Fair Value Measurements

6 Months Ended

Jun. 30, 2025

9. Fair Value Measurements

We use estimates of fair value in applying various accounting standards in our financial statements. We categorize our fair value estimates based on a hierarchical framework associated with three levels of price transparency utilized in measuring financial instruments at fair value. The fair value of the items discussed below are separately disclosed in this footnote.

During the three and six months ended June 30, 2025, there were no significant transfers of financial instruments between levels, or changes in our methodology used to value our financial instruments.

The following table summarizes the valuation of our financial instruments that are marked-to-market on a recurring basis. During the second-quarters of 2025 and 2024, there were no significant transfers of financial instruments between levels.


	Fair Value Measurements on a Recurring Basis
	June 30, 2025										December 31, 2024
(Dollars in millions)	Level 1		Level 2		Level 3			Total			Level 1		Level 2		Level 3			Total
Assets
Derivative instruments:(1)
Interest rate swaps	$	—	$	43	$	—		$	43		$	—	$	25	$	—		$	25
Cross currency interest rate swaps		—		—		4			4			—		—		—			—
Total derivative assets(2)		—		43		4			47			—		25		—			25
Total	$	—	$	43	$	4		$	47		$	—	$	25	$	—		$	25
Liabilities(3)
Derivative instruments(1)
Interest rate swaps	$	—	$	—	$	—		$	—		$	—	$	—	$	—		$	—
Cross-currency interest rate swaps		—		—		(79	)		(79	)		—		—		(244	)		(244	)
Total derivative liabilities(2)		—		—		(79	)		(79	)		—		—		(244	)		(244	)
Total	$	—	$	—	$	(79	)	$	(79	)	$	—	$	—	$	(244	)	$	(244	)

(1)

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

(2)

See "Note 5 – 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.

9. Fair Value Measurements (Continued)

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 June 30,
	2025										2024
	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	$	—	$	(190	)	$	—	$	(190	)	$	(1	)	$	(223	)	$	—	$	(224	)
Total gains/(losses):
Included in earnings(1)		—		107			—		107			—			(9	)		—		(9	)
Included in other comprehensive income		—		—			—		—			—			—			—		—
Settlements		—		8			—		8			—			10			—		10
Transfers in and/or out of level 3		—		—			—		—			—			—			—		—
Balance, end of period	$	—	$	(75	)	$	—	$	(75	)	$	(1	)	$	(222	)	$	—	$	(223	)
Change in mark-to- market gains/ (losses) relating to instruments still held at the reporting date(2)	$	—	$	115		$	—	$	115		$	—		$	1		$	—	$	1


	Six Months Ended June 30,
	2025										2024
	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	$	—	$	(244	)	$	—	$	(244	)	$	(1	)	$	(189	)	$	—	$	(190	)
Total gains/(losses):
Included in earnings(1)		—		152			—		152			—			(53	)		—		(53	)
Included in other comprehensive income		—		—			—		—			—			—			—		—
Settlements		—		17			—		17			—			20			—		20
Transfers in and/or out of level 3		—		—			—		—			—			—			—		—
Balance, end of period	$	—	$	(75	)	$	—	$	(75	)	$	(1	)	$	(222	)	$	—	$	(223	)
Change in mark-to- market gains/ (losses) relating to instruments still held at the reporting date(2)	$	—	$	169		$	—	$	169		$	—		$	(33	)	$	—	$	(33	)

(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 June 30,					Six Months Ended June 30,
(Dollars in millions)	2025		2024			2025		2024
Gains (losses) on derivative and hedging activities, net	$	—	$	—		$	—	$	—
Interest expense		107		(9	)		152		(53	)
Total	$	107	$	(9	)	$	152	$	(53	)

(2)

Recorded in “gains (losses) on derivative and hedging activities, net” in the consolidated statements of income for interest rate swaps. Recorded in interest expense for cross-currency interest rate swaps in fair value hedges.

9. Fair Value Measurements (Continued)

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 June 30, 2025			Valuation Technique	Input	Range and Weighted Average
Derivatives
Cross-currency interest rate swaps	$	(75	)	Discounted cash flow	Constant Prepayment Rate	5%
Total		(75	)

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


	June 30, 2025									December 31, 2024
(Dollars in millions)	Fair Value			Carrying Value			Difference			Fair Value			Carrying Value			Difference
Earning assets
FFELP Loans	$	29,261		$	29,618		$	(357	)	$	30,766		$	30,852		$	(86	)
Private Education Loans		15,216			15,530			(314	)		15,367			15,716			(349	)
Cash and investments		2,212			2,212			—			2,246			2,246			—
Total earning assets		46,689			47,360			(671	)		48,379			48,814			(435	)
Interest-bearing liabilities
Short-term borrowings		4,764			4,752			(12	)		5,144			5,134			(10	)
Long-term borrowings		41,672			42,345			673			42,361			43,184			823
Total interest-bearing liabilities		46,436			47,097			661			47,505			48,318			813
Derivative financial instruments
Interest rate swaps		43			43			—			25			25			—
Cross-currency interest rate swaps		(75	)		(75	)		—			(244	)		(244	)		—
Excess of net asset fair value over carrying value							$	(10	)							$	378