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Segment Reporting (Tables)

6 Months Ended

Jun. 30, 2021

Segment Results and Reconciliations to GAAP

		Three Months Ended June 30, 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		$	351			$	295			$	—			$	—			$	646			$	24			$	(10	)		$	14			$	660
Cash and investments			—				—				—				1				1				—				—				—				1
Total interest income			351				295				—				1				647				24				(10	)			14				661
Total interest expense			210				137				—				18				365				(2	)			(24	)			(26	)			339
Net interest income (loss)			141				158				—				(17	)			282				26				14				40				322
Less: provisions for loan losses			—				(1	)			—				—				(1	)			—				—				—				(1	)
Net interest income (loss) after    provisions for loan losses			141				159				—				(17	)			283				26				14				40				323
Other income (loss):
Servicing revenue			47				3				—				—				50				—				—				—				50
Asset recovery and business    processing revenue			12				—				130				—				142				—				—				—				142
Other income (loss)			2				—				—				2				4				(26	)			16				(10	)			(6	)
Gains on sales of loans			—				2				—				—				2				—				—				—				2
Losses on debt repurchases			—				—				—				(12	)			(12	)			—				—				—				(12	)
Total other income (loss)			61				5				130				(10	)			186				(26	)			16				(10	)			176
Expenses:
Direct operating expenses			55				39				92				—				186				—				—				—				186
Unallocated shared services    expenses			—				—				—				66				66				—				—				—				66
Operating expenses			55				39				92				66				252				—				—				—				252
Goodwill and acquired intangible    asset impairment and    amortization			—				—				—				—				—				—				5				5				5
Restructuring/other reorganization    expenses			—				—				—				2				2				—				—				—				2
Total expenses			55				39				92				68				254				—				5				5				259
Income (loss) before income tax    expense (benefit)			147				125				38				(95	)			215				—				25				25				240
Income tax expense (benefit)(2)			34				29				9				(22	)			50				—				5				5				55
Net income (loss)		$	113			$	96			$	29			$	(73	)		$	165			$	—			$	20			$	20			$	185

⁽¹⁾  Core Earnings adjustments to GAAP:

		Three Months Ended June 30, 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		$	40			$	—			$	40
Total other income (loss)			(10	)			—				(10	)
Goodwill and acquired intangible asset impairment and amortization			—				5				5
Total Core Earnings adjustments to GAAP		$	30			$	(5	)			25
Income tax expense (benefit)											5
Net income (loss)										$	20

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

		Three Months Ended June 30, 2020
																						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		$	456			$	362			$	—			$	—			$	818			$	13			$	(14	)		$	(1	)		$	817
Cash and investments			1				—				—				1				2				—				—				—				2
Total interest income			457				362				—				1				820				13				(14	)			(1	)			819
Total interest expense			286				174				—				31				491				25				3				28				519
Net interest income (loss)			171				188				—				(30	)			329				(12	)			(17	)			(29	)			300
Less: provisions for loan losses			3				41				—				—				44				—				—				—				44
Net interest income (loss) after    provisions for loan losses			168				147				—				(30	)			285				(12	)			(17	)			(29	)			256
Other income (loss):
Servicing revenue			51				1				—				—				52				—				—				—				52
Asset recovery and business    processing revenue			38				—				64				—				102				—				—				—				102
Other income (loss)			5				—				—				4				9				12				(42	)			(30	)			(21	)
Total other income (loss)			94				1				64				4				163				12				(42	)			(30	)			133
Expenses:
Direct operating expenses			70				34				57				—				161				—				—				—				161
Unallocated shared services expenses			—				—				—				52				52				—				—				—				52
Operating expenses			70				34				57				52				213				—				—				—				213
Goodwill and acquired intangible asset    impairment and amortization			—				—				—				—				—				—				5				5				5
Restructuring/other reorganization    expenses			—				—				—				1				1				—				—				—				1
Total expenses			70				34				57				53				214				—				5				5				219
Income (loss) before income tax    expense (benefit)			192				114				7				(79	)			234				—				(64	)			(64	)			170
Income tax expense (benefit)(2)			46				27				1				(19	)			55				—				(10	)			(10	)			45
Net income (loss)		$	146			$	87			$	6			$	(60	)		$	179			$	—			$	(54	)		$	(54	)		$	125

⁽¹⁾  Core Earnings adjustments to GAAP:

		Three Months Ended June 30, 2020
(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		$	(29	)		$	—			$	(29	)
Total other income (loss)			(30	)			—				(30	)
Goodwill and acquired intangible asset impairment and amortization			—				5				5
Total Core Earnings adjustments to GAAP		$	(59	)		$	(5	)			(64	)
Income tax expense (benefit)											(10	)
Net income (loss)										$	(54	)

