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Allowance for Loan Losses | 6 Months Ended
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Jun. 30, 2016
Receivables [Abstract] |
Allowance for Loan Losses |
2. | Allowance for Loan Losses
Our provisions for loan losses represent the periodic expense of maintaining an allowance sufficient to absorb incurred probable losses, net of expected recoveries, in the held-for-investment loan portfolios. The evaluation of the provisions for loan losses is inherently subjective, as it requires material estimates that may be susceptible to significant changes. We believe that the allowance for loan losses is appropriate to cover probable losses incurred in the loan portfolios. We segregate our Private Education Loan portfolio into two classes of loans — traditional and non-traditional. Non-traditional loans are loans to (i) customers attending for-profit schools with an original Fair Isaac and Company (“FICO”) score of less than 670 and (ii) customers attending not-for-profit schools with an original FICO score of less than 640. The FICO score used in determining whether a loan is non-traditional is the greater of the customer or cosigner FICO score at origination. Traditional loans are defined as all other Private Education Loans that are not classified as non-traditional. Allowance for Loan Losses Metrics
|  | Three Months Ended June 30, 2016 |
(Dollars in millions) |  | FFELP Loans |  |  | Private Education Loans |  |  | Other Loans |  |  | Total |
Allowance for Loan Losses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 70 |  |  | $ | 1,434 |  |  | $ | 15 |  |  | $ | 1,519 |
Total provision |  |  | 10 |  |  |  | 100 |  |  |  | — |  |  |  | 110 |
Charge-offs(1) |  |  | (18 | ) |  |  | (127 | ) |  |  | — |  |  |  | (145 | )
Reclassification of interest reserve(2) |  |  | — |  |  |  | 3 |  |  |  | — |  |  |  | 3 |
Ending balance |  | $ | 62 |  |  | $ | 1,410 |  |  | $ | 15 |  |  | $ | 1,487 |
Allowance: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance: individually evaluated for impairment |  | $ | — |  |  | $ | 1,163 |  |  | $ | 11 |  |  | $ | 1,174 |
Ending balance: collectively evaluated for impairment |  | $ | 62 |  |  | $ | 247 |  |  | $ | 4 |  |  | $ | 313 |
Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance: individually evaluated for impairment(3) |  | $ | — |  |  | $ | 11,162 |  |  | $ | 33 |  |  | $ | 11,195 |
Ending balance: collectively evaluated for impairment(3) |  | $ | 91,719 |  |  | $ | 15,478 |  |  | $ | 47 |  |  | $ | 107,244 |
Charge-offs as a percentage of average loans in repayment (annualized) |  |  | .10 | % |  |  | 2.17 | % |  |  | 1.32 | % |  |  |  |
Allowance coverage of charge-offs (annualized) |  |  | .9 |  |  |  | 2.8 |  |  |  | 13.5 |  |  |  |  |
Allowance as a percentage of the ending total loan balance |  |  | .07 | % |  |  | 5.29 | % |  |  | 18.18 | % |  |  |  |
Allowance as a percentage of the ending loans in repayment |  |  | .09 | % |  |  | 6.06 | % |  |  | 18.18 | % |  |  |  |
Ending total loans(3) |  | $ | 91,719 |  |  | $ | 26,640 |  |  | $ | 80 |  |  |  |  |
Average loans in repayment |  | $ | 72,973 |  |  | $ | 23,561 |  |  | $ | 82 |  |  |  |  |
Ending loans in repayment |  | $ | 72,058 |  |  | $ | 23,265 |  |  | $ | 80 |  |  |  |  |
| (1) | Charge-offs are reported net of expected recoveries. For Private Education Loans, the expected recovery amount is transferred to the receivable for partially charged-off loan balance. Charge-offs include charge-offs against the receivable for partially charged-off loans which represents the difference between what was expected to be recovered and any shortfalls in what was actually recovered in the period. See “Receivable for Partially Charged-Off Private Education Loans” for further discussion.
| (2) | Represents the additional allowance related to the amount of uncollectible interest reserved within interest income that is transferred in the period to the allowance for loan losses when interest is capitalized to a loan’s principal balance.
| (3) | Ending total loans for Private Education Loans includes the receivable for partially charged-off loans.
