Segment Reporting

12 Months Ended

Dec. 31, 2023

Segment Reporting [Abstract]

Segment Reporting

15. Segment Reporting

We monitor and assess our ongoing operations and results based on the following four reportable operating segments: Federal Education Loans, Consumer Lending, Business Processing and Other.

These segments meet the quantitative thresholds for reportable operating segments. Accordingly, the results of operations of these reportable operating segments are presented separately. The underlying operating segments are used by the Company’s chief operating decision maker to manage the business, review operating performance and allocate resources, and qualify to be aggregated as part of the primary reportable operating segments. As discussed further below, we measure the profitability of our operating segments based on Core Earnings net income. Accordingly, information regarding our reportable operating segments net income is provided on a Core Earnings basis.

Federal Education Loans Segment

Navient owns FFELP Loans and performs servicing on this portfolio. We also service FFELP Loans owned by other institutions. We generate revenue primarily through net interest income on our FFELP Loans.

The following table includes asset information for our Federal Education Loans segment.

	December 31,
(Dollars in millions)	2023		2022
FFELP Loans, net	$	37,925	$	43,525
Cash and investments(1)		1,520		2,746
Other		2,128		2,229
Total assets	$	41,573	$	48,500

(1)Includes restricted cash and investments.

Consumer Lending Segment

Navient owns, originates and services refinance and in-school Private Education Loans. "Refinance" Private Education Loans are loans where a borrower has refinanced their education loans, and "In-school" Private Education Loans are loans originally made to borrowers while they are attending school. We generate revenue primarily through net interest income on our Private Education Loan portfolio.

The following table includes asset information for our Consumer Lending segment.

	December 31,
(Dollars in millions)	2023		2022
Private Education Loans, net	$	16,902	$	18,725
Cash and investments(1)		497		617
Other		577		453
Total assets	$	17,976	$	19,795

(1)Includes restricted cash and investments.

15. Segment Reporting (Continued)

Business Processing Segment

Navient provides business processing solutions such as omnichannel contact center services, workflow processing, and revenue cycle optimization. Our clients include:

•Government: We offer our solutions to federal agencies, state governments, tolling and parking authorities, and other public sector clients.

•Healthcare: Our clients include hospitals, hospital systems, medical centers, large physician groups, other healthcare providers and public health departments.

At December 31, 2023 and 2022, the Business Processing segment had total assets of $380 million and $390 million, respectively.

Other Segment

This segment consists of our corporate liquidity portfolio, gains and losses incurred on the repurchase of debt, unallocated expenses of shared services (which includes regulatory expenses) and restructuring/other reorganization expenses.

Unallocated shared services expenses are comprised of costs primarily related to information technology costs related to infrastructure and operations, stock-based compensation expense, accounting, finance, legal, compliance and risk management, regulatory-related expenses, human resources, certain executive management and the Board of Directors. Regulatory-related expenses include actual settlement amounts as well as third-party professional fees we incur in connection with such regulatory matters and are presented net of any insurance reimbursements for covered costs related to such matters.

At December 31, 2023 and 2022, the Other segment had total assets of $1.4 billion and $2.1 billion, respectively.

15. Segment Reporting (Continued)

Measure of Profitability

We prepare financial statements and present financial results in accordance with GAAP. However, we also evaluate our business segments and present financial results on a basis that differs from GAAP. We refer to this different basis of presentation as Core Earnings. We provide this Core Earnings basis of presentation on a consolidated basis and for each business segment because this is what we review internally when making management decisions regarding our performance and how we allocate resources. We also refer to this information in our presentations with credit rating agencies, lenders and investors. Because our Core Earnings basis of presentation corresponds to our segment financial presentations, we are required by GAAP to provide Core Earnings disclosure in the notes to our consolidated financial statements for our business segments.

Core Earnings are not a substitute for reported results under GAAP. We use Core Earnings to manage our business segments because Core Earnings reflect adjustments to GAAP financial results for two items, discussed below, that can create significant volatility mostly due to timing factors generally beyond the control of management. Accordingly, we believe that Core Earnings provide management with a useful basis from which to better evaluate results from ongoing operations against the business plan or against results from prior periods. Consequently, we disclose this information because we believe it provides investors with additional information regarding the operational and performance indicators that are most closely assessed by management. When compared to GAAP results, the two items we remove to result in our Core Earnings presentations are:

1.Mark-to-market gains/losses resulting from our use of derivative instruments to hedge our economic risks that do not qualify for hedge accounting treatment or do qualify for hedge accounting treatment but result in ineffectiveness; and

2.The accounting for goodwill and acquired intangible assets.

