XML 25 R11.htm IDEA: XBRL DOCUMENT v3.23.1
Allowance for Loan Losses
 3 Months Ended
Mar. 31, 2023
Receivables [Abstract]  
Allowance for Loan Losses

2. Allowance for Loan Losses

Allowance for Loan Losses Roll Forward

 

 

Three Months Ended March 31, 2023

 

(Dollars in millions)

 

FFELP
Loans

 

 

Private
Education
Loans

 

 

Total

 

Allowance at beginning of period

 

$

222

 

 

$

800

 

 

$

1,022

 

Total provision

 

 

10

 

 

 

(24

)

 

 

(14

)

Charge-offs:

 

 

 

 

 

 

 

 

 

   Gross charge-offs

 

 

(18

)

 

 

(88

)

 

 

(106

)

   Expected future recoveries on current period gross charge-offs

 

 

—

 

 

 

13

 

 

 

13

 

Net charge-offs(1)

 

 

(18

)

 

 

(75

)

 

 

(93

)

Decrease in expected future recoveries on previously fully
  charged-off loans(2)

 

 

—

 

 

 

5

 

 

 

5

 

Allowance at end of period

 

$

214

 

 

$

706

 

 

$

920

 

Net charge-offs as a percentage of average loans in repayment
   (annualized)

 

 

.22

%

 

 

1.63

%

 

 

 

Ending total loans

 

$

42,362

 

 

$

18,981

 

 

 

 

Average loans in repayment

 

$

34,305

 

 

$

18,552

 

 

 

 

Ending loans in repayment

 

$

33,740

 

 

$

18,258

 

 

 

 

 

(1)
Charge-offs are reported net of expected recoveries. For Private Education Loans, we charge off the estimated loss of a defaulted loan balance by charging off the entire defaulted loan balance and estimating recoveries on a pool basis. These estimated recoveries are referred to as "expected future recoveries on previously fully charged-off loans." For FFELP Loans, the recovery is received at the time of charge-off.
(2)
At the end of each month, for Private Education Loans that are 212 days past due, we charge off the estimated loss of a defaulted loan balance by charging off the entire loan balance and estimating recoveries on a pool basis. These estimated recoveries are referred to as “expected future recoveries on previously fully charged-off loans.” If actual periodic recoveries are less than expected, the difference is immediately reflected as a reduction to expected future recoveries on previously fully charged-off loans. If actual periodic recoveries are greater than expected, they will be reflected as a recovery through the allowance for Private Education Loan losses once the cumulative recovery amount exceeds the cumulative amount originally expected to be recovered. The following table summarizes the activity in the expected future recoveries on previously fully charged-off loans:

 

 

Three Months Ended March 31,

 

(Dollars in millions)

 

2023

 

Beginning of period expected future recoveries on previously fully charged-off loans

 

$

274

 

Expected future recoveries of current period defaults

 

 

13

 

Recoveries (cash collected)

 

 

(13

)

Charge-offs (as a result of lower recovery expectations)

 

 

(6

)

End of period expected future recoveries on previously fully charged-off loans

 

 

268

 

Change in balance during period

 

$

(5

)

 

2. Allowance for Loan Losses (Continued)

 

 

 

Three Months Ended March 31, 2022

 

(Dollars in millions)

 

FFELP Loans

 

 

Private Education Loans

 

 

Total

 

Allowance at beginning of period

 

$

262

 

 

$

1,009

 

 

$

1,271

 

Total provision

 

 

—

 

 

 

16

 

 

 

16

 

Charge-offs:

 

 

 

 

 

 

 

 

 

   Gross charge-offs

 

 

(7

)

 

 

(81

)

 

 

(88

)

   Expected future recoveries on current period gross charge-offs

 

 

—

 

 

 

12

 

 

 

12

 

Net charge-offs(1)

 

 

(7

)

 

 

(69

)

 

 

(76

)

Decrease in expected future recoveries on previously fully
  charged-off loans(2)

 

 

—

 

 

 

8

 

 

 

8

 

Allowance at end of period

 

$

255

 

 

$

964

 

 

$

1,219

 

Net charge-offs as a percentage of average loans in repayment
  (annualized)

 

 

.07

%

 

 

1.38

%

 

 

 

Ending total loans

 

$

51,268

 

 

$

21,052

 

 

 

 

Average loans in repayment

 

$

43,125

 

 