|  | Three Months Ended June 30, 2015 |
(Dollars in millions) |  | FFELP Loans |  |  | Private Education Loans |  |  | Other Loans |  |  | Total |
Allowance for Loan Losses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 91 |  |  | $ | 1,849 |  |  | $ | 23 |  |  | $ | 1,963 |
Total provision |  |  | 7 |  |  |  | 191 |  |  |  | — |  |  |  | 198 |
Net adjustment resulting from the change in the charge-off rate(1) |  |  | — |  |  |  | (330 | ) |  |  | — |  |  |  | (330 | )
Net charge-offs remaining(2) |  |  | (9 | ) |  |  | (179 | ) |  |  | (2 | ) |  |  | (190 | )
Total net charge-offs |  |  | (9 | ) |  |  | (509 | ) |  |  | (2 | ) |  |  | (520 | )
Reclassification of interest reserve(3) |  |  | — |  |  |  | 2 |  |  |  | — |  |  |  | 2 |
Ending balance |  | $ | 89 |  |  | $ | 1,533 |  |  | $ | 21 |  |  | $ | 1,643 |
Allowance: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance: individually evaluated for impairment |  | $ | — |  |  | $ | 1,257 |  |  | $ | 17 |  |  | $ | 1,274 |
Ending balance: collectively evaluated for impairment |  | $ | 89 |  |  | $ | 276 |  |  | $ | 4 |  |  | $ | 369 |
Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance: individually evaluated for impairment(4) |  | $ | — |  |  | $ | 10,769 |  |  | $ | 41 |  |  | $ | 10,810 |
Ending balance: collectively evaluated for impairment(4) |  | $ | 99,207 |  |  | $ | 19,435 |  |  | $ | 55 |  |  | $ | 118,697 |
Net charge-offs as a percentage of average loans in repayment, excluding the net adjustment resulting from the change in the charge-off rate (annualized)(1) |  |  | .05 | % |  |  | 2.74 | % |  |  | 8.68 | % |  |  |  |
Net adjustment resulting from the change in the charge-off rate as a percentage of average loans in repayment (annualized)(1) |  |  | — | % |  |  | 5.07 | % |  |  | — | % |  |  |  |
Allowance coverage of net charge-offs, excluding the net adjustment resulting from the change in the charge-off rate (annualized)(1) |  |  | 2.3 |  |  |  | 2.1 |  |  |  | 2.4 |  |  |  |  |
Allowance as a percentage of the ending total loan balance |  |  | .09 | % |  |  | 5.08 | % |  |  | 21.50 | % |  |  |  |
Allowance as a percentage of the ending loans in repayment |  |  | .12 | % |  |  | 5.93 | % |  |  | 21.50 | % |  |  |  |
Ending total loans(4) |  | $ | 99,207 |  |  | $ | 30,204 |  |  | $ | 96 |  |  |  |  |
Average loans in repayment |  | $ | 76,325 |  |  | $ | 26,122 |  |  | $ | 101 |  |  |  |  |
Ending loans in repayment |  | $ | 75,244 |  |  | $ | 25,865 |  |  | $ | 96 |  |  |  |  |
| (1) | In the second quarter of 2015, the portion of the loan amount charged off at default on Private Education Loans increased from 73 percent to 79 percent. This did not impact the provision for loan losses as previously this had been reserved through the allowance for loan losses. This change resulted in a $330 million reduction to the balance of the receivable for partially charged-off loans.
| (2) | Charge-offs are reported net of expected recoveries. For Private Education Loans, the expected recovery amount is transferred to the receivable for partially charged-off loan balance. Charge-offs include charge-offs against the receivable for partially charged-off loans which represents the difference between what was expected to be recovered and any shortfalls in what was actually recovered in the period. See “Receivable for Partially Charged-Off Private Education Loans” for further discussion.
| (3) | Represents the additional allowance related to the amount of uncollectible interest reserved within interest income that is transferred in the period to the allowance for loan losses when interest is capitalized to a loan’s principal balance.
| (4) | Ending total loans for Private Education Loans includes the receivable for partially charged-off loans.
|  | Six Months Ended June 30, 2016 |
(Dollars in millions) |  | FFELP Loans |  |  | Private Education Loans |  |  | Other Loans |  |  | Total |
Allowance for Loan Losses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 78 |  |  | $ | 1,471 |  |  | $ | 15 |  |  | $ | 1,564 |
Total provision |  |  | 17 |  |  |  | 204 |  |  |  | — |  |  |  | 221 |
Charge-offs(1) |  |  | (33 | ) |  |  | (271 | ) |  |  | — |  |  |  | (304 | )
Reclassification of interest reserve(2) |  |  | — |  |  |  | 6 |  |  |  | — |  |  |  | 6 |
Ending balance |  | $ | 62 |  |  | $ | 1,410 |  |  | $ | 15 |  |  | $ | 1,487 |
Allowance: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance: individually evaluated for impairment |  | $ | — |  |  | $ | 1,163 |  |  | $ | 11 |  |  | $ | 1,174 |
Ending balance: collectively evaluated for impairment |  | $ | 62 |  |  | $ | 247 |  |  | $ | 4 |  |  | $ | 313 |
Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance: individually evaluated for impairment(3) |  | $ | — |  |  | $ | 11,162 |  |  | $ | 33 |  |  | $ | 11,195 |
Ending balance: collectively evaluated for impairment(3) |  | $ | 91,719 |  |  | $ | 15,478 |  |  | $ | 47 |  |  | $ | 107,244 |
Charge-offs as a percentage of average loans in repayment (annualized) |  |  | .09 | % |  |  | 2.28 | % |  |  | 1.69 | % |  |  |  |
Allowance coverage of charge-offs (annualized) |  |  | 1.0 |  |  |  | 2.6 |  |  |  | 10.4 |  |  |  |  |
Allowance as a percentage of the ending total loan balance |  |  | .07 | % |  |  | 5.29 | % |  |  | 18.18 | % |  |  |  |
Allowance as a percentage of the ending loans in repayment |  |  | .09 | % |  |  | 6.06 | % |  |  | 18.18 | % |  |  |  |
Ending total loans(3) |  | $ | 91,719 |  |  | $ | 26,640 |  |  | $ | 80 |  |  |  |  |
Average loans in repayment |  | $ | 73,331 |  |  | $ | 23,871 |  |  | $ | 83 |  |  |  |  |
Ending loans in repayment |  | $ | 72,058 |  |  | $ | 23,265 |  |  | $ | 80 |  |  |  |  |
| (1) | Charge-offs are reported net of expected recoveries. For Private Education Loans, the expected recovery amount is transferred to the receivable for partially charged-off loan balance. Charge-offs include charge-offs against the receivable for partially charged-off loans which represents the difference between what was expected to be recovered and any shortfalls in what was actually recovered in the period. See “Receivable for Partially Charged-Off Private Education Loans” for further discussion.
