(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 ~~days.~~ days. Yes☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§(§ 232.405 of this chapter)during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting ~~company”~~company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of March 31, ~~2022,~~2023, there were ~~148,744,651~~126,464,845 shares of common stock outstanding.

The order and presentation of content in our Form 10-Q dif~~fers~~differs from the traditional Securities and Exchange Commission (SEC) Form 10-Q format. Our format is designed to improve readability and to betterpresent how we organize and manage our business. See Appendix A, "Form 10-Q Cross-Reference Index" for a cross-reference index to the traditional SEC Form 10-Q format.

This Quarterly Report on Form 10-Q contains “forward-looking” statements and other information that is based on management’s current expectations as of the date of this report. Statements that are not historical facts, including statements about our beliefs, opinions, or expectations and statements that assume or are dependent upon future events, are forward-looking statements and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” “will,” “would,” “may,” “could,” “should,” “goals,” or “target.” Such statements are based on management's expectations as of the date of this filing and involve many risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties are discussed more fully under the section titled “Risk Factors” and include, but are not limited to the following:

Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Readers are urged to carefully review and consider the various disclosures made in this Form 10-Q and in other documents we file from time to time with the SEC that disclose risks and uncertainties that may affect our business.

The preparation of our consolidated financial statements also requires management to make certain estimates and assumptions including estimates and assumptions about future events. These estimates or assumptions may prove to be incorrect and actual results could differ materially. All forward-looking statements contained in this report are qualified by these cautionary statements and are made only as of the date of this report. We do not undertake any obligation to update or revise these forward-looking statements except as required by law.

Through this discussion and analysis, we intend to provide the reader with some narrative context for how our management views our consolidated financial statements, additional context within which to assess our operating results, and information on the quality and variability of our earnings, liquidity and cash flows.

We prepare financial statements and present financial results in accordance with GAAP. However, we also evaluate our business segments and present our financial results on a basis that differs from GAAP. We refer to this different basis of presentation as Core Earnings, which is a non-GAAP financial measure. We provide this Core Earnings basis of presentation on a consolidated basis and for each business segment because this is what we review internally when making management decisions regarding our performance and how we allocate resources. We also include this information in our presentations with credit rating agencies, lenders and investors. Because our Core Earnings basis of presentation ~~corresponds to~~is our ~~segment financial presentations,~~measure of profit or loss for our segments, we are required by GAAP to provide Core Earnings disclosures in the notes to our consolidated financial statements for our business segments.

In addition to Core Earnings, we present the following other non-GAAP financial measures: Adjusted Core Earnings, Tangible Equity, Adjusted Tangible Equity Ratio, ~~Pro forma Adjusted Tangible Equity Ratio, and~~ Earnings before Interest, Taxes, Depreciation and Amortization Expense (EBITDA) (for the Business Processing segment)., and Allowance for Loan Losses Excluding Expected Future Recoveries on Previously Fully Charged-off Loans. Definitions for the non-GAAP financial measures and reconciliations are provided below, except that reconciliations of forward-looking non-GAAP financial measures are not provided because the company is unable to provide such reconciliations without unreasonable effort due to the uncertainty and inherent difficulty of predicting the occurrence and financial impact of certain items, including, but not limited to, the impact of any mark-to-market gains/losses resulting from our use of derivative instruments to hedge our economic risks. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures” for a further discussion and a complete reconciliation between GAAP net income and Core Earnings.

Navient (Nasdaq: NAVI) provides technology-enabled education finance and business processing solutions that simplify complex programs and help millions of people achieve success. Our customer-focused, data-driven services deliver exceptional results for clients in education, health care and government. Learn more at navient.com.

With a focus on data-driven insights, service, compliance and innovative support, Navient’s business consists of:

We own a portfolio of ~~$51.0~~$42.1 billion of federally guaranteed Federal Family Education Loan Program (FFELP) Loans. ~~We service and provide asset recovery services~~As a servicer on ~~this~~our own portfolio and for third parties, ~~deploying~~we deploy data-driven approaches to support the success of our customers. Our flexible and scalable infrastructure manages large volumes of complex transactions, simplifying the customer experience and continually improving efficiency.

We ~~own, service~~help students and ~~originate~~families succeed through the college journey with innovative planning tools, student loans and refinancing products. Our $18.3 billion Private Education ~~Loans that enable people to pursue higher education and improve their economic opportunities. Our $20.1 billion private loan~~Loan portfolio demonstrates high customer success rates. ~~We help people simplify their finances through student loan refinancing, and we help families finance their higher education through transparent, affordable Private Education Loans.~~ In the first quarter of ~~2022,~~2023, we originated ~~$966~~$168 million inof Private Education Loans.

We leverage our loan servicing expertise to provide business processing solutions for ~~more than 600~~approximately 500 public sector and healthcare organizations, and their tens of millions of clients, patients, and constituents. Our suite of ~~solutions and~~omnichannel customer experience, ~~expertise enable~~digital processing and revenue cycle solutions enables our clients to ~~focus on their missions, optimize their cash flow and~~ deliver ~~essential services, while helping those~~better results for the people they serve successfully navigate complex programs, transactions and decisions. For each client, we customize a blend of technologies to deliver personalized, omnichannel communication experiences; machine learning automation; root-cause business analytics; secure cloud computing; and intelligent customer relationship platforms.serve.

Superior Operational Performance with a Strong Customer Service and Compliance Commitment

We help our customers — both individuals and institutions — navigate the path to financial success through proactive, data-driven, simplified service and innovative solutions.

We leverage our customer service expertise, data-driven insights, technology platforms, and scale to maximize value for our clients.

Navient is committed to a sustainable future. ~~Our work is largely services based; as a result, our day-to-day operations require relatively small amounts of natural resource and energy inputs.~~ We ~~focus on reducing the total amount of CO~~₂ ~~and CO~~₂ ~~equivalents through various initiatives, including~~leverage technology that minimizes energy ~~usage~~use in our office buildings and ~~the~~promote widespread adoption of “paperless” digital customer communications. Navient prioritizes ~~adding or updating insulation and other~~the usage of power-saving features to our buildings to ~~further~~ reduce ~~our carbon emissions. We consider our~~ energy usage. Energy efficiency and reducing CO2 and CO2 equivalents are among the many factors considered in our growth and real estate decisions.

Our first-quarter ~~2022~~2023 results continue to ~~build upon our previous year’s results demonstrating~~demonstrate the strength of our business model and our ability to deliver predictable and meaningful cash flow and earnings in all types of economic environments.

Our significant earnings generate significant capital which ~~results in~~allows for a strong capital return to our investors. Navient expects to continue to return excess capital to shareholders through dividends and share repurchases in accordance with our capital allocation policy.

By optimizing capital adequacy and allocating capital to highly accretive opportunities, including organic growth and acquisitions, we remain well positioned to pay dividends and repurchase stock, while maintaining appropriate leverage that supports our credit ratings and ensures ongoing access to capital markets.

In December 2021, our Board approved a share repurchase program authorizing the purchase of up to $1 billion of the Company’s outstanding common stock. At March 31, ~~2022, $885~~2023, $515 million remained in share repurchase authorization.

To inform our capital allocation decisions, we use the Adjusted Tangible Equity Ratio(1) in addition to other metrics. Our Adjusted Tangible Equity Ratio(1) was ~~7.0%~~8.5% as of March 31, ~~2022.~~2023.

We operate our business in three primary segments: Federal Education Loans, Consumer Lending and Business Processing.

~~In this segment,~~ Navient owns FFELP Loans and performs servicing ~~and asset recovery services~~ on this portfolio. We also service ~~and perform asset recovery services on~~ FFELP Loans owned by other institutions. Our servicing quality, data-driven strategies and omnichannel education about federal repayment options translate into positive results for the millions of borrowers we serve. We generate revenue primarily through net interest income on our FFELP Loans and servicing-related fee income.

~~In this segment,~~ Navient owns, originates ~~acquires~~ and services ~~high-quality~~in-school and refinance ~~and in-school~~ Private Education Loans. "In-school" Private Education Loans are loans originally made to borrowers while they are attending school whereas "Refinance" Private Education Loans are loans where a borrower has refinanced their education loans. We generate revenue primarily through net interest income on our Private Education Loan portfolio.

Navient helps students and families through the going-to and paying-for-college journey. Our digital tools empower people to find grants and scholarships, compare financial aid offers and complete the FAFSA. Our Private Education Loans offer easy-to-understand payment options. After graduation, we offer student loan refinancing to help people simplify their repayment and earn a better rate. We believe our ~~more than 45~~50 years of experience, product design, digital marketing strategies, and origination and servicing platform provide a unique competitive advantage. We see meaningful growth opportunities in originating Private Education Loans, ~~to financially responsible consumers,~~ generating attractive long-term, risk-adjusted returns. ~~We generate revenue primarily through net interest income on our Private Education Loan portfolio.~~

~~In this segment,~~ Navient ~~performs~~provides business processing solutions such as omnichannel contact center services, workflow processing, and revenue cycle optimization. We leverage the same expertise and intelligent tools we use to deliver successful results for ~~over 600 government~~portfolios we own. Our support enables our clients to ensure better constituent outcomes, meet rapidly changing needs, improve technology, reduce operating expenses, manage risk and optimize revenue opportunities. Our clients include:

•

Healthcare: Our clients include hospitals, hospital systems, medical centers, large physician groups, other healthcare ~~clients.~~

providers and public health departments.

•

~~Government services~~: We provide state governments, agencies, court systems, municipalities, and parking and tolling authorities with leveraging our scale, integrated technology solutions, decades of differentiated customer experience expertise and evidence-based approach. Our support enables our clients to better serve their constituents, meet rapidly changing needs, improve technology, reduce operating expenses, manage risk and optimize revenue opportunities.

•

~~Healthcare services~~: We perform revenue cycle outsourcing, accounts receivable management, extended business office support, consulting engagements and public health programs. We offer customizable solutions for our clients that include hospitals, hospital systems, medical centers, large physician groups, other healthcare providers and public health departments.

Other Segment

This segment consists of our corporate liquidity portfolio, gains and losses incurred on the repurchase of debt, unallocated expenses of shared services (which includes regulatory expenses) and restructuring/other reorganization expenses.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Selected Historical Financial Information and Ratios

Three Months Ended March 31,

(In millions, except per share data)

2022

2021

GAAP Basis

Net income

$
255

$
370

Diluted earnings per common share

$
1.67

$
2.00

Weighted average shares used to compute diluted earnings per share

$
153

185

Return on assets

1.34
%

1.78
%

Core Earnings Basis⁽¹⁾

Net income⁽¹⁾

$
135

$
305

Diluted earnings per common share⁽¹⁾

$
.88

$
1.65

Adjusted diluted earnings per common share⁽¹⁾

$
.90

$
1.71

Weighted average shares used to compute diluted earnings per share

153

185

Net interest margin, Federal Education Loans segment

1.04
%

.97
%
Net interest margin, Consumer Lending segment

2.80
%

2.99
%
Return on assets

.71
%

1.46
%

Education Loan Portfolios

Ending FFELP Loans, net

$
51,013

$
56,873

Ending Private Education Loans, net

20,088

19,742

Ending total education loans, net

$
71,101

$
76,615

Average FFELP Loans

$
52,258

$
58,078

Average Private Education Loans

21,157

22,143

Average total education loans

$
73,415

$
80,221


	Three Months Ended March 31,
(In millions, except per share data)	2023			2022
GAAP Basis
Net income	$	111		$	255
Diluted earnings per common share	$	.86		$	1.67
Weighted average shares used to compute diluted earnings per share	$	130			153
Return on assets		.68	%		1.34	%

Core Earnings Basis(1)
Net income(1)	$	133		$	135
Diluted earnings per common share(1)	$	1.02		$	.88
Adjusted diluted earnings per common share(1)	$	1.06		$	.90
Weighted average shares used to compute diluted earnings per share		130			153
Net interest margin, Federal Education Loans segment		1.12	%		1.04	%
Net interest margin, Consumer Lending segment		3.12	%		2.80	%
Return on assets		.82	%		.71	%

Education Loan Portfolios
Ending FFELP Loans, net	$	42,148		$	51,013
Ending Private Education Loans, net		18,275			20,088
Ending total education loans, net	$	60,423		$	71,101
Average FFELP Loans	$	43,263		$	52,258
Average Private Education Loans		19,289			21,157
Average total education loans	$	62,552		$	73,415

(1)

Item is a non-GAAP financial measure. For a description and reconciliation, see “Non-GAAP Financial ~~Measures – Core Earnings.~~Measures.”

The Quarter inin Review

We prepare financial statements and present financial results in accordance with GAAP. However, we also evaluate our business segments and present financial results on a basis that differs from GAAP. We refer to this different basis of presentation as Core Earnings. We provide this Core Earnings basis of presentation on a consolidated basis and for each business segment because this is what we review internally when making management decisions regarding our performance and how we allocate resources. We also include this information in our presentations with credit rating agencies, lenders and investors. Because our Core Earnings basis of presentation corresponds to our segment financial presentations, we are required by GAAP to provide certain Core Earnings disclosures in the notes to our consolidated financial statements for our business segments. See “Non-GAAP Financial Measures — Core Earnings” for a further discussion and a complete reconciliation between GAAP net income and Core Earnings.

First-quarter ~~2022~~2023 GAAP net income was ~~$255~~$111 million ($~~1.67~~0.86 diluted earnings per share), compared with ~~$370~~$255 million ($~~2.00~~1.67 diluted Core Earnings per share) for the year-ago quarter. See “Results of Operations – GAAP Comparison of First-Quarter ~~2022~~2023 Results with First-Quarter ~~2021”~~2022" for a discussion of the primary contributors to the change in GAAP earnings between periods.

First-quarter ~~2022~~2023 Core Earnings net income was ~~$135~~$133 million ($~~0.88~~1.02 diluted Core Earnings per share), compared with ~~$305~~$135 million ($~~1.65~~0.88 diluted Core Earnings per share) for the year-ago quarter. First-quarter ~~2022~~2023 and ~~2021~~2022 adjusted diluted Core Earnings(1) per share were ~~$0.90~~$1.06 and ~~$1.71,~~$0.90, respectively. See “Segment Results” for a discussion of the primary contributors to the change in Core Earnings between periods.

Financial highlights of first-quarter ~~2022~~2023 include:

Federal Education Loans segment:

•

Net income of $87 million.

•

Net interest margin of 1.12%.

•

~~Net income of $107 million.~~

•

~~FFELP Loan delinquency rate of 13.5%.~~

Consumer Lending segment:

•

Net income of $110 million.

•

Net interest margin of 3.12%.

•

Originated $168 million of Private Education Loans.

•

~~Net income of $79 million.~~

•

~~Originated $966 million of Private Education Loans.~~

•

~~Private Education Loan delinquency rate of 4.0% remains below pre-pandemic levels.~~

Business Processing segment:

•

Revenue of $72 million.

•

Net income of $4 million and EBITDA(1) of $5 million.

•

~~EBITDA~~⁽¹⁾~~of $19 million.~~

•

~~Revenue of $94 million.~~

Capital, funding and liquidity:

•

GAAP equity-to-asset ratio of 4.4% and adjusted tangible equity ratio(1) of 8.5%.

•

Repurchased $85 million of common shares. $515 million common share repurchase authority remains outstanding.

•

Paid $21 million in common stock dividends.

•

Retired $1 billion of unsecured debt.

Expenses:

•

GAAP operating expenses of $185 million and Adjusted Core Earnings expenses(1) of $183 million.

(1)

Item is a non-GAAP financial measure. For a description and reconciliation, see “Non-GAAP Financial Measures.”

•

A~~djusted tangible equity ratio~~⁽¹⁾ ~~of 7.0%.~~

•

~~Repurchased $115 million of common shares; $885 million common share repurchase authority remains outstanding.~~

•

~~Paid $24 million in common stock dividends.~~

•

~~Issued $952 million in term ABS.~~

~~Expenses:~~

•

~~Adjusted Core Earnings expenses~~⁽¹⁾ ~~of $204 million.~~

⁽¹⁾	~~Item is a non-GAAP financial measure. For a description and reconciliation, see “Non-GAAP Financial Measures.”~~

~~Navient’s Response to COVID-19~~

Since its emergence in early 2020, the COVID-19 pandemic has been dynamic and unpredictable. Variants continue to emerge while efforts to mitigate and contain the impact of the pandemic continue to evolve. In response to the COVID-19 pandemic, we have prioritized the safety of our employees and business partners, while continually striving to support the needs of our customers and communities during this unprecedented period. During 2021 and the first quarter of 2022, the COVID-19 pandemic has continued to affect our business operations. The future direct and indirect impact of the pandemic on our businesses, results of operations and financial condition remains uncertain. Should current economic conditions deteriorate or if the pandemic worsens due to various factors, including through the spread of more easily communicable variants of COVID-19, such conditions could have an adverse effect on our businesses and results of operations and could adversely affect our financial condition. For more information on the pandemic, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations ~~– Navient’s Response to COVID-19” in our 2021 Form 10-K.~~

~~Results of Operations~~

GAAP Income Statements (Unaudited)


	Three Months Ended March 31,					Increase (Decrease)						Three Months Ended March 31,					Increase (Decrease)
(In millions, except per share data)	2022		2021			$			%			2023			2022		$			%
Interest income
FFELP Loans	$	349	$	373		$	(24	)		(6	)%	$	693		$	349	$	344			99	%
Private Education Loans		276		319			(43	)		(13	)		344			276		68			25
Cash and investments		1		—			1			100			34			1		33			3,300
Total interest income		626		692			(66	)		(10	)		1,071			626		445			71
Total interest expense		289		329			(40	)		(12	)		837			289		548			190
Net interest income		337		363			(26	)		(7	)		234			337		(103	)		(31	)
Less: provisions for loan losses		16		(87	)		103			(118	)		(14	)		16		(30	)		(188	)
Net interest income after provisions for loan losses		321		450			(129	)		(29	)		248			321		(73	)		(23	)
Other income (loss):
Servicing revenue		18		53			(35	)		(66	)		17			18		(1	)		(6	)
Asset recovery and business processing revenue		97		139			(42	)		(30	)		72			97		(25	)		(26	)
Other income		10		—			10			100			7			10		(3	)		(30	)
Gains on sales of loans		—		76			(76	)		(100	)
Gains (losses) on derivative and hedging activities, net		98		36			62			172			(8	)		98		(106	)		(108	)
Total other income		223		304			(81	)		(27	)		88			223		(135	)		(61	)
Expenses:
Operating expenses		205		259			(54	)		(21	)		185			205		(20	)		(10	)
Goodwill and acquired intangible assets impairment and amortization expense		4		5			(1	)		(20	)		3			4		(1	)		(25	)
Restructuring/other reorganization expenses		3		6			(3	)		(50	)		4			3		1			33
Total expenses		212		270			(58	)		(21	)		192			212		(20	)		(9	)
Income before income tax expense		332		484			(152	)		(31	)		144			332		(188	)		(57	)
Income tax expense		77		114			(37	)		(32	)		33			77		(44	)		(57	)
Net income	$	255	$	370		$	(115	)		(31	)%	$	111		$	255	$	(144	)		(56	)%
Basic earnings per common share	$	1.69	$	2.02		$	(.33	)		(16	%)	$	.87		$	1.69	$	(.82	)		(49	)%
Diluted earnings per common share	$	1.67	$	2.00		$	(.33	)		(17	%)	$	.86		$	1.67	$	(.81	)		(49	)%
Dividends per common share	$	.16	$	.16		$	—			—	%	$	.16		$	.16	$	—			—

GAAP Comparison of First-Quarter ~~2022~~2023 Results with First-Quarter ~~2021~~2022

For the three months ended March 31, ~~2022,~~2023, net income was ~~$255~~$111 million, or ~~$1.67~~$0.86 diluted earnings per common share, compared with net income of ~~$370~~$255 million, or ~~$2.00~~$1.67 diluted earnings per common share, for the year-ago period.

The primary contributors to the change in net income are as follows:

•

~~Net interest income decreased by $26~~•

Net interest income decreased by $103 million primarily as a result of a $47 million decrease in mark-to-market gains on fair value hedges recorded in interest expense, an increase in interest rates as well as the ~~continued natural~~ paydown of the FFELP and ~~non-refinance~~ Private Education Loan portfolios. This was partially offset by an increase in the net interest margin primarily due to improved funding spreads.

•

Provisions for loan losses decreased $30 million from $16 million to $(14) million:

The provision for FFELP Loan losses increased $10 million from $0 to $10 million.

The provision for Private Education Loan losses decreased $40 million from $16 million to $(24) million.

The FFELP Loan ~~portfolios, as well as the $1.6 billion of Private Education Loans sales in first-quarter 2021. Partially offsetting this decrease was the growth in the Private Education Refinance Loan portfolio.~~

•

~~Provisions for loan losses increased $103 million from $(87) million to $16 million:~~

○

~~The provision for FFELP loan losses remained unchanged at $0.~~

○

~~The provision for Private Education Loan losses increased $103 million from $(87) million to $16 million.~~

~~The~~ provision for loan losses of $10 million in the current period was primarily ~~related~~a result of the extension of the portfolio and the resulting increase in unamortized premium allocated to expected future defaults.

The Private Education Loan provision for loan ~~originations. There has been an improvement~~losses of $(24) million in the current period included $(52) million in connection with the adoption of a new accounting standard (ASU 2022-02), $5 million in connection with loan originations and ~~forecasted economic conditions since~~$23 million in connection with the ~~prior period, but such improvement has not mitigated the uncertainty related to the potential negative impact on the portfolio from the end~~resolution of ~~various payment relief and stimulus benefits recently and~~certain private legacy loans in ~~the future.~~bankruptcy. The ~~negative~~ provision of ~~$(87)~~$16 million in the year-ago quarter included $11 million in connection with loan originations and $5 million related to a reserve build.

We adopted ASU No. 2022-02, “Financial Instruments – Credit Losses: Troubled Debt Restructurings and Vintage Disclosures” on January 1, 2023. This new ASU eliminates the troubled debt restructurings (TDRs) recognition and measurement guidance. Prior to adopting this new guidance, as it relates to interest rate concessions granted as part of our Private Education Loan modification program, a discounted cash flow model was used to calculate the amount of interest forgiven for loans that were in the program and the present value of that interest rate concession was included as a part of the allowance for loan loss. This new guidance no longer allows the measurement and recognition of this element of our allowance for loan loss for new modifications that occur subsequent to January 1, 2023. As of December 31, 2022, the allowance for loan loss included $77 million related to this interest rate concession component of the allowance for loan loss. We elected to adopt this amendment using a prospective transition method which results in the $77 million releasing in 2023 and 2024 as the borrowers exit their current modification programs. $52 million of the $77 million was released in the first quarter of 2023.

•

Asset recovery and business processing revenue decreased $25 million primarily as a result of the expected $37 million reduction in revenue from the wind-down of pandemic-related contracts, which was partially offset by a $15 million increase in revenue from services for our traditional services clients. The remaining $3 million decrease was related to revenue earned in our Federal Education Loan segment and was a result of exiting that business line in fourth-quarter 2022.

•

Net gains on derivative and hedging activities decreased $106 million. The primary factors affecting the change were interest rate fluctuations. Valuations of derivative instruments fluctuate based upon many factors including changes in interest rates and other market factors. As a result, net gains and losses on derivative and hedging activities may vary significantly in future periods.

•

Excluding net regulatory-related expenses of $2 million and $1 million in the first quarters of 2023 and 2022, respectively, operating expenses were $183 million and $204 million in the first quarters of 2023 and 2022, respectively. This $21 million decrease was primarily related to the ~~reversal of $102 million of allowance for loan losses~~decline in ~~connection with the sale of approximately $1.6 billion of Private Education Loans discussed below, partially offset by $15 million of provision primarily related to loan originations.~~Business Processing pandemic-related revenue as well as a decline in overall servicing costs.

•

Servicing revenue decreased $35 million primarily related to the transfer of the servicing contract for 5.6 million ED owned student loan accounts from Navient to a third party on October 6, 2021. As a result, Navient no longer is a party to the ED servicing contract. To aid in the transition, Navient will provide certain services in 2022 to the third party through a transition services agreement (see discussion below related to “Other income”).

