Segment Reporting

6 Months Ended

Jun. 30, 2024

Segment Reporting [Abstract]

Segment Reporting

11. 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 and manages FFELP Loans and is the master servicer on this portfolio. Our long history of servicing quality, data-driven strategies and omnichannel education about federal repayment options translate into positive results for the millions of borrowers we serve. We generate revenue primarily through net interest income on our FFELP Loans.

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

(Dollars in millions)	June 30, 2024		December 31, 2023
FFELP Loans, net	$	32,940	$	37,925
Cash and investments(1)		2,518		1,520
Other		1,885		2,128
Total assets	$	37,343	$	41,573

(1)Includes restricted cash and investments.

Consumer Lending Segment

Navient owns and manages Private Education Loans and is the master servicer for these portfolios. Through our Earnest brand, we also refinance and originate 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are loans where a borrower has refinanced their education loans, and "In-school" Private Education Loans are loans originally made to borrowers while they are attending school.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.

(Dollars in millions)	June 30, 2024		December 31, 2023
Private Education Loans, net	$	16,238	$	16,902
Cash and investments(1)		458		497
Other		547		577
Total assets	$	17,243	$	17,976

(1)Includes restricted cash and investments.

11. Segment Reporting (Continued)

Business Processing Segment

Navient provides business processing solutions such as omnichannel contact center services, workflow processing, and revenue cycle optimization. We leverage the same expertise and intelligent tools we use to deliver successful results for portfolios we own. Our support enables our clients to ensure better constituent outcomes, meet rapidly changing needs, improve technology, reduce operating expenses, manage risk and optimize revenue opportunities. 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 June 30, 2024 and December 31, 2023, the Business Processing segment had total assets of $357 million and $380 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 June 30, 2024 and December 31, 2023, the Other segment had total assets of $1.7 billion and $1.4 billion, respectively.

11. 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.

11. Segment Reporting (Continued)

Segment Results and Reconciliations to GAAP

	Three Months Ended June 30, 2024
			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	$	925												$	608		$	317	$	—	$	—
Cash and investments		48													28			7		—		13
Total interest income		973													636			324		—		13
Total interest expense		843													603			198		—		36
Net interest income    (loss)		130	$	9		$	(3	)	$	6		$	136		33			126		—		(23	)
Less: provisions for loan    losses		14											14		(2	)		16		—		—
Net interest income    (loss) after provisions    for loan losses		116													35			110		—		(23	)
Other income (loss):
Servicing revenue		18													15			3		—		—
Asset recovery and    business processing    revenue		81													—			—		81		—
Other revenue		18													2			—		—		2
Total other income    (loss)		117		(9	)		(5	)		(14	)		103		17			3		81		2
Expenses:
Direct operating    expenses		112													16			34		62		—
Unallocated shared    services expenses		54													—			—		—		54
Operating expenses		166		—			—			—			166		16			34		62		54
Goodwill and acquired    intangible asset    impairment and    amortization		3		—			(3	)		(3	)		—		—			—		—		—
Restructuring/other    reorganization    expenses		16		—			—			—			16		—			—		—		16
Total expenses		185		—			(3	)		(3	)		182		16			34		62		70
Income (loss) before    income tax expense    (benefit)		48		—			(5	)		(5	)		43		36			79		19		(91	)
Income tax expense    (benefit)(2)		12		—			(2	)		(2	)		10		8			19		4		(21	)
Net income (loss)	$	36	$	—		$	(3	)	$	(3	)	$	33	$	28		$	60	$	15	$	(70	)

(1)Core Earnings adjustments to GAAP:

	Three Months Ended June 30, 2024
(Dollars in millions)	Net Impact of Derivative Accounting			Net Impact of Goodwill and Acquired Intangibles			Total
Net interest income (loss) after provisions for loan losses	$	6		$	—		$	6
Total other income (loss)		(14	)		—			(14	)
Goodwill and acquired intangible asset impairment and amortization		—			(3	)		(3	)
Total Core Earnings adjustments to GAAP	$	(8	)	$	3			(5	)
Income tax expense (benefit)								(2	)
Net income (loss)							$	(3	)

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

11. Segment Reporting (Continued)

	Three Months Ended June 30, 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	$	1,061												$	721	$	341	$	—	$	—
Cash and investments		36													18		7		—		11
Total interest income		1,097													739		348		—		11
Total interest expense		919													633		205		—		39
Net interest income    (loss)		178	$	4		$	39		$	43		$	221		106		143		—		(28	)
Less: provisions for loan    losses		11											11		5		6		—		—
Net interest income    (loss) after provisions    for loan losses		167													101		137		—		(28	)
Other income (loss):
Servicing revenue		16													13		3		—		—
Asset recovery and    business processing    revenue		83													—		—		83		—
Other revenue		30													2		2		—		—
Total other income    (loss)		129		(4	)		(22	)		(26	)		103		15		5		83		—
Expenses:
Direct operating    expenses		135													18		42		75		—
Unallocated shared    services expenses		47													—		—		—		47
Operating expenses		182		—			—			—			182		18		42		75		47
Goodwill and acquired    intangible asset    impairment and    amortization		3		—			(3	)		(3	)		—		—		—		—		—
Restructuring/other    reorganization    expenses		15		—			—			—			15		—		—		—		15
Total expenses		200		—			(3	)		(3	)		197		18		42		75		62
Income (loss) before    income tax expense    (benefit)		96		—			20			20			116		98		100		8		(90	)
Income tax expense    (benefit)(2)		30		—			(2	)		(2	)		28		22		25		2		(21	)
Net income (loss)	$	66	$	—		$	22		$	22		$	88	$	76	$	75	$	6	$	(69	)