| (2) | Represents the additional allowance related to the amount of uncollectible interest reserved within interest income that is transferred in the period to the allowance for loan losses when interest is capitalized to a loan’s principal balance.
| (3) | Ending total loans for Private Education Loans includes the receivable for partially charged-off loans.
|  | Six Months Ended June 30, 2015 |
(Dollars in millions) |  | FFELP Loans |  |  | Private Education Loans |  |  | Other Loans |  |  | Total |
Allowance for Loan Losses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 93 |  |  | $ | 1,916 |  |  | $ | 24 |  |  | $ | 2,033 |
Total provision |  |  | 12 |  |  |  | 311 |  |  |  | — |  |  |  | 323 |
Net adjustment resulting from the change in the charge-off rate(1) |  |  | — |  |  |  | (330 | ) |  |  | — |  |  |  | (330 | )
Net charge-offs remaining(2) |  |  | (16 | ) |  |  | (369 | ) |  |  | (3 | ) |  |  | (388 | )
Total net charge-offs |  |  | (16 | ) |  |  | (699 | ) |  |  | (3 | ) |  |  | (718 | )
Reclassification of interest reserve(3) |  |  | — |  |  |  | 5 |  |  |  | — |  |  |  | 5 |
Ending balance |  | $ | 89 |  |  | $ | 1,533 |  |  | $ | 21 |  |  | $ | 1,643 |
Allowance: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance: individually evaluated for impairment |  | $ | — |  |  | $ | 1,257 |  |  | $ | 17 |  |  | $ | 1,274 |
Ending balance: collectively evaluated for impairment |  | $ | 89 |  |  | $ | 276 |  |  | $ | 4 |  |  | $ | 369 |
Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance: individually evaluated for impairment(4) |  | $ | — |  |  | $ | 10,769 |  |  | $ | 41 |  |  | $ | 10,810 |
Ending balance: collectively evaluated for impairment(4) |  | $ | 99,207 |  |  | $ | 19,435 |  |  | $ | 55 |  |  | $ | 118,697 |
Net charge-offs as a percentage of average loans in repayment, excluding the net adjustment resulting from the change in the charge-off rate (annualized)(1) |  |  | .04 | % |  |  | 2.82 | % |  |  | 6.01 | % |  |  |  |
Net adjustment resulting from the change in the charge-off rate as a percentage of average loans in repayment (annualized)(1) |  |  | — | % |  |  | 2.53 | % |  |  | — | % |  |  |  |
Allowance coverage of net charge-offs, excluding the net adjustment resulting from the change in the charge-off rate (annualized)(1) |  |  | 2.8 |  |  |  | 2.1 |  |  |  | 3.3 |  |  |  |  |
Allowance as a percentage of the ending total loan balance |  |  | .09 | % |  |  | 5.08 | % |  |  | 21.50 | % |  |  |  |
Allowance as a percentage of the ending loans in repayment |  |  | .12 | % |  |  | 5.93 | % |  |  | 21.50 | % |  |  |  |
Ending total loans(4) |  | $ | 99,207 |  |  | $ | 30,204 |  |  | $ | 96 |  |  |  |  |
Average loans in repayment |  | $ | 76,896 |  |  | $ | 26,382 |  |  | $ | 103 |  |  |  |  |
Ending loans in repayment |  | $ | 75,244 |  |  | $ | 25,865 |  |  | $ | 96 |  |  |  |  |
| (1) | In the second quarter of 2015, the portion of the loan amount charged off at default on Private Education Loans increased from 73 percent to 79 percent. This did not impact the provision for loan losses as previously this had been reserved through the allowance for loan losses. This change resulted in a $330 million reduction to the balance of the receivable for partially charged-off loans.