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

		Six Months Ended June 30, 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		$	709			$	614			$	—			$	—			$	1,323			$	48			$	(20	)		$	28			$	1,351
Cash and investments			—				—				—				1				1				—				—				—				1
Total interest income			709				614				—				1				1,324				48				(20	)			28				1,352
Total interest expense			424				287				—				36				747				(3	)			(77	)			(80	)			667
Net interest income (loss)			285				327				—				(35	)			577				51				57				108				685
Less: provisions for loan losses			—				(88	)			—				—				(88	)			—				—				—				(88	)
Net interest income (loss) after    provisions for loan losses			285				415				—				(35	)			665				51				57				108				773
Other income (loss):
Servicing revenue			99				3				—				—				102				—				—				—				102
Asset recovery and business    processing revenue			26				—				255				—				281				—				—				—				281
Other income (loss)			2				1				—				2				5				(38	)			64				26				31
Gains on sales of loans			—				91				—				—				91				(13	)			—				(13	)			78
Losses on debt repurchases			—				—				—				(12	)			(12	)			—				—				—				(12	)
Total other income (loss)			127				95				255				(10	)			467				(51	)			64				13				480
Expenses:
Direct operating expenses			117				79				183				—				379				—				—				—				379
Unallocated shared services expenses			—				—				—				131				131				—				—				—				131
Operating expenses			117				79				183				131				510				—				—				—				510
Goodwill and acquired intangible    asset impairment and amortization			—				—				—				—				—				—				10				10				10
Restructuring/other reorganization    expenses			—				—				—				8				8				—				—				—				8
Total expenses			117				79				183				139				518				—				10				10				528
Income (loss) before income tax    expense (benefit)			295				431				72				(184	)			614				—				111				111				725
Income tax expense (benefit)(2)			70				101				17				(43	)			145				—				25				25				170
Net income (loss)		$	225			$	330			$	55			$	(141	)		$	469			$	—			$	86			$	86			$	555

⁽¹⁾  Core Earnings adjustments to GAAP:

		Six Months Ended June 30, 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		$	108			$	—			$	108
Total other income (loss)			13				—				13
Goodwill and acquired intangible asset impairment and amortization			—				10				10
Total Core Earnings adjustments to GAAP		$	121			$	(10	)			111
Income tax expense (benefit)											25
Net income (loss)										$	86

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

		Six Months Ended June 30, 2020
																						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		$	1,037			$	767			$	—			$	—			$	1,804			$	16			$	(28	)		$	(12	)		$	1,792
Cash and investments			7				3				—				5				15				—				—				—				15
Total interest income			1,044				770				—				5				1,819				16				(28	)			(12	)			1,807
Total interest expense			742				385				—				66				1,193				32				9				41				1,234
Net interest income (loss)			302				385				—				(61	)			626				(16	)			(37	)			(53	)			573
Less: provisions for loan losses			9				130				—				—				139				—				—				—				139
Net interest income (loss) after    provisions for loan losses			293				255				—				(61	)			487				(16	)			(37	)			(53	)			434
Other income (loss):
Servicing revenue			106				3				—				—				109				—				—				—				109
Asset recovery and business    processing revenue			90				—				122				—				212				—				—				—				212
Other income (loss)			9				—				—				8				17				16				(269	)			(253	)			(236	)
Total other income (loss)			205				3				122				8				338				16				(269	)			(253	)			85
Expenses:
Direct operating expenses			153				72				111				—				336				—				—				—				336
Unallocated shared services    expenses			—				—				—				127				127				—				—				—				127
Operating expenses			153				72				111				127				463				—				—				—				463
Goodwill and acquired intangible    asset impairment and amortization			—				—				—				—				—				—				11				11				11
Restructuring/other reorganization    expenses			—				—				—				6				6				—				—				—				6
Total expenses			153				72				111				133				469				—				11				11				480
Income (loss) before income tax    expense (benefit)			345				186				11				(186	)			356				—				(317	)			(317	)			39
Income tax expense (benefit)(2)			82				43				3				(44	)			84				—				(64	)			(64	)			20
Net income (loss)		$	263			$	143			$	8			$	(142	)		$	272			$	—			$	(253	)		$	(253	)		$	19

⁽¹⁾  Core Earnings adjustments to GAAP:

		Six Months Ended June 30, 2020
(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		$	(53	)		$	—			$	(53	)
Total other income (loss)			(253	)			—				(253	)
Goodwill and acquired intangible asset impairment and amortization			—				11				11
Total Core Earnings adjustments to GAAP		$	(306	)		$	(11	)			(317	)
Income tax expense (benefit)											(64	)
Net income (loss)										$	(253	)

⁽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)		2021				2020				2021				2020
Core Earnings net income		$	165			$	179			$	469			$	272
Core Earnings adjustments to GAAP:
Net impact of derivative accounting(1)			30				(59	)			121				(306	)
Net impact of goodwill and acquired intangible assets(2)			(5	)			(5	)			(10	)			(11	)
Net tax effect(3)			(5	)			10				(25	)			64
Total Core Earnings adjustments to GAAP			20				(54	)			86				(253	)
GAAP net income		$	185			$	125			$	555			$	19

⁽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, 2021				December 31, 2020
FFELP Loans, net		$	55,550			$	58,284
Cash and investments(1)			1,694				1,685
Other			2,138				2,241
Total assets		$	59,382			$	62,210

⁽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, 2021				December 31, 2020
Private Education Loans, net		$	19,725			$	21,079
Cash and investments(1)			878				828
Other			883				964
Total assets		$	21,486			$	22,871

⁽¹⁾  Includes restricted cash and investments.

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