Allowance for Credit Losses

9 Months Ended

Sep. 30, 2024

Our provision for credit losses represents the periodic expense of maintaining an allowance sufficient to absorb lifetime expected credit losses in the held for investment loan portfolios. The evaluation of the allowance for credit losses is inherently subjective, as it requires material estimates that may be susceptible to significant changes. We believe the allowance for credit losses is appropriate to cover lifetime losses expected to be incurred in the loan portfolios. See Notes to Consolidated Financial Statements, Note 2, “Significant Accounting Policies — Allowance for Credit Losses — Allowance for Private Education Loan Losses, — Allowance for FFELP Loan Losses” in our 2023 Form 10-K for a more detailed discussion.

Allowance for Credit Losses Metrics


Three Months Ended September 30, 2024 (dollars in thousands)	FFELP Loans			Private Education Loans			Total
Allowance for Credit Losses
Beginning balance	$	4,060		$	1,265,592		$	1,269,652
Transfer from unfunded commitment liability(1)	—			115,421			115,421
Provisions:
Provision for current period	4,368			109,196			113,564


Total provisions(2)	4,368			109,196			113,564
Net charge-offs:
Charge-offs	(131)			(87,737)			(87,868)
Recoveries	—			11,149			11,149
Net charge-offs	(131)			(76,588)			(76,719)
Write-downs arising from transfer of loans to held for sale(3)	(8,297)			—			(8,297)

Ending Balance	$	—		$	1,413,621		$	1,413,621
Allowance(4):

Ending balance: collectively evaluated for impairment	$	—		$	1,413,621		$	1,413,621
Loans(4):

Ending balance: collectively evaluated for impairment	$	—		$	21,777,466		$	21,777,466
Accrued interest to be capitalized(4):
Ending balance: collectively evaluated for impairment	$	—		$	1,390,774		$	1,390,774
Net charge-offs as a percentage of average loans in repayment (annualized)(5)	—		%	2.08		%
Allowance as a percentage of the ending total loan balance and accrued interest to be capitalized(6)	—		%	6.10		%
Allowance as a percentage of the ending loans in repayment and accrued interest to be capitalized on loans in repayment(5)(6)	—		%	8.91		%
Allowance coverage of net charge-offs (annualized)	—			4.61
Ending total loans, gross	$	—		$	21,777,466
Average loans in repayment(5)	$	—		$	14,708,205
Ending loans in repayment(5)	$	—		$	15,360,255
Accrued interest to be capitalized on loans in repayment(7)	$	—		$	513,121

(1) See Note 6, “Unfunded Loan Commitments,” in this Form 10-Q for a summary of the activity in the allowance for and balance of unfunded loan commitments, respectively.

(2) Below is a reconciliation of the provisions for credit losses reported in the consolidated statements of operations. When a new loan commitment is made, we record the CECL allowance as a liability for unfunded loan commitments by recording a provision for credit losses. When the loan is funded, we transfer that liability to the allowance for credit losses.


Consolidated Statements of Operations Provisions for Credit Losses Reconciliation
Three Months Ended September 30, 2024 (dollars in thousands)
Private Education Loan provisions for credit losses:
Provisions for loan losses	$	109,196
Provisions for unfunded loan commitments	157,901
Total Private Education Loan provisions for credit losses	267,097
Other impacts to the provisions for credit losses:
FFELP Loans	4,368

Total	4,368
Provisions for credit losses reported in consolidated statements of operations	$	271,465

(3) Represents fair value adjustments on loans transferred to held for sale.

(4) For the three months ended September 30, 2024, there were no allowance for credit losses, loans, or accrued interest to be capitalized balances that were individually evaluated for impairment.

(5) Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period (but, for purposes of the table, do not include those loans while they are in forbearance).

(6) Accrued interest to be capitalized on Private Education Loans only.

(7) Accrued interest to be capitalized on loans in repayment includes interest on loans that are in repayment but have not yet entered into full principal and interest repayment status after any applicable grace period (but, for purposes of the table, does not include the interest on those loans while they are in forbearance).


Three Months Ended September 30, 2023 (dollars in thousands)	FFELP Loans			Private Education Loans			Total
Allowance for Credit Losses
Beginning balance	$	4,422		$	1,360,294		$	1,364,716
Transfer from unfunded commitment liability(1)	—			101,687			101,687
Provisions:
Provision for current period	666			44,423			45,089


Total provisions(2)	666			44,423			45,089
Net charge-offs:
Charge-offs	(272)			(104,865)			(105,137)
Recoveries	—			9,693			9,693
Net charge-offs	(272)			(95,172)			(95,444)

Ending Balance	$	4,816		$	1,411,232		$	1,416,048
Allowance(3):

Ending balance: collectively evaluated for impairment	$	4,816		$	1,411,232		$	1,416,048
Loans(3):

Ending balance: collectively evaluated for impairment	$	554,309		$	21,680,867		$	22,235,176
Accrued interest to be capitalized(3):
Ending balance: collectively evaluated for impairment	$	—		$	1,283,388		$	1,283,388
Net charge-offs as a percentage of average loans in repayment (annualized)(4)	0.25		%	2.53		%
Allowance as a percentage of the ending total loan balance and accrued interest to be capitalized(5)	0.87		%	6.15		%
Allowance as a percentage of the ending loans in repayment and accrued interest to be capitalized on loans in repayment(4)(5)	1.15		%	8.84		%
Allowance coverage of net charge-offs (annualized)	4.43			3.71
Ending total loans, gross	$	554,309		$	21,680,867
Average loans in repayment(4)	$	428,028		$	15,023,993
Ending loans in repayment(4)	$	418,022		$	15,505,145
Accrued interest to be capitalized on loans in repayment(6)	$	—		$	464,807

(1) See Note 6, “Unfunded Loan Commitments,” in this Form 10-Q for a summary of the activity in the allowance for and balance of unfunded loan commitments, respectively.


