Segment Reporting (Tables)

9 Months Ended

Sep. 30, 2024

Segment Results and Reconciliations to GAAP

Segment Results and Reconciliations to GAAP

	Three Months Ended September 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	$	905													$	591		$	314	$	—	$	—
Cash and investments		43														25			6		—		12
Total interest income		948														616			320		—		12
Total interest expense		828														576			198		—		34
Net interest income    (loss)		120		$	8		$	12		$	20		$	140		40			122		—		(22	)
Less: provisions for loan    losses		42												42		(5	)		47		—		—
Net interest income    (loss) after provisions    for loan losses		78														45			75		—		(22	)
Other income (loss):
Servicing revenue		13														11			2		—		—
Asset recovery and    business processing    revenue		70														—			—		70		—
Other revenue		(26	)													—			—		—		10
Gain on sale of subsidiary		219														—			—		219		—
Total other income    (loss)		276			(8	)		44			36			312		11			2		289		10
Expenses:
Direct operating    expenses		121														20			44		57		—
Unallocated shared    services expenses		63														—			—		—		63
Operating expenses		184			—			—			—			184		20			44		57		63
Goodwill and acquired    intangible asset    impairment and    amortization		140			—			(140	)		(140	)		—		—			—		—		—
Restructuring/other    reorganization    expenses		18			—			—			—			18		—			—		—		18
Total expenses		342			—			(140	)		(140	)		202		20			44		57		81
Income (loss) before    income tax expense    (benefit)		12			—			196			196			208		36			33		232		(93	)
Income tax expense    (benefit)(2)		14			—			34			34			48		9			6		54		(21	)
Net income (loss)	$	(2	)	$	—		$	162		$	162		$	160	$	27		$	27	$	178	$	(72	)

(1)Core Earnings adjustments to GAAP:

	Three Months Ended September 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	$	20	$	—		$	20
Total other income (loss)		36		—			36
Goodwill and acquired intangible asset impairment and amortization		—		(140	)		(140	)
Total Core Earnings adjustments to GAAP	$	56	$	140			196
Income tax expense (benefit)							34
Net income (loss)						$	162

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

12. Segment Reporting (Continued)

	Three Months Ended September 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	$	1,129												$	778	$	351	$	—	$	—
Cash and investments		41													19		7		—		15
Total interest income		1,170													797		358		—		15
Total interest expense		879													636		208		—		46
Net interest income    (loss)		291	$	7		$	(18	)	$	(11	)	$	280		161		150		—		(31	)
Less: provisions for loan    losses		72											72		36		36		—		—
Net interest income    (loss) after provisions    for loan losses		219													125		114		—		(31	)
Other income (loss):
Servicing revenue		15													12		3		—		—
Asset recovery and    business processing    revenue		85													—		—		85		—
Other revenue		31													3		1		—		1
Total other income    (loss)		131		(7	)		(19	)		(26	)		105		15		4		85		1
Expenses:
Direct operating    expenses		134													17		44		73		—
Unallocated shared    services expenses		99													—		—		—		99
Operating expenses		233		—			—			—			233		17		44		73		99
Goodwill and acquired    intangible asset    impairment and    amortization		3		—			(3	)		(3	)		—		—		—		—		—
Restructuring/other    reorganization    expenses		4		—			—			—			4		—		—		—		4
Total expenses		240		—			(3	)		(3	)		237		17		44		73		103
Income (loss) before    income tax expense    (benefit)		110		—			(34	)		(34	)		76		123		74		12		(133	)
Income tax expense    (benefit)(2)		31		—			(12	)		(12	)		19		29		18		3		(31	)
Net income (loss)	$	79	$	—		$	(22	)	$	(22	)	$	57	$	94	$	56	$	9	$	(102	)

(1)Core Earnings adjustments to GAAP:

	Three Months Ended September 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	$	(11	)	$	—		$	(11	)
Total other income (loss)		(26	)		—			(26	)
Goodwill and acquired intangible asset impairment and amortization		—			(3	)		(3	)
Total Core Earnings adjustments to GAAP	$	(37	)	$	3			(34	)
Income tax expense (benefit)								(12	)
Net income (loss)							$	(22	)