| (2) | Charge-offs are reported net of expected recoveries. For Private Education Loans, the expected recovery amount is transferred to the receivable for partially charged-off loan balance. Charge-offs include charge-offs against the receivable for partially charged-off loans which represents the difference between what was expected to be recovered and any shortfalls in what was actually recovered in the period. See “Receivable for Partially Charged-Off Private Education Loans” for further discussion.
| (3) | Represents the additional allowance related to the amount of uncollectible interest reserved within interest income that is transferred in the period to the allowance for loan losses when interest is capitalized to a loan’s principal balance.
| (4) | Ending total loans for Private Education Loans includes the receivable for partially charged-off loans.
Key Credit Quality Indicators FFELP Loans are substantially insured and guaranteed as to their principal and accrued interest in the event of default; therefore, the key credit quality indicator for this portfolio is loan status. The impact of changes in loan status is incorporated quarterly into the allowance for loan losses calculation. For Private Education Loans, the key credit quality indicators are school type, FICO scores, the existence of a cosigner, the loan status and loan seasoning. The school type/FICO score are assessed at origination and maintained through the traditional/non-traditional loan designation. The other Private Education Loan key quality indicators can change and are incorporated quarterly into the allowance for loan losses calculation. The following table highlights the principal balance (excluding the receivable for partially charged-off loans) of our Private Education Loan portfolio stratified by the key credit quality indicators.
|  | Private Education Loans Credit Quality Indicators |
|  | June 30, 2016 |  |  | December 31, 2015 |
(Dollars in millions) |  | Balance(3) |  |  | % of Balance |  |  | Balance(3) |  |  | % of Balance |
Credit Quality Indicators |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
School Type/FICO Scores: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Traditional |  | $ | 23,697 |  |  |  | 92 | % |  | $ | 25,280 |  |  |  | 92 | %
Non-Traditional(1) |  |  | 2,096 |  |  |  | 8 |  |  |  | 2,235 |  |  |  | 8 |
Total |  | $ | 25,793 |  |  |  | 100 | % |  | $ | 27,515 |  |  |  | 100 | %
Cosigners: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
With cosigner |  | $ | 16,621 |  |  |  | 64 | % |  | $ | 17,738 |  |  |  | 64 | %
Without cosigner |  |  | 9,172 |  |  |  | 36 |  |  |  | 9,777 |  |  |  | 36 |
Total |  | $ | 25,793 |  |  |  | 100 | % |  | $ | 27,515 |  |  |  | 100 | %
Seasoning(2): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
1-12 payments |  | $ | 1,448 |  |  |  | 6 | % |  | $ | 1,776 |  |  |  | 7 | %
13-24 payments |  |  | 1,596 |  |  |  | 6 |  |  |  | 1,977 |  |  |  | 7 |
25-36 payments |  |  | 2,486 |  |  |  | 10 |  |  |  | 2,982 |  |  |  | 11 |
37-48 payments |  |  | 3,431 |  |  |  | 13 |  |  |  | 3,787 |  |  |  | 14 |
More than 48 payments |  |  | 15,196 |  |  |  | 59 |  |  |  | 14,953 |  |  |  | 54 |
Not yet in repayment |  |  | 1,636 |  |  |  | 6 |  |  |  | 2,040 |  |  |  | 7 |
Total |  | $ | 25,793 |  |  |  | 100 | % |  | $ | 27,515 |  |  |  | 100 | %
(1) | Defined as loans to customers attending for-profit schools (with a FICO score of less than 670 at origination) and customers attending not-for-profit schools (with a FICO score of less than 640 at origination).
(2) | Number of months in active repayment for which a scheduled payment was received.
(3) | Balance represents gross Private Education Loans.
The following tables provide information regarding the loan status and aging of past due loans.