Consolidated Statements of Operations Provisions for Credit Losses Reconciliation
Three Months Ended September 30, 2023 (dollars in thousands)
Private Education Loan provisions for credit losses:
Provisions for loan losses	$	44,423
Provisions for unfunded loan commitments	152,934
Total Private Education Loan provisions for credit losses	197,357
Other impacts to the provisions for credit losses:
FFELP Loans	666

Total	666
Provisions for credit losses reported in consolidated statements of operations	$	198,023

(3) For the three months ended September 30, 2023, there were no allowance for credit losses, loans, or accrued interest to be capitalized balances that were individually evaluated for impairment.

(4) Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period (but, for purposes of the table, do not include those loans while they are in forbearance).

(5) Accrued interest to be capitalized on Private Education Loans only.

(6) Accrued interest to be capitalized on loans in repayment includes interest on loans that are in repayment but have not yet entered into full principal and interest repayment status after any applicable grace period (but, for purposes of the table, does not include the interest on those loans while they are in forbearance).


Nine Months Ended September 30, 2024 (dollars in thousands)	FFELP Loans			Private Education Loans			Total
Allowance for Credit Losses
Beginning balance	$	4,667		$	1,335,105		$	1,339,772
Transfer from unfunded commitment liability(1)	—			276,750			276,750
Provisions:
Provision for current period	4,010			276,534			280,544
Loan sale reduction to provision	—			(235,955)			(235,955)

Total provisions(2)	4,010			40,579			44,589
Net charge-offs:
Charge-offs	(380)			(272,653)			(273,033)
Recoveries	—			33,840			33,840
Net charge-offs	(380)			(238,813)			(239,193)
Write-downs arising from transfer of loans to held for sale(3)	(8,297)			—			(8,297)

Ending Balance	$	—		$	1,413,621		$	1,413,621
Allowance(4):

Ending balance: collectively evaluated for impairment	$	—		$	1,413,621		$	1,413,621
Loans(4):

Ending balance: collectively evaluated for impairment	$	—		$	21,777,466		$	21,777,466
Accrued interest to be capitalized(4):
Ending balance: collectively evaluated for impairment	$	—		$	1,390,774		$	1,390,774
Net charge-offs as a percentage of average loans in repayment (annualized)(5)	—		%	2.13		%
Allowance as a percentage of the ending total loan balance and accrued interest to be capitalized(6)	—		%	6.10		%
Allowance as a percentage of the ending loans in repayment and accrued interest to be capitalized on loans in repayment(5)(6)	—		%	8.91		%
Allowance coverage of net charge-offs (annualized)	—			4.44
Ending total loans, gross	$	—		$	21,777,466
Average loans in repayment(5)	$	—		$	14,944,421
Ending loans in repayment(5)	$	—		$	15,360,255
Accrued interest to be capitalized on loans in repayment(7)	$	—		$	513,121

(1) See Note 6, “Unfunded Loan Commitments,” in this Form 10-Q for a summary of the activity in the allowance for and balance of unfunded loan commitments, respectively.


Consolidated Statements of Operations Provisions for Credit Losses Reconciliation
Nine Months Ended September 30, 2024 (dollars in thousands)
Private Education Loan provisions for credit losses:
Provisions for loan losses	$	40,579
Provisions for unfunded loan commitments	255,747
Total Private Education Loan provisions for credit losses	296,326
Other impacts to the provisions for credit losses:
FFELP Loans	4,010

Total	4,010
Provisions for credit losses reported in consolidated statements of operations	$	300,336

(3) Represents fair value adjustments on loans transferred to held for sale.

(4) For the nine months ended September 30, 2024, there were no allowance for credit losses, loans, or accrued interest to be capitalized balances that were individually evaluated for impairment.

(6) Accrued interest to be capitalized on Private Education Loans only.


Nine Months Ended September 30, 2023 (dollars in thousands)	FFELP Loans			Private Education Loans			Total
Allowance for Credit Losses
Beginning balance	$	3,444		$	1,353,631		$	1,357,075
Transfer from unfunded commitment liability(1)	—			278,388			278,388
Provisions:
Provision for current period	2,225			196,859			199,084
Loan sale reduction to provision	—			(136,531)			(136,531)

Total provisions(2)	2,225			60,328			62,553
Net charge-offs:
Charge-offs	(853)			(314,500)			(315,353)
Recoveries	—			33,385			33,385
Net charge-offs	(853)			(281,115)			(281,968)

Ending Balance	$	4,816		$	1,411,232		$	1,416,048
Allowance(3):

Ending balance: collectively evaluated for impairment	$	4,816		$	1,411,232		$	1,416,048
Loans(3):

Ending balance: collectively evaluated for impairment	$	554,309		$	21,680,867		$	22,235,176
Accrued interest to be capitalized(3):
Ending balance: collectively evaluated for impairment	$	—		$	1,283,388		$	1,283,388
Net charge-offs as a percentage of average loans in repayment (annualized)(4)	0.26		%	2.44		%
Allowance as a percentage of the ending total loan balance and accrued interest to be capitalized(5)	0.87		%	6.15		%
Allowance as a percentage of the ending loans in repayment and accrued interest to be capitalized on loans in repayment(4)(5)	1.15		%	8.84		%
Allowance coverage of net charge-offs (annualized)	4.23			3.77
Ending total loans, gross	$	554,309		$	21,680,867
Average loans in repayment(4)	$	440,716		$	15,358,596
Ending loans in repayment(4)	$	418,022		$	15,505,145
Accrued interest to be capitalized on loans in repayment(6)	$	—		$	464,807

(1) See Note 6, “Unfunded Loan Commitments,” in this Form 10-Q for a summary of the activity in the allowance for and balance of unfunded loan commitments, respectively.