•

Asset recovery and business processing revenue decreased $42 million primarily as a result of a $31 million decrease in revenue earned in our Business Processing segment, primarily due to the expected winddown of the pandemic related contracts providing unemployment benefits, contact tracing and vaccine administration services, which was partially offset by revenue from services we perform for our traditional government and healthcare services clients.

•

~~Other income increased $10 million primarily related to the transition services being performed in connection with the transfer of the ED servicing contract to a third party, as discussed above.~~

•

Gains on sales of loans decreased $76 million in connection with the sale of approximately $1.6 billion of Private Education Loans in first-quarter 2021. There was a $13 million gain related to derivatives that were used to hedge this transaction that did not qualify for hedge accounting. As a result, this gain related to the derivatives was included as a part of “gains (losses) on derivative and hedging activities, net” on the income statement. There were no such sales in the current quarter.

•

Net gains on derivative and hedging activities increased $62 million. The primary factors affecting the change were interest rate and foreign currency fluctuations, which impact the valuations of derivative instruments including Floor Income Contracts, basis swaps and foreign currency hedges during each period. Valuations of derivative instruments fluctuate based upon many factors including changes in interest rates, credit risk, foreign currency fluctuations and other market factors. As a result, net gains and losses on derivative and hedging activities may vary significantly in future periods.

•

Excluding net regulatory-related expenses of $1 million and $8 million in the first quarters of 2022 and 2021, respectively, operating expenses were $204 million and $251 million in the first quarters of 2022 and 2021, respectively. This $47 million decrease was primarily related to no longer being a party to the ED servicing contract as well as the decline in Business Processing segment revenue.

•

During the three months ended March 31, 2022 and 2021, respectively, the Company incurred $3 million and $6 million, respectively, of restructuring/other reorganization expenses in connection with an effort to reduce costs and improve operating efficiency.

We repurchased ~~6.2~~4.9 million and ~~8.2~~6.2 million shares of our common stock during the first quarters of ~~2022~~2023 and ~~2021,~~2022, respectively. As a result of repurchases, our average outstanding diluted shares decreased by 3223 million common shares (or ~~17%~~15%) from the year-ago period.

Segment Results

Federal Education Loans Segment

The following table presents Core Earnings results for our Federal Education Loans segment.


	Three Months Ended March 31,				% Increase (Decrease)			Three Months Ended March 31,				% Increase (Decrease)
(Dollars in millions)	2022		2021		2022 vs. 2021			2023		2022		2023 vs. 2022
Interest income:
FFELP Loans	$	334	$	359		(7	)%	$	695	$	334		108	%
Cash and investments		—		—		—			20		—		100
Total interest income		334		359		(7	)		715		334		114
Total interest expense		195		215		(9	)		590		195		203
Net interest income		139		144		(3	)		125		139		(10	)
Less: provision for loan losses		—		—		—			10		—		100
Net interest income after provision for loan losses		139		144		(3	)		115		139		(17	)
Other income (loss):
Servicing revenue		15		52		(71	)		14		15		(7	)
Asset recovery and business processing revenue		3		14		(79	)		—		3		(100	)
Other income		11		—		100			5		11		(55	)
Total other income		29		66		(56	)		19		29		(34	)
Direct operating expenses		28		63		(56	)		20		28		(29	)
Income before income tax expense		140		147		(5	)		114		140		(19	)
Income tax expense		33		35		(6	)		27		33		(18	)
Net income	$	107	$	112		(4	)%	$	87	$	107		(19	)%

Comparison of First-Quarter ~~2022~~2023 Results with First-Quarter ~~2021~~2022

•

Net income was $87 million compared to $107 million.

•

Net interest income decreased $14 million primarily due to the paydown of the portfolio.

•

Provision for loan losses increased $10 million. The $10 million of provision for loan losses in the current period primarily was a result of the extension of the portfolio and the resulting increase in unamortized premium allocated to expected future defaults.

Net charge-offs were $18 million compared to $7 million.

Delinquencies greater than 90 days were $2.7 billion compared to $2.7 billion.

Forbearances were $6.8 billion compared to $6.3 billion.

•

Other revenue decreased $10 million due to a decrease in transition services as well as a decrease in asset recovery revenue.

•

Expenses were $8 million lower as a result of the paydown of the loan portfolio and the decrease in other revenue discussed above.

•

~~Net income was $107 million compared to $112 million.~~

•	~~Net interest income decreased $5 million, primarily due the natural paydown of the portfolio.~~

•	~~Provision for loan losses was unchanged at $0.~~

^○

~~Charge-offs were $7 million compared with $6 million.~~

^○

~~Delinquencies greater than 30 days were $5.8 billion compared $3.8 billion.~~

^○

~~Forbearances were $6.3 billion compared to $8.5 billion.~~

•	~~Other revenue decreased $37 million which was primarily a result of the transfer of the ED servicing contract to a third party in October 2021.~~

•	~~Expenses were $35 million lower primarily as a result of the decrease in other revenue discussed above.~~

Key performance metrics are as follows:

Three Months Ended March 31,

(Dollars in millions)

2022

2021

Segment net interest margin

1.04
%

.97
%
FFELP Loans:

      FFELP Loan spread

1.11
%

1.03
%
      Provision for loan losses

$
—

$
—

      Charge-offs

$
7

$
6

      Charge-off rate

.07
%

.06
%
      Greater than 30-days delinquency rate

13.5
%

8.3
%
      Greater than 90-days delinquency rate

6.4
%

3.5
%
      Forbearance rate

12.9
%

15.5
%
      Average FFELP Loans

$
52,258

$
58,078

      Ending FFELP Loans, net

$
51,013

$
56,873

(Dollars in billions)

Number of accounts serviced for ED (in millions)⁽¹⁾

—

5.6

Total federal loans serviced⁽¹⁾

$
59

$
285


	Three Months Ended March 31,
(Dollars in millions)	2023			2022
Segment net interest margin		1.12	%		1.04	%
FFELP Loans:
FFELP Loan spread		1.25	%		1.11	%
Provision for loan losses	$	10		$	—
Net charge-offs	$	18		$	7
Net charge-off rate		.22	%		.07	%
Greater than 30-days delinquency rate		14.4	%		13.5	%
Greater than 90-days delinquency rate		7.9	%		6.4	%
Forbearance rate		16.9	%		12.9	%
Average FFELP Loans	$	43,263		$	52,258
Ending FFELP Loans, net	$	42,148		$	51,013

(Dollars in billions)
Total federal loans serviced(1)	$	49		$	59

⁽¹⁾

~~Closed on the novation and transfer of our ED servicing contract to a third party in October 2021. As of March 31, 2022, we serviced $59 billion in FFELP (federally guaranteed) loans.~~

Net Interest Margin

The following table details the net interest margin.


	Three Months Ended March 31,
	2023			2022
FFELP Loan yield		6.07	%		2.10	%
Floor Income		.45			.49
FFELP Loan net yield		6.52			2.59
FFELP Loan cost of funds		(5.27	)		(1.48	)
FFELP Loan spread		1.25			1.11
Other interest-earning asset spread impact		(.13	)		(.07	)
Net interest margin(1)		1.12	%		1.04	%

Three Months Ended March 31,

2022

2021

FFELP Loan yield

2.10
%

1.92
%
Hedged Floor Income

.35

.40

Unhedged Floor Income

.14

.18

FFELP Loan net yield

2.59

2.50

FFELP Loan cost of funds

(1.48
)

(1.47
)
FFELP Loan spread

1.11

1.03

Other interest-earning asset spread impact

(.07
)

(.06
)
Net interest margin⁽¹⁾

1.04
%

.97
%
(1)

The average balances of the interest-earning assets for the respective periods are:


	Three Months Ended March 31,
(Dollars in millions)	2023		2022
FFELP Loans	$	43,263	$	52,258
Other interest-earning assets		1,972		1,930
Total FFELP Loan interest-earning assets	$	45,235	$	54,188

⁽¹⁾

~~The average balances of the interest-earning assets for the respective periods are:~~

Three Months Ended March 31,

(Dollars in millions)

2022

2021

FFELP Loans

$
52,258

$
58,078

Other interest-earning assets

1,930

1,794

Total FFELP Loan interest-earning assets

$
54,188

$
59,872

As of March 31, ~~2022,~~2023, our FFELP Loan portfolio totaled ~~$51.0~~$42.1 billion, comprised of ~~$17.8~~$15.2 billion of FFELP Stafford Loans and ~~$33.2~~$26.9 billion of FFELP Consolidation Loans. The weighted-average life of these portfolios as of March 31, ~~2022~~2023 was 67 years and 78 years, respectively, assuming a Constant Prepayment Rate (CPR) of 9%8% and 5%, respectively.

Floor Income

The following table analyzes on a Core Earnings basis the ability of the FFELP Loans in our portfolio to earn Floor Income after March 31, ~~2022~~2023 and ~~2021,~~2022, based on interest rates as of those dates.



(Dollars in billions)	March 31, 2022			March 31, 2021			March 31, 2023			March 31, 2022
Education loans eligible to earn Floor Income	$	50.7		$	56.4		$	41.8		$	50.7
Less: post-March 31, 2006 disbursed loans required to rebate Floor Income		(23.6	)		(25.9	)		(19.9	)		(23.6	)
Less: economically hedged Floor Income		(13.0	)		(13.5	)		(9.1	)		(13.0	)
Education loans eligible to earn Floor Income after rebates and economically hedged	$	14.1		$	17.0		$	12.8		$	14.1
Education loans earning Floor Income	$	5.6		$	12.0		$	—		$	5.6

The following table presents a projection of the average balance of FFELP Consolidation Loans for which Fixed Rate Floor Income has been economically hedged with derivatives for the period April 1, ~~2022~~2023 to December 31, ~~2026.~~2027.


(Dollars in billions)	April 1, 2022 to December 31, 2022		2023		2024		2025		2026		April 1, 2023 to December 31, 2023		2024		2025		2026		2027
Average balance of FFELP Consolidation Loans whose Floor Income is economically hedged	$	12.6	$	7.8	$	2.0	$	1.0	$	1.0	$	6.3	$	2.0	$	1.0	$	1.0	$	.3

~~Servicing Revenue~~

Servicing revenue decreased $37 million primarily related to the transfer of the servicing contract for 5.6 million ED owned student loan accounts from Navient to a third party on October 6, 2021. As a result, Navient no longer is a party to the ED servicing contract. To aid in the transition, Navient will provide certain services into 2022 to the third party through a transition services agreement (see discussion below related to “Other income”). As part of the transaction, approximately 700 Navient employees were transferred to the third party.This transaction provided a seamless transition for millions of borrowers ensuring the ongoing servicing capacity for the Department of ED through the knowledge transfer and ongoing employment of 700 employees. Additional benefits to Navient of this transaction are the simplification of our business, reducing our overall risk profile and avoiding significant severance expense.

~~Third-party loan servicing fees in the three months ended March 31, 2022 and 2021 included $0 and $34 million, respectively, of servicing revenue related to the ED servicing contract.~~

Asset Recovery and Business Processing Revenue

Asset recovery and business processing revenue decreased ~~$11~~$3 million ~~primarily~~ as a result of exiting the ~~impact~~FFELP asset recovery business in the fourth quarter of ~~COVID-19 on certain collection and processing activities (temporary stoppage or other restrictions on certain activities).~~2022.

Other Income

Other income ~~increased $11~~decreased $6 million primarily related to ~~the~~lower contract-exit transition ~~services being performed in connection with the transfer of the ED Servicing contract to a third party as discussed above.~~ services.

Operating Expenses

Operating expenses for the Federal Education Loans segment primarily include costs incurred to perform servicing ~~and asset recovery activities~~ on our FFELP Loan portfolio and federal education loans held by other institutions. Expenses were ~~$35~~$8 million lower primarily as a result of the paydown of the loan portfolio and the decrease in ~~servicing~~other income discussed above.

Federal Loan Forgiveness

On August 24, 2022, the Biden-Harris Administration announced its Student Debt Relief (SDR) Plan. The SDR Plan provides up to $20,000 in one-time debt relief to income-qualified recipients with ED held student loans and ~~asset recovery revenue discussed above.~~initially extended the repayment pause on ED held loans through December 31, 2022. This repayment pause has been further extended as detailed below. As the SDR Plan is currently configured, privately held FFELP Loans, like ours, do not qualify for debt forgiveness.

Following the initial announcement of the SDR Plan, ED provided more specific guidance on debt relief through its studentaid.gov website on September 29, 2022. Following publication of the SDR Plan, a number of states and private organizations initiated legal challenges to the SDR Plan in various courts throughout the country, which ultimately resulted in the implementation of the SDR Plan being disallowed. The Biden-Harris Administration and ED subsequently appealed both cases to the Supreme Court of the United States which heard the cases on February 28, 2023, and a ruling is expected prior to the end of the Supreme Court's current term. If the SDR Plan has not been implemented and the litigation is not resolved by June 30, 2023, payments are scheduled to resume 60 days after that date. While the current version of the SDR Plan provides that borrowers with federal student loans not held by ED cannot obtain one-time debt relief by consolidating those loans into Direct Loans, ED states that they are assessing whether there are alternative pathways to provide relief to borrowers with federal student loans not held by ED, including FFELP Loans.

We estimate that borrowers with approximately $600 million of FFELP Loans (1% of the FFELP portfolio’s average 2022 balance) had consolidated their loans with ED prior to the deadline to qualify for debt relief established by the SDR Plan.

As a result, there was not a material impact on the Company’s accounting and related 2022 and 2023 results related to the SDR Plan as currently:

Privately held FFELP Loans themselves, like ours, do not qualify for debt forgiveness, and

ED required FFELP borrowers to apply to consolidate their loans into the Direct Loan program prior to September 29, 2022, to qualify for their loan forgiveness.

As a result, at this time we do not expect there to be incremental consolidation activity in the future related to potential loan forgiveness under the SDR Plan.

Consumer Lending Segment

The following table presents Core Earnings results for our Consumer Lending segment.


	Three Months Ended March 31,					% Increase (Decrease)			Three Months Ended March 31,					% Increase (Decrease)
(Dollars in millions)	2022		2021			2022 vs. 2021			2023			2022		2023 vs. 2022
Interest income:
Private Education Loans	$	276	$	319			(13	)%	$	344		$	276		25	%
Cash and investments		1		—			100			6			1		500
Interest income		277		319			(13	)		350			277		26
Interest expense		125		150			(17	)		197			125		58
Net interest income		152		169			(10	)		153			152		1
Less: provision for loan losses		16		(87	)		118			(24	)		16		(250	)
Net interest income after provision for loan losses		136		256			(47	)		177			136		30
Other income (loss):
Servicing revenue		3		1			200			3			3		—
Gains on sales of loans		—		89			(100	)
Total other income		3		90			(97	)
Direct operating expenses		35		41			(15	)		37			35		6
Income before income tax expense		104		305			(66	)		143			104		38
Income tax expense		25		71			(65	)		33			25		32
Net income	$	79	$	234			(66	)%	$	110		$	79		39	%

Comparison of First-Quarter ~~2022~~2023 Results with First-Quarter ~~2021~~2022

•

Originated $168 million of Private Education Loans compared to $966 million.

Refinance Loan originations were $135 million compared to $941 million. The decrease in originations is primarily the result of borrowers with fixed interest rate loans having less of an incentive to refinance in light of the significant increase in interest rates that occurred in 2022.

In-school loan originations were $33 million compared to $25 million.

•

Net income was $110 million compared to $79 million.

•

Net interest income increased $1 million due to an increase in the net interest margin primarily due to improved funding spreads. This was partially offset by the paydown of the portfolio.

•

Provision for loan losses decreased $40 million. The provision for loan losses of $(24) million in the current period included $(52) million in connection with the adoption of a new accounting standard (ASU 2022-02) (see "GAAP Comparison of First-Quarter 2023 Results with First-Quarter 2022" for further discussion), $5 million in connection with loan originations and $23 million in connection with the resolution of certain private legacy loans in bankruptcy. The provision of $16 million in the year-ago period included $11 million in connection with loan originations and $5 million related to a reserve build. The increases in charge-offs and delinquencies detailed below are primarily the result of loans that were experiencing repayment difficulties pre-COVID returning to repayment after pandemic relief.

Net charge-offs were $75 million compared with $69 million.

Private Education Loan delinquencies greater than 90 days: $364 million, up $50 million from $314 million.

Private Education Loan forbearances: $354 million, down $64 million from $418 million.

•

Expenses increased $2 million.

•

~~Originated $966 million of Private Education Loans compared to $1.7 billion.~~

•

Net income was $79 million compared to $234 million, a $155 million decrease. Excluding the $1.6 billion of loan sales in first-quarter 2021, net income decreased $9 million from the prior period. The $1.6 billion loan sales resulted in gains on sales of $89 million and the reversal of $102 million of allowance for loan losses through provision.

•	Net interest income decreased $17 million primarily due to the natural paydown of the non-refinance loan portfolio, as well as the $1.6 billion of loan sales in first-quarter 2021. Partially offsetting this decrease was the growth of the Private Education Refinance Loan portfolio.

•

Provision for loan losses increased $103 million. The $16 million of provision for loan losses in the current period primarily related to loan originations. There has been an improvement in the current and forecasted economic conditions since the prior period, but such improvement has not mitigated the uncertainty related to the potential negative impact on the portfolio from the end of various payment relief and stimulus benefits recently and in the future. The negative provision of $(87) million in the year-ago quarter was primarily related to the reversal of $102 million of allowance for loan losses in connection with the sale of approximately $1.6 billion of Private Education Loans, partially offset by $15 million of provision primarily related to loan originations. The increase in charge-offs and delinquencies detailed below was expected as loans return to repayment after pandemic relief.

^○

~~Charge-offs were $69 million compared with $35 million.~~

^○

~~Private Education Loan delinquencies greater than 90 days: $314 million, up $133 million from $181 million.~~

^○

~~Private Education Loan delinquencies greater than 30 days: $810 million, up $350 million from $460 million.~~

^○

~~Private Education Loan forbearances: $418 million, down $379 million from $797 million.~~

•	Other revenue decreased $87 million primarily due to $89 million of gains on sales of education loans in connection with the sale of $1.6 billion of Private Education Loans in first-quarter 2021. There were no such sales in the current quarter.

•	~~Expenses decreased $6 million.~~

Key performance metrics are as follows:


	Three Months Ended March 31,						Three Months Ended March 31,
(Dollars in millions)	2022			2021			2023			2022
Segment net interest margin		2.80	%		2.99	%		3.12	%		2.80	%
Private Education Loans (including Refinance Loans):
Private Education Loan spread		2.97	%		3.21	%		3.28	%		2.97	%
Provision for loan losses	$	16		$	(87	)	$	(24	)	$	16
Charge-offs	$	69		$	35
Charge-off rate		1.38	%		.68	%
Net charge-offs(1)							$	75		$	69
Net charge-off rate(1)								1.63	%		1.38	%
Greater than 30-days delinquency rate		4.0	%		2.3	%		4.5	%		4.0	%
Greater than 90-days delinquency rate		1.6	%		.9	%		2.0	%		1.6	%
Forbearance rate		2.0	%		3.9	%		1.9	%		2.0	%
Average Private Education Loans	$	21,157		$	22,143		$	19,289		$	21,157
Ending Private Education Loans, net	$	20,088		$	19,742		$	18,275		$	20,088
Private Education Refinance Loans:
Charge-offs	$	6		$	3
Net charge-offs							$	8		$	6
Greater than 90-day delinquency rate		.1	%		.1	%		.3	%		.1	%
Average balance of Private Education Refinance Loans	$	10,084		$	8,604		$	9,521		$	10,084
Ending balance of Private Education Refinance Loans	$	9,995		$	7,882		$	9,274		$	9,995
Private Education Refinance Loan originations	$	941		$	1,671		$	135		$	941

Net Interest Margin

The following table details the net interest margin.


	Three Months Ended March 31,
	2023			2022
Private Education Loan yield		7.24	%		5.28	%
Private Education Loan cost of funds		(3.96	)		(2.31	)
Private Education Loan spread		3.28			2.97
Other interest-earning asset spread impact		(.16	)		(.17	)
Net interest margin(1)		3.12	%		2.80	%

Three Months Ended March 31,

2022

2021

Private Education Loan yield

5.28
%

5.84
%
Private Education Loan cost of funds

(2.31
)

(2.63
)
Private Education Loan spread

2.97

3.21

Other interest-earning asset spread impact

(.17
)

(.22
)
Net interest margin⁽¹⁾

2.80
%

2.99
%
(1)

The average balances of the interest-earning assets for the respective periods are:


	Three Months Ended March 31,
(Dollars in millions)	2023		2022
Private Education Loans	$	19,289	$	21,157
Other interest-earning assets		625		732
Total Private Education Loan interest-earning assets	$	19,914	$	21,889

⁽¹⁾

~~The average balances of the interest-earning assets for the respective periods are:~~

Three Months Ended March 31,

(Dollars in millions)

2022

2021

Private Education Loans

$
21,157

$
22,143

Other interest-earning assets

732

822

Total Private Education Loan interest-earning assets

$
21,889

$
22,965

The ~~decrease~~increase in the net interest margin from the prior year is primarily a result of an increase in the net interest margin on the refinance ~~loan~~ portfolio ~~becoming a larger percentage~~due to an improvement in the cost of ~~the overall portfolio.~~funds.

As of March 31, ~~2022,~~2023, our Private Education Loan portfolio totaled ~~$20.1~~$18.3 billion, comprised of ~~$10.0~~$9.3 billion of refinance loans and ~~$10.1~~$9.0 billion of non-refinance loans. The weighted-average life of these portfolios as of March 31, ~~2022~~2023 was 34 years and 5 years, respectively, assuming a Constant Prepayment Rate (CPR) of ~~20%~~15% and 9%10%, respectively.

Provision for Loan Losses

The provision for Private Education Loan losses ~~increased $103~~decreased $40 million. The provision for loan losses of $(24) million in the current period primarily related to loan originations. There has been an improvement in the current and forecasted economic conditions since the prior period, but such improvement has not mitigated the uncertainty related to the potential negative impact on the portfolio from the end of various payment relief and stimulus benefits recently and in the future. The negative provision of $(87) million in the first quarter of 2021 was primarily related to the reversal of $102 million of allowance for loan losses in connection with the sale of $1.6 billion of Private Education Loans, partially offset by $15 million of provision primarily related to loan originations.

~~Gains on Sales of Loans~~

~~Gains on sales of loans decreased $89~~included $(52) million in connection with the ~~sale~~adoption of ~~$1.6 billion~~a new accounting standard (ASU 2022-02), $5 million in connection with loan originations and $23 million in connection with the resolution of ~~Private Education Loans~~certain private legacy loans in ~~first-quarter 2021. There were no such sales~~bankruptcy. The provision of $16 million in the ~~current period.~~year-ago quarter included $11 million in connection with loan originations and $5 million related to a reserve build.

See "Note 1 — Significant Accounting Policies" for further discussion and detail on the adoption of ASU 2022-22.

Operating Expenses

Operating expenses for our consumer lending segment include costs to originate, acquire, service and collect on our consumer loan portfolio. Operating expenses ~~decreased $6 million primarily related to lower originations.~~increased $2 million.

Business Processing Segment

The following table presents Core Earnings results for our Business Processing segment.


	Three Months Ended March 31,				% Increase (Decrease)
(Dollars in millions)	2023		2022		2023 vs. 2022
Business processing revenue	$	72	$	94		(23	)%
Direct operating expenses		67		76		(12	)
Income before income tax expense		5		18		(72	)
Income tax expense		1		4		(75	)
Net income	$	4	$	14		(71	)%

Three Months Ended March 31,

% Increase
(Decrease)

(Dollars in millions)

2022

2021

2022 vs. 2021

Business processing revenue

$
94

$
125

(25
)%
Direct operating expenses

76

91

(16
)
Income before income tax expense

18

34

(47
)
Income tax expense

4

8

(50
)
Net income

$
14

$
26

(46
)%

Comparison of First-Quarter ~~2022~~2023 Results with First-Quarter ~~2021~~2022

•

Revenue was $72 million, $22 million lower due to the expected $37 million wind-down of pandemic-related contracts which was partially offset by a $15 million growth in ongoing government and healthcare services.