|  | FFELP Loan Delinquencies |
|  | June 30, 2016 |  |  | December 31, 2015 |
(Dollars in millions) |  | Balance |  |  | % |  |  | Balance |  |  | % |
Loans in-school/grace/deferment(1) |  | $ | 7,149 |  |  |  |  |  |  | $ | 8,257 |  |  |  |  |
Loans in forbearance(2) |  |  | 12,512 |  |  |  |  |  |  |  | 13,298 |  |  |  |  |
Loans in repayment and percentage of each status: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans current |  |  | 62,581 |  |  |  | 86.8 | % |  |  | 62,651 |  |  |  | 84.7 | %
Loans delinquent 31-60 days(3) |  |  | 2,668 |  |  |  | 3.7 |  |  |  | 3,285 |  |  |  | 4.5 |
Loans delinquent 61-90 days(3) |  |  | 1,605 |  |  |  | 2.3 |  |  |  | 1,856 |  |  |  | 2.5 |
Loans delinquent greater than 90 days(3) |  |  | 5,204 |  |  |  | 7.2 |  |  |  | 6,142 |  |  |  | 8.3 |
Total FFELP Loans in repayment |  |  | 72,058 |  |  |  | 100 | % |  |  | 73,934 |  |  |  | 100 | %
Total FFELP Loans, gross |  |  | 91,719 |  |  |  |  |  |  |  | 95,489 |  |  |  |  |
FFELP Loan unamortized premium |  |  | 961 |  |  |  |  |  |  |  | 1,087 |  |  |  |  |
Total FFELP Loans |  |  | 92,680 |  |  |  |  |  |  |  | 96,576 |  |  |  |  |
FFELP Loan allowance for losses |  |  | (62 | ) |  |  |  |  |  |  | (78 | ) |  |  |  |
FFELP Loans, net |  | $ | 92,618 |  |  |  |  |  |  | $ | 96,498 |  |  |  |  |
Percentage of FFELP Loans in repayment |  |  |  |  |  |  | 78.6 | % |  |  |  |  |  |  | 77.4 | %
Delinquencies as a percentage of FFELP Loans in repayment |  |  |  |  |  |  | 13.2 | % |  |  |  |  |  |  | 15.3 | %
FFELP Loans in forbearance as a percentage of loans in repayment and forbearance |  |  |  |  |  |  | 14.8 | % |  |  |  |  |  |  | 15.2 | %
(1) | Loans for customers who may still be attending school or engaging in other permitted educational activities and are not yet required to make payments on their loans, e.g., residency periods for medical students or a grace period for bar exam preparation, as well as loans for customers who have requested and qualify for other permitted program deferments such as military, unemployment, or economic hardships.
(2) | Loans for customers who have used their allowable deferment time or do not qualify for deferment, that need additional time to obtain employment or who have temporarily ceased making full payments due to hardship or other factors.
(3) | The period of delinquency is based on the number of days scheduled payments are contractually past due.
|  | Traditional Private Education Loan Delinquencies |
|  | June 30, 2016 |  |  | December 31, 2015 |
(Dollars in millions) |  | Balance |  |  | % |  |  | Balance |  |  | % |
Loans in-school/grace/deferment(1) |  | $ | 1,489 |  |  |  |  |  |  | $ | 1,859 |  |  |  |  |
Loans in forbearance(2) |  |  | 792 |  |  |  |  |  |  |  | 863 |  |  |  |  |
Loans in repayment and percentage of each status: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans current |  |  | 20,225 |  |  |  | 94.4 | % |  |  | 21,085 |  |  |  | 93.5 | %
Loans delinquent 31-60 days(3) |  |  | 401 |  |  |  | 1.9 |  |  |  | 491 |  |  |  | 2.2 |
Loans delinquent 61-90 days(3) |  |  | 242 |  |  |  | 1.1 |  |  |  | 292 |  |  |  | 1.3 |
Loans delinquent greater than 90 days(3) |  |  | 548 |  |  |  | 2.6 |  |  |  | 690 |  |  |  | 3.0 |
Total traditional loans in repayment |  |  | 21,416 |  |  |  | 100 | % |  |  | 22,558 |  |  |  | 100 | %
Total traditional loans, gross |  |  | 23,697 |  |  |  |  |  |  |  | 25,280 |  |  |  |  |
Traditional loans unamortized discount |  |  | (431 | ) |  |  |  |  |  |  | (470 | ) |  |  |  |
Total traditional loans |  |  | 23,266 |  |  |  |  |  |  |  | 24,810 |  |  |  |  |
Traditional loans receivable for partially charged-off loans |  |  | 541 |  |  |  |  |  |  |  | 560 |  |  |  |  |
Traditional loans allowance for losses |  |  | (1,186 | ) |  |  |  |  |  |  | (1,236 | ) |  |  |  |
Traditional loans, net |  | $ | 22,621 |  |  |  |  |  |  | $ | 24,134 |  |  |  |  |
Percentage of traditional loans in repayment |  |  |  |  |  |  | 90.4 | % |  |  |  |  |  |  | 89.2 | %
Delinquencies as a percentage of traditional loans in repayment |  |  |  |  |  |  | 5.6 | % |  |  |  |  |  |  | 6.5 | %
Loans in forbearance as a percentage of loans in repayment and forbearance |  |  |  |  |  |  | 3.6 | % |  |  |  |  |  |  | 3.7 | %
(1) | Deferment includes customers who have returned to school or are engaged in other permitted educational activities and are not yet required to make payments on their loans, e.g., residency periods for medical students or a grace period for bar exam preparation.
(2) | Loans for customers who have requested extension of grace period generally during employment transition or who have temporarily ceased making full payments due to hardship or other factors, consistent with established loan program servicing policies and procedures.