Consolidated Statements of Operations Provisions for Credit Losses Reconciliation
Nine Months Ended September 30, 2023 (dollars in thousands)
Private Education Loan provisions for credit losses:
Provisions for loan losses	$	60,328
Provisions for unfunded loan commitments	267,311
Total Private Education Loan provisions for credit losses	327,639
Other impacts to the provisions for credit losses:
FFELP Loans	$	2,225

Total	2,225
Provisions for credit losses reported in consolidated statements of operations	$	329,864

(3) For the nine months ended September 30, 2023, there were no allowance for credit losses, loans, or accrued interest to be capitalized balances that were individually evaluated for impairment.

(5) Accrued interest to be capitalized on Private Education Loans only.

Allowance for Credit Losses

In the second quarter of 2024, we implemented a loan-level future default rate model that includes current portfolio characteristics and forecasts of real gross domestic product and college graduate unemployment. In the second quarter of 2024, we also implemented a future prepayment speeds model to include forecasts of real gross domestic product, retail sales, SOFR, and the U.S. 10-year treasury rate. These models reduce the reliance on certain qualitative overlays compared to the previous default rate and prepayment speeds models. Prior to these changes, our loss models used forecasts of college graduate unemployment, retail sales, home price index, and median family income. Both the future default rate model and the future prepayment speeds model are used in determining the adequacy of the allowance for credit losses. The combined impact upon implementation of these model enhancements and the changes in the related qualitative overlays did not have a material impact on the overall level of our allowance for credit losses.

We obtain forecasts for our loss model inputs from Moody’s Analytics. Moody’s Analytics provides a range of forecasts for each of these inputs with various likelihoods of occurrence. We determine which forecasts we will include in our estimation of allowance for credit losses and the associated weightings for each of these inputs. At September 30, 2024, December 31, 2023, and September 30, 2023, we used the Baseline (50th percentile likelihood of occurring)/S1 (stronger near-term growth scenario - 10 percent likelihood of occurring)/S3 (unfavorable (or downside) scenario - 10 percent likelihood of occurring) and weighted them 40 percent, 30 percent, and 30 percent, respectively. Management reviews both the scenarios and their respective weightings each quarter in determining the allowance for credit losses.

Provision for credit losses for the nine months ended September 30, 2024 decreased by $30 million compared with the year-ago period. During the nine months ended September 30, 2024, the provision for credit losses was primarily affected by $236 million in negative provisions recorded as a result of the $3.69 billion Private Education Loan sales during the first nine months of 2024, an improved economic outlook, and changes in management overlays and recovery rates, offset by new loan commitments, net of expired commitments, and increases to the provision as a result of decreases in our estimates of the historical long-term average prepayment speeds used after the two-year reasonable and supportable period. In the year-ago period, the provision for credit losses was primarily affected by new loan commitments, net of expired commitments, slower prepayment rates, management overlays, and changes in economic outlook, which were offset by $137 million in negative provisions recorded as a result of the $2.10 billion Private Education Loan sales during the first nine months of 2023 and an increase in recovery rates.

As part of concluding on the adequacy of the allowance for credit losses, we review key allowance and loan metrics. The most significant of these metrics considered are the allowance coverage of net charge-offs ratio; the allowance as a percentage of ending total loans and accrued interest to be capitalized and of ending loans in repayment and accrued interest to be capitalized on loans in repayment; and delinquency and forbearance percentages.

Loan Modifications to Borrowers Experiencing Financial Difficulty

The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon asset origination or acquisition. The starting point for the estimate of the allowance for credit losses is historical information, which includes losses from modifications of receivables whose borrowers are experiencing financial difficulty. We use a discounted cash flow model to determine the allowance for credit losses. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification.

The effect of most modifications of loans made to borrowers who are experiencing financial difficulty is already included in the allowance for credit losses because of the measurement methodologies used to estimate the allowance. The forecast of expected future cash flows is updated as the loan modifications occur.

We adjust the terms of loans for certain borrowers when we believe such changes will help our customers manage their student loan obligations and achieve better student outcomes, and increase the collectability of the loans. These changes generally take the form of a temporary forbearance of payments, a temporary or permanent interest rate reduction, a temporary or permanent interest rate reduction with a permanent extension of the loan term, and/or a short-term extended repayment alternative. Forbearance is granted prospectively for borrowers who are current in their payments and may be granted retroactively for certain delinquent borrowers.

When we give a borrower facing financial difficulty an interest rate reduction under our programs, we evaluate their ability to pay and provide customized repayment terms based upon their financial condition. Prior to the third quarter of 2024, as part of demonstrating the ability and willingness to pay, the borrower was required to make three consecutive monthly payments at the reduced payment amount in order to qualify for enrollment in a modification program and, if applicable, for the loan to re-age and be brought current. Beginning in the third quarter of 2024, we refined our practices in this area and, after we determine the borrower’s ability to pay and they agree to the modification, the loan is modified

immediately. Following the modification, the borrower is still required to make three consecutive monthly payments at the reduced payment amount in order for the loan to re-age and be brought current, if eligible. It continues to be our practice that any loan that has received a previous rate reduction or permanent extension is generally not re-age eligible following a modification. In that case, following the modification, the loan will remain in delinquency unless and until all past due amounts are paid and the loan is brought current.

Under our programs, we limit the granting of a permanent extension of the final maturity date of a loan to one time over the life of the loan, and limit the number of interest rate reductions to twice over the life of the loan. Where appropriate, we will permit two consecutive rate reductions so long as the borrower qualifies. We believe by tailoring the modification programs to the borrower’s current financial condition and not having a one size fits all approach, we increase the likelihood the borrower will be able to make the modified payments and avoid default. This approach of giving different interest rate reductions to different borrowers experiencing more severe hardship also helps us better manage the overall assistance we provide to borrowers.

