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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2016

Fair Value Disclosures [Abstract]

Valuation of Financial Instruments that are Marked-to-Market on Recurring Basis

The following table summarizes the valuation of our financial instruments that are marked-to-market on a recurring basis.

		Fair Value Measurements on a Recurring Basis
		September 30, 2016																December 31, 2015
(Dollars in millions)		Level 1				Level 2				Level 3				Total				Level 1				Level 2				Level 3				Total
Assets
Available-for-sale investments:
Agency residential mortgage-backed securities		$	—			$	1			$	—			$	1			$	—			$	1			$	—			$	1
Other			—				3				—				3				—				4				—				4
Total available-for-sale investments			—				4				—				4				—				5				—				5
Derivative instruments:(1)
Interest rate swaps			—				904				26				930				—				709				17				726
Cross-currency interest rate swaps			—				—				18				18				—				—				2				2
Other			—				—				1				1				—				—				—				—
Total derivative assets(3)			—				904				45				949				—				709				19				728
Total		$	—			$	908			$	45			$	953			$	—			$	714			$	19			$	733
Liabilities(2)
Derivative instruments(1)
Interest rate swaps		$	—			$	(207	)		$	(65	)		$	(272	)		$	—			$	(99	)		$	(61	)		$	(160	)
Floor Income Contracts			—				(293	)			—				(293	)			—				(365	)			—				(365	)
Cross-currency interest rate swaps			—				(10	)			(732	)			(742	)			—				(83	)			(905	)			(988	)
Other			—				—				(11	)			(11	)			—				—				(2	)			(2	)
Total derivative liabilities(3)			—				(510	)			(808	)			(1,318	)			—				(547	)			(968	)			(1,515	)
Total		$	—			$	(510	)		$	(808	)		$	(1,318	)		$	—			$	(547	)		$	(968	)		$	(1,515	)

⁽¹⁾  Fair value of derivative instruments excludes accrued interest and the value of collateral.

⁽²⁾  Borrowings which are the hedged items in a fair value hedge relationship and which are adjusted for changes in value due to benchmark interest rates only are not carried at full fair value and are not reflected in this table.

⁽³⁾  See “Note 4 — Derivative Financial Instruments” for a reconciliation of gross positions without the impact of master netting agreements to the balance sheet classification.

Change in Balance Sheet Carrying Value Associated with Level 3 Financial Instruments Carried at Fair Value on Recurring Basis

The following tables summarize the change in balance sheet carrying value associated with level 3 financial instruments carried at fair value on a recurring basis.

		Three Months Ended September 30,
		2016																2015
		Derivative instruments																Derivative instruments
(Dollars in millions)		Interest Rate Swaps				Cross Currency Interest Rate Swaps				Other				Total Derivative Instruments				Interest Rate Swaps				Cross Currency Interest Rate Swaps				Other				Total Derivative Instruments
Balance, beginning of period		$	(37	)		$	(801	)		$	(7	)		$	(845	)		$	(82	)		$	(654	)		$	(15	)		$	(751	)
Total gains/(losses) (realized and unrealized):
Included in earnings(1)			(2	)			64				(4	)			58				40				(5	)			13				48
Included in other comprehensive income			—				—				—				—				—				—				—				—
Settlements			—				23				1				24				3				3				—				6
Transfers in and/or out of level 3			—				—				—				—				—				—				—				—
Balance, end of period		$	(39	)		$	(714	)		$	(10	)		$	(763	)		$	(39	)		$	(656	)		$	(2	)		$	(697	)
Change in unrealized gains/(losses) relating to instruments still held at the reporting date(2)		$	(2	)		$	87			$	(3	)		$	82			$	37			$	(2	)		$	13			$	48

