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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2022

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. During the third quarters of 2022 and 2021, there were no significant transfers of financial instruments between levels.

		Fair Value Measurements on a Recurring Basis
		September 30, 2022																December 31, 2021
(Dollars in millions)		Level 1				Level 2				Level 3				Total				Level 1				Level 2				Level 3				Total
Assets
Derivative instruments:(1)
Interest rate swaps			—				56				—				56				—				223				1				224
Cross-currency interest rate swaps			—				—				—				—				—				—				—				—
Total derivative assets(2)			—				56				—				56				—				223				1				224
Total		$	—			$	56			$	—			$	56			$	—			$	223			$	1			$	224
Liabilities(3)
Derivative instruments(1)
Interest rate swaps		$	—				(7	)		$	(2	)		$	(9	)		$	—			$	—			$	(5	)		$	(5	)
Floor Income Contracts			—				—				—				—				—				(65	)			—				(65	)
Cross-currency interest rate swaps			—				—				(407	)			(407	)			—				—				(190	)			(190	)
Total derivative liabilities(2)			—				(7	)			(409	)			(416	)			—				(65	)			(195	)			(260	)
Total		$	—			$	(7	)		$	(409	)		$	(416	)		$	—			$	(65	)		$	(195	)		$	(260	)

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

⁽²⁾ See "Note 4 – Derivative Financial Instruments" for a reconciliation of gross positions without the impact of master netting agreements to the balance sheet classification.

⁽³⁾ Borrowings which are the hedged item 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 not reflected in this table.

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,
		2022																2021
		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		$	(3	)		$	(279	)		$	—			$	(282	)		$	(6	)		$	(108	)		$	—			$	(114	)
Total gains/(losses):
Included in earnings(1)			1				(141	)			—				(140	)			1				(53	)			—				(52	)
Included in other comprehensive income			—				—				—				—				—				—				—				—
Settlements			—				13				—				13				—				5				—				5
Transfers in and/or out of level 3			—				—				—				—				—				—				—				—
Balance, end of period		$	(2	)		$	(407	)		$	—			$	(409	)		$	(5	)		$	(156	)		$	—			$	(161	)
Change in mark-to-market gains/(losses)    relating to instruments still held at the    reporting date(2)		$	1			$	(128	)		$	—			$	(127	)		$	1			$	(48	)		$	—			$	(47	)

		Nine Months Ended September 30,
		2022																2021
		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		$	(4	)		$	(190	)		$	—			$	(194	)		$	(8	)		$	(294	)		$	—			$	(302	)
Total gains/(losses):
Included in earnings(1)			1				(244	)			—				(243	)			2				120				—				122
Included in other comprehensive income			—				—				—				—				—				—				—				—
Settlements			1				27				—				28				1				18				—				19
Transfers in and/or out of level 3			—				—				—				—				—				—				—				—
Balance, end of period		$	(2	)		$	(407	)		$	—			$	(409	)		$	(5	)		$	(156	)		$	—			$	(161	)
Change in mark-to-market gains/(losses)    relating to instruments still held at the    reporting date(2)		$	1			$	(217	)		$	—			$	(216	)		$	2			$	(122	)		$	—			$	(120	)

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

		Three Months Ended September 30,								Nine Months Ended September 30,
(Dollars in millions)		2022				2021				2022				2021
Gains (losses) on derivative and hedging activities, net		$	1			$	1			$	1			$	2
Interest expense			(141	)			(53	)			(244	)			120
Total		$	(140	)		$	(52	)		$	(243	)		$	122

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

Included in Earnings

		Nine Months Ended September 30,
		2022																2021
		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		$	(4	)		$	(190	)		$	—			$	(194	)		$	(8	)		$	(294	)		$	—			$	(302	)
Total gains/(losses):
Included in earnings(1)			1				(244	)			—				(243	)			2				120				—				122
Included in other comprehensive income			—				—				—				—				—				—				—				—
Settlements			1				27				—				28				1				18				—				19
Transfers in and/or out of level 3			—				—				—				—				—				—				—				—
Balance, end of period		$	(2	)		$	(407	)		$	—			$	(409	)		$	(5	)		$	(156	)		$	—			$	(161	)
Change in mark-to-market gains/(losses)    relating to instruments still held at the    reporting date(2)		$	1			$	(217	)		$	—			$	(216	)		$	2			$	(122	)		$	—			$	(120	)

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

		Three Months Ended September 30,								Nine Months Ended September 30,
(Dollars in millions)		2022				2021				2022				2021
Gains (losses) on derivative and hedging activities, net		$	1			$	1			$	1			$	2
Interest expense			(141	)			(53	)			(244	)			120
Total		$	(140	)		$	(52	)		$	(243	)		$	122

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, 2022				Valuation Technique		Input		Range and Weighted Average
Derivatives
Prime/LIBOR basis swaps		$	(2	)		Discounted cash flow		Constant Prepayment Rate		10%
								Bid/ask adjustment to discount rate		.08%
Cross-currency interest rate swaps			(407	)		Discounted cash flow		Constant Prepayment Rate		5%
Other			—
Total		$	(409	)

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, 2022												December 31, 2021
(Dollars in millions)		Fair Value				Carrying Value				Difference				Fair Value				Carrying Value				Difference
Earning assets
FFELP Loans		$	44,627			$	46,891			$	(2,264	)		$	53,632			$	52,641			$	991
Private Education Loans			18,287				19,151				(864	)			21,140				20,171				969
Cash and investments			4,088				4,088				—				3,845				3,845				—
Total earning assets			67,002				70,130				(3,128	)			78,617				76,657				1,960
Interest-bearing liabilities
Short-term borrowings			5,684				5,677				(7	)			2,492				2,490				(2	)
Long-term borrowings			60,787				63,998				3,211				74,548				74,488				(60	)
Total interest-bearing liabilities			66,471				69,675				3,204				77,040				76,978				(62	)
Derivative financial instruments
Floor Income Contracts			—				—				—				(65	)			(65	)			—
Interest rate swaps			47				47				—				219				219				—
Cross-currency interest rate swaps			(407	)			(407	)			—				(190	)			(190	)			—
Other			—				—				—				—				—				—
Excess of net asset fair value over carrying value										$	76											$	1,898

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