•

Net income was $4 million compared to $14 million.

•

EBITDA(1) was $5 million, down $14 million, primarily the result of the revenue decrease discussed above. Upfront start-up costs on new contracts were $4 million in first-quarter 2023. Excluding these contract start-up costs, first-quarter 2023 EBITDA and EBITDA margin would be $9 million and 13%, respectively.

•

~~Net income was $14 million compared to $26 million.~~

•	Revenue decreased $31 million, or 25%, primarily due to the expected winddown of the pandemic related contracts, which was partially offset by revenue from services we perform for our traditional government and healthcare services clients.

•	~~EBITDA was $19 million, down $17 million, or 47%. The decrease in EBITDA is primarily the result of the revenue decrease discussed above.~~

Key performance metrics are as follows:


	Three Months Ended March 31,
(Dollars in millions)	2023			2022
Revenue from government services	$	40		$	49
Revenue from healthcare services		32			45
Total fee revenue	$	72		$	94
EBITDA(1)	$	5		$	19
EBITDA margin(1)		7	%		20	%

Three Months Ended March 31,

(Dollars in millions)

2022

2021

Revenue from government services

$
49

$
63

Revenue from healthcare services

45

62

Total fee revenue

$
94

$
125

EBITDA⁽¹⁾

$
19

$
36

EBITDA margin⁽¹⁾

20
%

29
%

⁽¹⁾

Item is a non-GAAP financial measure. For a description and reconciliation, see “Non-GAAP Financial Measures.”

Other Segment

The following table presents Core Earnings results for our Other segment.


	Three Months Ended March 31,						% Increase (Decrease)			Three Months Ended March 31,						% Increase (Decrease)
(Dollars in millions)	2022			2021			2022 vs. 2021			2023			2022			2023 vs. 2022
Net interest loss after provision for loan losses	$	(15	)	$	(18	)		(17	)%	$	(25	)	$	(15	)		67	%
Other income		(1	)		—			(100	)
Other income (loss)											2			(1	)		300
Expenses:
Unallocated shared services expenses:
Unallocated information technology costs		21			21			—			19			21			(10	)
Unallocated corporate costs		45			43			5			42			45			(7	)
Total unallocated shared services expenses		66			64			3			61			66			(8	)
Restructuring/other reorganization expenses		3			6			(50	)		4			3			33
Total expenses		69			70			(1	)		65			69			(6	)
Loss before income tax benefit		(85	)		(88	)		(3	)		(88	)		(85	)		4
Income tax benefit		(20	)		(21	)		(5	)		(20	)		(20	)		—
Net income (loss)	$	(65	)	$	(67	)		(3	)%	$	(68	)	$	(65	)		5	%

Net Interest Loss after Provision for Loan Losses

Net interest loss after provision for loan losses is due to the negative carrying cost of our corporate liquidity portfolio. The ~~decrease in~~amount of the net interest loss is primarily a result of ~~a decrease in~~ the size of the liquidity portfolio as well as ~~a decrease in~~ the cost of funds of the debt funding the corporate liquidity portfolio.

Unallocated Shared Services Expenses

Unallocated shared services expenses are comprised of costs primarily related to information technology costs related to infrastructure and operations, stock-based compensation expense, accounting, finance, legal, compliance and risk management, regulatory-related expenses, human resources, certain executive management and the board of directors. Regulatory-related expenses include actual settlement amounts as well as third-party professional fees we incur in connection with such regulatory matters and are presented net of any insurance reimbursements for covered costs related to such matters. On an adjusted basis, expenses ~~increased $9~~decreased $6 million from the year-ago ~~quarter, primarily related to the year-ago period having a $10 million insurance reimbursement related to litigation matters.~~quarter. Adjusted expenses exclude $1$2 million and $8$1 million, respectively, of regulatory-related expenses in the first quarters of ~~2022~~2023 and ~~2021.~~2022.

See “Note 9 – Commitments and Contingencies” for a discussion of legal and regulatory matters where it is reasonably possible that a loss contingency exists. The Company is unable to anticipate the timing of a resolution or the impact that these matters may have on the Company’s consolidated financial position, liquidity, results of operation or cash flows. As a result, it is not possible at this time to estimate a range of potential exposure, if any, for amounts that may be payable in connection with these matters and reserves have not been established. It is possible that an adverse ruling or rulings may have a material adverse impact on the Company.

Restructuring/Other Reorganization Expenses

During the first quarters of ~~2022~~2023 and ~~2021,~~2022, the Company incurred $3$4 million and $6$3 million, respectively, of restructuring/other reorganization expenses ~~in connection with an effort to reduce costs and improve operating efficiency. These charges were~~ primarily due to facility ~~lease terminations~~exit and severance-related costs.

Financial Condition

This section provides information regarding the balances, activity and credit performance metrics of our education loan portfolio.

Summary of Our Education Loan Portfolio

Ending Education Loan Balances, net


	March 31, 2023
(Dollars in millions)	FFELP Stafford and Other			FFELP Consolidation Loans			Total FFELP Loans			Private Education Loans			Total Portfolio
Total education loan portfolio:
In-school(1)	$	15		$	—		$	15		$	73		$	88
Grace, repayment and other(2)		15,339			27,008			42,347			18,908			61,255
Total		15,354			27,008			42,362			18,981			61,343
Allowance for loan losses		(155	)		(59	)		(214	)		(706	)		(920	)
Total education loan portfolio	$	15,199		$	26,949		$	42,148		$	18,275		$	60,423
% of total FFELP		36	%		64	%		100	%
% of total		25	%		45	%		70	%		30	%		100	%


	December 31, 2022
(Dollars in millions)	FFELP Stafford and Other			FFELP Consolidation Loans			Total FFELP Loans			Private Education Loans			Total Portfolio
Total education loan portfolio:
In-school(1)	$	16		$	—		$	16		$	54		$	70
Grace, repayment and other(2)		15,834			27,897			43,731			19,471			63,202
Total		15,850			27,897			43,747			19,525			63,272
Allowance for loan losses		(159	)		(63	)		(222	)		(800	)		(1,022	)
Total education loan portfolio	$	15,691		$	27,834		$	43,525		$	18,725		$	62,250
% of total FFELP		36	%		64	%		100	%
% of total		25	%		45	%		70	%		30	%		100	%


	March 31, 2022
(Dollars in millions)	FFELP Stafford and Other			FFELP Consolidation Loans			Total FFELP Loans			Private Education Loans			Total Portfolio
Total education loan portfolio:
In-school(1)	$	21		$	—		$	21		$	40		$	61
Grace, repayment and other(2)		17,983			33,264			51,247			21,012			72,259
Total		18,004			33,264			51,268			21,052			72,320
Allowance for loan losses		(176	)		(79	)		(255	)		(964	)		(1,219	)
Total education loan portfolio	$	17,828		$	33,185		$	51,013		$	20,088		$	71,101
% of total FFELP		35	%		65	%		100	%
% of total		25	%		47	%		72	%		28	%		100	%

March 31, 2022

(Dollars in millions)

FFELP
Stafford and
Other

FFELP
Consolidation
Loans

Total
FFELP
Loans

Private
Education
Loans

Total
Portfolio

Total education loan portfolio:

In-school⁽¹⁾

$
21

$
—

$
21

$
40

$
61

Grace, repayment and other⁽²⁾

17,983

33,264

51,247

21,012

72,259

Total

18,004

33,264

51,268

21,052

72,320

Allowance for loan losses

(176
)

(79
)

(255
)

(964
)

(1,219
)
Total education loan portfolio

$
17,828

$
33,185

$
51,013

$
20,088

$
71,101

% of total FFELP

35
%

65
%

100
%

% of total

25
%

47
%

72
%

28
%

100
%
(1)

Loans for customers still attending school and are not yet required to make payments on the loan.

(2)

Includes loans in deferment or forbearance.

December 31, 2021

(Dollars in millions)

FFELP
Stafford and
Other

FFELP
Consolidation
Loans

Total
FFELP
Loans

Private
Education
Loans

Total
Portfolio

Total education loan portfolio:

In-school⁽¹⁾

$
20

$
—

$
20

$
19

$
39

Grace, repayment and other⁽²⁾

18,379

34,504

52,883

21,161

74,044

Total

18,399

34,504

52,903

21,180

74,083

Allowance for loan losses

(180
)

(82
)

(262
)

(1,009
)

(1,271
)
Total education loan portfolio

$
18,219

$
34,422

$
52,641

$
20,171

$
72,812

% of total FFELP

35
%

65
%

100
%

% of total

25
%

47
%

72
%

28
%

100
%

March 31, 2021

(Dollars in millions)

FFELP
Stafford and
Other

FFELP
Consolidation
Loans

Total
FFELP
Loans

Private
Education
Loans

Total
Portfolio

Total education loan portfolio:

In-school⁽¹⁾

$
28

$
—

$
28

$
21

$
49

Grace, repayment and other⁽²⁾

19,381

37,746

57,127

20,713

77,840

Total

19,409

37,746

57,155

20,734

77,889

Allowance for loan losses

(191
)

(91
)

(282
)

(992
)

(1,274
)
Total education loan portfolio

$
19,218

$
37,655

$
56,873

$
19,742

$
76,615

% of total FFELP

34
%

66
%

100
%

% of total

25
%

49
%

74
%

26
%

100
%

⁽¹⁾	~~Loans for customers still attending school and are not yet required to make payments on the loan.~~

⁽²⁾	~~Includes loans in deferment or forbearance.~~

Education Loan Activity


	Three Months Ended March 31, 2023
(Dollars in millions)	FFELP Stafford and Other			FFELP Consolidation Loans			Total FFELP Loans			Private Education Loans			Total Portfolio
Beginning balance	$	15,691		$	27,834		$	43,525		$	18,725		$	62,250
Acquisitions (originations and purchases)(1)		—			—			—			274			274
Capitalized interest and premium/discount amortization		146			163			309			49			358
Refinancings and consolidations to third parties		(252	)		(435	)		(687	)		(72	)		(759	)
Repayments and other		(386	)		(613	)		(999	)		(701	)		(1,700	)
Ending balance	$	15,199		$	26,949		$	42,148		$	18,275		$	60,423


	Three Months Ended March 31, 2022
(Dollars in millions)	FFELP Stafford and Other			FFELP Consolidation Loans			Total FFELP Loans			Private Education Loans			Total Portfolio
Beginning balance	$	18,219		$	34,422		$	52,641		$	20,171		$	72,812
Acquisitions (originations and purchases)(1)		—			1			1			1,090			1,091
Capitalized interest and premium/discount amortization		170			183			353			53			406
Refinancings and consolidations to third parties		(245	)		(686	)		(931	)		(222	)		(1,153	)
Repayments and other		(316	)		(735	)		(1,051	)		(1,004	)		(2,055	)
Ending balance	$	17,828		$	33,185		$	51,013		$	20,088		$	71,101

Three Months Ended March 31, 2022

(Dollars in millions)

FFELP
Stafford and
Other

FFELP
Consolidation
Loans

Total
FFELP
Loans

Total Private
Education
Loans

Total
Portfolio

Beginning balance

$
18,219

$
34,422

$
52,641

$
20,171

$
72,812

Acquisitions (originations and purchases)⁽¹⁾

—

1

1

1,090

1,091

Capitalized interest and premium/discount
amortization

170

183

353

53

406

Refinancings and consolidations to third
parties

(245
)

(686
)

(931
)

(222
)

(1,153
)
Repayments and other

(316
)

(735
)

(1,051
)

(1,004
)

(2,055
)
Ending balance

$
17,828

$
33,185

$
51,013

$
20,088

$
71,101

(1)

Includes the origination of $50 million and $218 million of Private Education Refinance Loans in the first quarters of 2023 and 2022, that refinanced FFELP and Private Education Loans that were on our balance sheet.

Three Months Ended March 31, 2021

(Dollars in millions)

FFELP
Stafford and
Other

FFELP
Consolidation
Loans

Total
FFELP
Loans

Total Private
Education
Loans

Total
Portfolio

Beginning balance

$
19,607

$
38,677

$
58,284

$
21,079

$
79,363

Acquisitions (originations and purchases)⁽¹⁾

2

2

4

1,730

1,734

Capitalized interest and premium/discount
amortization

191

210

401

45

446

Refinancings and consolidations to third
parties

(248
)

(432
)

(680
)

(139
)

(819
)
Loan sales

—

—

—

(1,465
)

(1,465
)
Repayments and other

(334
)

(802
)

(1,136
)

(1,508
)

(2,644
)
Ending balance

$
19,218

$
37,655

$
56,873

$
19,742

$
76,615

⁽¹⁾

Includes the origination of $218 million and $593 million of Private Education Refinance Loans in the first quarters of 2022 and 2021, respectively, that refinanced FFELP and Private Education Loans that were on our balance sheet.

FFELP Loan Portfolio Performance


	March 31, 2023						December 31, 2022						March 31, 2022
(Dollars in millions)	Balance			%			Balance			%			Balance			%
Loans in-school/grace/deferment(1)	$	1,778					$	1,772					$	2,232
Loans in forbearance(2)		6,844						7,603						6,312
Loans in repayment and percentage of each status:
Loans current		28,886			85.6	%		29,004			84.4	%		36,948			86.5	%
Loans delinquent 31-60 days(3)		1,270			3.8			1,247			3.6			1,888			4.4
Loans delinquent 61-90 days(3)		902			2.7			833			2.4			1,148			2.7
Loans delinquent greater than 90 days(3)		2,682			7.9			3,288			9.6			2,740			6.4
Total FFELP Loans in repayment		33,740			100	%		34,372			100	%		42,724			100	%
Total FFELP Loans		42,362						43,747						51,268
FFELP Loan allowance for losses		(214	)					(222	)					(255	)
FFELP Loans, net	$	42,148					$	43,525					$	51,013
Percentage of FFELP Loans in repayment					79.6	%					78.6	%					83.3	%
Delinquencies as a percentage of FFELP Loans in repayment					14.4	%					15.6	%					13.5	%
FFELP Loans in forbearance as a percentage of loans in repayment and forbearance					16.9	%					18.1	%					12.9	%

March 31, 2022

December 31, 2021

March 31, 2021

(Dollars in millions)

Balance

%

Balance

%

Balance

%

Loans in-school/grace/deferment⁽¹⁾

$
2,232

$
2,220

$
2,781

Loans in forbearance⁽²⁾

6,312

6,292

8,452

Loans in repayment and percentage of each status:

Loans current

36,948

86.5
%

39,679

89.4
%

42,127

91.7
%
Loans delinquent 31-60 days⁽³⁾

1,888

4.4

1,696

3.8

1,377

3.0

Loans delinquent 61-90 days⁽³⁾

1,148

2.7

904

2.0

813

1.8

Loans delinquent greater than 90 days⁽³⁾

2,740

6.4

2,112

4.8

1,605

3.5

Total FFELP Loans in repayment

42,724

100
%

44,391

100
%

45,922

100
%
Total FFELP Loans

51,268

52,903

57,155

FFELP Loan allowance for losses

(255
)

(262
)

(282
)

FFELP Loans, net

$
51,013

$
52,641

$
56,873

Percentage of FFELP Loans in repayment

83.3
%

83.9
%

80.3
%
Delinquencies as a percentage of FFELP Loans in
repayment

13.5
%

10.6
%

8.3
%
FFELP Loans in forbearance as a percentage of
loans in repayment and forbearance

12.9
%

12.4
%

15.5
%
(1)

Loans for customers who may still be attending school or engaging in other permitted educational activities and are not yet required to make payments on their loans, e.g., residency periods for medical students or a grace period for bar exam preparation, as well as loans for customers who have requested and qualify for other permitted program deferments such as military, unemployment, or economic hardships.

(2)

Loans for customers who have used their allowable deferment time or do not qualify for deferment, that need additional time to obtain employment or who have temporarily ceased making payments due to hardship or other factors such as disaster relief, including COVID-19 relief programs.

(3)

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

⁽¹⁾

⁽²⁾	Loans for customers who have used their allowable deferment time or do not qualify for deferment, that need additional time to obtain employment or who have temporarily ceased making payments due to hardship or other factors such as disaster relief, including COVID-19 relief programs.

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

Private Education Loan Portfolio Performance


	March 31, 2023						December 31, 2022						March 31, 2022
(Dollars in millions)	Balance			%			Balance			%			Balance			%
Loans in-school/grace/deferment(1)	$	369					$	354					$	377
Loans in forbearance(2)		354						401						418
Loans in repayment and percentage of each status:
Loans current		17,439			95.5	%		17,838			95.0	%		19,447			96.0	%
Loans delinquent 31-60 days(3)		290			1.6			335			1.8			290			1.4
Loans delinquent 61-90 days(3)		165			.9			186			1.0			206			1.0
Loans delinquent greater than 90 days(3)		364			2.0			411			2.2			314			1.6
Total Private Education Loans in repayment		18,258			100	%		18,770			100	%		20,257			100	%
Total Private Education Loans		18,981						19,525						21,052
Private Education Loan allowance for losses		(706	)					(800	)					(964	)
Private Education Loans, net	$	18,275					$	18,725					$	20,088
Percentage of Private Education Loans in repayment					96.2	%					96.1	%					96.2	%
Delinquencies as a percentage of Private Education Loans in repayment					4.5	%					5.0	%					4.0	%
Loans in forbearance as a percentage of loans in repayment and forbearance					1.9	%					2.1	%					2.0	%
Percentage of Private Education Loans with a cosigner(4)					33	%					33	%					34	%

March 31, 2022

December 31, 2021

March 31, 2021

(Dollars in millions)

Balance

%

Balance

%

Balance

%

Loans in-school/grace/deferment⁽¹⁾

$
377

$
361

$
457

Loans in forbearance⁽²⁾

418

535

797

Loans in repayment and percentage of each status:

Loans current

19,447

96.0
%

19,634

96.8
%

19,020

97.7
%
Loans delinquent 31-60 days⁽³⁾

290

1.4

222

1.1

179

.9

Loans delinquent 61-90 days⁽³⁾

206

1.0

131

.6

100

.5

Loans delinquent greater than 90 days⁽³⁾

314

1.6

297

1.5

181

.9

Total Private Education Loans in repayment

20,257

100
%

20,284

100
%

19,480

100
%
Total Private Education Loans

21,052

21,180

20,734

Private Education Loan allowance for losses

(964
)

(1,009
)

(992
)

Private Education Loans, net

$
20,088

$
20,171

$
19,742

Percentage of Private Education Loans in
   repayment

96.2
%

95.8
%

94.0
%
Delinquencies as a percentage of Private Education
   Loans in repayment

4.0
%

3.2
%

2.3
%
Loans in forbearance as a percentage of loans in
   repayment and forbearance

2.0
%

2.6
%

3.9
%
Percentage of Private Education Loans with a
   cosigner⁽⁴⁾

34
%

35
%

40
%

(1)

Loans for customers who are attending school or are in other permitted educational activities and are not yet required to make payments on their loans, e.g., internship periods, as well as loans for customers who have requested and qualify for other permitted program deferments such as various military eligible deferments.

(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 such as disaster relief, including COVID-19 relief programs, 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.

(4)

Excluding Private Education Refinance Loans, which do not have a cosigner, the cosigner rate was 65% for all periods presented.

⁽¹⁾

⁽²⁾

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

⁽⁴⁾	~~Excluding Private Education Refinance Loans, which do not have a cosigner, the cosigner rate was 65% for all periods presented.~~

Allowance for Loan Losses


	Three Months Ended March 31,
	2023									2022
(Dollars in millions)	FFELP Loans			Private Education Loans			Total			FFELP Loans			Private Education Loans			Total
Allowance at beginning of period	$	222		$	800		$	1,022		$	262		$	1,009		$	1,271
Total provision		10			(24	)		(14	)		—			16			16
Charge-offs:
Gross charge-offs		(18	)		(88	)		(106	)		(7	)		(81	)		(88	)
Expected future recoveries on current period gross charge-offs		—			13			13			—			12			12
Net charge-offs(1)		(18	)		(75	)		(93	)		(7	)		(69	)		(76	)
Decrease in expected future recoveries on charged- off loans(2)		—			5			5			—			8			8
Allowance at end of period (GAAP)		214			706			920			255			964			1,219
Plus: expected future recoveries on previously fully charged-off loans(2)		—			268			268			—			321			321
Allowance at end of period excluding expected future recoveries on previously fully charged-off loans (Non-GAAP Financial Measure)(3)	$	214		$	974		$	1,188		$	255		$	1,285		$	1,540
Net charge-offs as a percentage of average loans in repayment (annualized)		.22	%		1.63	%					.07	%		1.38	%
Allowance coverage of charge-offs (annualized)(3)		2.9			3.2		(Non-GAAP)				8.8			4.6		(Non-GAAP)
Allowance as a percentage of the ending total loan balance(3)		.5	%		5.1	%	(Non-GAAP)				.5	%		6.1	%	(Non-GAAP)
Allowance as a percentage of ending loans in repayment(3)		.6	%		5.4	%	(Non-GAAP)				.6	%		6.3	%	(Non-GAAP)
Ending total loans	$	42,362		$	18,981					$	51,268		$	21,052
Average loans in repayment	$	34,305		$	18,552					$	43,125		$	20,387
Ending loans in repayment	$	33,740		$	18,258					$	42,724		$	20,257

Three Months Ended March 31,

2022

2021

(Dollars in millions)

FFELP Loans

Private Education Loans

Total

FFELP Loans

Private Education Loans

Total

Allowance at beginning of period

$
262

$
1,009

$
1,271

$
288

$
1,089

$
1,377

Provision:

   Reversal of allowance related to loan sales⁽¹⁾

—

—

—

—

(102
)

(102
)
   Remaining provision

—

16

16

—

15

15

Total provision

—

16

16

—

(87
)

(87
)
Charge-offs⁽²⁾

(7
)

(69
)

(76
)

(6
)

(35
)

(41
)
Decrease in expected future recoveries on charged-
   off loans⁽³⁾

—

8

8

—

25

25

Allowance at end of period

255

964

1,219

282

992

1,274

Plus: expected future recoveries on charged-off
   loans⁽³⁾

—

321

321

—

454

454

Allowance at end of period excluding expected future
   recoveries on charged-off loans⁽⁴⁾

$
255

$
1,285

$
1,540

$
282

$
1,446

$
1,728

Charge-offs as a percentage of average loans in
   repayment (annualized)

.07
%

1.38
%

.06
%

.68
%

Allowance coverage of charge-offs (annualized)⁽⁴⁾

8.8

4.6

10.7

10.2

Allowance as a percentage of the ending total loan
   balance⁽⁴⁾

.5
%

6.1
%

.5
%

7.0
%

Allowance as a percentage of ending loans in
   repayment⁽⁴⁾

.6
%

6.3
%

.6
%

7.4
%

Ending total loans

$
51,268

$
21,052

$
57,155

$
20,734

Average loans in repayment

$
43,125

$
20,387

$
47,044

$
20,883

Ending loans in repayment

$
42,724

$
20,257

$
45,922

$
19,480

(1)

Charge-offs are reported net of expected recoveries. For Private Education Loans, we charge off the estimated loss of a defaulted loan balance by charging off the entire defaulted loan balance and estimating recoveries on a pool basis. These estimated recoveries are referred to as “expected future recoveries on previously fully charged-off loans.” For FFELP Loans, the recovery is received at the time of charge-off.

