borrowings under the facilities.

Asset-backed securitizations

The following tables summarize the asset-backed securitization transactions completed in 2017 and 2016.



	Securitizations completed during the year ended December 31, 2017
	NSLT 2017-1		NSLT 2017-2		NSLT 2017-3	Total
Date securities issued	5/24/17		7/26/17		12/14/17
Total original principal amount	$	535,000	399,390		539,400	1,473,790
Bond discount	—		(2,002	)	—	(2,002	)
Issue price	$	535,000	397,388		539,400	1,471,788
Cost of funds:	1-month LIBOR plus 0.78%		1-month LIBOR plus 0.77%		1-month LIBOR plus 0.85%
Final maturity date	6/25/65		9/25/65		2/25/66



	Securitizations completed during the year ended December 31, 2016
	FFELP 2016-1		Private education loan 2016-A (a)						Total
			Class A-1A notes	Class A-1B notes		2016-A total
Date securities issued	10/12/16		12/21/16	12/21/16		12/21/16
Total original principal amount	$	426,000	112,582	91,378		225,960			$	651,960

Class A senior notes:
Total original principal amount	$	426,000	112,582	91,378		203,960			629,960
Bond discount	—		—	(609	)	(609		)	(609		)
Issue price	$	426,000	112,582	90,769		203,351			629,351
Cost of funds:	1-month LIBOR plus 0.80%		1-month LIBOR plus 1.75%	3.60%
Final maturity date	9/25/65		12/26/40	12/26/40

Class B subordinated notes:
Total original principal amount						$	22,000		22,000
Bond discount						(285		)	(285		)
Issue price						$	21,715		21,715
Cost of funds:						5.35		%
Final maturity date						12/28/43


(a)	On June 26, 2015, the Company entered into a $275.0 million private education loan warehouse facility. The Company funded all loans that were included in this warehouse in the Private Education Loan 2016-A securitization and terminated the private education loan warehouse facility on December 21, 2016.

Auction Rate Securities

The interest rates on certain of the Company's FFELP asset-backed securities are set and periodically reset via a "dutch auction" ("Auction Rate Securities"). As of December 31, 2017, the Company is currently the sponsor on $780.8 million of Auction Rate Securities. The Auction Rate Securities generally pay interest to the holder at a maximum rate as defined by the indenture. While these rates will vary, they will generally be based on a spread to LIBOR or Treasury Securities, or the Net Loan Rate as defined in the financing documents. Based on the relative levels of these indices as of December 31, 2017, the rates expected to be paid by the Company range from LIBOR plus 100 basis points, on the low end, to LIBOR plus 250 basis points, on the high end. These maximum rates are subject to increase if the credit ratings on the bonds are downgraded.

Unsecured Line of Credit

The Company has a $350.0 million unsecured line of credit that has a maturity date of December 12, 2021. As of December 31, 2017, $10.0 million was outstanding on the line of credit and $340.0 million was available for future use. Interest on amounts borrowed under the line of credit is payable, at the Company's election, at an alternate base rate or a Eurodollar rate, plus a variable rate (LIBOR), in each case as defined in the credit agreement. The initial margin applicable to Eurodollar borrowings is 150 basis points and may vary from 100 to 200 basis points depending on the Company's credit rating.

The line of credit agreement contains certain financial covenants that, if not met, lead to an event of default under the agreement. The covenants include maintaining:


•	A minimum consolidated net worth


•	A minimum adjusted EBITDA to corporate debt interest (over the last four rolling quarters)


•	A limitation on recourse indebtedness


•	A limitation on the amount of unsecuritized private education and consumer loans in the Company’s portfolio


•	A limitation on permitted investments, including business acquisitions that are not in one of the Company's existing lines of business

As of December 31, 2017, the Company was in compliance with all of these requirements. Many of these covenants are duplicated in the Company's other lending facilities, including its warehouse facilities.

The Company's operating line of credit does not have any covenants related to unsecured debt ratings. However, changes in the Company's ratings (as well as the amounts the Company borrows) have modest implications on the pricing level at which the Company obtains funds

A default on the Company's warehouse facilities would result in an event of default on the Company's unsecured line of credit that would result in the outstanding balance on the line of credit becoming immediately due and payable.