Within the Private Education Loan portfolio, we deem loans greater than 90 days past due as nonperforming. FFELP Loans are at least 97 percent guaranteed as to their principal and accrued interest by the federal government in the event of default and, therefore, we do not deem FFELP Loans as nonperforming from a credit risk perspective at any point in their life cycle prior to claim payment and continue to accrue interest on those loans through the date of claim.

For additional information, see Notes to Consolidated Financial Statements, Note 2, “Significant Accounting Policies —Allowance for Credit Losses,” and Note 7, “Allowance for Credit Losses” in our 2023 Form 10-K.

Under our current forbearance practices, temporary forbearance of payments is generally granted in one-to-two month increments, for up to 12 months over the life of the loan, with 12 months of positive payment performance by a borrower required between grants (meaning the borrower must make payment in a cumulative amount equivalent to 12 monthly required payments under the loan). See Notes to Consolidated Financial Statements, Note 5, “Loans Held for Investment — Certain Collection Tools - Private Education Loans” in our 2023 Form 10-K. In the first quarter of 2022, we adopted ASU No. 2022-02 (see Notes to Consolidated Financial Statements, Note 2, “Significant Accounting Policies” in our 2023 Form 10-K). Under ASU No. 2022-02, if the debt has been previously restructured, an entity must consider the cumulative effect of past restructurings made within the 12-month period before the current restructuring when determining whether a delay in payment resulting from the current restructuring is insignificant. Due to our current forbearance practices, including the limitations on forbearances offered to borrowers, we do not believe the granting of forbearances will exceed the significance threshold and, therefore, we do not consider the forbearances as loan modifications.

The limitations on granting of forbearances described above apply to hardship forbearances. We offer other administrative forbearances (e.g., death and disability, bankruptcy, military service, disaster forbearance, and in school assistance) that are either required by law (such as by the Servicemembers Civil Relief Act) or are considered separate from our active loss mitigation programs and therefore are not considered to be loan modifications requiring disclosure under ASU No. 2022-02. In addition, we may offer on a limited basis term extensions or rate reductions or a combination of both to borrowers to reduce consolidation activities. For purposes of this disclosure, we do not consider them modifications of loans to borrowers experiencing financial difficulty and they therefore are not included in the tables below.

In the fourth quarter of 2023, we developed additional modification programs tailored to the financial condition of individual borrowers. Pursuant to these additional modification programs, for our borrowers experiencing the most severe financial conditions, we currently may reduce the contractual interest rate on a loan to as low as 2 percent for the remaining life of the loan and also permanently extend the final maturity of the loan. Other borrowers experiencing severe hardship may not require as much assistance, however, given their circumstances. In those instances, we may reduce the contractual interest rate on a loan to a rate greater than 2 percent, and up to 8 percent, for a temporary period of two to four years, and in some instances may also permanently extend the final maturity of the loan. These new programs are reflected in the tables below.

As part of the additional modification programs that were launched in the fourth quarter of 2023, we also offered for a short period of time a permanent term extension with no interest rate reduction program. This program ended in the fourth quarter of 2023. The amortized cost of this program totaled $8.2 million, representing 0.04 percent of the total Private Education Loan portfolio. This program added a weighted average of 6.7 years to the life of loans in the program. As of September 30, 2024, $6.8 million of these loans were in a current or deferred status, $0.7 million of these loans were 30-59 days past due, $0.3 million of these loans were 60-89 days past due, and $0.4 million of these loans were 90 days or greater past due. For the three months ended September 30, 2024, there were $0.5 million modified loans1 (with $0.5 mill

ion of unpaid principal balance at the time the loan became 60 days past due) in this program that became 60 days past due within 12 months of receiving the term extension and $0.2 million loans charged off within 12 months of receiving the term extension. For the nine months ended September 30, 2024, there were $1.1 million modified loans2 (with $1.2 million of unpaid principal balance at the time the loan because 60 days past due) in this program that became 60 days past due within 12 months of receiving the term extension and $0.3 million loans charged off within 12 months of receiving the term extension.

The following tables show the amortized cost basis at the end of the respective reporting periods of the loans to borrowers experiencing financial difficulty that were modified during the period, disaggregated by class of financing receivable and type of modification. When we approve a Private Education Loan at the beginning of an academic year, we do not always disburse the full amount of the loan at the time of approval, but instead have a commitment to fund a portion of the loan at a later date (usually at the start of the second semester or subsequent trimesters). We consider borrowers to be in financial difficulty after they have exited school and have difficulty making their scheduled principal and interest payments. The increases in loan modifications during the three and nine months ended September 30, 2024 compared to the year-ago periods are primarily due to additional modification programs implemented in the fourth quarter of 2023 and refinements to those programs, as previously described.