		Nine Months Ended September 30,
		2016																2015
		Derivative instruments																Derivative instruments
(Dollars in millions)		Interest Rate Swaps				Cross Currency Interest Rate Swaps				Other				Total Derivative Instruments				Interest Rate Swaps				Cross Currency Interest Rate Swaps				Other				Total Derivative Instruments
Balance, beginning of period		$	(44	)		$	(903	)		$	(2	)		$	(949	)		$	(88	)		$	(117	)		$	(11	)		$	(216	)
Total gains/(losses) (realized and unrealized):
Included in earnings(1)			4				129				(10	)			123				45				(538	)			6				(487	)
Included in other comprehensive income			—				—				—				—				—				—				—				—
Settlements			1				60				2				63				4				(1	)			3				6
Transfers in and/or out of level 3			—				—				—				—				—				—				—				—
Balance, end of period		$	(39	)		$	(714	)		$	(10	)		$	(763	)		$	(39	)		$	(656	)		$	(2	)		$	(697	)
Change in unrealized gains/(losses) relating to instruments still held at the reporting date(2)		$	6			$	189			$	(8	)		$	187			$	42			$	(536	)		$	9			$	(485	)

⁽¹⁾ “Included in earnings” is comprised of the following amounts recorded in the specified line item in the consolidated statements of income:

Included in Earnings

		Three Months Ended September 30,								Nine Months Ended September 30,
(Dollars in millions)		2016				2015				2016				2015
Gains (losses) on derivative and hedging activities, net		$	81			$	50			$	183			$	(488	)
Interest expense			(23	)			(2	)			(60	)			1
Total		$	58			$	48			$	123			$	(487	)

⁽²⁾  Recorded in “gains (losses) on derivative and hedging activities, net” in the consolidated statements of income.

Unobservable Data Used in Recurring Valuations of Level 3

The following table presents the significant inputs that are unobservable or from inactive markets used in the recurring valuations of the level 3 financial instruments detailed above.

(Dollars in millions)		Fair Value at September 30, 2016				Valuation Technique		Input				Range (Weighted Average)
Derivatives
Consumer Price Index/ LIBOR basis swaps		$	8			Discounted cash flow			Bid/ask adjustment to discount rate			.02% — .05% (.05%)
Prime/LIBOR basis swaps			(47	)		Discounted cash flow			Constant prepayment rate			6.2%
									Bid/ask adjustment to discount rate			.03% — .05% (.05%)
Cross-currency interest rate swaps			(714	)		Discounted cash flow			Constant prepayment rate			2.8%
Other			(10	)
Total		$	(763	)

Fair Values of Financial Assets and Liabilities, Including Derivative Financial Instruments

The following table summarizes the fair values of our financial assets and liabilities, including derivative financial instruments.

		September 30, 2016												December 31, 2015
(Dollars in millions)		Fair Value				Carrying Value				Difference				Fair Value				Carrying Value				Difference
Earning assets
FFELP Loans		$	88,765			$	90,146			$	(1,381	)		$	94,377			$	96,498			$	(2,121	)
Private Education Loans			23,698				24,010				(312	)			25,772				26,394				(622	)
Cash and investments(1)			5,882				5,882				—				5,833				5,833				—
Total earning assets			118,345				120,038				(1,693	)			125,982				128,725				(2,743	)
Interest-bearing liabilities
Short-term borrowings			2,648				2,637				(11	)			2,569				2,570				1
Long-term borrowings			112,258				116,540				4,282				118,471				124,833				6,362
Total interest-bearing liabilities			114,906				119,177				4,271				121,040				127,403				6,363
Derivative financial instruments
Floor Income Contracts			(293	)			(293	)			—				(365	)			(365	)			—
Interest rate swaps			658				658				—				566				566				—
Cross-currency interest rate swaps			(724	)			(724	)			—				(986	)			(986	)			—
Other			(10	)			(10	)			—				(2	)			(2	)			—
Excess of net asset fair value over carrying value										$	2,578											$	3,620

⁽¹⁾ “Cash and investments” includes available-for-sale investments that consist of investments that are primarily agency securities whose cost basis is $4 million and $4 million at September 30, 2016 and December 31, 2015, respectively, versus a fair value of $4 million and $5 million at September 30, 2016 and December 31, 2015, respectively.

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