$

20,387

 

 

 

 

Ending loans in repayment

 

$

42,724

 

 

$

20,257

 

 

 

 

 

(1)
Charge-offs are reported net of expected recoveries. For Private Education Loans, we charge off the estimated loss of a defaulted loan balance by charging off the entire defaulted loan balance and estimating recoveries on a pool basis. These estimated recoveries are referred to as "expected future recoveries on previously fully charged-off loans." For FFELP Loans, the recovery is received at the time of charge-off.
(2)
At the end of each month, for Private Education Loans that are 212 days past due, we charge off the estimated loss of a defaulted loan balance by charging off the entire loan balance and estimating recoveries on a pool basis. These estimated recoveries are referred to as “expected future recoveries on previously fully charged-off loans.” If actual periodic recoveries are less than expected, the difference is immediately reflected as a reduction to expected future recoveries on previously fully charged-off loans. If actual periodic recoveries are greater than expected, they will be reflected as a recovery through the allowance for Private Education Loan losses once the cumulative recovery amount exceeds the cumulative amount originally expected to be recovered. The following table summarizes the activity in the expected future recoveries on previously fully charged-off loans:

 

 

 

Three Months Ended March 31,

 

(Dollars in millions)

 

2022

 

Beginning of period expected future recoveries on previously fully charged-off loans

 

$

329

 

Expected future recoveries of current period defaults

 

 

12

 

Recoveries (cash collected)

 

 

(15

)

Charge-offs (as a result of lower recovery expectations)

 

 

(5

)

End of period expected future recoveries on previously fully charged-off loans

 

$

321

 

Change in balance during period

 

$

(8

)

 

 

 

 

 

2. Allowance for Loan Losses (Continued)

Key Credit Quality Indicators

We assess and determine the collectability of our education loan portfolios by evaluating certain risk characteristics we refer to as key credit quality indicators. Key credit quality indicators are incorporated into the allowance for loan losses calculation.

FFELP Loans

FFELP Loans are substantially insured and guaranteed as to their principal and accrued interest in the event of default. The key credit quality indicators are loan status and loan type.

 

 

FFELP Loan Delinquencies

 

 

 

March 31, 2023

 

 

December 31, 2022

 

 

March 31, 2022

 

(Dollars in millions)

 

Balance

 

 

%

 

 

Balance

 

 

%

 

 

Balance

 

 

%

 

Loans in-school/grace/deferment(1)

 

$

1,778

 

 

 

 

 

$

1,772

 

 

 

 

 

$

2,232

 

 

 

 

Loans in forbearance(2)

 

 

6,844

 

 

 

 

 

 

7,603

 

 

 

 

 

 

6,312

 

 

 

 

Loans in repayment and percentage of each status:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans current

 

 

28,886

 

 

 

85.6

%

 

 

29,004

 

 

 

84.4

%

 

 

36,948

 

 

 

86.5

%

Loans delinquent 31-60 days(3)

 

 

1,270

 

 

 

3.8

 

 

 

1,247

 

 

 

3.6

 

 

 

1,888

 

 

 

4.4

 

Loans delinquent 61-90 days(3)

 

 

902

 

 

 

2.7

 

 

 

833

 

 

 

2.4

 

 

 

1,148

 

 

 

2.7

 

Loans delinquent greater than 90 days(3)

 

 

2,682

 

 

 

7.9

 

 

 

3,288

 

 

 

9.6

 

 

 

2,740

 

 

 

6.4

 

Total FFELP Loans in repayment

 

 

33,740

 

 

 

100

%

 

 

34,372

 

 

 

100

%

 

 

42,724

 

 

 

100

%

Total FFELP Loans

 

 

42,362

 

 

 

 

 

 

43,747

 

 

 

 

 

 

51,268

 

 

 

 

FFELP Loan allowance for losses

 

 

(214

)

 

 

 

 

 

(222

)

 

 

 

 

 

(255

)

 

 

 

FFELP Loans, net

 

$

42,148

 

 

 

 

 

$

43,525

 

 

 

 

 

$

51,013

 

 

 

 

Percentage of FFELP Loans in repayment

 

 

 

 

 

79.6

%

 

 

 

 

 

78.6

%

 

 

 

 

 

83.3

%

Delinquencies as a percentage of FFELP Loans in
   repayment

 

 

 

 

 

14.4

%

 

 

 

 

 