(3) | The period of delinquency is based on the number of days scheduled payments are contractually past due.
|  | Non-Traditional Private Education Loan Delinquencies |
|  | June 30, 2016 |  |  | December 31, 2015 |
(Dollars in millions) |  | Balance |  |  | % |  |  | Balance |  |  | % |
Loans in-school/grace/deferment(1) |  | $ | 147 |  |  |  |  |  |  | $ | 181 |  |  |  |  |
Loans in forbearance(2) |  |  | 100 |  |  |  |  |  |  |  | 110 |  |  |  |  |
Loans in repayment and percentage of each status: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans current |  |  | 1,618 |  |  |  | 87.5 | % |  |  | 1,646 |  |  |  | 84.7 | %
Loans delinquent 31-60 days(3) |  |  | 66 |  |  |  | 3.6 |  |  |  | 86 |  |  |  | 4.4 |
Loans delinquent 61-90 days(3) |  |  | 45 |  |  |  | 2.4 |  |  |  | 56 |  |  |  | 2.9 |
Loans delinquent greater than 90 days(3) |  |  | 120 |  |  |  | 6.5 |  |  |  | 156 |  |  |  | 8.0 |
Total non-traditional loans in repayment |  |  | 1,849 |  |  |  | 100 | % |  |  | 1,944 |  |  |  | 100 | %
Total non-traditional loans, gross |  |  | 2,096 |  |  |  |  |  |  |  | 2,235 |  |  |  |  |
Non-traditional loans unamortized discount |  |  | (58 | ) |  |  |  |  |  |  | (61 | ) |  |  |  |
Total non-traditional loans |  |  | 2,038 |  |  |  |  |  |  |  | 2,174 |  |  |  |  |
Non-traditional loans receivable for partially charged-off loans |  |  | 306 |  |  |  |  |  |  |  | 321 |  |  |  |  |
Non-traditional loans allowance for losses |  |  | (224 | ) |  |  |  |  |  |  | (235 | ) |  |  |  |
Non-traditional loans, net |  | $ | 2,120 |  |  |  |  |  |  | $ | 2,260 |  |  |  |  |
Percentage of non-traditional loans in repayment |  |  |  |  |  |  | 88.2 | % |  |  |  |  |  |  | 87.0 | %
Delinquencies as a percentage of non-traditional loans in repayment |  |  |  |  |  |  | 12.5 | % |  |  |  |  |  |  | 15.3 | %
Loans in forbearance as a percentage of loans in repayment and forbearance |  |  |  |  |  |  | 5.1 | % |  |  |  |  |  |  | 5.4 | %
(1) | Deferment includes customers who have returned to school or are engaged in other permitted educational activities and are not yet required to make payments on their loans, e.g., residency periods for medical students or a grace period for bar exam preparation.
(2) | Loans for customers who have requested extension of grace period generally during employment transition or who have temporarily ceased making full payments due to hardship or other factors, consistent with established loan program servicing policies and procedures.
(3) | The period of delinquency is based on the number of days scheduled payments are contractually past due.
Receivable for Partially Charged-Off Private Education Loans At the end of each month, for loans that are 212 or more days past due, we charge off the estimated loss of a defaulted loan balance. Actual recoveries are applied against the remaining loan balance that was not charged off. We refer to this remaining loan balance as the “receivable for partially charged-off loans.” If actual periodic recoveries are less than expected, the difference is immediately charged off through the allowance for Private Education Loan losses with an offsetting reduction in the receivable for partially charged-off Private Education Loans. If actual periodic recoveries are greater than expected, they will be reflected as a recovery through the allowance for Private Education Loan losses once the cumulative recovery amount exceeds the cumulative amount originally expected to be recovered. The financial crisis, which began in 2007, impacted our collections on defaulted loans and as a result, Private Education Loans which defaulted from 2007 through March 31, 2015, experienced collection performance below our pre-financial crisis experience. For that reason, until we gained enough data and experience to determine the long-term, post-default recovery rate of 21 percent in second-quarter 2015, we established a reserve for potential shortfalls in recoveries. In the second quarter of 2015, the portion of the loan amount charged off at default increased from 73 percent to 79 percent. This did not impact the provision for loan losses as previously this had been reserved through the allowance for loan losses. This change resulted in a $330 million reduction to the balance of the receivable for partially charged-off loans. We no longer expect to have significant periodic recovery shortfalls as a result of this change; however, it is possible we may continue to experience such shortfalls. The following table summarizes the activity in the receivable for partially charged-off Private Education Loans.