While GAAP provides a uniform, comprehensive basis of accounting, for the reasons described above, our Core Earnings basis of presentation does not. Core Earnings are subject to certain general and specific limitations that investors should carefully consider. For example, there is no comprehensive, authoritative guidance for management reporting. Our Core Earnings are not defined terms within GAAP and may not be comparable to similarly titled measures reported by other companies. Accordingly, our Core Earnings presentation does not represent a comprehensive basis of accounting. Investors, therefore, may not be able to compare our performance with that of other financial services companies based upon Core Earnings. Core Earnings results are only meant to supplement GAAP results by providing additional information regarding the operational and performance indicators that are most closely used by management, our Board of Directors, credit rating agencies, lenders and investors to assess performance.

15. Segment Reporting (Continued)

Segment Results and Reconciliations to GAAP

	Year Ended December 31, 2023
				Adjustments											Reportable Segments
(Dollars in millions)	Total GAAP			Reclassi- fications			Additions/ (Subtractions)			Total Adjustments (1)			Total Core Earnings		Federal Education Loans		Consumer Lending		Business Processing		Other
Interest income:
Education loans	$	4,266													$	2,901	$	1,369	$	—	$	—
Cash and investments		153														76		27		—		50
Total interest income		4,419														2,977		1,396		—		50
Total interest expense		3,557														2,497		816		—		164
Net interest income    (loss)		862		$	32		$	52		$	84		$	946		480		580		—		(114	)
Less: provisions for loan    losses		123												123		56		67		—		—
Net interest income    (loss) after provisions    for loan losses		739														424		513		—		(114	)
Other income (loss):
Servicing revenue		64														52		12		—		—
Asset recovery and    business processing    revenue		321														—		—		321		—
Other revenue		32														14		2		—		5
Losses on debt repurchases		(8	)		—			—			—			—		—		—		—		(8	)
Total other income    (loss)		409			(32	)		21			(11	)		398		66		14		321		(3	)
Expenses:
Direct operating    expenses		508														72		151		285		—
Unallocated shared    services expenses		292														—		—		—		292
Operating expenses		800			—			—			—			800		72		151		285		292
Goodwill and acquired    intangible asset    impairment and    amortization		10			—			(10	)		(10	)		—		—		—		—		—
Restructuring/other    reorganization    expenses		25			—			—			—			25		—		—		—		25
Total expenses		835			—			(10	)		(10	)		825		72		151		285		317
Income (loss) before    income tax expense    (benefit)		313			—			83			83			396		418		376		36		(434	)
Income tax expense    (benefit)(2)		85			—			8			8			93		99		89		8		(103	)
Net income (loss)	$	228		$	—		$	75		$	75		$	303	$	319	$	287	$	28	$	(331	)

(1)Core Earnings adjustments to GAAP:

	Year Ended December 31, 2023
(Dollars in millions)	Net Impact of Derivative Accounting			Net Impact of Acquired Intangibles			Total
Net interest income (loss) after provisions for loan losses	$	84		$	—		$	84
Total other income (loss)		(11	)		—			(11	)
Goodwill and acquired intangible asset impairment and amortization		—			(10	)		(10	)
Total Core Earnings adjustments to GAAP	$	73		$	10			83
Income tax expense (benefit)								8
Net income (loss)							$	75

(2)Income taxes are based on a percentage of net income before tax for the individual reportable segment.

15. Segment Reporting (Continued)

	Year Ended December 31, 2022
			Adjustments											Reportable Segments
(Dollars in millions)	Total GAAP		Reclassi- fications			Additions/ (Subtractions)			Total Adjustments (1)			Total Core Earnings		Federal Education Loans		Consumer Lending		Business Processing		Other
Interest income:
Education loans	$	3,161												$	1,955	$	1,195	$	—	$	—
Cash and investments		62													32		10		—		20
Total interest income		3,223													1,987		1,205		—		20
Total interest expense		2,102													1,468		611		—		107
Net interest income (loss)		1,121	$	(15	)	$	(80	)	$	(95	)	$	1,026		519		594		—		(87	)
Less: provisions for loan    losses		79											79		—		79		—		—
Net interest income (loss)    after provisions for loan    losses		1,042													519		515		—		(87	)
Other income (loss):
Servicing revenue		77													65		12		—		—
Asset recovery and    business processing    revenue		336													6		—		330		—
Other revenue		203													31		1		—		—
Total other income (loss)		616		15			(186	)		(171	)		445		102		13		330		—
Expenses:
Direct operating    expenses		534													106		148		280		—
Unallocated shared    services expenses		242													—		—		—		242
Operating expenses		776		—			—			—			776		106		148		280		242
Goodwill and acquired    intangible asset    impairment and    amortization		19		—			(19	)		(19	)		—		—		—		—		—
Restructuring/other    reorganization    expenses		36		—			—			—			36		—		—		—		36
Total expenses		831		—			(19	)		(19	)		812		106		148		280		278
Income (loss) before    income tax expense    (benefit)		827		—			(247	)		(247	)		580		515		380		50		(365	)
Income tax expense    (benefit)(2)		182		—			(60	)		(60	)		122		108		80		10		(76	)
Net income (loss)	$	645	$	—		$	(187	)	$	(187	)	$	458	$	407	$	300	$	40	$	(289	)

(1)Core Earnings adjustments to GAAP:

	Year Ended December 31, 2022
(Dollars in millions)	Net Impact of Derivative Accounting			Net Impact of Acquired Intangibles			Total
Net interest income (loss) after provisions for loan losses	$	(95	)	$	—		$	(95	)
Total other income (loss)		(171	)		—			(171	)
Goodwill and acquired intangible asset impairment and amortization		—			(19	)		(19	)
Total Core Earnings adjustments to GAAP	$	(266	)	$	19			(247	)
Income tax expense (benefit)								(60	)
Net income (loss)							$	(187	)

(2)Income taxes are based on a percentage of net income before tax for the individual reportable segment.