	Loan Modifications Made to Borrowers Experiencing Financial Difficulty
Three Months Ended September 30, 2024 (dollars in thousands)	Interest Rate Reduction				Combination - Interest Rate Reduction and Term Extension
Loan Type:	Amortized Cost Basis		% of Total Class of Financing Receivable		Amortized Cost Basis		% of Total Class of Financing Receivable
Private Education Loans	$	21,159	0.09	%	$	449,484	1.92	%
Total	$	21,159	0.09	%	$	449,484	1.92	%


	Loan Modifications Made to Borrowers Experiencing Financial Difficulty
Three Months Ended September 30, 2023 (dollars in thousands)	Interest Rate Reduction				Combination - Interest Rate Reduction and Term Extension
Loan Type:	Amortized Cost Basis		% of Total Class of Financing Receivable		Amortized Cost Basis		% of Total Class of Financing Receivable
Private Education Loans	$	16,620	0.07	%	$	90,193	0.39	%
Total	$	16,620	0.07	%	$	90,193	0.39	%


	Loan Modifications Made to Borrowers Experiencing Financial Difficulty
Nine Months Ended September 30, 2024 (dollars in thousands)	Interest Rate Reduction				Combination - Interest Rate Reduction and Term Extension
Loan Type:	Amortized Cost Basis		% of Total Class of Financing Receivable		Amortized Cost Basis		% of Total Class of Financing Receivable
Private Education Loans	$	28,633	0.12	%	$	937,723	4.01	%
Total	$	28,633	0.12	%	$	937,723	4.01	%


	Loan Modifications Made to Borrowers Experiencing Financial Difficulty
Nine Months Ended September 30, 2023 (dollars in thousands)	Interest Rate Reduction				Combination - Interest Rate Reduction and Term Extension
Loan Type:	Amortized Cost Basis		% of Total Class of Financing Receivable		Amortized Cost Basis		% of Total Class of Financing Receivable
Private Education Loans	$	39,263	0.17	%	$	254,639	1.10	%
Total	$	39,263	0.17	%	$	254,639	1.10	%

The following tables describe the financial effect of the modifications made to loans whose borrowers are experiencing financial difficulty:

Three Months Ended September 30, 2024

Interest Rate Reduction

Combination - Interest Rate
Reduction and Term Extension

Loan Type

Financial Effect

Loan Type

Financial Effect

Private Education Loans

Reduced average contractual rate from 13.16% to 3.59%

Private Education Loans

Added a weighted average 9.42 years to the life of loans

Reduced average contractual rate from 12.58% to 3.51%

Three Months Ended September 30, 2023

Interest Rate Reduction

Combination - Interest Rate
Reduction and Term Extension

Loan Type

Financial Effect

Loan Type

Financial Effect

Private Education Loans

Reduced average contractual rate from 13.57% to 4.00%

Private Education Loans

Added a weighted average 10.22 years to the life of loans

Reduced average contractual rate from 13.12% to 4.00%

Nine Months Ended September 30, 2024

Interest Rate Reduction

Combination - Interest Rate
Reduction and Term Extension

Loan Type

Financial Effect

Loan Type

Financial Effect

Private Education Loans

Reduced average contractual rate from 13.18% to 3.59%

Private Education Loans

Added a weighted average 9.21 years to the life of loans

Reduced average contractual rate from 12.69% to 3.60%

Nine Months Ended September 30, 2023

Interest Rate Reduction

Combination - Interest Rate
Reduction and Term Extension

Loan Type

Financial Effect

Loan Type

Financial Effect

Private Education Loans

Reduced average contractual rate from 13.29% to 4.00%

Private Education Loans

Added a weighted average 10.24 years to the life of loans

Reduced average contractual rate from 12.84% to 4.00%

Private Education Loans are generally charged off at the end of the month in which they reach 120 days delinquent or otherwise when the loans are classified as a loss by us or our regulator. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount. See Notes to Consolidated Financial Statements, Note 2, “Significant Accounting Policies — Allowance for Credit Losses — Allowance for Private Education Loan Losses, and — Allowance for FFELP Loan Losses” in our 2023 Form 10-K for a more detailed discussion.

For the periods presented, the following tables provide, on both an amortized cost basis and unpaid principal balance basis, loan modifications that, at any point during the period presented, were 60 days or more past due within 12 months of the loan receiving a loan modification. Additionally, the table summarizes charge-offs occurring in the period presented within 12 months of the loan receiving a loan modification. The increases in loan modifications during the three and nine months ended September 30, 2024 compared to the year-ago periods are primarily due to the previously described additional modification programs implemented in the fourth quarter of 2023 and the refinements to those programs. The following tables do not include loans that received a permanent term extension with no interest rate reduction during the fourth quarter of 2023, which are discussed above.




	Three Months Ended September 30, 2024						Three Months Ended September 30, 2023
(Dollars in thousands)	Modified Loans(1)(2)		Payment Default(4)		Charge-Offs(5)		Modified Loans(1)(2)		Payment Default(4)		Charge-Offs(5)
Loan Type:
Private Education Loans	$	87,722	$	86,969	$	18,056	$	14,546	$	14,129	$	4,534
Total	$	87,722	$	86,969	$	18,056	$	14,546	$	14,129	$	4,534




	Nine Months Ended September 30, 2024						Nine Months Ended September 30, 2023
(Dollars in thousands)	Modified Loans(1)(3)		Payment Default(4)		Charge-Offs(5)		Modified Loans(1)(3)		Payment Default(4)		Charge-Offs(5)
Loan Type:
Private Education Loans	$	121,032	$	123,127	$	20,564	$	26,449	$	27,672	$	6,428
Total	$	121,032	$	123,127	$	20,564	$	26,449	$	27,672	$	6,428

(1) Represents period-end amortized cost basis of modified loans that were 60 days or more past due in the period presented and within 12 months of receiving a modification.

(2) For the three months ended September 30, 2024, the modified loans include $83.1 million of interest rate reduction and term extension loan modifications and $4.6 million of interest rate reduction only loan modifications. For the three months ended September 30, 2023, the modified loans include $12.4 million of interest rate reduction and term extension loan modifications and $2.1 million of interest rate reduction only loan modifications.

(3) For the nine months ended September 30, 2024, the modified loans include $115.4 million of interest rate reduction and term extension loan modifications and $5.7 million of interest rate reduction only loan modifications. For the nine months ended September 30, 2023, the modified loans include $23.0 million of interest rate reduction and term extension loan modifications and $3.4 million of interest rate reduction only loan modifications.