15.6

%

 

 

 

 

 

13.5

%

FFELP Loans in forbearance as a percentage of
   loans in repayment and forbearance

 

 

 

 

 

16.9

%

 

 

 

 

 

18.1

%

 

 

 

 

 

12.9

%

(1)
Loans for customers who may still be attending school or engaging in other permitted educational activities and are not yet required to make payments on their loans, e.g., residency periods for medical students or a grace period for bar exam preparation, as well as loans for customers who have requested and qualify for other permitted program deferments such as military, unemployment, or economic hardships.
(2)
Loans for customers who have used their allowable deferment time or do not qualify for deferment, that need additional time to obtain employment or who have temporarily ceased making full payments due to hardship or other factors such as disaster relief, including COVID-19 relief programs, consistent with established loan program servicing policies and procedures.
(3)
The period of delinquency is based on the number of days scheduled payments are contractually past due.

Loan type:

(Dollars in millions)

 

March 31, 2023

 

 

March 31, 2022

 

 

Change

 

Stafford Loans

 

$

13,592

 

 

$

15,975

 

 

$

(2,383

)

Consolidation Loans

 

 

24,697

 

 

 

30,665

 

 

 

(5,968

)

Rehab Loans

 

 

4,073

 

 

 

4,628

 

 

 

(555

)

Total loans, gross

 

$

42,362

 

 

$

51,268

 

 

$

(8,906

)

 

 

2. Allowance for Loan Losses (Continued)

Private Education Loans

The key credit quality indicators are credit scores (FICO scores), loan status, loan seasoning, certain loan modifications, the existence of a cosigner and school type. The FICO score is the higher of the borrower or co-borrower score and is updated at least every six months while school type is assessed at origination. The other Private Education Loan key quality indicators are updated quarterly.

 

 

 

Private Education Loan Credit Quality Indicators by Origination Year

 

 

 

March 31, 2023

 

(Dollars in millions)

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

Prior

 

 

Total

 

 

% of Total

 

Credit Quality
   Indicators

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FICO Scores:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

640 and above

 

$

167

 

 

$

1,761

 

 

$

4,368

 

 

$

1,438

 

 

$

1,353

 

 

$

8,133

 

 

$

17,220

 

 

 

91

%

Below 640

 

 

3

 

 

 

40

 

 

 

92

 

 

 

24

 

 

 

43

 

 

 

1,559

 

 

 

1,761

 

 

 

9

 

Total

 

$

170

 

 

$

1,801

 

 

$

4,460

 

 

$

1,462

 

 

$

1,396

 

 

$

9,692

 

 

$

18,981

 

 

 

100

%

Loan Status:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In-school/grace/
   deferment/forbearance

 

$

9

 

 

$

67

 

 

$

91

 

 

$

27

 

 

$

31

 

 

$

498

 

 

$

723

 

 

 

4

%

Current/90 days or
   less delinquent

 

 

161

 

 

 

1,729

 

 

 

4,360

 

 

 

1,432

 

 

 

1,359

 

 

 

8,853

 

 

 

17,894

 

 

 

94

 

Greater than 90 days
   delinquent

 

 

—

 

 

 

5

 

 

 

9

 

 

 

3

 

 

 

6

 

 

 

341

 

 

 

364

 

 

 

2

 

Total

 

$

170

 

 

$

1,801

 

 

$

4,460

 

 

$

1,462

 

 

$

1,396

 

 

$

9,692

 

 

$

18,981

 

 

 

100

%

Seasoning(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-12 payments

 

$

161

 

 

$

1,386

 

 

$

80

 

 

$

9

 

 

$

8

 

 

$

71

 

 

$

1,715

 

 

 

9

%

13-24 payments

 

 

—

 

 

 

362

 

 

 

4,084

 

 

 

32

 

 

 

23

 

 

 

86

 

 

 

4,587

 

 

 

24

 

25-36 payments

 

 

—

 

 

 

—

 

 

 

242

 

 

 

1,251

 

 

 

106

 

 

 

157

 

 

 

1,756

 

 

 

9

 

37-48 payments

 

 

—

 

 

 

—

 

 

 

—

 

 

 

155

 

 

 

1,190

 

 

 

272

 

 

 

1,617

 

 

 

9

 

More than 48
   payments

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

53

 

 

 

8,884

 

 

 

8,937

 

 

 

47

 