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
(Dollars in millions) |  | 2016 |  |  | 2015 |  |  | 2016 |  |  | 2015 |
Receivable at beginning of period |  | $ | 867 |  |  | $ | 1,236 |  |  | $ | 881 |  |  | $ | 1,245 |
Expected future recoveries of current period defaults(1) |  |  | 32 |  |  |  | 46 |  |  |  | 68 |  |  |  | 108 |
Recoveries(2) |  |  | (52 | ) |  |  | (50 | ) |  |  | (102 | ) |  |  | (102 | )
Net adjustment resulting from the change in the charge-off rate(3) |  |  | — |  |  |  | (330 | ) |  |  | — |  |  |  | (330 | )
Net charge-offs remaining |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (19 | )
Total net charge-offs |  |  | — |  |  |  | (330 | ) |  |  | — |  |  |  | (349 | )
Receivable at end of period |  | $ | 847 |  |  | $ | 902 |  |  | $ | 847 |  |  | $ | 902 |
| (1) | Represents the difference between the defaulted loan balance and our estimate of the amount to be collected in the future.
| (2) | Current period cash collections.
| (3) | Prior to second-quarter 2015, charge-offs represent the current period recovery shortfall — the difference between what was expected to be collected and what was actually collected. In the second quarter of 2015, the portion of the loan amount charged off at default increased from 73 percent to 79 percent. This change resulted in a $330 million reduction to the balance of the receivable for partially charged-off loans. These amounts are included in total charge-offs as reported in the “Allowance for Private Education Loan Losses” table.
Troubled Debt Restructurings (“TDRs”) We sometimes modify the terms of loans for certain customers when we believe such modifications may increase the ability and willingness of a customer to make payments and thus increase the ultimate overall amount collected on a loan. These modifications generally take the form of a forbearance, a temporary interest rate reduction or an extended repayment plan. For customers experiencing financial difficulty, certain Private Education Loans for which we have granted either a forbearance of greater than three months, an interest rate reduction or an extended repayment plan are classified as TDRs. Approximately 58 percent and 56 percent of the loans granted forbearance have qualified as a TDR loan at June 30, 2016 and December 31, 2015, respectively. The unpaid principal balance of TDR loans that were in an interest rate reduction plan as of June 30, 2016 and December 31, 2015 was $2.8 billion and $2.5 billion, respectively. At June 30, 2016 and December 31, 2015, all of our TDR loans had a related allowance recorded. The following table provides the recorded investment, unpaid principal balance and related allowance for our TDR loans.
|  | TDR Loans |
(Dollars in millions) |  | Recorded Investment(1) |  |  | Unpaid Principal Balance |  |  | Related Allowance |
June 30, 2016 |  |  |  |  |  |  |  |  |  |  |  |
Private Education Loans — Traditional |  | $ | 9,351 |  |  | $ | 9,404 |  |  | $ | 964 |
Private Education Loans — Non-Traditional |  |  | 1,409 |  |  |  | 1,415 |  |  |  | 199 |
Total |  | $ | 10,760 |  |  | $ | 10,819 |  |  | $ | 1,163 |
December 31, 2015 |  |  |  |  |  |  |  |  |  |  |  |
Private Education Loans — Traditional |  | $ | 9,134 |  |  | $ | 9,200 |  |  | $ | 995 |
Private Education Loans — Non-Traditional |  |  | 1,441 |  |  |  | 1,442 |  |  |  | 214 |
Total |  | $ | 10,575 |  |  | $ | 10,642 |  |  | $ | 1,209 |
| (1) | The recorded investment is equal to the unpaid principal balance and accrued interest receivable net of unamortized deferred fees and costs.
The following tables provide the average recorded investment and interest income recognized for our TDR loans.
|  | Three Months Ended June 30, |
|  | 2016 |  |  | 2015 |
(Dollars in millions) |  | Average Recorded Investment |  |  | Interest Income Recognized |  |  | Average Recorded Investment |  |  | Interest Income Recognized |
Private Education Loans — Traditional |  | $ | 9,320 |  |  | $ | 138 |  |  | $ | 8,943 |  |  | $ | 135 |
Private Education Loans — Non-Traditional |  |  | 1,418 |  |  |  | 27 |  |  |  | 1,466 |  |  |  | 29 |
Total |  | $ | 10,738 |  |  | $ | 165 |  |  | $ | 10,409 |  |  | $ | 164 |
|  | Six Months Ended June 30, |
|  | 2016 |  |  | 2015 |
(Dollars in millions) |  | Average Recorded Investment |  |  | Interest Income Recognized |  |  | Average Recorded Investment |  |  | Interest Income Recognized |
Private Education Loans — Traditional |  | $ | 9,271 |  |  | $ | 276 |  |  | $ | 8,900 |  |  | $ | 267 |
Private Education Loans — Non-Traditional |  |  | 1,425 |  |  |  | 54 |  |  |  | 1,471 |  |  |  | 58 |
Total |  | $ | 10,696 |  |  | $ | 330 |  |  | $ | 10,371 |  |  | $ | 325 |
The following table provides information regarding the loan status and aging of TDR loans that are past due.