(4) Represents the unpaid principal balance at the time the modified loan became 60 days or more past due within 12 months of the loan receiving a loan modification.

(5) Represents the unpaid principal balance at the time of charge off.

We closely monitor performance of the loans to borrowers experiencing financial difficulty that are modified to understand the effectiveness of the modification efforts. The following table depicts the performance of loans that have been modified within the nine months prior to September 30, 2024, the 12 months prior to September 30, 2024, and the 12 months prior to December 31, 2023, respectively. Loans that received a permanent term extension with no interest rate reduction during the fourth quarter of 2023 are not included in the below table, but are discussed above.


	Nine Months Ended September 30, 2024				Twelve Months Ended September 30, 2024				Twelve Months Ended December 31, 2023
(Dollars in thousands)	Balance		%		Balance		%		Balance		%
Payment Status (Amortized Cost Basis):
Loan modifications in deferment(1)	$	24,946			$	28,327			$	6,843
Loan modifications in repayment:
Loans current(2)(3)	766,273		81	%	837,473		82	%	334,967		90	%
Loans delinquent 30-59 days(2)(3)	74,279		8	%	77,145		8	%	17,205		4	%
Loans delinquent 60-89 days(2)(3)	43,208		5	%	44,846		4	%	7,689		2	%
Loans 90 days or greater past due(2)(3)	57,650		6	%	61,399		6	%	13,822		4	%
Total loan modifications in repayment	941,410		100	%	1,020,863		100	%	373,683		100	%
Total Private Education Loan modifications	$	966,356			$	1,049,190			$	380,526

(1) Deferment includes customers who have returned to school or are engaged in other permitted educational activities and are not yet required to make full principal and interest payments on the loans (e.g., residency periods for medical students or a grace period for bar exam preparation). Deferment also includes loans that have entered a forbearance after the loan modification was granted.

(2) Represents loans in repayment, which include loans that have entered full principal and interest repayment status after any applicable grace period (but, for purposes of the table, do not include those loans while they are in forbearance).

(3) The period of delinquency is based on the number of days scheduled payments are contractually past due.

Private Education Loans Held for Investment - Key Credit Quality Indicators

FFELP Loans are at least 97 percent guaranteed as to their principal and accrued interest in the event of default; therefore, there are no key credit quality indicators associated with FFELP Loans.

For Private Education Loans, the key credit quality indicators are FICO scores, the existence of a cosigner, the loan status, and loan seasoning. The FICO scores are assessed at original approval and periodically refreshed/updated through the loan’s term. The following tables highlight the gross principal balance of our Private Education Loan portfolio (held for investment), by year of origination approval, stratified by key credit quality indicators.


As of September 30, 2024 (dollars in thousands)	Private Education Loans Held for Investment - Credit Quality Indicators
Year of Origination Approval	2024(1)		2023(1)		2022(1)		2021(1)		2020(1)		2019 and Prior(1)		Total(1)		% of Balance
Cosigners:
With cosigner	$	3,734,881	$	4,740,192	$	2,775,372	$	1,792,296	$	1,185,946	$	4,854,732	$	19,083,419	88	%
Without cosigner	410,127		623,056		454,404		321,490		233,207		651,763		2,694,047		12
Total	$	4,145,008	$	5,363,248	$	3,229,776	$	2,113,786	$	1,419,153	$	5,506,495	$	21,777,466	100	%

FICO at Origination Approval(2):
Less than 670	$	246,464	$	394,068	$	261,780	$	156,049	$	96,605	$	495,359	$	1,650,325	8	%
670-699	509,488		751,734		450,549		288,455		201,741		937,664		3,139,631		14
700-749	1,256,692		1,649,606		1,010,936		673,104		463,935		1,861,249		6,915,522		32
Greater than or equal to 750	2,132,364		2,567,840		1,506,511		996,178		656,872		2,212,223		10,071,988		46
Total	$	4,145,008	$	5,363,248	$	3,229,776	$	2,113,786	$	1,419,153	$	5,506,495	$	21,777,466	100	%


FICO Refreshed(2)(3):
Less than 670	$	350,534	$	634,599	$	460,995	$	304,198	$	195,926	$	866,117	$	2,812,369	13	%
670-699	530,612		722,522		411,258		247,461		142,707		599,235		2,653,795		12
700-749	1,240,651		1,541,321		904,821		581,250		371,047		1,464,960		6,104,050		28
Greater than or equal to 750	2,023,211		2,464,806		1,452,702		980,877		709,473		2,576,183		10,207,252		47
Total	$	4,145,008	$	5,363,248	$	3,229,776	$	2,113,786	$	1,419,153	$	5,506,495	$	21,777,466	100	%

Seasoning(4):
1-12 payments	$	2,276,316	$	2,140,723	$	420,171	$	247,167	$	149,269	$	353,135	$	5,586,781	25	%
13-24 payments	—		1,056,273		1,277,280		192,430		127,669		374,514		3,028,166		14
25-36 payments	—		—		619,637		855,419		116,659		484,079		2,075,794		10
37-48 payments	—		—		—		380,010		524,320		453,928		1,358,258		6
More than 48 payments	—		—		—		—		276,001		3,336,669		3,612,670		17
Not yet in repayment	1,868,692		2,166,252		912,688		438,760		225,235		504,170		6,115,797		28
Total	$	4,145,008	$	5,363,248	$	3,229,776	$	2,113,786	$	1,419,153	$	5,506,495	$	21,777,466	100	%

2024 Current period(5) gross charge-offs	$	(672)	$	(16,359)	$	(48,389)	$	(38,496)	$	(27,088)	$	(141,649)	$	(272,653)
2024 Current period(5) recoveries	37		1,268		4,876		4,317		2,886		20,456		33,840
2024 Current period(5) net charge-offs	$	(635)	$	(15,091)	$	(43,513)	$	(34,179)	$	(24,202)	$	(121,193)	$	(238,813)

Total accrued interest by origination vintage	$	104,376	$	452,478	$	350,208	$	226,175	$	126,965	$	269,612	$	1,529,814
(1)Balance represents gross Private Education Loans held for investment. (2)Represents the higher credit score of the cosigner or the borrower. (3)Represents the FICO score updated as of the third-quarter 2024. (4)Number of months in active repayment (whether interest only payment, fixed payment, or full principal and interest payment status) for which a scheduled payment was due. (5)Current period refers to period from January 1, 2024 through September 30, 2024.