Loans in-school/
   grace/deferment

 

 

9

 

 

 

53

 

 

 

54

 

 

 

15

 

 

 

16

 

 

 

222

 

 

 

369

 

 

 

2

 

Total

 

$

170

 

 

$

1,801

 

 

$

4,460

 

 

$

1,462

 

 

$

1,396

 

 

$

9,692

 

 

$

18,981

 

 

 

100

%

Certain Loan
   Modifications(2):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Modified

 

$

—

 

 

$

14

 

 

$

89

 

 

$

38

 

 

$

72

 

 

$

6,279

 

 

$

6,492

 

 

 

34

%

Non-Modified

 

 

170

 

 

 

1,787

 

 

 

4,371

 

 

 

1,424

 

 

 

1,324

 

 

 

3,413

 

 

 

12,489

 

 

 

66

 

Total

 

$

170

 

 

$

1,801

 

 

$

4,460

 

 

$

1,462

 

 

$

1,396

 

 

$

9,692

 

 

$

18,981

 

 

 

100

%

Cosigners:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

With cosigner(3)

 

$

35

 

 

$

189

 

 

$

103

 

 

$

26

 

 

$

9

 

 

$

5,894

 

 

$

6,256

 

 

 

33

%

Without cosigner

 

 

135

 

 

 

1,612

 

 

 

4,357

 

 

 

1,436

 

 

 

1,387

 

 

 

3,798

 

 

 

12,725

 

 

 

67

 

Total

 

$

170

 

 

$

1,801

 

 

$

4,460

 

 

$

1,462

 

 

$

1,396

 

 

$

9,692

 

 

$

18,981

 

 

 

100

%

School Type:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Not-for-profit

 

$

158

 

 

$

1,704

 

 

$

4,202

 

 

$

1,397

 

 

$

1,300

 

 

$

8,150

 

 

$

16,911

 

 

 

89

%

For-profit

 

 

12

 

 

 

97

 

 

 

258

 

 

 

65

 

 

 

96

 

 

 

1,542

 

 

 

2,070

 

 

 

11

 

Total

 

$

170

 

 

$

1,801

 

 

$

4,460

 

 

$

1,462

 

 

$

1,396

 

 

$

9,692

 

 

$

18,981

 

 

 

100

%

Allowance for loan
   losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(706

)

 

 

 

Total loans, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

18,275

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1Q-23 Net Charge-Offs

 

$

—

 

 

$

(2

)

 

$

(2

)

 

$

(1

)

 

$

(2

)

 

$

(68

)

 

$

(75

)

 

 

100

%

(1)
Number of months in active repayment for which a scheduled payment was received.
(2)
Loan Modification status represents the historical definition of a troubled debt restructuring (“TDR”) prior to the implementation of ASU 2022-02 on January 1, 2023. Any loan that meets the historical definition of a TDR retains that classification for the life of the loan (including loans that meet that definition in 2023). This includes loans given rate modifications, term extensions or forbearance greater than 3 months in the prior 24-month period. This classification is not intended to reconcile in any way to the new modification disclosures required under ASU 2022-02.
(3)
Excluding Private Education Refinance Loans, which do not have a cosigner, the cosigner rate was 65% for total loans at March 31, 2023.

2. Allowance for Loan Losses (Continued)

 

 

 

Private Education Loan Credit Quality Indicators by Origination Year

 

 

 

March 31, 2022

 

(Dollars in millions)

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

2018

 

 

Prior

 

 

Total

 

 

% of Total

 

Credit Quality
   Indicators

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FICO Scores:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

640 and above

 

$

948

 

 

$

5,037

 

 

$

1,783

 

 

$

1,683

 

 

$

626

 

 

$

9,314

 

 

$

19,391

 

 

 

92

%

Below 640

 

 

8

 

 

 

44

 

 

 

16

 

 

 

37

 

 

 

21

 

 

 

1,535

 

 

$

1,661

 

 

 

8

 

Total

 

$

956

 

 

$

5,081

 

 

$

1,799

 

 

$

1,720

 

 

$

647

 

 

$

10,849

 

 

$

21,052

 

 

 

100

%

Loan Status:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In-school/grace/
   deferment/forbearance

 

$

5

 

 

$

64

 

 

$

25

 

 

$

34

 

 

$

13

 

 

$

654

 

 

$

795

 

 

 

4

%

Current/90 days or
   less delinquent

 