(2)

At the end of each month, for Private Education Loans that are 212 or more days past due, we charge off the estimated loss of a defaulted loan balance by charging off the entire loan balance and estimating recoveries on a pool basis. These estimated recoveries are referred to as "expected future recoveries on previously fully charged-off loans." If actual periodic recoveries are greater than expected, the difference is immediately reflected as a reduction to expected future recoveries on previously fully charged-off loans. If actual periodic recoveries are greater than expected, they will be reflected as a recovery through the allowance for Private Education Loan losses once the cumulative recovery amount exceeds the cumulative amount originally expected to be recovered. The following table summarizes the activity in the expected future recoveries on previously fully charged-off loans:


	Three Months Ended March 31,
(Dollars in millions)	2023			2022
Beginning of period expected future recoveries on previously fully charged-off loans	$	274		$	329
Expected future recoveries of current period defaults		13			12
Recoveries (cash collected)		(13	)		(15	)
Charge-offs (as a result of lower recovery expectations)		(6	)		(5	)
End of period expected future recoveries on previously fully charged-off loans		268		$	321
Change in balance during period	$	(5	)	$	(8	)

(3)

The allowance used for these metrics excludes the expected future recoveries on charged-off loans to better reflect the current expected credit losses remaining in the portfolio.

⁽¹⁾

~~In connection with the sale of approximately $1.6 billion of Private Education Loans in the first quarter of 2021.~~

⁽²⁾

Charge-offs are reported net of expected recoveries. For Private Education Loans, at the time of charge-off the expected recovery amount is transferred from the education loan balance to the allowance for loan loss and is referred to as the “expected future recoveries on charged-off loans.” For FFELP Loans, the recovery is received at the time of charge-off

⁽³⁾

At the end of each month, for Private Education Loans that are 212 or more days past due, we charge off the estimated loss of a defaulted loan balance. Actual recoveries are applied against the remaining loan balance that was not charged off. We refer to this as the “expected future recoveries on charged-off loans.” If actual periodic recoveries are less than expected, the difference is immediately charged off through the allowance for Private Education Loan losses with an offsetting reduction in the expected future recoveries for charged-off loans. If actual periodic recoveries are greater than expected, they will be reflected as a recovery through the allowance for Private Education Loan losses once the cumulative recovery amount exceeds the cumulative amount originally expected to be recovered. The following table summarizes the activity in the expected future recoveries on charged-off loans:

Three Months Ended March 31,

(Dollars in millions)

2022

2021

Beginning of period expected recoveries

$
329

$
479

Expected future recoveries of current period defaults

12

5

Recoveries

(15
)

(25
)
Charge-offs

(5
)

(5
)
End of period expected recoveries

$
321

$
454

Change in balance during period

$
(8
)

$
(25
)

⁽⁴⁾	~~The allowance used for these metrics excludes the expected future recoveries on charged-off loans to better reflect the current expected credit losses remaining in the portfolio.~~

Liquidity and Capital Resources

Funding and Liquidity Risk Management

The following “Liquidity and Capital Resources” discussion concentrates primarily on our Federal Education Loans and Consumer Lending segments. Our Business Processing and Other segments require minimal liquidity and funding. ~~See “Navient’s Response to COVID-19” for a discussion of COVID-19’s impact on liquidity and capital resources.~~

We define liquidity as cash and high-quality liquid assets that we can use to meet our cash requirements. Our two primary liquidity needs are: (1) servicing our debt and (2) our ongoing ability to meet our cash needs for running the operations of our businesses (including derivative collateral requirements) throughout market cycles, including during periods of financial stress. Secondary liquidity needs, which can be adjusted as needed, include the origination of Private Education Loans, acquisitions of Private Education Loan and FFELP Loan portfolios, acquisitions of companies, the payment of common stock dividends and the repurchase of our common stock. To achieve these objectives, we analyze and monitor our liquidity needs and maintain excess liquidity and access to diverse funding sources including the issuance of unsecured debt and the issuance of secured debt primarily through asset-backed securitizations and/or other financing facilities.

We define our liquidity risk as the potential inability to meet our obligations when they become due without incurring unacceptable losses or to invest in future asset growth and business operations at reasonable market rates. Our primary liquidity risk relates to our ability to service our debt, meet our other business obligations and to continue to grow our business. The ability to access the capital markets is impacted by general market and economic conditions, our credit ratings, as well as the overall availability of funding sources in the marketplace. In addition, credit ratings may be important to customers or counterparties when we compete in certain markets and when we seek to engage in certain transactions, including over-the-counter derivatives.

Credit ratings and outlooks are opinions subject to ongoing review by the rating agencies and may change, from time to time, based on our financial performance, industry and market dynamics and other factors. Other factors that influence our credit ratings include the rating agencies’ assessment of the general operating environment, our relative positions in the markets in which we compete, reputation, liquidity position, the level and volatility of earnings, corporate governance and risk management policies, capital position and capital management practices. A negative change in our credit rating could have a negative effect on our liquidity because it might raise the cost and availability of funding and potentially require additional cash collateral or restrict cash currently held as collateral on existing borrowings or derivative collateral arrangements. It is our objective to improve our credit ratings so that we can continue to efficiently access the capital markets even in difficult economic and market conditions. We have unsecured debt totaling ~~$7.1~~$6.0 billion at March 31, ~~2022.~~2023. Three credit rating agencies currently rate our long-term unsecured debt at below investment grade.

We expect to fund our ongoing liquidity needs, including the repayment of ~~$1.0~~$1.1 billion of senior unsecured notes that mature in the short term (i.e., over the next 12 months) and the remaining ~~$6.1~~$4.9 billion of senior unsecured notes that mature in the long term (from ~~2023~~2024 to 2043 with ~~81%~~77% maturing by 2029), through a number of sources. These sources ~~primarily are~~include our cash on hand, unencumbered FFELP Loan and Private Education Refinance Loan portfolios (see “Sources of Primary Liquidity” below), the predictable operating cash flows provided by operating activities, the repayment of principal on unencumbered education loan assets, and the distribution of overcollateralization from our securitization trusts. We may also, depending on market conditions and availability, draw down on our secured FFELP Loan and Private Education Loan facilities, issue term ABS, enter into additional Private Education Loan ABS repurchase facilities, or issue additional unsecured ~~debt~~debt..

We originate Private Education Loans (a portion of which ~~are done~~is obtained through a forward purchase agreement). We also have purchased and may purchase, in future periods, Private Education Loan and FFELP Loan portfolios from third parties. ~~Those~~Loan originations and purchases are part of our ongoing liquidity needs. We purchased ~~6.2~~4.9 million shares of common stock for ~~$115~~$85 million in the first quarter of ~~2022~~2023 and have ~~$885~~$515 million of unused share repurchase authority as of March 31, ~~2022.~~2023.

Sources of Primary Liquidity



(Dollars in millions)	March 31, 2022		December 31, 2021		March 31, 2021		March 31, 2023		December 31, 2022		March 31, 2022
Ending Balances:
Total unrestricted cash and liquid investments	$	708	$	905	$	1,497	$	570	$	1,535	$	708
Unencumbered FFELP Loans		222		124		259		62		68		222
Unencumbered Private Education Refinance Loans		232		383		936		37		55		232
Total	$	1,162	$	1,412	$	2,692	$	669	$	1,658	$	1,162


	Three Months Ended
(Dollars in millions)	March 31, 2023		December 31, 2022		March 31, 2022
Average Balances:
Total unrestricted cash and liquid investments	$	825	$	1,517	$	874
Unencumbered FFELP Loans		85		153		177
Unencumbered Private Education Refinance Loans		66		300		343
Total	$	976	$	1,970	$	1,394

Three Months Ended

(Dollars in millions)

March 31, 2022

December 31, 2021

March 31, 2021

Average Balances:

Total unrestricted cash and liquid investments

$
874

$
1,339

$
1,198

Unencumbered FFELP Loans

177

119

276

Unencumbered Private Education Refinance
Loans

343

565

752

Total

$
1,394

$
2,023

$
2,226

Sources of Additional Liquidity

Liquidity may also be available under our secured credit facilities. Maximum borrowing capacity under the FFELP Loan and Private Education Loan asset-backed commercial paper (ABCP) facilities will vary and be subject to each agreement’s borrowing conditions, including, among others, facility size, current usage and availability of qualifying collateral from unencumbered loans. The following tables detail the additional borrowing capacity of these facilities with maturity dates ranging from June ~~2022~~2023 to April 2024.


(Dollars in millions)	March 31, 2022		December 31, 2021		March 31, 2021		March 31, 2023		December 31, 2022		March 31, 2022
Ending Balances
FFELP Loan ABCP facilities	$	352	$	546	$	826	$	57	$	101	$	352
Private Education Loan ABCP facilities		2,137		2,235		2,844		1,028		1,248		2,137
Total	$	2,489	$	2,781	$	3,670	$	1,085	$	1,349	$	2,489


	Three Months Ended						Three Months Ended
(Dollars in millions)	March 31, 2022		December 31, 2021		March 31, 2021		March 31, 2023		December 31, 2022		March 31, 2022
Average Balances
FFELP Loan ABCP facilities	$	382	$	441	$	656	$	107	$	193	$	382
Private Education Loan ABCP facilities		2,239		2,419		2,420		1,141		1,556		2,239
Total	$	2,621	$	2,860	$	3,076	$	1,248	$	1,749	$	2,621

At March 31, ~~2022,~~2023, we had a total of ~~$4.0~~$3.0 billion of unencumbered tangible assets inclusive of those listed in the table above as sources of primary liquidity. Total unencumbered education loans comprised ~~$2.1~~$1.5 billion principal of our unencumbered tangible assets of which ~~$1.9~~$1.5 billion and ~~$222~~$62 million related to Private Education Loans and FFELP Loans, respectively. In addition, as of March 31, ~~2022,~~2023, we had ~~$5.7~~$5.4 billion of encumbered net assets (i.e., overcollateralization) in our various financing facilities (consolidated variable interest entities). Our secured financing facilities include Private Education Loan ABS Repurchase Facilities, which had ~~$0.5~~$0.6 billion outstanding as of March 31, ~~2022.~~2023. These repurchase facilities are collateralized by the net assets in previously issued Private Education Loan ABS trusts and have had a cost of funds lower than that of a new unsecured debt issuance.

The following table reconciles encumbered and unencumbered assets and their net impact on total Tangible Equity.


(Dollars in billions)	March 31, 2023			December 31, 2022
Net assets of consolidated variable interest entities (encumbered assets) — FFELP Loans	$	3.7			3.7
Net assets of consolidated variable interest entities (encumbered assets) — Private Education Loans		1.7			1.5
Tangible unencumbered assets(1)		3.0			4.1
Senior unsecured debt		(6.0	)		(7.0	)
Mark-to-market on unsecured hedged debt(2)		.2			.3
Other liabilities, net		(.3	)		(.3	)
Total Tangible Equity (1)	$	2.3		$	2.3

(Dollars in billions)

March 31, 2022

December 31, 2021

Net assets of consolidated variable interest entities
(encumbered assets) — FFELP Loans

$
3.8

3.8

Net assets of consolidated variable interest entities
(encumbered assets) — Private Education Loans

1.9

1.7

Tangible unencumbered assets⁽¹⁾

4.0

4.5

Senior unsecured debt

(7.0
)

(7.0
)
Mark-to-market on unsecured hedged debt⁽²⁾

(.1
)

(.3
)
Other liabilities, net

(.5
)

(.8
)
Total Tangible Equity ⁽¹⁾

$
2.1

$
1.9

(1)

Item is a non-GAAP financial measure. For a description and reconciliation, see “Non-GAAP Financial Measures.”

(2)

At March 31, 2023 and December 31, 2022, there were $(207) million and $(285) million, respectively, of net gains (losses) on derivatives hedging this debt in unencumbered assets, which partially offset these gains (losses).

Borrowings

⁽¹⁾

~~Item is a non-GAAP financial measure. For a description and reconciliation, see “Non-GAAP Financial Measures.”~~

⁽²⁾

At March 31, 2022 and December 31, 2021, there were $35 million and $324 million, respectively, of net gains (losses) on derivatives hedging this debt in unencumbered assets, which partially offset these gains (losses).

~~Borrowings~~

Ending Balances


	March 31, 2023									December 31, 2022
(Dollars in millions)	Short Term			Long Term			Total			Short Term			Long Term			Total
Unsecured borrowings:
Senior unsecured debt	$	1,149		$	4,864		$	6,013		$	1,301		$	5,711		$	7,012
Total unsecured borrowings		1,149			4,864			6,013			1,301			5,711			7,012
Secured borrowings:
FFELP Loan securitizations		68			40,275			40,343			76			42,675			42,751
Private Education Loan securitizations		648			12,187			12,835			725			12,744			13,469
FFELP Loan ABCP facilities		887			428			1,315			923			386			1,309
Private Education Loan ABCP facilities		2,917			—			2,917			2,734			—			2,734
Other		105			—			105			121			—			121
Total secured borrowings		4,625			52,890			57,515			4,579			55,805			60,384
Core Earnings basis borrowings(1)		5,774			57,754			63,528			5,880			61,516			67,396
Adjustment for GAAP accounting treatment		(21	)		(366	)		(387	)		(10	)		(490	)		(500	)
GAAP basis borrowings	$	5,753		$	57,388		$	63,141		$	5,870		$	61,026		$	66,896

March 31, 2022

December 31, 2021

(Dollars in millions)

Short
Term

Long
Term

Total

Short
Term

Long
Term

Total

Unsecured borrowings:

   Senior unsecured debt

$
999

$
6,018

$
7,017

$
—

$
7,014

$
7,014

Total unsecured borrowings

999

6,018

7,017

—

7,014

7,014

Secured borrowings:

   FFELP Loan securitizations

—

49,622

49,622

—

51,841

51,841

   Private Education Loan securitizations

515

14,038

14,553

543

14,074

14,617

   FFELP Loan ABCP facilities

619

145

764

282

150

432

   Private Education Loan ABCP facilities

1,462

1,114

2,576

1,363

1,152

2,515

   Other

204

—

204

302

—

302

Total secured borrowings

2,800

64,919

67,719

2,490

67,217

69,707

Core Earnings basis borrowings⁽¹⁾

3,799

70,937

74,736

2,490

74,231

76,721

Adjustment for GAAP accounting treatment

3

(112
)

(109
)

—

257

257

GAAP basis borrowings

$
3,802

$
70,825

$
74,627

$
2,490

$
74,488

$
76,978

Average Balances


	Three Months Ended March 31,
	2023					2022
(Dollars in millions)	Average Balance		Average Rate			Average Balance		Average Rate
Unsecured borrowings:
Senior unsecured debt	$	6,279		8.14	%	$	7,015		4.30	%
Total unsecured borrowings		6,279		8.14			7,015		4.30
Secured borrowings:
FFELP Loan securitizations		41,377		5.15			50,553		1.31
Private Education Loan securitizations		13,172		3.25			14,653		2.29
FFELP Loan ABCP facilities		1,288		5.90			692		1.57
Private Education Loan ABCP facilities		2,828		6.25			2,496		1.90
Other		108		5.03			251		.67
Total secured borrowings		58,773		4.79			68,645		1.54
Core Earnings basis borrowings(1)		65,052		5.11			75,660		1.79
Adjustment for GAAP accounting treatment		—		.11			—		(.24	)
GAAP basis borrowings	$	65,052		5.22	%	$	75,660		1.55	%

(1)

Item is a non-GAAP financial measure. For a description and reconciliation, see “Non-GAAP Financial Measures.” The differences in derivative accounting give rise to the difference above.

Three Months Ended March 31,

2022

2021

(Dollars in millions)

Average
Balance

Average
Rate

Average
Balance

Average
Rate

Unsecured borrowings:

   Senior unsecured debt

$
7,015

4.30
%

$
8,675

4.60
%
Total unsecured borrowings

7,015

4.30

8,675

4.60

Secured borrowings:

   FFELP Loan securitizations

50,553

1.31

54,533

1.28

   Private Education Loan securitizations

14,653

2.29

14,644

2.55

   FFELP Loan ABCP facilities

692

1.57

2,043

1.49

   Private Education Loan ABCP facilities

2,496

1.90

2,355

2.08

   Other

251

.67

283

.32

Total secured borrowings

68,645

1.54

73,858

1.56

Core Earnings basis borrowings⁽¹⁾

75,660

1.79

82,533

1.88

Adjustment for GAAP accounting treatment

—

(.24
)

—

(.27
)
GAAP basis borrowings

$
75,660

1.55
%

$
82,533

1.61
%

⁽¹⁾

~~Item is a non-GAAP financial measure. For a description and reconciliation, see “Non-GAAP Financial Measures.” The differences in derivative accounting give rise to the difference above.~~

Critical Accounting Policies and Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations addresses our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP). A discussion of our critical accounting policies, which includes the allowance for loan losses, goodwill impairment assessment, ~~and~~ premium and discount amortization, and the impact of the SDR Plan on our accounting policies and estimates, can be found in our ~~2021~~2022 Form 10-K. In the first quarter of 2022, we considered the potential negative impact associated with the uncertainty in connection with both historically high inflation and the war in Ukraine and the potential impact on these critical accounting policies. We concluded there was not a material impact at this time. This will continue to be monitored and assessed during 2022.

Non-GAAP Financial Measures

In addition to financial results reported on a GAAP basis, Navient also provides certain performance measures which are non-GAAP financial measures. We present the following non-GAAP financial measures: (1) Core Earnings (as well as Adjusted Core Earnings), (2) Tangible Equity (as well as the Adjusted Tangible Equity ~~Ratio and~~Ratio), (3) EBITDA for the Business Processing ~~segment.~~segment, and (4) Allowance for Loan Losses Excluding Expected Future Recoveries on Previously Fully Charged-off Loans. Definitions for the non-GAAP financial measures and reconciliations are provided below, except that reconciliations of forward-looking non-GAAP financial measures are not provided because the company is unable to provide such reconciliations without unreasonable effort due to the uncertainty and inherent difficulty of predicting the occurrence and financial impact of certain items, including, but not limited to, the impact of any mark-to-market gains/losses resulting from our use of derivative instruments to hedge our economic risks.

1. Core Earnings

We prepare financial statements and present financial results in accordance with GAAP. However, we also evaluate our business segments and present financial results on a basis that differs from GAAP. We refer to this different basis of presentation as Core Earnings. We provide this Core Earnings basis of presentation on a consolidated basis and for each business segment because this is what we review internally when making management decisions regarding our performance and how we allocate resources. We also refer to this information in our presentations with credit rating agencies, lenders and investors. Because our Core Earnings basis of presentation corresponds to our segment financial presentations, we are required by GAAP to provide certain Core Earnings disclosures in the notes to our consolidated financial statements for our business segments.

Core Earnings are not a substitute for reported results under GAAP. We use Core Earnings to manage our business segments because Core Earnings reflect adjustments to GAAP financial results for two items, discussed below, that can create significant volatility mostly due to timing factors generally beyond the control of management. Accordingly, we believe that Core Earnings provide management with a useful basis from which to better evaluate results from ongoing operations against the business plan or against results from prior periods. Consequently, we disclose this information because we believe it provides investors with additional information regarding the operational and performance indicators that are most closely assessed by management. When compared to GAAP results, the two items we remove to result in our Core Earnings presentations are:

(1)

Mark-to-market gains/losses resulting from our use of derivative instruments to hedge our economic risks that do not qualify for hedge accounting treatment or do qualify for hedge accounting treatment but result in ineffectiveness; and

(2)

The accounting for goodwill and acquired intangible assets.

~~(1)~~

~~(2)~~

~~The accounting for goodwill and acquired intangible assets.~~

While GAAP provides a uniform, comprehensive basis of accounting, for the reasons described above, our Core Earnings basis of presentation does not. Core Earnings are subject to certain general and specific limitations that investors should carefully consider. For example, there is no comprehensive, authoritative guidance for management reporting. Our Core Earnings are not defined terms within GAAP and may not be comparable to similarly titled measures reported by other companies. Accordingly, our Core Earnings presentation does not represent a comprehensive basis of accounting. Investors, therefore, may not be able to compare our performance with that of other financial services companies based upon Core Earnings. Core Earnings results are only meant to supplement GAAP results by providing additional information regarding the operational and performance indicators that are most closely used by management, our board of directors, credit rating agencies, lenders and investors to assess performance.

The following tables show our consolidated GAAP results, Core Earnings results (including for each reportable ~~segment and our business as a whole~~segment) along with the adjustments made to the income/expense items to reconcile the ~~amounts~~consolidated GAAP results to ~~our reported GAAP~~the Core Earnings results as required by GAAP and reported in “Note 12 — Segment Reporting.”


	Three Months Ended March 31, 2023
				Adjustments												Reportable Segments
(Dollars in millions)	Total GAAP			Reclassi- fications			Additions/ (Subtractions)			Total Adjustments (1)			Total Core Earnings			Federal Education Loans		Consumer Lending			Business Processing		Other
Interest income:
Education loans	$	1,037														$	695	$	344		$	—	$	—
Cash and investments		34															20		6			—		8
Total interest income		1,071															715		350			—		8
Total interest expense		837															590		197			—		33
Net interest income (loss)		234		$	12		$	7		$	19		$	253			125		153			—		(25	)
Less: provisions for loan losses		(14	)											(14	)		10		(24	)		—		—
Net interest income (loss) after provisions for loan losses		248															115		177			—		(25	)
Other income (loss):
Servicing revenue		17															14		3			—		—
Asset recovery and business processing revenue		72															—		—			72		—
Other income (loss)		(1	)														5		—			—		2
Total other income (loss)		88			(12	)		20			8			96			19		3			72		2
Expenses:
Direct operating expenses		124															20		37			67		—
Unallocated shared services expenses		61															—		—			—		61
Operating expenses		185			—			—			—			185			20		37			67		61
Goodwill and acquired intangible asset impairment and amortization		3			—			(3	)		(3	)		—			—		—			—		—
Restructuring/other reorganization expenses		4			—			—			—			4			—		—			—		4
Total expenses		192			—			(3	)		(3	)		189			20		37			67		65
Income (loss) before income tax expense (benefit)		144			—			30			30			174			114		143			5		(88	)
Income tax expense (benefit)(2)		33			—			8			8			41			27		33			1		(20	)
Net income (loss)	$	111		$	—		$	22		$	22		$	133		$	87	$	110		$	4	$	(68	)

Three Months Ended March 31, 2022

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

$
334

$
276

$
—

$
—

$
610

$
19

$
(4
)

$
15

$
625

Cash and investments

—

1

—

—

1

—

—

—

1

Total interest income

334

277

—

—

611

19

(4
)

15

626

Total interest expense

195

125

—

15

335

—

(46
)

(46
)

289

Net interest income (loss)

139

152

—

(15
)

276

19

42

61

337

Less: provisions for loan losses

—

16

—

—

16

—

—

—

16

Net interest income (loss) after
   provisions for loan losses

139

136

—

(15
)

260

19

42

61

321

Other income (loss):

Servicing revenue

15

3

—

—

18

—

—

—

18

Asset recovery and business
   processing revenue

3

—

94

—

97

—

—

—

97

Other income (loss)

11

—

—

(1
)

10

(19
)

117

98

108

Total other income (loss)

29

3

94

(1
)

125

(19
)

117

98

223

Expenses:

Direct operating expenses

28

35

76

—

139

—

—

—

139

Unallocated shared services
   expenses

—

—

—

66

66

—

—

—

66

Operating expenses

28

35

76

66

205

—

—

—

205

Goodwill and acquired intangible
   asset impairment and
   amortization

—

—

—

—

—

—

4

4

4

Restructuring/other reorganization
   expenses

—

—

—

3

3

—

—

—

3

Total expenses

28

35

76

69

208

—

4

4

212

Income (loss) before income tax
   expense (benefit)

140

104

18

(85
)

177

—

155

155

332

Income tax expense (benefit)⁽²⁾

33

25

4

(20
)

42

—

35

35

77

Net income (loss)

$
107

$
79

$
14

$
(65
)

$
135

$
—

$
120

$
120

$
255

(1)

Core Earnings adjustments to GAAP:


	Three Months Ended March 31, 2023
(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	$	19	$	—		$	19
Total other income (loss)		8		—			8
Goodwill and acquired intangible asset impairment and amortization		—		(3	)		(3	)
Total Core Earnings adjustments to GAAP	$	27	$	3			30
Income tax expense (benefit)							8
Net income (loss)						$	22

(2)