15. Segment Reporting (Continued)

	Year Ended December 31, 2021
				Adjustments												Reportable Segments
(Dollars in millions)	Total GAAP			Reclassi- fications			Additions/ (Subtractions)			Total Adjustments (1)			Total Core Earnings			Federal Education Loans		Consumer Lending			Business Processing		Other
Interest income:
Education loans	$	2,645														$	1,405	$	1,181		$	—	$	—
Cash and investments		3															—		2			—		1
Total interest income		2,648															1,405		1,183			—		1
Total interest expense		1,316															830		541			—		70
Net interest income (loss)		1,332		$	(106	)	$	(78	)	$	(184	)	$	1,148			575		642			—		(69	)
Less: provisions for loan    losses		(61	)											(61	)		—		(61	)		—		—
Net interest income (loss)    after provisions for loan    losses		1,393															575		703			—		(69	)
Other income (loss):
Servicing revenue		168															162		6			—		—
Asset recovery and    business processing    revenue		539															51		—			488		—
Other revenue		94															25		—			—		5
Gains on sales of loans		78															—		91			—		—
Losses on debt    repurchases		(73	)														—		—			—		(73	)
Total other income (loss)		806			106			(157	)		(51	)		755			238		97			488		(68	)
Expenses:
Direct operating    expenses		745															223		162			360		—
Unallocated shared    services expenses		462															—		—			—		462
Operating expenses		1,207			—			—			—			1,207			223		162			360		462
Goodwill and acquired    intangible asset    impairment and    amortization		30			—			(30	)		(30	)		—			—		—			—		—
Restructuring/other    reorganization    expenses		26			—			—			—			26			—		—			—		26
Total expenses		1,263			—			(30	)		(30	)		1,233			223		162			360		488
Income (loss) before    income tax expense    (benefit)		936			—			(205	)		(205	)		731			590		638			128		(625	)
Income tax expense    (benefit)(2)		219			—			(39	)		(39	)		180			136		146			29		(131	)
Net income (loss)	$	717		$	—		$	(166	)	$	(166	)	$	551		$	454	$	492		$	99	$	(494	)

(1)Core Earnings adjustments to GAAP:

	Year Ended December 31, 2021
(Dollars in millions)	Net Impact of Derivative Accounting			Net Impact of Acquired Intangibles			Total
Net interest income (loss) after provisions for loan losses	$	(184	)	$	—		$	(184	)
Total other income (loss)		(51	)		—			(51	)
Goodwill and acquired intangible asset impairment and amortization		—			(30	)		(30	)
Total Core Earnings adjustments to GAAP	$	(235	)	$	30			(205	)
Income tax expense (benefit)								(39	)
Net income (loss)							$	(166	)

(2) Income taxes are based on a percentage of net income before tax for the individual reportable segment.

15. Segment Reporting (Continued)

Summary of Core Earnings Adjustments to GAAP

	Years Ended December 31,
(Dollars in millions)	2023			2022			2021
GAAP net income	$	228		$	645		$	717
Core Earnings adjustments to GAAP:
Net impact of derivative accounting(1)		73			(266	)		(235	)
Net impact of goodwill and acquired intangible assets(2)		10			19			30
Net income tax effect(3)		(8	)		60			39
Total Core Earnings adjustments to GAAP		75			(187	)		(166	)
Core Earnings net income	$	303		$	458		$	551

(1)Derivative accounting: Core Earnings exclude periodic gains and losses that are caused by the mark-to-market valuations on derivatives that do not qualify for hedge accounting treatment under GAAP as well as the periodic mark-to-market gains and losses that are a result of ineffectiveness recognized related to effective hedges under GAAP. Under GAAP, for our derivatives that are held to maturity, the mark-to-market gain or loss over the life of the contract will equal $0 except for Floor Income Contracts where the mark-to-market gain will equal the amount for which we sold the contract. In our Core Earnings presentation, we recognize the economic effect of these hedges, which generally results in any net settlement cash paid or received being recognized ratably as an interest expense or revenue over the hedged item’s life.

(2)Goodwill and acquired intangible assets: Our Core Earnings exclude goodwill and intangible asset impairment and amortization of acquired intangible assets.

Net tax effect: Such tax effect is based upon our Core Earnings effective tax rate for the year.