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

12. Segment Reporting (Continued)

	Nine Months Ended September 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	$	2,819												$	1,861		$	958	$	—	$	—
Cash and investments		129													75			20		—		34
Total interest income		2,948													1,936			978		—		34
Total interest expense		2,547													1,810			597		—		102
Net interest income    (loss)		401	$	28		$	10		$	38		$	439		126			381		—		(68	)
Less: provisions for loan    losses		68											68		(6	)		74		—		—
Net interest income    (loss) after provisions    for loan losses		333													132			307		—		(68	)
Other income (loss):
Servicing revenue		48													39			9		—		—
Asset recovery and    business processing    revenue		228													—			—		228		—
Other revenue		33													5			1		—		16
Gain on sale of subsidiary		219													—			—		219		—
Total other income    (loss)		528		(28	)		17			(11	)		517		44			10		447		16
Expenses:
Direct operating    expenses		351													53			110		188		—
Unallocated shared    services expenses		182													—			—		—		182
Operating expenses		533		—			—			—			533		53			110		188		182
Goodwill and acquired    intangible asset    impairment and    amortization		145		—			(145	)		(145	)		—		—			—		—		—
Restructuring/other    reorganization    expenses		35		—			—			—			35		—			—		—		35
Total expenses		713		—			(145	)		(145	)		568		53			110		188		217
Income (loss) before    income tax expense    (benefit)		148		—			172			172			320		123			207		259		(269	)
Income tax expense    (benefit)(2)		41		—			33			33			74		28			47		60		(61	)
Net income (loss)	$	107	$	—		$	139		$	139		$	246	$	95		$	160	$	199	$	(208	)

(1)Core Earnings adjustments to GAAP:

	Nine Months Ended September 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	$	38		$	—		$	38
Total other income (loss)		(11	)		—			(11	)
Goodwill and acquired intangible asset impairment and amortization		—			(145	)		(145	)
Total Core Earnings adjustments to GAAP	$	27		$	145			172
Income tax expense (benefit)								33
Net income (loss)							$	139

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

12. Segment Reporting (Continued)

	Nine Months Ended September 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	$	3,227												$	2,194	$	1,036	$	—	$	—
Cash and investments		111													56		20		—		35
Total interest income		3,338													2,250		1,056		—		35
Total interest expense		2,636													1,859		610		—		119
Net interest income    (loss)		702	$	24		$	27		$	51		$	753		391		446		—		(84	)
Less: provisions for loan    losses		68											68		51		17		—		—
Net interest income    (loss) after provisions    for loan losses		634													340		429		—		(84	)
Other income (loss):
Servicing revenue		48													39		9		—		—
Asset recovery and    business processing    revenue		240													—		—		240		—
Other revenue		59													10		2		—		3
Total other income    (loss)		347		(24	)		(20	)		(44	)		303		49		11		240		3
Expenses:
Direct operating    expenses		394													55		124		215		—
Unallocated shared    services expenses		207													—		—		—		207
Operating expenses		601		—			—			—			601		55		124		215		207
Goodwill and acquired    intangible asset    impairment and    amortization		8		—			(8	)		(8	)		—		—		—		—		—
Restructuring/other    reorganization    expenses		23		—			—			—			23		—		—		—		23
Total expenses		632		—			(8	)		(8	)		624		55		124		215		230
Income (loss) before    income tax expense    (benefit)		349		—			15			15			364		334		316		25		(311	)
Income tax expense    (benefit)(2)		93		—			(7	)		(7	)		86		78		75		6		(73	)
Net income (loss)	$	256	$	—		$	22		$	22		$	278	$	256	$	241	$	19	$	(238	)

(1)Core Earnings adjustments to GAAP:

	Nine Months Ended September 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	$	51		$	—		$	51
Total other income (loss)		(44	)		—			(44	)
Goodwill and acquired intangible asset impairment and amortization		—			(8	)		(8	)
Total Core Earnings adjustments to GAAP	$	7		$	8			15
Income tax expense (benefit)								(7	)
Net income (loss)							$	22

(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 September 30,						Nine Months Ended September 30,
(Dollars in millions)	2024			2023			2024			2023
GAAP net income (loss)	$	(2	)	$	79		$	107		$	256
Core Earnings adjustments to GAAP:
Net impact of derivative accounting(1)		56			(37	)		27			7
Net impact of goodwill and acquired   intangible assets(2)		140			3			145			8
Net tax effect(3)		(34	)		12			(33	)		7
Total Core Earnings adjustments to GAAP		162			(22	)		139			22
Core Earnings net income	$	160		$	57		$	246		$	278

(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)	September 30, 2024		December 31, 2023
FFELP Loans, net	$	31,522	$	37,925
Cash and investments(1)		1,250		1,520
Other		1,829		2,128
Total assets	$	34,601	$	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)	September 30, 2024		December 31, 2023
Private Education Loans, net	$	16,005	$	16,902
Cash and investments(1)		444		497
Other		565		577
Total assets	$	17,014	$	17,976

(1)Includes restricted cash and investments.