(1)Core Earnings adjustments to GAAP:

	Three Months Ended June 30, 2023
(Dollars in millions)	Net Impact of Derivative Accounting			Net Impact of Goodwill and Acquired Intangibles			Total
Net interest income (loss) after provisions for loan losses	$	43		$	—		$	43
Total other income (loss)		(26	)		—			(26	)
Goodwill and acquired intangible asset impairment and amortization		—			(3	)		(3	)
Total Core Earnings adjustments to GAAP	$	17		$	3			20
Income tax expense (benefit)								(2	)
Net income (loss)							$	22

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

11. Segment Reporting (Continued)

	Six Months Ended June 30, 2024
			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	$	1,914												$	1,269		$	645	$	—	$	—
Cash and investments		86													51			14		—		21
Total interest income		2,000													1,320			659		—		21
Total interest expense		1,718													1,233			400		—		68
Net interest income    (loss)		282	$	19		$	(2	)	$	17		$	299		87			259		—		(47	)
Less: provisions for loan    losses		26											26		(1	)		27		—		—
Net interest income    (loss) after provisions    for loan losses		256													88			232		—		(47	)
Other income (loss):
Servicing revenue		35													28			7		—		—
Asset recovery and    business processing    revenue		158													—			—		158		—
Other revenue		59													5			1		—		7
Total other income    (loss)		252		(19	)		(27	)		(46	)		206		33			8		158		7
Expenses:
Direct operating    expenses		231													33			67		131		—
Unallocated shared    services expenses		119													—			—		—		119
Operating expenses		350		—			—			—			350		33			67		131		119
Goodwill and acquired    intangible asset    impairment and    amortization		5		—			(5	)		(5	)		—		—			—		—		—
Restructuring/other    reorganization    expenses		17		—			—			—			17		—			—		—		17
Total expenses		372		—			(5	)		(5	)		367		33			67		131		136
Income (loss) before    income tax expense    (benefit)		136		—			(24	)		(24	)		112		88			173		27		(176	)
Income tax expense    (benefit)(2)		27		—			(1	)		(1	)		26		20			40		6		(40	)
Net income (loss)	$	109	$	—		$	(23	)	$	(23	)	$	86	$	68		$	133	$	21	$	(136	)

(1)Core Earnings adjustments to GAAP:

	Six Months Ended June 30, 2024
(Dollars in millions)	Net Impact of Derivative Accounting			Net Impact of Goodwill and Acquired Intangibles			Total
Net interest income (loss) after provisions for loan losses	$	17		$	—		$	17
Total other income (loss)		(46	)		—			(46	)
Goodwill and acquired intangible asset impairment and amortization		—			(5	)		(5	)
Total Core Earnings adjustments to GAAP	$	(29	)	$	5			(24	)
Income tax expense (benefit)								(1	)
Net income (loss)							$	(23	)

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

11. Segment Reporting (Continued)

	Six Months Ended June 30, 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	$	2,099														$	1,416	$	686		$	—	$	—
Cash and investments		70															38		13			—		19
Total interest income		2,169															1,454		699			—		19
Total interest expense		1,756															1,223		402			—		73
Net interest income    (loss)		413		$	16		$	45		$	61		$	474			231		297			—		(54	)
Less: provisions for loan    losses		(3	)											(3	)		15		(18	)		—		—
Net interest income    (loss) after provisions    for loan losses		416															216		315			—		(54	)
Other income (loss):
Servicing revenue		33															27		6			—		—
Asset recovery and    business processing    revenue		155															—		—			155		—
Other revenue		28															7		1			—		3
Total other income    (loss)		216			(16	)		(1	)		(17	)		199			34		7			155		3
Expenses:
Direct operating    expenses		259															38		79			142		—
Unallocated shared    services expenses		109															—		—			—		109
Operating expenses		368			—			—			—			368			38		79			142		109
Goodwill and acquired    intangible asset    impairment and    amortization		5			—			(5	)		(5	)		—			—		—			—		—
Restructuring/other    reorganization    expenses		19			—			—			—			19			—		—			—		19
Total expenses		392			—			(5	)		(5	)		387			38		79			142		128
Income (loss) before    income tax expense    (benefit)		240			—			49			49			289			212		243			13		(179	)
Income tax expense    (benefit)(2)		63			—			5			5			68			50		58			3		(43	)
Net income (loss)	$	177		$	—		$	44		$	44		$	221		$	162	$	185		$	10	$	(136	)

(1)Core Earnings adjustments to GAAP:

	Six Months Ended June 30, 2023
(Dollars in millions)	Net Impact of Derivative Accounting			Net Impact of Goodwill and Acquired Intangibles			Total
Net interest income (loss) after provisions for loan losses	$	61		$	—		$	61
Total other income (loss)		(17	)		—			(17	)
Goodwill and acquired intangible asset impairment and amortization		—			(5	)		(5	)
Total Core Earnings adjustments to GAAP	$	44		$	5			49
Income tax expense (benefit)								5
Net income (loss)							$	44

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

11. Segment Reporting (Continued)

Summary of Core Earnings Adjustments to GAAP

	Three Months Ended June 30,					Six Months Ended June 30,
(Dollars in millions)	2024			2023		2024			2023
GAAP net income	$	36		$	66	$	109		$	177
Core Earnings adjustments to GAAP:
Net impact of derivative accounting(1)		(8	)		17		(29	)		44
Net impact of goodwill and acquired   intangible assets(2)		3			3		5			5
Net tax effect(3)		2			2		1			(5	)
Total Core Earnings adjustments to GAAP		(3	)		22		(23	)		44
Core Earnings net income	$	33		$	88	$	86		$	221

(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.

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