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


	Three Months Ended March 31, 2022
			Adjustments											Reportable Segments
(Dollars in millions)	Total GAAP		Reclassi- fications			Additions/ (Subtractions)			Total Adjustments (1)			Total Core Earnings		Federal Education Loans		Consumer Lending		Business Processing		Other
Interest income:
Education loans	$	625												$	334	$	276	$	—	$	—
Cash and investments		1													—		1		—		—
Total interest income		626													334		277		—		—
Total interest expense		289													195		125		—		15
Net interest income (loss)		337	$	(19	)	$	(42	)	$	(61	)	$	276		139		152		—		(15	)
Less: provisions for loan losses		16											16		—		16		—		—
Net interest income (loss) after provisions for loan losses		321													139		136		—		(15	)
Other income (loss):
Servicing revenue		18													15		3		—		—
Asset recovery and business processing revenue		97													3		—		94		—
Other income (loss)		108													11		—		—		(1	)
Total other income (loss)		223		19			(117	)		(98	)		125		29		3		94		(1	)
Expenses:
Direct operating expenses		139													28		35		76		—
Unallocated shared services expenses		66													—		—		—		66
Operating expenses		205		—			—			—			205		28		35		76		66
Goodwill and acquired intangible asset impairment and amortization		4		—			(4	)		(4	)		—		—		—		—		—
Restructuring/other reorganization expenses		3		—			—			—			3		—		—		—		3
Total expenses		212		—			(4	)		(4	)		208		28		35		76		69
Income (loss) before income tax expense (benefit)		332		—			(155	)		(155	)		177		140		104		18		(85	)
Income tax expense (benefit)(2)		77		—			(35	)		(35	)		42		33		25		4		(20	)
Net income (loss)	$	255	$	—		$	(120	)	$	(120	)	$	135	$	107	$	79	$	14	$	(65	)

(1)

Core Earnings adjustments to GAAP:


	Three Months Ended March 31, 2022
(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	$	(61	)	$	—		$	(61	)
Total other income (loss)		(98	)		—			(98	)
Goodwill and acquired intangible asset impairment and amortization		—			(4	)		(4	)
Total Core Earnings adjustments to GAAP	$	(159	)	$	4			(155	)
Income tax expense (benefit)								(35	)
Net income (loss)							$	(120	)

(2)

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

⁽¹⁾

~~Core Earnings adjustments to GAAP:~~

Three Months Ended March 31, 2022

(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

$
61

$
—

$
61

Total other income (loss)

98

—

98

Goodwill and acquired intangible asset impairment and amortization

—

4

4

Total Core Earnings adjustments to GAAP

$
159

$
(4
)

155

Income tax expense (benefit)

35

Net income (loss)

$
120

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

Three Months Ended March 31, 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

$
359

$
319

$
—

$
—

$
678

$
23

$
(9
)

$
14

$
692

Cash and investments

—

—

—

—

—

—

—

—

—

Total interest income

359

319

—

—

678

23

(9
)

14

692

Total interest expense

215

150

—

18

383

(1
)

(53
)

(54
)

329

Net interest income (loss)

144

169

—

(18
)

295

24

44

68

363

Less: provisions for loan losses

—

(87
)

—

—

(87
)

—

—

—

(87
)
Net interest income (loss) after
   provisions for loan losses

144

256

—

(18
)

382

24

44

68

450

Other income (loss):

Servicing revenue

52

1

—

—

53

—

—

—

53

Asset recovery and business
   processing revenue

14

—

125

—

139

—

—

—

139

Other income (loss)

—

—

—

—

—

(11
)

47

36

36

Gains on sales of loans

—

89

—

—

89

(13
)

—

(13
)

76

Total other income (loss)

66

90

125

—

281

(24
)

47

23

304

Expenses:

Direct operating expenses

63

41

91

—

195

—

—

—

195

Unallocated shared services
   expenses

—

—

—

64

64

—

—

—

64

Operating expenses

63

41

91

64

259

—

—

—

259

Goodwill and acquired intangible
   asset impairment and amortization

—

—

—

—

—

—

5

5

5

Restructuring/other reorganization
   expenses

—

—

—

6

6

—

—

—

6

Total expenses

63

41

91

70

265

—

5

5

270

Income (loss) before income tax
   expense (benefit)

147

305

34

(88
)

398

—

86

86

484

Income tax expense (benefit)⁽²⁾

35

71

8

(21
)

93

—

21

21

114

Net income (loss)

$
112

$
234

$
26

$
(67
)

$
305

$
—

$
65

$
65

$
370

⁽¹⁾	~~Core Earnings adjustments to GAAP:~~

Three Months Ended March 31, 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

$
68

$
—

$
68

Total other income (loss)

23

—

23

Goodwill and acquired intangible asset impairment and amortization

—

5

5

Total Core Earnings adjustments to GAAP

$
91

$
(5
)

86

Income tax expense (benefit)

21

Net income (loss)

$
65

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

The following discussion summarizes the differences between GAAP and Core Earnings ~~and GAAP~~ net income and details each

specific adjustment required to reconcile our GAAP earnings to our Core Earnings segment ~~presentation to our GAAP earnings.~~presentation.


	Three Months Ended March 31,						Three Months Ended March 31,
(Dollars in millions)	2022			2021			2023			2022
Core Earnings net income	$	135		$	305
GAAP net income							$	111		$	255
Core Earnings adjustments to GAAP:
Net impact of derivative accounting		159			91			27			(159	)
Net impact of goodwill and acquired intangible assets		(4	)		(5	)		3			4
Net income tax effect		(35	)		(21	)		(8	)		35
Total Core Earnings adjustments to GAAP		120			65			22			(120	)
GAAP net income	$	255		$	370
Core Earnings net income							$	133		$	135

(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 originally 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.

The accounting for derivatives requires that changes in the fair value of derivative instruments be recognized currently in earnings, with no fair value adjustment of the hedged item, unless specific hedge accounting criteria are met. The gains and losses recorded in “Gains (losses) on derivative and hedging activities, net” and interest expense (for qualifying fair value hedges) are primarily caused by interest rate and foreign currency exchange rate volatility and changing credit spreads during the period as well as the volume and term of derivatives not receiving hedge accounting treatment. We believe that our derivatives are effective economic hedges, and as such, are a critical element of our interest rate and foreign currency risk management strategy. However, some of our derivatives, primarily Floor Income Contracts, basis swaps and at times, certain other LIBOR swaps do not qualify for hedge accounting treatment and the stand-alone derivative is adjusted to fair value in the income statement with no consideration for the corresponding change in fair value of the hedged item.

Our Floor Income Contracts are written options that must meet more stringent requirements than other hedging relationships to achieve hedge effectiveness. Specifically, our Floor Income Contracts do not qualify for hedge accounting treatment because the pay down of principal of the education loans underlying the Floor Income embedded in those education loans does not exactly match the change in the notional amount of our written Floor Income Contracts. Additionally, the term, the interest rate index, and the interest rate index reset frequency of the Floor Income Contract can be different than that of the education loans. Under derivative accounting treatment, the upfront contractual payment is deemed a liability and changes in fair value are recorded through income throughout the life of the contract. The change in the fair value of Floor Income Contracts is primarily caused by changing interest rates that cause the amount of Floor Income paid to the counterparties to vary. This is economically offset by the change in the amount of Floor Income earned on the underlying education loans but that offsetting change in fair value is not recognized. We believe the Floor Income Contracts are economic hedges because they effectively fix the amount of Floor Income earned over the contract period, thus eliminating the timing and uncertainty that changes in interest rates can have on Floor Income for that period. Therefore, for purposes of Core Earnings, we have removed the mark-to-market gains and losses related to these contracts and added back the amortization of the net contractual premiums received on the Floor Income Contracts. The amortization of the net contractual premiums received on the Floor Income Contracts for Core Earnings is reflected in education loan interest income. Under GAAP accounting, the premiums received on the Floor Income Contracts are recorded as revenue in the “gains (losses) on derivative and hedging activities, net” line item by the end of the contracts’ lives.

Basis swaps are used to convert floating rate debt from one floating interest rate index to another to better match the interest rate characteristics of the assets financed by that debt. We primarily use basis swaps to hedge our education loan assets that are primarily indexed to LIBOR or Prime. The accounting for derivatives requires that when using basis swaps, the change in the cash flows of the hedge effectively offset both the change in the cash flows of the asset and the change in the cash flows of the liability. Our basis swaps hedge variable interest rate risk; however, they generally do not meet this effectiveness test because the index of the swap does not exactly match the index of the hedged assets as required for hedge accounting treatment. Additionally, some of our FFELP Loans can earn interest at either a variable or a fixed interest rate depending on market interest rates and therefore swaps economically hedging these FFELP Loans do not meet the criteria for hedge accounting treatment. As a result, under GAAP, these swaps are recorded at fair value with changes in fair value reflected currently in the income statement.

The table below quantifies the adjustments for derivative accounting between GAAP and Core Earnings net income.


	Three Months Ended March 31,
(Dollars in millions)	2023			2022
Core Earnings derivative adjustments:
(Gains) losses on derivative and hedging activities, net, included in other income	$	8		$	(98	)
Plus: (Gains) losses on fair value hedging activity included in interest expense		6			(41	)
Total (gains) losses in GAAP net income		14			(139	)
Plus: Reclassification of settlement income (expense) on derivative and hedging activities, net(1)		12			(19	)
Mark-to-market (gains) losses on derivative and hedging activities, net(2)		26			(158	)
Amortization of net premiums on Floor Income Contracts in net interest income for Core Earnings		2			4
Other derivative accounting adjustments(3)		(1	)		(5	)
Total net impact of derivative accounting	$	27		$	(159	)

Three Months Ended March 31,

(Dollars in millions)

2022

2021

Core Earnings derivative adjustments:

Gains (losses) on derivative and hedging activities,
   net, included in other income

$
98

$
36

Plus: Gains (losses) on fair value hedging
   activity included in interest expense

41

45

Total gains (losses) in GAAP net income

139

81

Plus: Reclassification of settlement expense (income) on
   derivative and hedging activities, net⁽¹⁾

19

11

Mark-to-market gains (losses) on derivative and
   hedging activities, net⁽²⁾

158

92

Amortization of net premiums on Floor Income
   Contracts in net interest income for Core Earnings

(4
)

(9
)
Other derivative accounting adjustments⁽³⁾

5

8

Total net impact of derivative accounting

$
159

$
91

(1)

Derivative accounting requires net settlement income/expense on derivatives that do not qualify as hedges to be recorded in a separate income statement line item below net interest income. Under our Core Earnings presentation, these settlements are reclassified to the income statement line item of the economically hedged item. For our Core Earnings net interest income, this would primarily include (a) reclassifying the net settlement amounts related to our Floor Income Contracts to education loan interest income and (b) reclassifying the net settlement amounts related to certain of our interest rate swaps to debt interest expense. The table below summarizes these net settlements on derivative and hedging activities and the associated reclassification on a Core Earnings basis.


	Three Months Ended March 31,
(Dollars in millions)	2023		2022
Reclassification of settlements on derivative and hedging activities:
Net settlement expense on Floor Income Contracts reclassified to net interest income	$	—	$	(19	)
Net settlement income (expense) on interest rate swaps reclassified to net interest income		12		—
Total reclassifications of settlement income (expense) on derivative and hedging activities	$	12	$	(19	)

(2)

“Mark-to-market (gains) losses on derivative and hedging activities, net” is comprised of the following:


	Three Months Ended March 31,
(Dollars in millions)	2023		2022
Fair value hedges	$	4	$	(25	)
Foreign currency hedges		2		(16	)
Floor Income Contracts		—		(55	)
Basis swaps		2		(2	)
Other - LIBOR swaps		18		(60	)
Total mark-to-market (gains) losses on derivative and hedging activities, net	$	26	$	(158	)

(3)

Other derivative accounting adjustments consist of adjustments related to certain terminated derivatives that did not receive hedge accounting treatment under GAAP but were economic hedges under Core Earnings and, as a result, such gains or losses are amortized into Core Earnings over the life of the hedged item.

⁽¹⁾

Three Months Ended March 31,

(Dollars in millions)

2022

2021

Reclassification of settlements on derivative and
   hedging activities:

Net settlement expense on Floor Income Contracts
   reclassified to net interest income

$
(19
)

$
(23
)
Net settlement income (expense) on interest rate
   swaps reclassified to net interest income

—

(1
)
Net realized gains (losses) on terminated derivative
   contracts reclassified to other income

—

13

Total reclassifications of settlements on derivative
   and hedging activities

$
(19
)

$
(11
)

⁽²⁾	~~“Mark-to-market gains (losses) on derivative and hedging activities, net” is comprised of the following:~~

Three Months Ended March 31,

(Dollars in millions)

2022

2021

Floor Income Contracts

$
55

$
37

Basis swaps

2

4

Foreign currency hedges

16

30

Other

85

21

Total mark-to-market gains (losses) on derivative
and hedging activities, net

$
158

$
92

⁽³⁾

Other derivative accounting adjustments consist of adjustments related to: (1) foreign currency denominated debt that is adjusted to spot foreign exchange rates for GAAP where such adjustments are reversed for Core Earnings and (2) certain terminated derivatives that did not receive hedge accounting treatment under GAAP but were economic hedges under Core Earnings and, as a result, such gains or losses are amortized into Core Earnings over the life of the hedged item.

Cumulative Impact of Derivative Accounting under GAAP compared to Core Earnings

As of March 31, ~~2022,~~2023, derivative accounting has ~~decreased~~increased GAAP equity by approximately ~~$63~~$81 million as a result of cumulative net mark-to-market ~~losses~~gains (after tax) recognized under GAAP, but not in Core Earnings. The following table rolls forward the cumulative impact to GAAP equity due to these after-tax mark-to-market net gains and losses related to derivative accounting.


	Three Months Ended March 31,
(Dollars in millions)	2023			2022
Beginning impact of derivative accounting on GAAP equity	$	122		$	(299	)
Net impact of net mark-to-market gains (losses) under derivative accounting(1)		(41	)		236
Ending impact of derivative accounting on GAAP equity	$	81		$	(63	)

Three Months Ended March 31,

(Dollars in millions)

2022

2021

Beginning impact of derivative accounting on GAAP
   equity

$
(299
)

$
(616
)
Net impact of net mark-to-market gains (losses) under
   derivative accounting⁽¹⁾

236

117

Ending impact of derivative accounting on GAAP
   equity

$
(63
)

$
(499
)
(1)

Net impact of net mark-to-market gains (losses) under derivative accounting is composed of the following:


	Three Months Ended March 31,
(Dollars in millions)	2023			2022
Total pre-tax net impact of derivative accounting recognized in net income(2)	$	(27	)	$	159
Tax and other impacts of derivative accounting adjustments		7			(37	)
Change in mark-to-market gains (losses) on derivatives, net of tax recognized in other comprehensive income		(21	)		114
Net impact of net mark-to-market gains (losses) under derivative accounting	$	(41	)	$	236

(2)

See “Core Earnings derivative adjustments” table above.

⁽¹⁾

~~Net impact of net mark-to-market gains (losses) under derivative accounting is composed of the following:~~

Three Months Ended March 31,

(Dollars in millions)

2022

2021

Total pre-tax net impact of derivative accounting
   recognized in net income⁽²⁾

$
159

$
91

Tax and other impacts of derivative accounting
   adjustments

(37
)

(22
)
Change in mark-to-market gains (losses) on
   derivatives, net of tax recognized in other
   comprehensive income

114

48

Net impact of net mark-to-market gains (losses) under
   derivative accounting

$
236

$
117

⁽²⁾

~~See “Core Earnings derivative adjustments” table above.~~

Hedging Embedded Floor Income

We use Floor Income Contracts, pay-fixed swaps and fixed rate debt to economically hedge embedded ~~floor income~~Floor Income in our FFELP ~~loans.~~Loans. Historically, we have used these instruments on a periodic basis and depending upon market conditions and pricing, we may enter into additional hedges in the future. Under GAAP, the Floor Income Contracts do not qualify for hedge accounting and the pay-fixed swaps are accounted for as ~~cashflow~~cash flow hedges. The table below shows the amount of ~~Hedged~~hedged Floor Income that will be recognized in Core Earnings in future periods based on these hedge strategies.


(Dollars in millions)	March 31, 2023		March 31, 2022
Total hedged Floor Income, net of tax(1)(2)	$	166	$	289

(Dollars in millions)

March 31, 2022

March 31, 2021

Total hedged Floor Income, net of tax⁽¹⁾⁽²⁾

$
289

$
364

(1)

$217 million and $377 million on a pre-tax basis as of March 31, 2023 and March 31, 2022, respectively.

(2)

Of the $166 million as of March 31, 2023, approximately $70 million, $39 million, $21 million and $18 million will be recognized as part of Core Earnings net income in the remainder of 2023, 2024, 2025 and 2026, respectively.

⁽¹⁾(2)

~~$377 million and $476 million on a pre-tax basis as of March 31, 2022 and March 31, 2021, respectively.~~

⁽²⁾

Of the $289 million as of March 31, 2022, approximately $94 million, $98 million, $39 million and $21 million will be recognized as part of Core Earnings net income in the remainder of 2022, 2023, 2024 and 2025, respectively.

~~(2)~~ Goodwill and Acquired Intangible Assets: Our Core Earnings exclude goodwill and intangible asset impairment and the amortization of acquired intangible assets. The following table summarizes the goodwill and acquired intangible asset adjustments.


	Three Months Ended March 31,						Three Months Ended March 31,
(Dollars in millions)	2022			2021			2023		2022
Core Earnings goodwill and acquired intangible asset adjustments	$	(4	)	$	(5	)	$	3	$	4

Adjusted Core Earnings

Adjusted Core Earnings net income and Adjusted Core Earnings operating expenses exclude restructuring and regulatory-related expenses. Management excludes these expenses as itAdjusted Core Earnings is one of the measures we review internally when making management decisions regarding our performance and how we allocate resources, as this presentation is a useful basis for management and investors to further analyze Core Earnings. We also refer to this information in our presentations with credit rating agencies, lenders and investors.

The following table summarizes these expenses which are excluded:


	Three Months Ended March 31,				Three Months Ended March 31,
(Dollars in millions)	2022		2021		2023		2022
Restructuring/other reorganization expenses	$	3	$	6	$	4	$	3
Regulatory-related expenses		1		8		2		1
Total	$	4	$	14	$	6	$	4

2. Tangible Equity and Adjusted Tangible Equity Ratio

Adjusted Tangible Equity Ratio measures the ratio of Navient’s Tangible Equity to its tangible assets. We adjust this ratio to exclude the assets and equity associated with our FFELP Loan portfolio because FFELP Loans are no longer originated and the FFELP Loan portfolio bears a 3% maximum loss exposure under the terms of the federal guaranty. Management believes that excluding this portfolio from the ratio enhances its usefulness to investors. Management uses this ratio, in addition to other metrics, for analysis and decision making related to capital allocation decisions. The Adjusted Tangible Equity Ratio is calculated as:


(Dollars in millions)	March 31, 2022			March 31, 2021			March 31, 2023			March 31, 2022
Navient Corporation's stockholders' equity	$	2,824		$	2,723		$	2,958		$	2,824
Less: Goodwill and acquired intangible assets		722			731			703			722
Tangible Equity		2,102			1,992			2,255			2,102
Less: Equity held for FFELP Loans		255			284			211			255
Adjusted Tangible Equity	$	1,847		$	1,708		$	2,044		$	1,847
Divided by:
Total assets	$	78,158		$	84,957		$	66,913		$	78,158
Less:
Goodwill and acquired intangible assets		722			731			703			722
FFELP Loans		51,013			56,873			42,148			51,013
Adjusted tangible assets	$	26,423		$	27,353		$	24,062		$	26,423
Adjusted Tangible Equity Ratio⁽¹⁾		7.0	%		6.2	%
Adjusted Tangible Equity Ratio								8.5	%		7.0	%

⁽¹⁾

The following provides the Adjusted Tangible Equity Ratio on a pro forma basis assuming the cumulative net mark-to-market losses related to derivative accounting under GAAP were excluded. These cumulative losses reverse to $0 upon the maturity of the individual derivative instruments. As these losses are temporary, we believe this pro forma presentation is a useful basis for management and investors to further analyze the Adjusted Tangible Equity Ratio.

(Dollars in millions)

March 31, 2022

March 31, 2021

Adjusted Tangible Equity (from above table)

$
1,847

$
1,708

Plus: ending impact of derivative accounting on GAAP equity

63

499

Pro forma Adjusted Tangible Equity

$
1,910

$
2,207

Divided by: adjusted tangible assets (from above table)

$
26,423

$
27,353

Pro forma Adjusted Tangible Equity Ratio

7.2
%

8.1
%

3. Earnings before Interest, Taxes, Depreciation and Amortization Expense (EBITDA)

This measures the operating performance of the Business Processing segment and is used by management and equity investors to monitor operating performance and determine the value of those businesses. EBITDA for the Business Processing segment is calculated as:


	Three Months Ended March 31,
(Dollars in millions)	2023			2022
Pre-tax income	$	5		$	18
Plus:
Depreciation and amortization expense(1)		—			1
EBITDA	$	5		$	19
Divided by:
Total revenue	$	72		$	94
EBITDA margin		7	%		20	%

Three Months Ended March 31,

(Dollars in millions)

2022

2021

Pre-tax income

$
18

$
34

Plus:

Depreciation and amortization expense⁽¹⁾

1

2

EBITDA

$
19

$
36

Divided by:

Total revenue

$
94

$
125

EBITDA margin

20
%

29
%
(1)

There is no interest expense in this segment.

4. Allowance for Loan Losses Excluding Expected Future Recoveries on Previously Fully Charged-off

Loans

The allowance for loan losses on the Private Education Loan portfolio used for the three credit metrics below excludes the expected future recoveries on previously fully charged-off loans to better reflect the current expected credit losses remaining in connection with the loans on balance sheet that have not charged off. That is, as of March 31, 2023, the $974 million Private Education Loan allowance for loan losses excluding expected future recoveries on previously fully charged-off loans represents the current expected credit losses that remain in connection with the $18,275 million Private Education Loan portfolio. The $268 million of expected future recoveries on previously fully charged-off loans, which is collected over an average 15-year period, mechanically is a reduction to the overall allowance for loan losses. However, it is not related to the $18,275 million Private Education Loan portfolio on our balance sheet and, as a result, management excludes this impact to the allowance to better evaluate and assess our overall credit loss coverage on the Private Education Loan portfolio. We believe this provides a more meaningful and holistic view of the available credit loss coverage on our non-charged-off Private Education Loan portfolio. We believe this information is useful to our investors, lenders and rating agencies.

Allowance for Loan Losses Metrics – Private Education Loans


	Three Months Ended March 31,
(Dollars in millions)	2023			2022
Allowance at end of period (GAAP)	$	706		$	964
Plus: expected future recoveries on previously fully charged-off loans		268			321
Allowance at end of period excluding expected future recoveries on previously fully charged-off loans (Non-GAAP Financial Measure)	$	974		$	1,285
Ending total loans	$	18,981		$	21,052
Ending loans in repayment	$	18,258		$	20,257
Net charge-offs	$	75		$	69

Allowance coverage of charge-offs (annualized):
GAAP		2.3			3.4
Adjustment(1)		.9			1.2
Non-GAAP Financial Measure(1)		3.2			4.6

Allowance as a percentage of the ending total loan balance:
GAAP		3.7	%		4.6	%
Adjustment(1)		1.4			1.5
Non-GAAP Financial Measure(1)		5.1	%		6.1	%

Allowance as a percentage of the ending loans in repayment:
GAAP		3.9	%		4.8	%
Adjustment(1)		1.5			1.5
Non-GAAP Financial Measure(1)		5.4	%		6.3	%

(1)

The allowance used for these credit metrics excludes the expected future recoveries on previously fully charged-off loans. See discussion above.

⁽¹⁾

~~There is no interest expense in this segment.~~

Legal Proceedings

For a discussion of legal matters as of March 31, ~~2022,~~2023, please refer to “Note 9 – Commitments and Contingencies” to our consolidated financial statements included in this report, which is incorporated into this item by reference.