As of December 31, 2023 (dollars in thousands)	Private Education Loans Held for Investment - Credit Quality Indicators
Year of Origination Approval	2023(1)		2022(1)		2021(1)		2020(1)		2019(1)		2018 and Prior(1)		Total(1)		% of Balance
Cosigners:
With cosigner	$	3,903,676	$	4,428,163	$	2,516,380	$	1,535,308	$	1,378,699	$	4,529,768	$	18,291,994	87	%
Without cosigner	586,443		660,576		421,042		283,781		253,601		528,407		2,733,850		13
Total	$	4,490,119	$	5,088,739	$	2,937,422	$	1,819,089	$	1,632,300	$	5,058,175	$	21,025,844	100	%

FICO at Origination Approval(2):
Less than 670	$	328,199	$	395,526	$	208,696	$	118,935	$	137,494	$	451,613	$	1,640,463	8	%
670-699	635,642		704,642		400,744		254,762		257,840		868,777		3,122,407		15
700-749	1,383,779		1,586,783		934,033		590,401		545,333		1,709,299		6,749,628		32
Greater than or equal to 750	2,142,499		2,401,788		1,393,949		854,991		691,633		2,028,486		9,513,346		45
Total	$	4,490,119	$	5,088,739	$	2,937,422	$	1,819,089	$	1,632,300	$	5,058,175	$	21,025,844	100	%


FICO Refreshed(2)(3):
Less than 670	$	495,451	$	638,381	$	379,738	$	217,956	$	214,665	$	791,875	$	2,738,066	13	%
670-699	616,684		672,777		365,674		193,462		176,963		564,245		2,589,805		12
700-749	1,347,094		1,477,310		836,747		498,414		445,244		1,361,073		5,965,882		28
Greater than or equal to 750	2,030,890		2,300,271		1,355,263		909,257		795,428		2,340,982		9,732,091		47
Total	$	4,490,119	$	5,088,739	$	2,937,422	$	1,819,089	$	1,632,300	$	5,058,175	$	21,025,844	100	%

Seasoning(4):
1-12 payments	$	2,514,079	$	740,450	$	440,293	$	245,631	$	208,941	$	332,608	$	4,482,002	21	%
13-24 payments	—		2,675,956		303,045		167,532		165,577		384,760		3,696,870		18
25-36 payments	—		—		1,524,834		195,091		129,571		456,448		2,305,944		11
37-48 payments	—		—		—		902,938		208,521		446,350		1,557,809		7
More than 48 payments	—		—		—		116		706,097		2,985,015		3,691,228		18
Not yet in repayment	1,976,040		1,672,333		669,250		307,781		213,593		452,994		5,291,991		25
Total	$	4,490,119	$	5,088,739	$	2,937,422	$	1,819,089	$	1,632,300	$	5,058,175	$	21,025,844	100	%

2023 Current period(5) gross charge-offs	$	(1,812)	$	(31,032)	$	(70,331)	$	(49,624)	$	(50,585)	$	(216,711)	$	(420,095)
2023 Current period(5) recoveries	172		2,342		6,496		4,923		5,260		27,175		46,368
2023 Current period(5) net charge-offs	$	(1,640)	$	(28,690)	$	(63,835)	$	(44,701)	$	(45,325)	$	(189,536)	$	(373,727)

Total accrued interest by origination vintage	$	177,959	$	408,800	$	269,978	$	152,094	$	116,618	$	229,116	$	1,354,565

(1)Balance represents gross Private Education Loans held for investment.

(2)Represents the higher credit score of the cosigner or the borrower.

(3)Represents the FICO score updated as of the fourth-quarter 2023.

(4)Number of months in active repayment (whether interest only payment, fixed payment, or full principal and interest payment status) for which a scheduled payment was due.

(5)Current period refers to January 1, 2023 through December 31, 2023.

Delinquencies - Private Education Loans Held for Investment

The following tables provide information regarding the loan status of our Private Education Loans held for investment, by year of origination approval. Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period (but, for purposes of the following tables, do not include those loans while they are in forbearance).


	Private Education Loans Held for Investment - Delinquencies by Origination Vintage
As of September 30, 2024 (dollars in thousands)	2024			2023			2022			2021			2020			2019 and Prior			Total