 

951

 

 

 

5,015

 

 

 

1,772

 

 

 

1,684

 

 

 

632

 

 

 

9,889

 

 

$

19,943

 

 

 

95

 

Greater than 90 days
   delinquent

 

 

—

 

 

 

2

 

 

 

2

 

 

 

2

 

 

 

2

 

 

 

306

 

 

 

314

 

 

 

1

 

Total

 

$

956

 

 

$

5,081

 

 

$

1,799

 

 

$

1,720

 

 

$

647

 

 

$

10,849

 

 

$

21,052

 

 

 

100

%

Seasoning(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-12 payments

 

$

951

 

 

$

4,740

 

 

$

26

 

 

$

17

 

 

$

3

 

 

$

115

 

 

$

5,852

 

 

 

28

%

13-24 payments

 

 

—

 

 

 

300

 

 

 

1,555

 

 

 

108

 

 

 

11

 

 

 

134

 

 

$

2,108

 

 

 

10

 

25-36 payments

 

 

—

 

 

 

—

 

 

 

201

 

 

 

1,507

 

 

 

46

 

 

 

225

 

 

$

1,979

 

 

 

9

 

37-48 payments

 

 

—

 

 

 

—

 

 

 

—

 

 

 

68

 

 

 

545

 

 

 

369

 

 

$

982

 

 

 

5

 

More than 48
   payments

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

35

 

 

 

9,719

 

 

$

9,754

 

 

 

46

 

Loans in-school/
   grace/deferment

 

 

5

 

 

 

41

 

 

 

17

 

 

 

20

 

 

 

7

 

 

 

287

 

 

 

377

 

 

 

2

 

Total

 

$

956

 

 

$

5,081

 

 

$

1,799

 

 

$

1,720

 

 

$

647

 

 

$

10,849

 

 

$

21,052

 

 

 

100

%

Certain Loan
   Modifications(2):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Modified

 

$

—

 

 

$

9

 

 

$

15

 

 

$

43

 

 

$

28

 

 

$

6,998

 

 

$

7,093

 

 

 

34

%

Non-Modified

 

 

956

 

 

 

5,072

 

 

 

1,784

 

 

 

1,677

 

 

 

619

 

 

 

3,851

 

 

 

13,959

 

 

 

66

 

Total

 

$

956

 

 

$

5,081

 

 

$

1,799

 

 

$

1,720

 

 

$

647

 

 

$

10,849

 

 

$

21,052

 

 

 

100

%

Cosigners:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

With cosigner(3)

 

$

11

 

 

$

97

 

 

$

31

 

 

$

11

 

 

$

—

 

 

$

6,994

 

 

$

7,144

 

 

 

34

%

Without cosigner

 

 

945

 

 

 

4,984

 

 

 

1,768

 

 

 

1,709

 

 

 

647

 

 

 

3,855

 

 

 

13,908

 

 

 

66

 

Total

 

$

956

 

 

$

5,081

 

 

$

1,799

 

 

$

1,720

 

 

$

647

 

 

$

10,849

 

 

$

21,052

 

 

 

100

%

School Type:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Not-for-profit

 

$

893

 

 

$

4,786

 

 

$

1,719

 

 

$

1,602

 

 

$

595

 

 

$

9,048

 

 

$

18,643

 

 

 

89

%

For-profit

 

 

63

 

 

 

295

 

 

 

80

 

 

 

118

 

 

 

52

 

 

 

1,801

 

 

 

2,409

 

 

 

11

 

Total

 

$

956

 

 

$

5,081

 

 

$

1,799

 

 

$

1,720

 

 

$

647

 

 

$

10,849

 

 

$

21,052

 

 

 

100

%

Allowance for loan
   losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(964

)

 

 

 

Total loans, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

20,088

 

 

 

 

 

(1)
Number of months in active repayment for which a scheduled payment was received.
(2)
Loan Modification status represents the historical definition of a troubled debt restructuring (“TDR”) prior to the implementation of ASU 2022-02 on January 1, 2023. Any loan that meets the historical definition of a TDR retains that classification for the life of the loan (including loans that meet that definition in 2023). This includes loans given rate modifications, term extensions or forbearance greater than 3 months in the prior 24-month period. This classification is not intended to reconcile in any way to the new modification disclosures required under ASU 2022-02.
(3)
Excluding Private Education Refinance Loans, which do not have a cosigner, the cosigner rate was 65% for total loans at March 31, 2022.