Risk Factors

The risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021~~2022 (the “Form 10-K”) should be considered together with information included in this Quarterly Report on Form ~~10-Q for the quarter ended March 31, 2022. For a discussion of our risk factors, please see “Risk Factors” in our 2021 Annual Report on Form 10-K.~~10-Q. These are not the only risks to which we are exposed. The following information amends and restates in their entirety the previously disclosed risk factors in our Form 10-K relating to adverse market conditions and potential inability to manage our liquidity risk or access liquidity and credit risk related to use of our derivatives. Except for such additional information, we believe there have been no material changes from the risk factors previously disclosed in our Form 10-K.

Adverse market conditions or an inability to effectively manage our liquidity risk or access liquidity could negatively impact our ability to meet our liquidity and funding needs, which could materially and adversely impact our results of operations, cash flow or financial condition.

We must effectively manage our liquidity risk. We require liquidity and the ability to access funds held at banks and other financial institutions to meet cash requirements such as day-to-day operating expenses, origination of loans, required payments of principal and interest on borrowings, and distributions to shareholders. We expect to fund our ongoing liquidity needs, including the repayment of $6.0 billion of senior unsecured notes that mature in 2023 to 2043, primarily through our current cash, investments and unencumbered FFELP Loan and Private Education Refinance Loan portfolios, the predictable operating cash flows provided by operating activities, the repayment of principal on unencumbered education loan assets, and the distribution of overcollateralization from our securitization trusts. We may also, depending on market conditions and availability, draw down on our secured FFELP Loan and Private Education Loan facilities, issue term ABS, enter into additional Private Education Loan ABS repurchase facilities, or issue additional unsecured debt. We may maintain too much liquidity, which can be costly, or may be too illiquid or may be unable to access funds held at banks and other financial institutions due to such banks or financial institutions entering receivership or becoming insolvent, which could result in financial distress during times of financial stress or capital market disruptions.

Our use of derivatives to manage interest rate and foreign currency sensitivity exposes us to credit and market risk that could have a material adverse effect on our earnings and liquidity.

We strive to maintain an overall strategy that uses derivatives to minimize the economic effect of interest rate and/or foreign currency changes. However, developing an effective strategy for dealing with these movements is complex, and no strategy can completely avoid the risks associated with these fluctuations. For example, our education loan portfolio is subject to prepayment risk that could result in being under- or over-hedged, which could result in material losses. As a result, there can be no assurance that hedging activities using derivatives will effectively manage our interest rate or foreign currency sensitivity, have the desired beneficial impact on our results of operations or financial condition or not adversely impact our liquidity.

Our use of derivatives also exposes us to market risk and credit risk. Market risk is the chance of financial loss resulting from changes in interest rates, foreign exchange rates and market liquidity. Our Floor Income Contracts and basis swaps we use to manage earnings variability caused by different reset characteristics on interest-earning assets and interest-bearing liabilities do not qualify for hedge accounting treatment. Therefore, the change in fair value, called the “mark-to-market,” of these derivative instruments is included in our statement of income without a corresponding mark-to-market of the economically hedged item. A decline in the fair value of these derivatives could have a material adverse effect on our reported earnings. In addition, a change in the mark-to-market value of these instruments may cause us to have to post more collateral to our counterparty or to a clearing house. If these values change significantly, the increased collateral posting requirement could have a material adverse impact on our liquidity.

Credit risk is the risk that a counterparty, for a period of time or indefinitely, will not perform its obligations under a contract or is not permitted to perform its obligations under a contract due to the counterparty entering receivership or becoming insolvent. Credit risk is limited to the loss of the fair value gain in a derivative that the counterparty or clearinghouse owes or will owe in the future to us. If a counterparty or clearinghouse fails to perform its obligations, we could, depending on the type of counterparty arrangement, experience a loss of liquidity or an economic loss. In addition, we might not be able to cost effectively replace the derivative position depending on the type of derivative and the current economic environment.

Our securitization trusts, which we consolidate on our balance sheet, had $1.7 billion of Euro denominated bonds outstanding as of March 31, 2023. To convert these non-U.S. dollar denominated bonds into U.S. dollar liabilities, the trusts have entered into foreign-currency swaps with highly rated counterparties. A failure by a swap counterparty to perform its obligations could, if the swap has a positive fair value to us and was not adequately collateralized, materially and adversely affect our earnings.

Quantitative and Qualitative Disclosures about Market Risk

LIBOR Transition

We continue to work internally as well as with external parties to ensure an orderly transition from one-month and three-month LIBOR to an alternative benchmark rate by the June 30, 2023 transition date. We have established an internal LIBOR transition team whose purpose is to assess impacts, recommend plans and coordinate transition efforts among different business areas. Executive management and the LIBOR transition team provide quarterly reports to our Board of Directors. We have also established internal LIBOR working groups comprised of members from different business areas who meet regularly to assess specific business-level impacts and to implement operational changes necessary to effectuate a successful transition from LIBOR. In addition to our enterprise-wide efforts, we engage with market participants, industry groups and regulators, including the Alternative Reference Rates Committee (the ARRC), to develop plans and documentation to facilitate the transition to an alternative benchmark rate.

We ~~support the ARRC’s recommendation to replace LIBOR with the Secured Overnight Financing Rate (SOFR) and~~ continue to ~~comply~~work to align with the ARRC’s recommended best practices for completing the transition from LIBOR. All our new variable rate Private Education Loans issued since December 2021 are indexed to SOFR. Also, as of December 31, 2021, we have ceased entering into any other new contracts that are indexed to LIBOR and, where practicable, have engaged with counterparties to modify certain existing contracts to transition the existing reference rate from LIBOR to SOFR. With respect to our legacy variable rate Private Education Loans and other financial contracts that reference USD LIBOR and contain fallbacks provisions that clearly specify a method for the transition from LIBOR, we plan to transition such loans using such existing fallbacks. We have engaged with our IT vendors and impacted internal work groups to prepare and update our systems, procedures and processes to transition LIBOR-indexed contracts to SOFR. With respect to our financial instruments that do not include fallback provisions that clearly specify a method for the transition from LIBOR to an alternative benchmark rate, where practicable and commercially reasonable, we have made efforts to engage with customers, counterparties and investors to modify such instruments. Due to stringent noteholder consent requirements, it may be impracticable or impossible to modify certain financial instruments like certain of our ABS. Further, the SAP formula for our FFELP Loans, which is indexed to one-month LIBOR, cannot be modified without legislative action. Thus, in such instances, we ~~may~~will need to rely on ~~the New York state LIBOR legislation or the proposed~~ federal legislation to transition to SOFR.

On March 15, 2022, the Adjustable Interest Rate (LIBOR) Act (the ~~“LIBOR Act”)~~LIBOR Act) was signed into law. The LIBOR Act provides that for contracts that contain no fallback provision or contain fallback provisions that do not identify a specific USD LIBOR benchmark replacement (including the SAP formula for FFELP Loans), a benchmark replacement based on SOFR, as recommended by the Federal Reserve Bank of New York, will automatically replace the USD LIBOR benchmark in the contract after June 30, 2023. ~~The recommended benchmark replacement will be based on the SOFR published by~~On December 16, 2022, the Federal Reserve Bank of New York ~~including any recommended spread adjustment and~~adopted a final rule that implements the LIBOR Act by identifying benchmark ~~replacement conforming changes.~~rates based on SOFR that will replace LIBOR in certain financial contracts after June 30, 2023. Following the enactment and implementation of the LIBOR Act, all of our financial instruments which are currently indexed to USD LIBOR will transition to SOFR by no later than June 30, 2023. Specifically, after June 30, 2023, the SAP formula for FFELP Loans will transition to 30-day Average SOFR and our LIBOR-indexed FFELP ABS contracts that are subject to the LIBOR Act will transition to 30-day or 90-day Average SOFR. Our LIBOR-indexed Private Education Loan ABS contracts that are subject to the LIBOR Act will transition to 1-month or 3-month Term SOFR. Similarly, our LIBOR-indexed Private Education Loans will transition to 1-month or 3-month Term SOFR. Our LIBOR-indexed derivatives will transition to the Fallback Rate (SOFR) as defined in the ISDA 2020 IBOR Fallbacks Protocol published by the International Swaps and Derivatives Association, Inc. on October 23, 2020.

For a discussion of the risks related to the LIBOR transition, see “Risk Factors – Market, Funding & Liquidity Risk – The transition away from the LIBOR reference rate to ~~an alternative reference rate~~the Secured Overnight Financing Rate (SOFR) may create uncertainty in the capital markets and may negatively impact the value of existing LIBOR based financial ~~instruments. Post transition alternative reference rates may perform significantly different than LIBOR”~~instruments and our financial results and business” in our ~~Annual Report on~~ Form ~~10-K for the fiscal year ended December 31, 2021.~~10-K.

Interest Rate Sensitivity Analysis

Our interest rate risk management seeks to limit the impact of short-term movements in interest rates on our results of operations and financial position. The following tables summarize the potential effect on earnings over the next 12 months and the potential effect on fair values of balance sheet assets and liabilities at March 31, ~~2022~~2023 and ~~2021,~~2022, based upon a sensitivity analysis performed by management assuming a hypothetical increase and decrease in market interest rates of 100 basis points. The earnings sensitivities assume an immediate increase and decrease in market interest rates of 100 basis points and are applied only to financial assets and liabilities, including hedging instruments, that existed at the balance sheet date and do not take into account any new assets, liabilities or hedging instruments that may arise over the next 12 months.


	As of March 31, 2022					As of March 31, 2021						As of March 31, 2023					As of March 31, 2022
	Impact on Annual Earnings If:					Impact on Annual Earnings If:						Impact on Annual Earnings If:					Impact on Annual Earnings If:
	Interest Rates					Interest Rates						Interest Rates					Interest Rates
(Dollars in millions, except per share amounts)	Increase 100 Basis Points		Decrease 100 Basis Points			Increase 100 Basis Points			Decrease 100 Basis Points			Increase 100 Basis Points		Decrease 100 Basis Points			Increase 100 Basis Points		Decrease 100 Basis Points
Effect on Earnings:
Change in pre-tax net income before mark-to -market gains (losses) on derivative and hedging activities⁽¹⁾	$	25	$	4		$	(34	)	$	13
Change in pre-tax net income before mark-to -market gains (losses) on derivative and hedging activities												$	39	$	(26	)	$	25	$	4
Mark-to-market gains (losses) on derivative and hedging activities		43		(63	)		115			(153	)		32		(33	)		43		(63	)
Increase (decrease) in income before taxes	$	68	$	(59	)	$	81		$	(140	)	$	71	$	(59	)	$	68	$	(59	)
Increase (decrease) in net income after taxes	$	52	$	(45	)	$	62		$	(108	)	$	55	$	(45	)	$	52	$	(45	)
Increase (decrease) in diluted earnings per common share	$	.35	$	(.30	)	$	.35		$	(.60	)	$	.43	$	(.36	)	$	.35	$	(.30	)


	At March 31, 2023
			Interest Rates:
			Change from Increase of 100 Basis Points						Change from Decrease of 100 Basis Points
(Dollars in millions)	Fair Value		$			%			$			%
Effect on Fair Values:
Assets
Education Loans	$	57,500	$	(100	)		—		$	148			—
Other earning assets		2,931		—			—			—			—
Other assets		3,559		24			1			(11	)		—
Total assets gain/(loss)	$	63,990	$	(76	)		—	%	$	137			—	%
Liabilities
Interest-bearing liabilities	$	60,019	$	(245	)		—	%	$	264			—	%
Other liabilities		814		121			15			(115	)		(14	)
Total liabilities (gain)/loss	$	60,833	$	(124	)		—	%	$	149			—	%


	At December 31, 2022
			Interest Rates:
			Change from Increase of 100 Basis Points						Change from Decrease of 100 Basis Points
(Dollars in millions)	Fair Value		$			%			$			%
Effect on Fair Values:
Assets
Education Loans	$	59,306	$	(81	)		—		$	120			—
Other earning assets		4,974		—			—			—			—
Other assets		3,571		36			1			(29	)		(1	)
Total assets gain/(loss)	$	67,851	$	(45	)		—	%	$	91			—	%
Liabilities
Interest-bearing liabilities	$	63,531	$	(250	)		—	%	$	272			—	%
Other liabilities		922		125			14			(134	)		(15	)
Total liabilities (gain)/loss	$	64,453	$	(125	)		—	%	$	138			—	%

⁽¹⁾

~~If decreasing interest rates by 100 basis points results in a negative interest rate, we assume the interest rate is 0% for this disclosure (as opposed to being a negative interest rate).~~

At March 31, 2022

Interest Rates:

Change from
Increase of
100 Basis
Points

Change from
Decrease of
100 Basis
Points

(Dollars in millions)

Fair Value

$

%

$

%

Effect on Fair Values:

Assets

Education Loans

$
70,588

$
(152
)

—

$
231

—

Other earning assets

3,424

—

—

—

—

Other assets

3,633

18

—

85

2

Total assets gain/(loss)

$
77,645

$
(134
)

—
%

$
316

—
%
Liabilities

Interest-bearing liabilities

$
73,328

$
(321
)

—
%

$
347

—
%
Other liabilities

701

119

17

(8
)

(1
)
Total liabilities (gain)/loss

$
74,029

$
(202
)

—
%

$
339

—
%

At December 31, 2021

Interest Rates:

Change from
Increase of
100 Basis
Points

Change from
Decrease of
100 Basis
Points

(Dollars in millions)

Fair Value

$

%

$

%

Effect on Fair Values:

Assets

Education Loans

$
74,772

$
(279
)

—

$
432

1
%
Other earning assets

3,845

—

—

—

—

Other assets

3,948

(124
)

(3
)

263

7

Total assets gain/(loss)

$
82,565

$
(403
)

—
%

$
695

1
%
Liabilities

Interest-bearing liabilities

$
77,040

$
(356
)

—
%

$
386

1
%
Other liabilities

1,019

(40
)

(4
)

193

19

Total liabilities (gain)/loss

$
78,059

$
(396
)

(1
)%

$
579

1
%

A primary objective in our funding is to minimize our sensitivity to changing interest rates by generally funding our floating rate education loan portfolio with floating rate debt and our fixed rate education loan portfolio with fixed rate debt although we can have a mismatch at times. In addition, we can have a mismatch in the index (including the frequency of reset) of floating rate debt versus floating rate assets. In addition, due to the ability of some FFELP Loans to earn Floor Income, we can have a fixed versus floating mismatch in funding if the education loan earns at the fixed borrower rate and the funding remains floating. ~~During 2021 and 2020, certain FFELP Loans were earning~~We use Floor Income Contracts, pay-fixed swaps and ~~we locked in a portion of that~~fixed rate debt to economically hedge embedded Floor Income ~~through~~in our FFELP loans. Historically, we have used these instruments on a periodic basis and depending upon market conditions and pricing, we may enter into additional hedges in the ~~use of derivative contracts.~~future. The result of these hedging transactions ~~was~~is to fix the relative spread between the education loan asset rate and the variable rate liability.

In the preceding tables, under the scenario where interest rates increase or decrease by 100 basis points, the change in pre-tax net income before the mark-to-market gains (losses) on derivative and hedging activities is primarily due to the impact of (i) our unhedged FFELP Loans being in a fixed-rate mode due to Floor Income, while being funded with variable rate debt in low interest rate environments; (ii) certain FFELP fixed rate loans becoming variable interest rate loans when variable interest rates rise above a certain level (Special Allowance Payment of “SAP”). When these loans are funded with fixed rate debt (as we do for a portion of the portfolio to economically hedge Floor Income) we earn additional interest income when earning the higher variable rate that is in effect; and ~~(ii)~~(iii) a portion of our variable rate assets being funded with fixed rate liabilities. Item (i) will generally cause income to decrease when interest rates increase and income to increase when interest rates decrease. Item (ii) ~~has~~and (iii) have the opposite effect. The changes due to the interest rate scenarios in the current period ~~in relation to each other and in relation to the prior period,~~ are primarily a result of item (ii) having a more significant impact than item (i) as a result of interest rates being significantly higher compared to the ~~1-year LIBOR forward curve increasing significantly from~~prior period. The changes in the prior period ~~which results in less loss~~are a result of ~~Floor Income when~~item (i) having a more significant impact than item (ii) primarily as a result of interest rates ~~are increased and~~being significantly lower at that time. In addition, item (iii) had more of an impact in the prior period due to a ~~greater increase to Floor Income when rates are decreased.~~higher balance of variable rate assets being funded with fixed rate liabilities.

In the preceding tables, under the scenario where interest rates increase or decrease by 100 basis points, the change in mark-to-market gains (losses) on derivative and hedging activities in both periods is primarily due to (i) the notional amount and remaining term of our derivative portfolio and related hedged debt and (ii) the interest rate environment. In both periods, the mark-to-market gains (losses) are primarily related to derivatives that don’t qualify for hedge accounting that are used to economically hedge Floor Income as well as the origination of fixed rate Private Education Refinance loans. As a result of not qualifying for hedge accounting, there is not an offsetting mark- to-market of the hedged item in this analysis. The mark-to-market gains (losses) where interest rates increase and decrease 100 basis points are lower in ~~2022~~2023 than ~~2021~~2022 primarily as a result of ~~an increased~~2023's higher interest rate ~~environment~~

~~in 2022~~environment's impact on derivatives used to hedge Floor Income and a decline in the notional amount of derivatives outstanding in connection with the decrease in the education loan portfolio over that time period.

In addition to interest rate risk addressed in the preceding tables, we are also exposed to risks related to foreign currency exchange rates. Foreign currency exchange risk is primarily the result of foreign currency denominated debt issued by us. When we issue foreign denominated corporate unsecured and securitization debt, our policy is to use cross currency interest rate swaps to swap all foreign currency denominated debt payments (fixed and floating) to USD LIBOR using a fixed exchange rate. In the tables above, there would be an immaterial impact on earnings if exchange rates were to decrease or increase, due to the terms of the hedging instrument and hedged items matching. The balance sheet interest-bearing liabilities would be affected by a change in exchange rates; however, the change would be materially offset by the cross-currency interest rate swaps in other assets or other liabilities. In certain economic environments, volatility in the spread between spot and forward foreign exchange rates has resulted in mark-to-market impacts to current period earnings which have not been factored into the above analysis. The earnings impact is noncash, and at maturity of the instruments the cumulative mark-to-market impact will be zero. Navient has not issued foreign currency denominated debt since 2008.

Asset and Liability Funding Gap

The tables below present our assets and liabilities (funding) arranged by underlying indices as of March 31, ~~2022.~~2023. In the following GAAP presentation, the funding gap only includes derivatives that qualify as effective hedges (those derivatives which are reflected in net interest margin, as opposed to those reflected in the “gains (losses) on derivatives and hedging activities, net” line on the consolidated statements of income). The difference between the asset and the funding is the funding gap for the specified index. This represents our exposure to interest rate risk in the form of basis risk and repricing risk, which is the risk that the different indices may reset at different frequencies or may not move in the same direction or at the same magnitude.

Management analyzes interest rate risk and in doing so includes all derivatives that are economically hedging our debt whether they qualify as effective hedges or not (Core Earnings basis). Accordingly, we are also presenting the asset and liability funding gap on a Core Earnings basis in the table that follows the GAAP presentation.

GAAP Basis:


Index (Dollars in billions)	Frequency of Variable Resets	Assets		Funding(1)		Funding Gap
3-month Treasury bill	weekly	$	2.2	$	—	$	2.2
3-month Treasury bill	annual		.1		—		.1
Prime	annual		.1		—		.1
Prime	quarterly		1.2		—		1.2
Prime	monthly		4.1		—		4.1
3-month LIBOR	quarterly		.2		17.2		(17.0	)
1-month LIBOR	monthly		2.6		24.8		(22.2	)
1-month LIBOR	daily		39.7		—		39.7
SOFR(2)	various		.1		.7		(.6	)
Non-Discrete reset(2)(3)	monthly		—		4.6		(4.6	)
Non-Discrete reset(4)	daily/weekly		3.0		.1		2.9
Fixed Rate(5)			13.6		19.5		(5.9	)
Total		$	66.9	$	66.9	$	—

Index
(Dollars in billions)

Frequency of
Variable
Resets

Assets

Funding⁽¹⁾

Funding
Gap

3-month Treasury bill

weekly

$
2.6

$
—

$
2.6

3-month Treasury bill

annual

.2

—

.2

Prime

annual

.2

—

.2

Prime

quarterly

1.4

—

1.4

Prime

monthly

5.1

—

5.1

3-month LIBOR

quarterly

.3

22.2

(21.9
)
3-month LIBOR⁽²⁾

monthly

—

.5

(.5
)
3-month LIBOR⁽²⁾

daily

—

.1

(.1
)
1-month LIBOR

monthly

3.4

29.8

(26.4
)
1-month LIBOR

daily

48.2

—

48.2

SOFR⁽³⁾

various

—

.1

(.1
)
Non-Discrete reset⁽²⁾⁽⁴⁾

monthly

—

3.7

(3.7
)
Non-Discrete reset⁽⁵⁾

daily/weekly

3.4

.2

3.2

Fixed Rate⁽⁶⁾

13.4

21.6

(8.2
)
Total

$
78.2

$
78.2

$
—

(1)

Funding (by index) includes all derivatives that qualify as hedges.

(2)

Funding includes loan repurchase facilities.

(3)

Funding consists of auction rate ABS and ABCP facilities.

(4)

Assets include restricted and unrestricted cash equivalents and other overnight type instruments. Funding includes the obligation to return cash collateral held related to derivatives exposures.

(5)

Assets include receivables and other assets (including goodwill and acquired intangibles). Funding includes other liabilities and stockholders’ equity.

⁽¹⁾

~~Funding (by index) includes all derivatives that qualify as hedges.~~

⁽²⁾

~~Funding includes loan repurchase facilities.~~

⁽³⁾

~~Assets include $37M of student loans indexed to 30-day average SOFR. Funding includes $50M indexed to 30-day average SOFR or 90-day average SOFR.~~

⁽⁴⁾

~~Funding consists of auction rate ABS and ABCP facilities.~~

⁽⁵⁾

~~Assets include restricted and unrestricted cash equivalents and other overnight type instruments. Funding includes the obligation to return cash collateral held related to derivatives exposures.~~

⁽⁶⁾

~~Assets include receivables and other assets (including goodwill and acquired intangibles). Funding includes other liabilities and stockholders’ equity.~~

Core Earnings Basis:


Index (Dollars in billions)	Frequency of Variable Resets	Assets		Funding(1)		Funding Gap
3-month Treasury bill	weekly	$	2.2	$	—	$	2.2
3-month Treasury bill	annual		.1		—		.1
Prime	annual		.1		—		.1
Prime	quarterly		1.2		—		1.2
Prime	monthly		4.1		—		4.1
3-month LIBOR	quarterly		.2		6.2		(6.0	)
1-month LIBOR	monthly		2.6		34.3		(31.7	)
1-month LIBOR	daily		39.7		—		39.7
SOFR(2)	various		.1		.7		(.6	)
Non-Discrete reset(2)(3)	monthly		—		4.6		(4.6	)
Non-Discrete reset(4)	daily/weekly		3.0		.1		2.9
Fixed Rate(5)			13.7		21.1		(7.4	)
Total		$	67.0	$	67.0	$	—

Index
(Dollars in billions)

Frequency of
Variable
Resets

Assets

Funding⁽¹⁾

Funding
Gap

3-month Treasury bill

weekly

$
2.6

$
—

$
2.6

3-month Treasury bill

annual

.2

—

.2

Prime

annual

.2

—

.2

Prime

quarterly

1.4

—

1.4

Prime

monthly

5.1

—

5.1

3-month LIBOR

quarterly

.3

4.2

(3.9
)
3-month LIBOR⁽²⁾

monthly

—

.5

(.5
)
3-month LIBOR⁽²⁾

daily

—

.1

(.1
)
1-month LIBOR

monthly

3.4

46.4

(43.0
)
1-month LIBOR

daily

48.2

—

48.2

SOFR⁽³⁾

various

—

.1

(.1
)
Non-Discrete reset⁽²⁾⁽⁴⁾

monthly

—

3.7

(3.7
)
Non-Discrete reset⁽⁵⁾

daily/weekly

3.4

.2

3.2

Fixed Rate⁽⁶⁾

13.3

22.9

(9.6
)
Total

$
78.1

$
78.1

$
—

(1)

Funding (by index) includes all derivatives that management considers economic hedges of interest rate risk and reflects how we internally manage our interest rate exposure.