|  | TDR Loan Delinquencies |
|  | June 30, 2016 |  |  | December 31, 2015 |
(Dollars in millions) |  | Balance |  |  | % |  |  | Balance |  |  | % |
Loans in deferment(1) |  | $ | 609 |  |  |  |  |  |  | $ | 706 |  |  |  |  |
Loans in forbearance(2) |  |  | 648 |  |  |  |  |  |  |  | 695 |  |  |  |  |
Loans in repayment and percentage of each status: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans current |  |  | 8,424 |  |  |  | 88.1 | % |  |  | 7,885 |  |  |  | 85.3 | %
Loans delinquent 31-60 days(3) |  |  | 356 |  |  |  | 3.7 |  |  |  | 414 |  |  |  | 4.5 |
Loans delinquent 61-90 days(3) |  |  | 228 |  |  |  | 2.4 |  |  |  | 263 |  |  |  | 2.8 |
Loans delinquent greater than 90 days(3) |  |  | 554 |  |  |  | 5.8 |  |  |  | 679 |  |  |  | 7.4 |
Total TDR loans in repayment |  |  | 9,562 |  |  |  | 100 | % |  |  | 9,241 |  |  |  | 100 | %
Total TDR loans, gross |  | $ | 10,819 |  |  |  |  |  |  | $ | 10,642 |  |  |  |  |
(1) | Deferment includes customers who have returned to school or are engaged in other permitted educational activities and are not yet required to make payments on their loans, e.g., residency periods for medical students or a grace period for bar exam preparation.
(2) | Loans for customers who have requested extension of grace period generally during employment transition or who have temporarily ceased making full payments due to hardship or other factors, consistent with established loan program servicing policies and procedures.
(3) | The period of delinquency is based on the number of days scheduled payments are contractually past due.
The following table provides the amount of loans modified in the periods presented that resulted in a TDR. Additionally, the table summarizes charge-offs occurring in the TDR portfolio, as well as TDRs for which a payment default occurred in the current period within 12 months of the loan first being designated as a TDR. We define payment default as 60 days past due for this disclosure. The majority of our loans that are considered TDRs involve a temporary forbearance of payments and do not change the contractual interest rate of the loan or do not involve an extended repayment plan.
|  | Three Months Ended June 30, |
|  | 2016 |  |  | 2015 |
(Dollars in millions) |  | Modified Loans(1) |  |  | Charge- Offs(2) |  |  | Payment Default |  |  | Modified Loans(1) |  |  | Charge- Offs(2) |  |  | Payment Default |
Private Education Loans — Traditional |  | $ | 286 |  |  | $ | 74 |  |  | $ | 56 |  |  | $ | 339 |  |  | $ | 101 |  |  | $ | 83 |
Private Education Loans — Non-Traditional |  |  | 25 |  |  |  | 20 |  |  |  | 10 |  |  |  | 36 |  |  |  | 30 |  |  |  | 14 |
Total |  | $ | 311 |  |  | $ | 94 |  |  | $ | 66 |  |  | $ | 375 |  |  | $ | 131 |  |  | $ | 97 |
|  | Six Months Ended June 30, |
|  | 2016 |  |  | 2015 |
(Dollars in millions) |  | Modified Loans(1) |  |  | Charge- Offs(2) |  |  | Payment Default |  |  | Modified Loans(1) |  |  | Charge- Offs(2) |  |  | Payment Default |
Private Education Loans — Traditional |  | $ | 628 |  |  | $ | 154 |  |  | $ | 118 |  |  | $ | 768 |  |  | $ | 192 |  |  | $ | 183 |
Private Education Loans — Non-Traditional |  |  | 52 |  |  |  | 42 |  |  |  | 21 |  |  |  | 79 |  |  |  | 58 |  |  |  | 32 |
Total |  | $ | 680 |  |  | $ | 196 |  |  | $ | 139 |  |  | $ | 847 |  |  | $ | 250 |  |  | $ | 215 |
(1) | Represents period ending balance of loans that have been modified during the period and resulted in a TDR.
(2) | Represents loans that charged off that were classified as TDRs.
Accrued Interest Receivable The following table provides information regarding accrued interest receivable on our Private Education Loans.
(Dollars in millions) |  | Accrued Interest Receivable |  |  | Allowance for Uncollectible Interest |
June 30, 2016 |  |  |  |  |  |  |  |
Private Education Loans — Traditional |  | $ | 385 |  |  | $ | 25 |
Private Education Loans — Non-Traditional |  |  | 49 |  |  |  | 8 |
Total |  | $ | 434 |  |  | $ | 33 |
December 31, 2015 |  |  |  |  |  |  |  |
Private Education Loans — Traditional |  | $ | 433 |  |  | $ | 26 |
Private Education Loans — Non-Traditional |  |  | 57 |  |  |  | 9 |
Total |  | $ | 490 |  |  | $ | 35 |

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