 

 

 

2. Allowance for Loan Losses (Continued)

 

 

 

Private Education Loan Delinquencies

 

 

 

March 31, 2023

 

 

December 31, 2022

 

 

March 31, 2022

 

(Dollars in millions)

 

Balance

 

 

%

 

 

Balance

 

 

%

 

 

Balance

 

 

%

 

Loans in-school/grace/deferment(1)

 

$

369

 

 

 

 

 

$

354

 

 

 

 

 

$

377

 

 

 

 

Loans in forbearance(2)

 

 

354

 

 

 

 

 

 

401

 

 

 

 

 

 

418

 

 

 

 

Loans in repayment and percentage of each status:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans current

 

 

17,439

 

 

 

95.5

%

 

 

17,838

 

 

 

95.0

%

 

 

19,447

 

 

 

96.0

%

Loans delinquent 31-60 days(3)

 

 

290

 

 

 

1.6

 

 

 

335

 

 

 

1.8

 

 

 

290

 

 

 

1.4

 

Loans delinquent 61-90 days(3)

 

 

165

 

 

 

.9

 

 

 

186

 

 

 

1.0

 

 

 

206

 

 

 

1.0

 

Loans delinquent greater than 90 days(3)

 

 

364

 

 

 

2.0

 

 

 

411

 

 

 

2.2

 

 

 

314

 

 

 

1.6

 

Total loans in repayment

 

 

18,258

 

 

 

100

%

 

 

18,770

 

 

 

100

%

 

 

20,257

 

 

 

100

%

Total loans

 

 

18,981

 

 

 

 

 

 

19,525

 

 

 

 

 

 

21,052

 

 

 

 

Allowance for losses

 

 

(706

)

 

 

 

 

 

(800

)

 

 

 

 

 

(964

)

 

 

 

Loans, net

 

$

18,275

 

 

 

 

 

$

18,725

 

 

 

 

 

$

20,088

 

 

 

 

Percentage of loans in repayment

 

 

 

 

 

96.2

%

 

 

 

 

 

96.1

%

 

 

 

 

 

96.2

%

Delinquencies as a percentage of loans in
   repayment

 

 

 

 

 

4.5

%

 

 

 

 

 

5.0

%

 

 

 

 

 

4.0

%

Loans in forbearance as a percentage of loans in
   repayment and forbearance

 

 

 

 

 

1.9

%

 

 

 

 

 

2.1

%

 

 

 

 

 

2.0

%

 

(1)
Loans for customers who are attending school or are in other permitted educational activities and are not yet required to make payments on their loans, e.g., internship periods, as well as loans for customers who have requested and qualify for other permitted program deferments such as various military eligible deferments.
(2)
Loans for customers who have requested extension of grace period generally during employment transition or who have temporarily ceased making full payments due to hardship or other factors such as disaster relief, including COVID-19 relief programs, consistent with established loan program servicing policies and procedures.
(3)
The period of delinquency is based on the number of days scheduled payments are contractually past due.

 

 

2. Allowance for Loan Losses (Continued)

Loan Modifications to Borrowers Experiencing Financial Difficulty

We adjust the terms of Private Education Loans for certain borrowers when we believe such changes will help our customers better manage their student loan obligations, achieve better outcomes and increase the collectability of the loans. These changes generally take the form of a temporary interest rate reduction, a temporary forbearance of payments, a temporary interest only payment, and a temporary interest rate reduction with a permanent extension of the loan term. The effect of most modifications of loans made to borrowers who are experiencing financial difficulty is already included in the allowance for credit losses because of the measurement methodologies used to estimate the allowance. The model design predicts borrowers that will have financial difficulty in the future and require loan modification and increased life of loan default risk.

Under our current forbearance practices, temporary hardship forbearance of payments generally cannot exceed 12 months over the life of the loan. However, exceptions can be made in cases where borrowers have shown the ability to make a substantial number of monthly principal and interest payments and in those cases borrowers can be granted up to 24 months of hardship forbearance over the life of the loan. We offer other administrative forbearances (e.g., death and disability, bankruptcy, military service, and disaster forbearance) that are either required by law (such as the Servicemembers Civil Relief Act) or are considered separate from our active loss mitigation programs and therefore are not considered to be loan modifications requiring disclosure under ASU No. 2022-02.

