Segment Reporting (Tables)

6 Months Ended

Jun. 30, 2024

Segment Results and Reconciliations to GAAP

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.

Core Earnings Adjustments to GAAP

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.

Federal Education Loans [Member]

Asset Information for Loans Segment

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 [Member]

Asset Information for Loans Segment

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.