(2)

Funding includes loan repurchase facilities.

(3)

Funding consists of auction rate ABS and ABCP facilities.

(4)

Assets include restricted and unrestricted cash equivalents and other overnight type instruments. Funding includes the obligation to return cash collateral held related to derivatives exposures.

(5)

Assets include receivables and other assets (including goodwill and acquired intangibles). Funding includes other liabilities and stockholders’ equity.

⁽¹⁾

~~Funding (by index) includes all derivatives that management considers economic hedges of interest rate risk and reflects how we internally manage our interest rate exposure.~~

⁽²⁾

~~Funding includes loan repurchase facilities.~~

⁽³⁾

~~Assets include $37M of student loans indexed to 30-day average SOFR. Funding includes $50M indexed to 30-day average SOFR or 90-day average SOFR.~~

⁽⁴⁾

~~Funding consists of auction rate ABS and ABCP facilities.~~

⁽⁵⁾

~~Assets include restricted and unrestricted cash equivalents and other overnight type instruments. Funding includes the obligation to return cash collateral held related to derivatives exposures.~~

⁽⁶⁾

~~Assets include receivables and other assets (including goodwill and acquired intangibles). Funding includes other liabilities and stockholders’ equity.~~

We use interest rate swaps and other derivatives to achieve our risk management objectives. Our asset liability management strategy is to match assets with debt (in combination with derivatives) that have the same underlying index and reset frequency or, when economical, have interest rate characteristics that we believe are highly correlated. Interest earned on our FFELP Loans is primarily indexed to daily one-month LIBOR and our cost of funds is primarily indexed to rates other than daily one-month LIBOR. A source of variability in FFELP net interest income could also be Floor Income we earn on certain FFELP Loans. Pursuant to the terms of the FFELP, certain FFELP Loans can earn interest at the stated fixed rate of interest as underlying debt interest rate expense remains variable. We refer to this additional spread income as “Floor Income.” Floor Income can be volatile since it is dependent on interest rate levels. We frequently hedge this volatility ~~with derivatives which~~to lock in the value of the Floor Income over the term of the contract. Interest earned on our Private Education Refinance Loans is generally fixed rate with the related cost of funds generally fixed rate as well. Interest earned on the remaining Private Education Loans is generally indexed to either one-month Prime or LIBOR rates and our cost of funds is primarily indexed to one-month or three-month LIBOR. The use of funding with index types and reset frequencies that are different from our assets exposes us to interest rate risk in the form of basis and repricing risk. This could result in our cost of funds not moving in the same direction or with the same magnitude as the yield on our assets. While we believe this risk is low, as all of these indices are short-term with rate movements that are highly correlated over a long period of time, market disruptions (which have occurred in prior years) can lead to a temporary divergence between indices resulting in a negative impact to our ~~earnings.~~

earnings.

Unregistered Sales of Equity Securities and Use of Proceeds

Share Repurchases

The following table provides information relating to our purchases of shares of our common stock in the three months ended March 31, ~~2022.~~2023.


(In millions, except per share data)	Total Number of Shares Purchased(1)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2)		Approximate Dollar Value of Shares That May Yet Be Purchased Under Publicly Announced Plans or Programs(2)
Period:
January 1 — January 31, 2023		1.6	$	17.58		1.6	$	573
February 1 — February 28, 2023		1.8		18.68		1.4	$	547
March 1 — March 31, 2023		2.1		16.53		1.9	$	515
Total first-quarter 2023		5.5	$	17.52		4.9

(In millions, except per share data)

Total Number
of Shares
Purchased⁽¹⁾

Average Price
Paid per
Share

Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs⁽²⁾

Approximate Dollar
Value of Shares
That May Yet Be
Purchased Under
Publicly Announced
Plans or
Programs⁽²⁾

Period:

January 1 — January 31, 2022

2.0

$
20.03

1.9

$
963

February 1 — February 28, 2022

3.5

18.12

2.7

$
913

March 1 — March 31, 2022

1.9

17.00

1.6

$
885

Total first-quarter 2022

7.4

$
18.33

6.2

(1)

The total number of shares purchased includes shares purchased under the stock repurchase program discussed below and tax withholding obligations in connection with vesting of restricted stock and restricted stock units.

⁽¹⁾

The total number of shares purchased includes: (i) shares purchased under the stock repurchase program discussed below and (ii) shares of our common stock tendered to us to satisfy the exercise price in connection with cashless exercise of stock options, and tax withholding obligations in connection with exercise of stock options and vesting of restricted stock and restricted stock units.

⁽²⁾

~~In December 2021, our board of directors approved a $1 billion multi-year share repurchase program.~~

(2)

In December 2021, our board of directors approved a $1 billion multi-year share repurchase program.

Controls and Procedures

Disclosure Controls and Procedures

Our management, with the participation of our Principal Executive and Principal Financial Officers, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of March 31, ~~2022.~~2023. Based on this evaluation, our Principal Executive and Principal Financial Officers concluded that, as of March 31, ~~2022,~~2023, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (a) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (b) accumulated and communicated to our management, including our Principal Executive and Principal Financial Officers as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended March 31, ~~2022~~2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Exhibits


10.1^†*		Form of Navient Corporation 2014 Omnibus Incentive Plan Performance Stock Unit ~~Agreement~~Agreement.
.
31.1*
31.1*		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002~~2002.
.
31.2*
31.2*		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002~~2002.
.
32.1**
32.1**		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002~~2002.
.
32.2**
32.2**		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002~~2002.
.
101.INS*
101.INS*		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH*		Inline XBRL Taxonomy Extension Schema Document.

101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

† Management Contract or Compensatory Plan or Arrangement

* Filed herewith

** Furnished herewith

^†

~~Management Contract or Compensatory Plan or Arrangement~~

*	~~Filed herewith~~

**	~~Furnished herewith~~

Financial Statements

NAVIENT CORPORATION

CONSOLIDATED BALANCE SHEETS

(In millions, except per share amounts)

(Unaudited)


	March 31, 2022			December 31, 2021			March 31, 2023			December 31, 2022
Assets
FFELP Loans (net of allowance for losses of $255 and $262, respectively)	$	51,013		$	52,641
Private Education Loans (net of allowance for losses of $964 and $1,009, respectively)		20,088			20,171
FFELP Loans (net of allowance for losses of $214 and $222, respectively)							$	42,148		$	43,525
Private Education Loans (net of allowance for losses of $706 and $800, respectively)								18,275			18,725
Investments
Held-to-maturity		69			74			57			60
Other		141			193			96			107
Total investments		210			267			153			167
Cash and cash equivalents		708			905			570			1,535
Restricted cash and cash equivalents		2,506			2,673			2,208			3,272
Goodwill and acquired intangible assets, net		722			725			703			705
Other assets		2,911			3,223			2,856			2,866
Total assets	$	78,158		$	80,605		$	66,913		$	70,795
Liabilities
Short-term borrowings	$	3,802		$	2,490		$	5,753		$	5,870
Long-term borrowings		70,825			74,488			57,388			61,026
Other liabilities		701			1,019			814			922
Total liabilities		75,328			77,997			63,955			67,818
Commitments and contingencies
Equity
Series A Junior Participating Preferred Stock, par value $0.20 per share; 2 million shares authorized at December 31, 2021; 0 shares issued or outstanding		—			—
Common stock, par value $0.01 per share, 1.125 billion shares authorized: 461 million and 459 million shares issued, respectively		4			4
Series A Junior Participating Preferred Stock, par value $0.20 per share; 2 million shares authorized at December 31, 2021; no shares issued or outstanding								—			—
Common stock, par value $0.01 per share, 1.125 billion shares authorized: 464 million and 461 million shares issued, respectively								4			4
Additional paid-in capital		3,302			3,282			3,335			3,313
Accumulated other comprehensive loss (net of tax benefit of $7 and $45, respectively)		(19	)		(133	)
Accumulated other comprehensive income (net of tax expense of $22 and $29, respectively)								66			87
Retained earnings		4,167			3,939			4,579			4,490
Total Navient Corporation stockholders’ equity before treasury stock		7,454			7,092			7,984			7,894
Less: Common stock held in treasury at cost: 312 million and 305 million shares, respectively		(4,630	)		(4,495	)
Less: Common stock held in treasury at cost: 337 million and 331 million shares, respectively								(5,026	)		(4,917	)
Total Navient Corporation stockholders’ equity		2,824			2,597			2,958			2,977
Noncontrolling interest		6			11			—			—
Total equity		2,830			2,608			2,958			2,977
Total liabilities and equity	$	78,158		$	80,605		$	66,913		$	70,795

Supplemental information — assets and liabilities of consolidated variable interest entities:


	March 31, 2022		December 31, 2021		March 31, 2023		December 31, 2022
FFELP Loans	$	50,779	$	52,502	$	42,086	$	43,465
Private Education Loans		18,224		18,147		16,822		17,207
Restricted cash		2,471		2,649		2,180		3,233
Other assets, net		1,500		1,522		1,534		1,356
Short-term borrowings		2,596		2,188		4,520		4,458
Long-term borrowings		64,755		67,107		52,714		55,598
Net assets of consolidated variable interest entities	$	5,623	$	5,525	$	5,388	$	5,205

See accompanying notes to consolidated financial statements.

NAVIENT CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share amounts)

(Unaudited)


	Three Months Ended March 31,					Three Months Ended March 31,
	2022		2021			2023			2022
Interest income:
FFELP Loans	$	349	$	373		$	693		$	349
Private Education Loans		276		319			344			276
Cash and investments		1		—			34			1
Total interest income		626		692			1,071			626
Total interest expense		289		329			837			289
Net interest income		337		363			234			337
Less: provisions for loan losses		16		(87	)		(14	)		16
Net interest income after provisions for loan losses		321		450			248			321
Other income (loss):
Servicing revenue		18		53			17			18
Asset recovery and business processing revenue		97		139			72			97
Other income		10		—			7			10
Gains on sales of loans		—		76
Gains (losses) on derivative and hedging activities, net		98		36			(8	)		98
Total other income		223		304			88			223
Expenses:
Salaries and benefits		120		149			105			120
Other operating expenses		85		110			80			85
Total operating expenses		205		259			185			205
Goodwill and acquired intangible asset impairment and amortization expense		4		5			3			4
Restructuring/other reorganization expenses		3		6			4			3
Total expenses		212		270			192			212
Income before income tax expense		332		484			144			332
Income tax expense		77		114			33			77
Net income	$	255	$	370		$	111		$	255
Basic earnings per common share	$	1.69	$	2.02		$	.87		$	1.69
Average common shares outstanding		151		183			129			151
Diluted earnings per common share	$	1.67	$	2.00		$	.86		$	1.67
Average common and common equivalent shares outstanding		153		185			130			153
Dividends per common share	$	.16	$	.16		$	.16		$	.16

See accompanying notes to consolidated financial statements.

NAVIENT CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)


	Three Months Ended March 31,
	2023			2022
Net income	$	111		$	255
Net changes in cash flow hedges, net of taxes(1)		(21	)		114
Total comprehensive income	$	90		$	369

Three Months Ended March 31,

2022

2021

Net income

$
255

$
370

Net changes in cash flow hedges, net of taxes⁽¹⁾

114

48

Total comprehensive income

$
369

$
418

(1)

See “Note 4 – Derivative Financial Instruments.”

⁽¹⁾	~~See “Note 4 – Derivative Financial Instruments.”~~

See accompanying notes to consolidated financial statements.

NAVIENT CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In millions, except share and per share amounts)

(Unaudited)

													Accumulated
	Common Stock Shares										Additional		Other									Total																					Accumulated
									Common		Paid-In		Comprehensive			Retained			Treasury			Stockholders'			Noncontrolling			Total			Common Stock Shares										Additional		Other									Total
	Issued		Treasury			Outstanding			Stock		Capital		Income (Loss)			Earnings			Stock			Equity			Interest			Equity											Common		Paid-In		Comprehensive			Retained			Treasury			Stockholders'			Noncontrolling			Total
Balance at December 31, 2020		453,778,975		(267,476,521	)		186,302,454		$	4	$	3,226	$	(274	)	$	3,331		$	(3,854	)	$	2,433		$	14		$	2,447
Comprehensive income (loss):
Net income		—		—			—			—		—		—			370			—			370			—			370
Other comprehensive income (loss), net of tax		—		—			—			—		—		48			—			—			48			—			48
Total comprehensive income (loss)		—		—			—			—		—		—			—			—			418			—			418
Cash dividends:
Common stock ($.16 per share)		—		—			—			—		—		—			(29	)		—			(29	)		—			(29	)
Dividend equivalent units related to employee stock-based compensation plans		—		—			—			—		—		—			(2	)		—			(2	)		—			(2	)
Issuance of common shares		3,624,586		—			3,624,586			—		19		—			—			—			19			—			19
Stock-based compensation expense		—		—			—			—		10		—			—			—			10			—			10
Common stock repurchased		—		(8,178,100	)		(8,178,100	)		—		—		—			—			(100	)		(100	)		—			(100	)
Shares repurchased related to employee stock-based compensation plans		—		(2,235,658	)		(2,235,658	)		—		—		—			—			(26	)		(26	)		—			(26	)
Balance at March 31, 2021		457,403,561		(277,890,279	)		179,513,282		$	4	$	3,255	$	(226	)	$	3,670		$	(3,980	)	$	2,723		$	14		$	2,737
																															Issued		Treasury			Outstanding			Stock		Capital		Income (Loss)			Earnings			Stock			Equity			Interest			Equity
Balance at December 31, 2021		458,629,384		(304,886,613	)		153,742,771		$	4	$	3,282	$	(133	)	$	3,939		$	(4,495	)	$	2,597		$	11		$	2,608			458,629,384		(304,886,613	)		153,742,771		$	4	$	3,282	$	(133	)	$	3,939		$	(4,495	)	$	2,597		$	11		$	2,608
Comprehensive income (loss):
Net income		—		—			—			—		—		—			255			—			255			—			255			—		—			—			—		—		—			255			—			255			—			255
Other comprehensive income (loss), net of tax		—		—			—			—		—		114			—			—			114			—			114
Other comprehensive income (loss),net of tax																																—		—			—			—		—		114			—			—			114			—			114
Total comprehensive income (loss)		—		—			—			—		—		—			—			—			369			—			369			—		—			—			—		—		—			—			—			369			—			369
Cash dividends:		—
Common stock ($.16 per share)		—		—			—			—		—		—			(24	)		—			(24	)		—			(24	)
Common stock ($.16 per share)																																—		—			—			—		—		—			(24	)		—			(24	)		—			(24	)
Dividend equivalent units related to employee stock-based compensation plans		—		—			—			—		—		—			(3	)		—			(3	)		—			(3	)		—		—			—			—		—		—			(3	)		—			(3	)		—			(3	)
Issuance of common shares		2,359,901		—			2,359,901			—		11		—			—			—			11			—			11			2,359,901		—			2,359,901			—		11		—			—			—			11			—			11
Stock-based compensation expense		—		—			—			—		9		—			—			—			9			—			9			—		—			—			—		9		—			—			—			9			—			9
Common stock repurchased		—		(6,247,437	)		(6,247,437	)		—		—		—			—			(115	)		(115	)		—			(115	)		—		(6,247,437	)		(6,247,437	)		—		—		—			—			(115	)		(115	)		—			(115	)
Shares repurchased related to employee stock-based compensation plans		—		(1,110,584	)		(1,110,584	)		—		—		—			—			(20	)		(20	)		—			(20	)		—		(1,110,584	)		(1,110,584	)		—		—		—			—			(20	)		(20	)		—			(20	)
Net activity in noncontrolling interest		—		—			—			—		—		—			—			—			—			(5	)		(5	)		—		—			—			—		—		—			—			—			—			(5	)		(5	)
Balance at March 31, 2022		460,989,285		(312,244,634	)		148,744,651		$	4	$	3,302	$	(19	)	$	4,167		$	(4,630	)	$	2,824		$	6		$	2,830			460,989,285		(312,244,634	)		148,744,651		$	4	$	3,302	$	(19	)	$	4,167		$	(4,630	)	$	2,824		$	6		$	2,830

Balance at December 31, 2022																																461,087,590		(330,878,152	)		130,209,438		$	4	$	3,313	$	87		$	4,490		$	(4,917	)	$	2,977		$	—		$	2,977
Comprehensive income (loss):
Net income																																—		—			—			—		—		—			111			—			111			—			111
Other comprehensive income (loss),net of tax																																—		—			—			—		—		(21	)		—			—			(21	)		—			(21	)
Total comprehensive income (loss)																																—		—			—			—		—		—			—			—			90			—			90
Cash dividends:																																—
Common stock ($.16 per share)																																—		—			—			—		—		—			(21	)		—			(21	)		—			(21	)
Dividend equivalent units related to employee stock-based compensation plans																																—		—			—			—		—		—			(1	)		—			(1	)		—			(1	)
Issuance of common shares																																2,420,932		—			2,420,932			—		13		—			—			—			13			—			13
Stock-based compensation expense																																—		—			—			—		9		—			—			—			9			—			9
Common stock repurchased																																—		(4,888,812	)		(4,888,812	)		—		—		—			—			(85	)		(85	)		—			(85	)
Shares repurchased related to employee stock-based compensation plans																																—		(1,276,713	)		(1,276,713	)		—		—		—			—			(23	)		(23	)		—			(23	)
Other																																—		—			—			—		—		—			—			(1	)		(1	)		—			(1	)
Balance at March 31, 2023																																463,508,522		(337,043,677	)		126,464,845		$	4	$	3,335	$	66		$	4,579		$	(5,026	)	$	2,958		$	—		$	2,958

See accompanying notes to consolidated financial statements.

NAVIENT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


	Three Months Ended March 31,						Three Months Ended March 31,
	2022			2021			2023			2022
Cash flows from operating activities
Net income	$	255		$	370		$	111		$	255
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
(Gains) on sales of education loans		—			(76	)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Goodwill and acquired intangible asset impairment and amortization expense		4			5			3			4
Stock-based compensation expense		9			10			9			9
Mark-to-market (gains) losses on derivative and hedging activities, net		(314	)		(198	)		65			(314	)
Provisions for loan losses		16			(87	)		(14	)		16
Decrease in accrued interest receivable		48			80
(Decrease) in accrued interest payable		(15	)		(45	)
(Increase) decrease in accrued interest receivable								(12	)		48
Decrease in accrued interest payable								(49	)		(15	)
Decrease in other assets		174			111			58			174
(Decrease) increase in other liabilities		(286	)		9
Decrease in other liabilities								(26	)		(286	)
Total adjustments		(364	)		(191	)		34			(364	)
Net cash (used in) provided by operating activities		(109	)		179
Net cash provided by (used in) operating activities								145			(109	)
Cash flows from investing activities
Education loans originated and acquired		(1,091	)		(1,734	)		(274	)		(1,091	)
Proceeds from payments on education loans		2,789			3,009			2,118			2,789
Proceeds from sales of education loans		—			1,588
Other investing activities, net		53			22			4			53
Net cash provided by investing activities		1,751			2,885			1,848			1,751
Cash flows from financing activities
Borrowings collateralized by loans in trust - issued		995			1,828			—			995
Borrowings collateralized by loans in trust - repaid		(3,296	)		(2,846	)		(3,047	)		(3,296	)
Asset-backed commercial paper conduits, net		391			(1,735	)		189			391
Long-term unsecured notes issued		—			495
Long-term unsecured notes repaid		—			(78	)		(1,001	)		—
Other financing activities, net		43			(34	)		(57	)		43
Common stock repurchased		(115	)		(100	)		(85	)		(115	)
Common dividends paid		(24	)		(29	)		(21	)		(24	)
Net cash used in financing activities		(2,006	)		(2,499	)		(4,022	)		(2,006	)
Net (decrease) increase in cash, cash equivalents, restricted cash and restricted cash equivalents		(364	)		565
Net decrease in cash, cash equivalents, restricted cash and restricted cash equivalents								(2,029	)		(364	)
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period		3,578			3,537			4,807			3,578
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period	$	3,214		$	4,102		$	2,778		$	3,214
Supplemental disclosure of cash flow information:
Cash disbursements made (refunds received) for:
Interest paid	$	300		$	362		$	845		$	300
Income taxes paid	$	5		$	1		$	6		$	5
Income taxes refunds received	$	(4	)	$	—		$	(2	)	$	(4	)
Noncash activity:
Investing activity - Held-to-maturity asset backed securities retained related to sales of education loans	$	—		$	53
Operating activity - Servicing assets recognized upon sales of education loans	$	—		$	20

Reconciliation of the Consolidated Statements of Cash Flows to the Consolidated Balance Sheets:
Cash and cash equivalents	$	708		$	1,497		$	570		$	708
Restricted cash and restricted cash equivalents		2,506			2,605			2,208			2,506
Total cash, cash equivalents, restricted cash and restricted cash equivalents at end of period	$	3,214		$	4,102		$	2,778		$	3,214

See accompanying notes to consolidated financial statements.

NAVIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, ~~2022~~2023 and for the three months ended

March 31, ~~2022~~2023 and ~~2021~~2022 is unaudited)

1.Significant Accounting Policies

Basis of Presentation

The accompanying unaudited, consolidated financial statements of Navient have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. The consolidated financial statements include the accounts of Navient and its majority-owned and controlled subsidiaries and those Variable Interest Entities (VIEs) for which we are the primary beneficiary, after eliminating the effects of intercompany accounts and transactions. In the opinion of management, all adjustments considered necessary for a fair statement of the results for the interim periods have been included. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Operating results for the three months ended March 31, ~~2022~~2023 are not necessarily indicative of the results for the year ending December 31, ~~2021~~2022 or for any other period. These unaudited financial statements should be read in conjunction with the audited financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 (the ~~2021~~2022 Form 10-K). Definitions for certain capitalized terms used but not otherwise defined in this Quarterly Report on Form 10-Q can be found in our ~~2021~~2022 Form 10-K.

Recently Issued Accounting Pronouncements

Effective in 2020 and Forward

Rate Reform

In March 2020 (and as amended in December 2022), the FASB issued ASU No. 2020-04, “Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” which provides optional temporary relief for companies who are preparing for the discontinuation of interest rates indexed to the London Interbank Offered Rate (LIBOR). The ASU provides companies with guidance in the form of expedients and exceptions related to contract modifications and hedge accounting to ease the burden of and simplify the accounting associated with transitioning away from LIBOR. Modifications of qualifying contracts are accounted for as the continuation of an existing contract rather than as a new contract. Modifications of qualifying hedging relationships will not require discontinuation of the existing hedge accounting relationships. One-month and three-month LIBOR will be discontinued after June 30, 2023. Our instruments that are indexed to one-month and three-month LIBOR will be indexed to SOFR after that date. There is $13 billion of debt as of March 31, 2023, that is in either a fair value or cash flow hedge relationship using LIBOR swaps. We will use the hedge accounting expedients in this ASU when those swaps transition to SOFR. As a result, these hedges will not result in the discontinuation of the existing hedge accounting relationships.

NAVIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, 2023 and for the three months ended

March 31, 2023 and 2022 is unaudited)

1.Significant Accounting Policies (Continued)

Troubled Debt Restructurings

In March 2022, the FASB issued ASU No. 2022-02, “Financial Instruments – Credit Losses: Troubled Debt Restructurings and Vintage Disclosures,” which eliminates the troubled debt restructurings (TDRs) recognition and measurement guidance and instead requires an entity to evaluate whether the modification represents a new loan or a continuation of an existing loan. The ASU also enhances the disclosure requirements for certain modifications of receivables made to borrowers experiencing financial difficulty. This guidance iswas effective on January 1, 2023. ~~Early adoption is permissible. The Company is currently assessing~~Prior to adopting this new guidance on January 1, 2023, as it relates to interest rate concessions granted as part of our Private Education Loan modification program, a discounted cash flow model was used to calculate the ~~potential impact~~amount of interest forgiven for loans that were in the program and the present value of that interest rate concession was included as a part of the allowance for loan loss. This new guidance no longer requires the measurement and recognition of this ~~amendment.~~ element of our allowance for loan loss for new modifications that occur subsequent to January 1, 2023. As of December 31, 2022, the allowance for loan loss included $77 million related to this interest rate concession component of the allowance for loan loss. We elected to adopt this amendment using a prospective transition method which results in the $77 million releasing in 2023 and 2024 as the borrowers exit their current modification programs. $52 million of the $77 million was released in first-quarter 2023.