FFELP loans are at least 97 percent guaranteed as to their principal and accrued interest by the federal government in the event of default and, therefore, we do not deem FFELP loans as nonperforming from a credit risk perspective at any point in their life cycle prior to claim payment and continue to accrue interest on those loans through the date of claim. Further, FFELP loan modification events are either legal entitlements subject to regulatory-driven eligibility criteria or addressed in the promissory note terms, so we do not consider these events as a component of our loan modification programs.

The following table shows the amortized cost basis as of March 31, 2023 of the loans to borrowers experiencing financial difficulty that were modified in first-quarter 2023.

 

 

 

Loan Modifications Made to Borrowers Experiencing Financial Difficulty

 

(Dollars in millions)

 

Interest Rate Reductions(1)

 

 

More Than an Insignificant Payment Delay (2)

 

 

Combination Rate Reduction and Term Extension

 

Loan Type

 

Amortized Cost

 

 

% of Loan Type

 

 

Amortized Cost

 

 

% of Loan Type

 

 

Amortized Cost

 

 

% of Loan Type

 

Private Education
   Loans

 

$

611

 

 

 

3.2

%

 

$

275

 

 

 

1.4

%

 

$

46

 

 

 

.2

%

 

(1)
As of March 31, 2023, there was $1.1 billion of loans in the interest rate reduction program.
(2)
More Than an Insignificant Payment Delay includes loans granted more than 3 months of short-term interest only payments or hardship forbearance in first-quarter 2023.

 

For those loans modified in first-quarter 2023, the following table shows the impact of such modification.

 

Loan Type

Interest Rate Reductions

More Than an Insignificant Payment Delay

Combination Rate Reduction and Term Extension

Private Education Loans

Reduced the weighted average contractual rate from 12.9% to 4.9%

Added an average 6 months to the remaining life of the loans

Added an average 8 years to the remaining life of the loans and reduced the weighted average contractual rate from
 12.5% to 5.1%.

 

 

 

 

2. Allowance for Loan Losses (Continued)

The following table provides the amount of loans whose borrowers were experiencing financial difficulty, were modified during first-quarter 2023 and subsequently had a payment default in first-quarter 2023. We define payment default as 60 days past due for purposes of this disclosure. We closely monitor performance of the loans to borrowers experiencing financial difficulty that are modified to understand the effectiveness of the modification efforts.

(Dollars in millions)

 

 

 

Loan Type

 

Modified Loans
   (Amortized Cost)

 

 

Payment Default (Par)

 

Private Education Loans(1)

 

$

2

 

 

$

2

 

 

(1)
For first-quarter 2023, the modified loans include $1.6 million of Interest Rate Reduction and $0.1 million of Combination Rate Reduction and Term Extension.

 

 

The following table provides the performance and related loan status as of March 31, 2023 of loans that were modified in first-quarter 2023.

 

(Dollars in millions)

 

 

 

Loan Type:

 

 

 

 

 

Private Education Loans(1)

 

Status

 

Payment status (Amortized Cost)

 

 

 

Loans in School/Deferment

 

$

2

 

 

 

Loans in Forbearance

 

 

22

 

 

 

Loans current

 

 

891

 

 

 

Loans delinquent 31 - 60 days

 

 

8

 

 

 

Loans delinquent 61 - 90 days

 

 

2

 

 

 

Loans delinquent greater than 90 days

 

 

7

 

 

 

  Total Modified Loans

 

$

932

 

 

(1)
For first-quarter 2023, $0.4 million of loans modified during the quarter were charged off.

Prior to our adoption of ASU 2022-02 on January 1, 2023, we accounted for a modification to the contractual terms of a loan that resulted in granting a concession to a borrower experiencing financial difficulties as a TDR. Certain Private Education Loans for which we have granted either a forbearance of greater than three months, an interest rate reduction or an extended repayment plan were classified as TDRs.

The following table provides the amount of loans modified in the period presented that resulted in a TDR. Additionally, the table summarizes charge-offs occurring in the TDR portfolio, as well as TDRs for which a payment default occurred in the current period within 12 months of the loan first being designated as a TDR. We define payment default as 60 days past due for this disclosure.

 

 

Three Months Ended March 31,

 

(Dollars in millions)

 

2022

 

Modified loans

 

$

55

 

Charge-offs

 

$

56

 

Payment default

 

$

9