Segment Reporting (Tables)

3 Months Ended

Mar. 31, 2022

Segment Results and Reconciliations to GAAP

	Three Months Ended March 31, 2022
												Adjustments
(Dollars in millions)	Federal Education Loans		Consumer Lending		Business Processing		Other			Total Core Earnings		Reclassi- fications			Additions/ (Subtractions)			Total Adjustments⁽¹⁾			Total GAAP
Interest income:
Education loans	$	334	$	276	$	—	$	—		$	610	$	19		$	(4	)	$	15		$	625
Cash and investments		—		1		—		—			1		—			—			—			1
Total interest income		334		277		—		—			611		19			(4	)		15			626
Total interest expense		195		125		—		15			335		—			(46	)		(46	)		289
Net interest income (loss)		139		152		—		(15	)		276		19			42			61			337
Less: provisions for loan losses		—		16		—		—			16		—			—			—			16
Net interest income (loss) after provisions for loan losses		139		136		—		(15	)		260		19			42			61			321
Other income (loss):
Servicing revenue		15		3		—		—			18		—			—			—			18
Asset recovery and business processing revenue		3		—		94		—			97		—			—			—			97
Other income (loss)		11		—		—		(1	)		10		(19	)		117			98			108
Total other income (loss)		29		3		94		(1	)		125		(19	)		117			98			223
Expenses:
Direct operating expenses		28		35		76		—			139		—			—			—			139
Unallocated shared services expenses		—		—		—		66			66		—			—			—			66
Operating expenses		28		35		76		66			205		—			—			—			205
Goodwill and acquired intangible asset impairment and amortization		—		—		—		—			—		—			4			4			4
Restructuring/other reorganization expenses		—		—		—		3			3		—			—			—			3
Total expenses		28		35		76		69			208		—			4			4			212
Income (loss) before income tax expense (benefit)		140		104		18		(85	)		177		—			155			155			332
Income tax expense (benefit)⁽²⁾		33		25		4		(20	)		42		—			35			35			77
Net income (loss)	$	107	$	79	$	14	$	(65	)	$	135	$	—		$	120		$	120		$	255

⁽¹⁾	Core Earnings adjustments to GAAP:

	Three Months Ended March 31, 2022
(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)		98		—			98
Goodwill and acquired intangible asset impairment and amortization		—		4			4
Total Core Earnings adjustments to GAAP	$	159	$	(4	)		155
Income tax expense (benefit)							35
Net income (loss)						$	120

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

	Three Months Ended March 31, 2021
														Adjustments
(Dollars in millions)	Federal Education Loans		Consumer Lending			Business Processing		Other			Total Core Earnings			Reclassi- fications			Additions/ (Subtractions)			Total Adjustments⁽¹⁾			Total GAAP
Interest income:
Education loans	$	359	$	319		$	—	$	—		$	678		$	23		$	(9	)	$	14		$	692
Cash and investments		—		—			—		—			—			—			—			—			—
Total interest income		359		319			—		—			678			23			(9	)		14			692
Total interest expense		215		150			—		18			383			(1	)		(53	)		(54	)		329
Net interest income (loss)		144		169			—		(18	)		295			24			44			68			363
Less: provisions for loan losses		—		(87	)		—		—			(87	)		—			—			—			(87	)
Net interest income (loss) after provisions for loan losses		144		256			—		(18	)		382			24			44			68			450
Other income (loss):
Servicing revenue		52		1			—		—			53			—			—			—			53
Asset recovery and business processing revenue		14		—			125		—			139			—			—			—			139
Other income (loss)		—		—			—		—			—			(11	)		47			36			36
Gains on sales of loans		—		89			—		—			89			(13	)		—			(13	)		76
Total other income (loss)		66		90			125		—			281			(24	)		47			23			304
Expenses:
Direct operating expenses		63		41			91		—			195			—			—			—			195
Unallocated shared services expenses		—		—			—		64			64			—			—			—			64
Operating expenses		63		41			91		64			259			—			—			—			259
Goodwill and acquired intangible asset impairment and amortization		—		—			—		—			—			—			5			5			5
Restructuring/other reorganization expenses		—		—			—		6			6			—			—			—			6
Total expenses		63		41			91		70			265			—			5			5			270
Income (loss) before income tax expense (benefit)		147		305			34		(88	)		398			—			86			86			484
Income tax expense (benefit)⁽²⁾		35		71			8		(21	)		93			—			21			21			114
Net income (loss)	$	112	$	234		$	26	$	(67	)	$	305		$	—		$	65		$	65		$	370

⁽¹⁾	Core Earnings adjustments to GAAP:

	Three Months Ended March 31, 2021
(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	$	68	$	—		$	68
Total other income (loss)		23		—			23
Goodwill and acquired intangible asset impairment and amortization		—		5			5
Total Core Earnings adjustments to GAAP	$	91	$	(5	)		86
Income tax expense (benefit)							21
Net income (loss)						$	65

⁽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 March 31,
(Dollars in millions)	2022			2021
Core Earnings net income	$	135		$	305
Core Earnings adjustments to GAAP:
Net impact of derivative accounting⁽¹⁾		159			91
Net impact of goodwill and acquired intangible assets⁽²⁾		(4	)		(5	)
Net tax effect⁽³⁾		(35	)		(21	)
Total Core Earnings adjustments to GAAP		120			65
GAAP net income	$	255		$	370

⁽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

(Dollars in millions)	March 31, 2022		December 31, 2021
FFELP Loans, net	$	51,013	$	52,641
Cash and investments⁽¹⁾		1,879		2,071
Other		2,008		2,183
Total assets	$	54,900	$	56,895

⁽¹⁾

Includes restricted cash and investments.

Consumer Lending [Member]

Asset Information for Loans Segment

(Dollars in millions)	March 31, 2022		December 31, 2021
Private Education Loans, net	$	20,088	$	20,171
Cash and investments⁽¹⁾		774		824
Other		720		815
Total assets	$	21,582	$	21,810

⁽¹⁾

Includes restricted cash and investments.