Junior Subordinated Hybrid Securities

On September 27, 2006, the Company issued $200.0 million aggregate principal amount of Junior Subordinated Hybrid Securities ("Hybrid Securities"). The Hybrid Securities are unsecured obligations of the Company. The interest rate on the Hybrid Securities through September 29, 2036 ("the scheduled maturity date") is equal to three-month LIBOR plus 3.375%, payable quarterly, which was 5.07% at December 31, 2017. The principal amount of the Hybrid Securities will become due on the scheduled maturity date only to the extent that prior to such date the Company has received proceeds from the sale of certain qualifying capital securities (as defined in the Hybrid Securities' indenture). If any amount is not paid on the scheduled maturity date, it will remain outstanding and bear interest at a floating rate as defined in the indenture, payable monthly. On September 15, 2061, the Company must pay any remaining principal and interest on the Hybrid Securities in full whether or not the Company has sold qualifying capital securities. At the Company's option, the Hybrid Securities are redeemable in whole or in part at their principal amount plus accrued and unpaid interest.

During the first quarter of 2017, the Company initiated a cash tender offer to purchase any and all of its outstanding Hybrid Securities, including a related consent solicitation to effect certain amendments to the indenture governing the notes to eliminate a provision requiring a minimum principal amount of the notes to remain outstanding after a partial redemption. The aggregate principal amount of notes tendered to the Company was $29.7 million. The Company paid $25.3 million to redeem these notes, and the amendments described above were made to the indenture.

Other Borrowings

During 2017, the Company entered into a repurchase agreement, the proceeds of which are collateralized by FFELP asset-backed security investments. Included in "other borrowings" as of December 31, 2017 was $50.4 million subject to this repurchase agreement.

The Company also has three notes payable, which were each issued by TDP Phase Three, LLC ("TDP") in connection with the development of a commercial building in Lincoln, Nebraska that is the new corporate headquarters for Hudl, a related party. TDP is an entity established during 2015 for the sole purpose of developing and operating this building. The Company owns 25 percent of TDP. However, because the Company was the developer of and a current tenant in this building, the operating results of TDP are included in the Company's consolidated financial statements. Recourse to the Company on the outstanding balance of these notes is equal to its ownership percentage of TDP. A summary of the TDP notes outstanding as of December 31, 2017 is summarized below:



Issue date	Debt outstanding		Maturity date	Interest rate
December 30, 2015	$	12,000	March 31, 2023	3.38% - fixed
December 30, 2015	6,355		December 15, 2045	3.38% - fixed
October 31, 2017	1,743		March 31, 2023	1-month LIBOR plus 2.00%

Debt Covenants

Certain bond resolutions and related credit agreements contain, among other requirements, covenants relating to restrictions on additional indebtedness, limits as to direct and indirect administrative expenses, and maintaining certain financial ratios. Management believes the Company is in compliance with all covenants of the bond indentures and related credit agreements as of December 31, 2017.

Maturity Schedule

Bonds and notes outstanding as of December 31, 2017 are due in varying amounts as shown below.



2018	$	50,418
2019	189,502
2020	146,490
2021	33,410
2022	—
2023 and thereafter	21,307,307
	$	21,727,127

Generally, the Company's secured financing instruments can be redeemed on any interest payment date at par plus accrued interest. Subject to certain provisions, all bonds and notes are subject to redemption prior to maturity at the option of certain education lending subsidiaries.

Debt Repurchases

The following table summarizes the Company's repurchases of its own debt. Gains (losses) recorded by the Company from the repurchase of debt are included in "gain on sale of loans and debt repurchases, net" on the Company’s consolidated statements of income.



	Par value		Purchase price	Gain (loss)		Par value	Purchase price	Gain (loss)	Par value	Purchase price	Gain (loss)
	Year ended December 31,
	2017					2016			2015
Unsecured debt - Hybrid Securities	$	29,803	25,357	4,446		7,000	4,865	2,135	14,504	11,374	3,130
Asset-backed securities	154,407		155,951	(1,544	)	78,412	72,566	5,846	32,026	30,354	1,672
	$	184,210	181,308	2,902		85,412	77,431	7,981	46,530	41,728	4,802