Loans in-school/grace/deferment(1)	$	1,868,692		$	2,166,252		$	912,688		$	438,760		$	225,235		$	504,170		$	6,115,797
Loans in forbearance(2)	4,394			60,324			67,024			40,094			28,002			101,576			301,414
Loans in repayment:
Loans current	2,264,429			3,081,961			2,166,187			1,564,016			1,116,464			4,613,926			14,806,983
Loans delinquent 30-59 days(3)	5,536			31,829			41,997			34,974			23,902			147,233			285,471
Loans delinquent 60-89 days(3)	1,314			15,492			24,717			20,840			14,467			72,268			149,098
Loans 90 days or greater past due(3)	643			7,390			17,163			15,102			11,083			67,322			118,703
Total Private Education Loans in repayment	2,271,922			3,136,672			2,250,064			1,634,932			1,165,916			4,900,749			15,360,255
Total Private Education Loans, gross	4,145,008			5,363,248			3,229,776			2,113,786			1,419,153			5,506,495			21,777,466
Private Education Loans deferred origination costs and unamortized premium/(discount)	37,794			26,654			11,375			6,512			4,325			9,428			96,088
Total Private Education Loans	4,182,802			5,389,902			3,241,151			2,120,298			1,423,478			5,515,923			21,873,554
Private Education Loans allowance for losses	(212,169)			(313,135)			(235,225)			(155,737)			(95,729)			(401,626)			(1,413,621)
Private Education Loans, net	$	3,970,633		$	5,076,767		$	3,005,926		$	1,964,561		$	1,327,749		$	5,114,297		$	20,459,933

Percentage of Private Education Loans in repayment	54.8		%	58.5		%	69.7		%	77.3		%	82.2		%	89.0		%	70.5		%
Delinquent Private Education Loans in repayment as a percentage of Private Education Loans in repayment	0.3		%	1.7		%	3.7		%	4.3		%	4.2		%	5.9		%	3.6		%
Loans in forbearance as a percentage of loans in repayment and forbearance	0.2		%	1.9		%	2.9		%	2.4		%	2.3		%	2.0		%	1.9		%

(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 the 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.


	Private Education Loans Held for Investment - Delinquencies by Origination Vintage
As of December 31, 2023 (dollars in thousands)	2023			2022			2021			2020			2019			2018 and Prior			Total

Loans in-school/grace/deferment(1)	$	1,976,040		$	1,672,333		$	669,250		$	307,781		$	213,593		$	452,994		$	5,291,991
Loans in forbearance(2)	19,265			93,079			58,438			35,450			31,818			85,989			324,039
Loans in repayment:
Loans current	2,469,817			3,254,534			2,131,040			1,416,069			1,323,825			4,213,986			14,809,271
Loans delinquent 30-59 days(3)	17,599			34,627			37,147			28,020			31,432			149,926			298,751
Loans delinquent 60-89 days(3)	5,720			17,227			20,077			16,614			15,482			75,897			151,017
Loans 90 days or greater past due(3)	1,678			16,939			21,470			15,155			16,150			79,383			150,775
Total Private Education Loans in repayment	2,494,814			3,323,327			2,209,734			1,475,858			1,386,889			4,519,192			15,409,814
Total Private Education Loans, gross	4,490,119			5,088,739			2,937,422			1,819,089			1,632,300			5,058,175			21,025,844
Private Education Loans deferred origination costs and unamortized premium/(discount)	35,616			18,556			9,465			5,809			3,556			8,552			81,554
Total Private Education Loans	4,525,735			5,107,295			2,946,887			1,824,898			1,635,856			5,066,727			21,107,398
Private Education Loans allowance for losses	(269,642)			(335,090)			(194,104)			(118,755)			(100,111)			(317,403)			(1,335,105)
Private Education Loans, net	$	4,256,093		$	4,772,205		$	2,752,783		$	1,706,143		$	1,535,745		$	4,749,324		$	19,772,293

Percentage of Private Education Loans in repayment	55.6		%	65.3		%	75.2		%	81.1		%	85.0		%	89.3		%	73.3		%
Delinquent Private Education Loans in repayment as a percentage of Private Education Loans in repayment	1.0		%	2.1		%	3.6		%	4.1		%	4.5		%	6.8		%	3.9		%
Loans in forbearance as a percentage of loans in repayment and forbearance	0.8		%	2.7		%	2.6		%	2.3		%	2.2		%	1.9		%	2.1		%

(3)The period of delinquency is based on the number of days scheduled payments are contractually past due.

Accrued Interest Receivable

The following table provides information regarding accrued interest receivable on our Private Education Loans. The table also discloses the amount of accrued interest on loans 90 days or greater past due as compared to our allowance for uncollectible interest on loans making full interest payments. The majority of the total accrued interest receivable represents accrued interest on deferred loans where no payments are due while the borrower is in school and fixed-pay loans where the borrower makes a $25 monthly payment that is smaller than the interest accruing on the loan in that month. The accrued interest on these loans will be capitalized to the balance of the loans when the borrower exits the grace period after separation from school, and the current expected credit losses on accrued interest that will be capitalized is included in our allowance for credit losses.


	Private Education Loans
	Accrued Interest Receivable
(Dollars in thousands)	Total Interest Receivable		90 Days or Greater Past Due		Allowance for Uncollectible Interest(1)(2)

September 30, 2024	$	1,529,814	$	5,534	$	7,426
December 31, 2023	$	1,354,565	$	8,373	$	9,897

(1)The allowance for uncollectible interest at September 30, 2024 represents the expected losses related to the portion of accrued interest receivable on those loans that are in repayment ($139 million of accrued interest receivable) that is not expected to be capitalized. The accrued interest receivable that is expected to be capitalized ($1.4 billion) is reserved in the allowance for credit losses. The accrued interest receivable for the loans delinquent 90 days or greater includes $4.6 million of accrued interest receivable on those loans that are in repayment that is not expected to be capitalized and $0.9 million that is expected to be capitalized.

(2)The allowance for uncollectible interest at December 31, 2023 represents the expected losses related to the portion of accrued interest receivable on those loans in repayment ($151 million of accrued interest receivable) that was not expected to be capitalized. The accrued interest receivable that was expected to be capitalized ($1.2 billion) was reserved in the allowance for credit losses. The accrued interest receivable for the loans delinquent 90 days or greater includes $7.7 million of accrued interest receivable on those loans that are in repayment that is not expected to be capitalized and $0.6 million that is expected to be capitalized.