2. Allowance for Loan Losses

Allowance for Loan Losses Roll Forward


	Three Months Ended March 31, 2023
(Dollars in millions)	FFELP Loans			Private Education Loans			Total
Allowance at beginning of period	$	222		$	800		$	1,022
Total provision		10			(24	)		(14	)
Charge-offs:
Gross charge-offs		(18	)		(88	)		(106	)
Expected future recoveries on current period gross charge-offs		—			13			13
Net charge-offs(1)		(18	)		(75	)		(93	)
Decrease in expected future recoveries on previously fully charged-off loans(2)		—			5			5
Allowance at end of period	$	214		$	706		$	920
Net charge-offs as a percentage of average loans in repayment (annualized)		.22	%		1.63	%
Ending total loans	$	42,362		$	18,981
Average loans in repayment	$	34,305		$	18,552
Ending loans in repayment	$	33,740		$	18,258

(1)

Charge-offs are reported net of expected recoveries. For Private Education Loans, we charge off the estimated loss of a defaulted loan balance by charging off the entire defaulted loan balance and estimating recoveries on a pool basis. These estimated recoveries are referred to as "expected future recoveries on previously fully charged-off loans." For FFELP Loans, the recovery is received at the time of charge-off.

(2)

At the end of each month, for Private Education Loans that are 212 days past due, we charge off the estimated loss of a defaulted loan balance by charging off the entire loan balance and estimating recoveries on a pool basis. These estimated recoveries are referred to as “expected future recoveries on previously fully charged-off loans.” If actual periodic recoveries are less than expected, the difference is immediately reflected as a reduction to expected future recoveries on previously fully charged-off loans. If actual periodic recoveries are greater than expected, they will be reflected as a recovery through the allowance for Private Education Loan losses once the cumulative recovery amount exceeds the cumulative amount originally expected to be recovered. The following table summarizes the activity in the expected future recoveries on previously fully charged-off loans:


	Three Months Ended March 31,
(Dollars in millions)	2023
Beginning of period expected future recoveries on previously fully charged-off loans	$	274
Expected future recoveries of current period defaults		13
Recoveries (cash collected)		(13	)
Charge-offs (as a result of lower recovery expectations)		(6	)
End of period expected future recoveries on previously fully charged-off loans		268
Change in balance during period	$	(5	)

4748

NAVIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, ~~2022~~2023 and for the three months ended

March 31, ~~2022~~2023 and ~~2021~~2022 is unaudited)

2. Allowance for Loan Losses (Continued)

~~Allowance~~


	Three Months Ended March 31, 2022
(Dollars in millions)	FFELP Loans			Private Education Loans			Total
Allowance at beginning of period	$	262		$	1,009		$	1,271
Total provision		—			16			16
Charge-offs:
Gross charge-offs		(7	)		(81	)		(88	)
Expected future recoveries on current period gross charge-offs		—			12			12
Net charge-offs(1)		(7	)		(69	)		(76	)
Decrease in expected future recoveries on previously fully charged-off loans(2)		—			8			8
Allowance at end of period	$	255		$	964		$	1,219
Net charge-offs as a percentage of average loans in repayment (annualized)		.07	%		1.38	%
Ending total loans	$	51,268		$	21,052
Average loans in repayment	$	43,125		$	20,387
Ending loans in repayment	$	42,724		$	20,257

(1)

Charge-offs are reported net of expected recoveries. For Private Education Loans, we charge off the estimated loss of a defaulted loan balance by charging off the entire defaulted loan balance and estimating recoveries on a pool basis. These estimated recoveries are referred to as "expected future recoveries on previously fully charged-off loans." For FFELP Loans, the recovery is received at the time of charge-off.

(2)

Three Months Ended March 31, 2022

(Dollars in millions)

FFELP Loans

Private Education Loans

Total

Allowance at beginning of period

$
262

$
1,009

$
1,271

Total provision

—

16

16

Charge-offs⁽¹⁾

(7
)

(69
)

(76
)
Decrease in expected future recoveries on charged-off loans⁽²⁾

—

8

8

Allowance at end of period

255

964

1,219

Plus: expected future recoveries on charged-off loans⁽²⁾

—

321

321

Allowance at end of period excluding expected future recoveries on
charged-off loans⁽³⁾

$
255

$
1,285

$
1,540

Charge-offs as a percentage of average loans in repayment
(annualized)

.07
%

1.38
%

Allowance coverage of charge-offs (annualized)⁽³⁾

8.8

4.6

Allowance as a percentage of the ending total loan balance⁽³⁾

.5
%

6.1
%

Allowance as a percentage of ending loans in repayment⁽³⁾

.6
%

6.3
%

Ending total loans

$
51,268

$
21,052

Average loans in repayment

$
43,125

$
20,387

Ending loans in repayment

$
42,724

$
20,257

losses once the cumulative recovery amount exceeds the cumulative amount originally expected to be recovered. The following table summarizes the activity in the expected future recoveries on previously fully charged-off loans:


	Three Months Ended March 31,
(Dollars in millions)	2022
Beginning of period expected future recoveries on previously fully charged-off loans	$	329
Expected future recoveries of current period defaults		12
Recoveries (cash collected)		(15	)
Charge-offs (as a result of lower recovery expectations)		(5	)
End of period expected future recoveries on previously fully charged-off loans	$	321
Change in balance during period	$	(8	)

⁽¹⁾

Charge-offs are reported net of expected recoveries. For Private Education Loans, at the time of charge-off, the expected recovery amount is transferred from the education loan balance to the allowance for loan loss and is referred to as the expected future recoveries on charged-off loans. For FFELP Loans, the recovery is received at the time of charge-off.

⁽²⁾

Three Months Ended March 31,

(Dollars in millions)

2022

Beginning of period expected recoveries

$
329

Expected future recoveries of current period defaults⁽¹⁾

12

Recoveries⁽²⁾

(15
)
Charge-offs⁽³⁾

(5
)
End of period expected recoveries

$
321

Change in balance during period

$
(8
)

⁽

49³⁾

~~The allowance used for these metrics excludes the expected future recoveries on charged-off loans to better reflect the current expected credit losses remaining in the portfolio.~~

NAVIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, ~~2022~~2023 and for the three months ended

March 31, ~~2022~~2023 and ~~2021~~2022 is unaudited)

2. Allowance for Loan Losses (Continued)

Key Credit Quality Indicators

We assess and determine the collectability of our education loan portfolios by evaluating certain risk characteristics we refer to as key credit quality indicators. Key credit quality indicators are incorporated into the allowance for loan losses calculation.

FFELP Loans

FFELP Loans are substantially insured and guaranteed as to their principal and accrued interest in the event of default. The key credit quality indicators are loan status and loan type.

Three Months Ended March 31, 2021

(Dollars in millions)

FFELP Loans

Private Education
Loans

Total

Allowance at beginning of period

$
288

$
1,089

$
1,377

Provision:

   Reversal of allowance related to loan sales⁽¹⁾

—

(102
)

(102
)
   Remaining provision

—

15

15

Total provision

—

(87
)

(87
)
Charge-offs⁽²⁾

(6
)

(35
)

(41
)
Decrease in expected future recoveries on charged-off loans⁽³⁾

—

25

25

Allowance at end of period

282

992

1,274

Plus: expected future recoveries on charged-off loans⁽³⁾

—

454

454

Allowance at end of period excluding expected future recoveries on
   charged-off loans⁽⁴⁾

$
282

$
1,446

$
1,728

Charge-offs as a percentage of average loans in repayment
   (annualized)

.06
%

.68
%

Allowance coverage of charge-offs⁽⁴⁾

10.7

10.2

Allowance as a percentage of the ending total loan balance⁽⁴⁾

.5
%

7.0
%

Allowance as a percentage of ending loans in repayment⁽⁴⁾

.6
%

7.4
%

Ending total loans

$
57,155

$
20,734

Average loans in repayment

$
47,044

$
20,883

Ending loans in repayment

$
45,922

$
19,480


	FFELP Loan Delinquencies
	March 31, 2023						December 31, 2022						March 31, 2022
(Dollars in millions)	Balance			%			Balance			%			Balance			%
Loans in-school/grace/deferment(1)	$	1,778					$	1,772					$	2,232
Loans in forbearance(2)		6,844						7,603						6,312
Loans in repayment and percentage of each status:
Loans current		28,886			85.6	%		29,004			84.4	%		36,948			86.5	%
Loans delinquent 31-60 days(3)		1,270			3.8			1,247			3.6			1,888			4.4
Loans delinquent 61-90 days(3)		902			2.7			833			2.4			1,148			2.7
Loans delinquent greater than 90 days(3)		2,682			7.9			3,288			9.6			2,740			6.4
Total FFELP Loans in repayment		33,740			100	%		34,372			100	%		42,724			100	%
Total FFELP Loans		42,362						43,747						51,268
FFELP Loan allowance for losses		(214	)					(222	)					(255	)
FFELP Loans, net	$	42,148					$	43,525					$	51,013
Percentage of FFELP Loans in repayment					79.6	%					78.6	%					83.3	%
Delinquencies as a percentage of FFELP Loans in repayment					14.4	%					15.6	%					13.5	%
FFELP Loans in forbearance as a percentage of loans in repayment and forbearance					16.9	%					18.1	%					12.9	%

(1)

(2)

Loans for customers who have used their allowable deferment time or do not qualify for deferment, that need additional time to obtain employment or who have temporarily ceased making full payments due to hardship or other factors such as disaster relief, including COVID-19 relief programs, 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.

Loan type:


(Dollars in millions)	March 31, 2023		March 31, 2022		Change
Stafford Loans	$	13,592	$	15,975	$	(2,383	)
Consolidation Loans		24,697		30,665		(5,968	)
Rehab Loans		4,073		4,628		(555	)
Total loans, gross	$	42,362	$	51,268	$	(8,906	)

⁽¹⁾

~~In connection with the sale of approximately $1.6 billion of Private Education Loans.~~

⁽²⁾

⁽³⁾

Three Months Ended March 31,

(Dollars in millions)

2021

Beginning of period expected recoveries

$
479

Expected future recoveries of current period defaults

5

Recoveries

(25
)
Charge-offs

(5
)
End of period expected recoveries

$
454

Change in balance during period

$
(25
)

⁽⁴⁾	~~The allowance used for these metrics excludes the expected future recoveries on charged-off loans to better reflect the current expected credit losses remaining in the portfolio.~~

4950

NAVIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, ~~2022~~2023 and for the three months ended

March 31, ~~2022~~2023 and ~~2021~~2022 is unaudited)

2. Allowance for Loan Losses (Continued)

~~Troubled Debt Restructurings~~Private Education Loans

The key credit quality indicators are credit scores (FICO scores), loan status, loan seasoning, certain loan modifications, the existence of a cosigner and school type. The FICO score is the higher of the borrower or co-borrower score and is updated at least every six months while school type is assessed at origination. The other Private Education Loan key quality indicators are updated quarterly.


	Private Education Loan Credit Quality Indicators by Origination Year
	March 31, 2023
(Dollars in millions)	2023		2022			2021			2020			2019			Prior			Total			% of Total
Credit Quality Indicators
FICO Scores:
640 and above	$	167	$	1,761		$	4,368		$	1,438		$	1,353		$	8,133		$	17,220			91	%
Below 640		3		40			92			24			43			1,559			1,761			9
Total	$	170	$	1,801		$	4,460		$	1,462		$	1,396		$	9,692		$	18,981			100	%
Loan Status:
In-school/grace/ deferment/forbearance	$	9	$	67		$	91		$	27		$	31		$	498		$	723			4	%
Current/90 days or less delinquent		161		1,729			4,360			1,432			1,359			8,853			17,894			94
Greater than 90 days delinquent		—		5			9			3			6			341			364			2
Total	$	170	$	1,801		$	4,460		$	1,462		$	1,396		$	9,692		$	18,981			100	%
Seasoning(1):
1-12 payments	$	161	$	1,386		$	80		$	9		$	8		$	71		$	1,715			9	%
13-24 payments		—		362			4,084			32			23			86			4,587			24
25-36 payments		—		—			242			1,251			106			157			1,756			9
37-48 payments		—		—			—			155			1,190			272			1,617			9
More than 48 payments		—		—			—			—			53			8,884			8,937			47
Loans in-school/ grace/deferment		9		53			54			15			16			222			369			2
Total	$	170	$	1,801		$	4,460		$	1,462		$	1,396		$	9,692		$	18,981			100	%
Certain Loan Modifications(2):
Modified	$	—	$	14		$	89		$	38		$	72		$	6,279		$	6,492			34	%
Non-Modified		170		1,787			4,371			1,424			1,324			3,413			12,489			66
Total	$	170	$	1,801		$	4,460		$	1,462		$	1,396		$	9,692		$	18,981			100	%
Cosigners:
With cosigner(3)	$	35	$	189		$	103		$	26		$	9		$	5,894		$	6,256			33	%
Without cosigner		135		1,612			4,357			1,436			1,387			3,798			12,725			67
Total	$	170	$	1,801		$	4,460		$	1,462		$	1,396		$	9,692		$	18,981			100	%
School Type:
Not-for-profit	$	158	$	1,704		$	4,202		$	1,397		$	1,300		$	8,150		$	16,911			89	%
For-profit		12		97			258			65			96			1,542			2,070			11
Total	$	170	$	1,801		$	4,460		$	1,462		$	1,396		$	9,692		$	18,981			100	%
Allowance for loan losses																			(706	)
Total loans, net																		$	18,275

1Q-23 Net Charge-Offs	$	—	$	(2	)	$	(2	)	$	(1	)	$	(2	)	$	(68	)	$	(75	)		100	%

(1)

Number of months in active repayment for which a scheduled payment was received.

(2)

Loan Modification status represents the historical definition of a troubled debt restructuring (“~~TDRs”~~TDR”) prior to the implementation of ASU 2022-02 on January 1, 2023. Any loan that meets the historical definition of a TDR retains that classification for the life of the loan (including loans that meet that definition in 2023). This includes loans given rate modifications, term extensions or forbearance greater than 3 months in the prior 24-month period. This classification is not intended to reconcile in any way to the new modification disclosures required under ASU 2022-02.

(3)

Excluding Private Education Refinance Loans, which do not have a cosigner, the cosigner rate was 65% for total loans at March 31, 2023.

NAVIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, 2023 and for the three months ended

March 31, 2023 and 2022 is unaudited)

2. Allowance for Loan Losses (Continued)


	Private Education Loan Credit Quality Indicators by Origination Year
	March 31, 2022
(Dollars in millions)	2022		2021		2020		2019		2018		Prior		Total			% of Total
Credit Quality Indicators
FICO Scores:
640 and above	$	948	$	5,037	$	1,783	$	1,683	$	626	$	9,314	$	19,391			92	%
Below 640		8		44		16		37		21		1,535	$	1,661			8
Total	$	956	$	5,081	$	1,799	$	1,720	$	647	$	10,849	$	21,052			100	%
Loan Status:
In-school/grace/ deferment/forbearance	$	5	$	64	$	25	$	34	$	13	$	654	$	795			4	%
Current/90 days or less delinquent		951		5,015		1,772		1,684		632		9,889	$	19,943			95
Greater than 90 days delinquent		—		2		2		2		2		306		314			1
Total	$	956	$	5,081	$	1,799	$	1,720	$	647	$	10,849	$	21,052			100	%
Seasoning(1):
1-12 payments	$	951	$	4,740	$	26	$	17	$	3	$	115	$	5,852			28	%
13-24 payments		—		300		1,555		108		11		134	$	2,108			10
25-36 payments		—		—		201		1,507		46		225	$	1,979			9
37-48 payments		—		—		—		68		545		369	$	982			5
More than 48 payments		—		—		—		—		35		9,719	$	9,754			46
Loans in-school/ grace/deferment		5		41		17		20		7		287		377			2
Total	$	956	$	5,081	$	1,799	$	1,720	$	647	$	10,849	$	21,052			100	%
Certain Loan Modifications(2):
Modified	$	—	$	9	$	15	$	43	$	28	$	6,998	$	7,093			34	%
Non-Modified		956		5,072		1,784		1,677		619		3,851		13,959			66
Total	$	956	$	5,081	$	1,799	$	1,720	$	647	$	10,849	$	21,052			100	%
Cosigners:
With cosigner(3)	$	11	$	97	$	31	$	11	$	—	$	6,994	$	7,144			34	%
Without cosigner		945		4,984		1,768		1,709		647		3,855		13,908			66
Total	$	956	$	5,081	$	1,799	$	1,720	$	647	$	10,849	$	21,052			100	%
School Type:
Not-for-profit	$	893	$	4,786	$	1,719	$	1,602	$	595	$	9,048	$	18,643			89	%
For-profit		63		295		80		118		52		1,801		2,409			11
Total	$	956	$	5,081	$	1,799	$	1,720	$	647	$	10,849	$	21,052			100	%
Allowance for loan losses														(964	)
Total loans, net													$	20,088

(1)

Number of months in active repayment for which a scheduled payment was received.

(2)

Loan Modification status represents the historical definition of a troubled debt restructuring (“TDR”) prior to the implementation of ASU 2022-02 on January 1, 2023. Any loan that meets the historical definition of a TDR retains that classification for the life of the loan (including loans that meet that definition in 2023). This includes loans given rate modifications, term extensions or forbearance greater than 3 months in the prior 24-month period. This classification is not intended to reconcile in any way to the new modification disclosures required under ASU 2022-02.

(3)

Excluding Private Education Refinance Loans, which do not have a cosigner, the cosigner rate was 65% for total loans at March 31, 2022.

NAVIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, 2023 and for the three months ended

March 31, 2023 and 2022 is unaudited)

2. Allowance for Loan Losses (Continued)


	Private Education Loan Delinquencies
	March 31, 2023						December 31, 2022						March 31, 2022
(Dollars in millions)	Balance			%			Balance			%			Balance			%
Loans in-school/grace/deferment(1)	$	369					$	354					$	377
Loans in forbearance(2)		354						401						418
Loans in repayment and percentage of each status:
Loans current		17,439			95.5	%		17,838			95.0	%		19,447			96.0	%
Loans delinquent 31-60 days(3)		290			1.6			335			1.8			290			1.4
Loans delinquent 61-90 days(3)		165			.9			186			1.0			206			1.0
Loans delinquent greater than 90 days(3)		364			2.0			411			2.2			314			1.6
Total loans in repayment		18,258			100	%		18,770			100	%		20,257			100	%
Total loans		18,981						19,525						21,052
Allowance for losses		(706	)					(800	)					(964	)
Loans, net	$	18,275					$	18,725					$	20,088
Percentage of loans in repayment					96.2	%					96.1	%					96.2	%
Delinquencies as a percentage of loans in repayment					4.5	%					5.0	%					4.0	%
Loans in forbearance as a percentage of loans in repayment and forbearance					1.9	%					2.1	%					2.0	%

(1)

(2)

(3)

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

NAVIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, 2023 and for the three months ended

March 31, 2023 and 2022 is unaudited)

2. Allowance for Loan Losses (Continued)

Loan Modifications to Borrowers Experiencing Financial Difficulty

We ~~sometimes modify~~adjust the terms of Private Education Loans for certain borrowers when we believe such changes will help our customers better manage their student loan obligations, achieve better outcomes and increase the collectability of the loans. These changes generally take the form of a temporary interest rate reduction, a temporary forbearance of payments, a temporary interest only payment, and a temporary interest rate reduction with a permanent extension of the loan term. The effect of most modifications of loans ~~for customers~~made to borrowers who are experiencing financial ~~difficulty.~~difficulty is already included in the allowance for credit losses because of the measurement methodologies used to estimate the allowance. The model design predicts borrowers that will have financial difficulty in the future and require loan modification and increased life of loan default risk.

Under our current forbearance practices, temporary hardship forbearance of payments generally cannot exceed 12 months over the life of the loan. However, exceptions can be made in cases where borrowers have shown the ability to make a substantial number of monthly principal and interest payments and in those cases borrowers can be granted up to 24 months of hardship forbearance over the life of the loan. We offer other administrative forbearances (e.g., death and disability, bankruptcy, military service, and disaster forbearance) that are either required by law (such as 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.

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. Further, FFELP loan modification events are either legal entitlements subject to regulatory-driven eligibility criteria or addressed in the promissory note terms, so we do not consider these events as a component of our loan modification programs.

The following table shows the amortized cost basis as of March 31, 2023 of the loans to borrowers experiencing financial difficulty that were modified in first-quarter 2023.


	Loan Modifications Made to Borrowers Experiencing Financial Difficulty
(Dollars in millions)	Interest Rate Reductions(1)					More Than an Insignificant Payment Delay (2)					Combination Rate Reduction and Term Extension
Loan Type	Amortized Cost		% of Loan Type			Amortized Cost		% of Loan Type			Amortized Cost		% of Loan Type
Private Education Loans	$	611		3.2	%	$	275		1.4	%	$	46		.2	%

(1)

As of March 31, 2023, there was $1.1 billion of loans in the interest rate reduction program.

(2)

More Than an Insignificant Payment Delay includes loans granted more than 3 months of short-term interest only payments or hardship forbearance in first-quarter 2023.

For those loans modified in first-quarter 2023, the following table shows the impact of such modification.


Loan Type	Interest Rate Reductions	More Than an Insignificant Payment Delay	Combination Rate Reduction and Term Extension
Private Education Loans	Reduced the weighted average contractual rate from 12.9% to 4.9%	Added an average 6 months to the remaining life of the loans	Added an average 8 years to the remaining life of the loans and reduced the weighted average contractual rate from 12.5% to 5.1%.

NAVIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, 2023 and for the three months ended

March 31, 2023 and 2022 is unaudited)

2. Allowance for Loan Losses (Continued)

The following table provides the amount of loans whose borrowers were experiencing financial difficulty, were modified during first-quarter 2023 and subsequently had a payment default in first-quarter 2023. We define payment default as 60 days past due for purposes of this disclosure. We closely monitor performance of the loans to borrowers experiencing financial difficulty that are modified to understand the effectiveness of the modification efforts.


(Dollars in millions)
Loan Type	Modified Loans (Amortized Cost)		Payment Default (Par)
Private Education Loans(1)	$	2	$	2

(1)

For first-quarter 2023, the modified loans include $1.6 million of Interest Rate Reduction and $0.1 million of Combination Rate Reduction and Term Extension.

The following table provides the performance and related loan status as of March 31, 2023 of loans that were modified in first-quarter 2023.


(Dollars in millions)
Loan Type:
Private Education Loans(1)	Status	Payment status (Amortized Cost)
	Loans in School/Deferment	$	2
	Loans in Forbearance		22
	Loans current		891
	Loans delinquent 31 - 60 days		8
	Loans delinquent 61 - 90 days		2
	Loans delinquent greater than 90 days		7
	Total Modified Loans	$	932

(1)

For first-quarter 2023, $0.4 million of loans modified during the quarter were charged off.

Prior to our adoption of ASU 2022-02 on January 1, 2023, we accounted for a modification to the contractual terms of a loan that resulted in granting a concession to a borrower experiencing financial difficulties as a TDR. Certain Private Education Loans for which we have granted either a forbearance of greater than three months, an interest rate reduction or an extended repayment plan ~~are~~were classified as TDRs. Approximately 75% of the loans granted forbearance have qualified as a TDR loan at both March 31, 2022 and December 31, 2021. The unpaid principal balance of TDR loans that were in an interest rate reduction program as of March 31, 2022 and December 31, 2021 was $838 million and $831 million, respectively.

The following table provides the amount of loans modified in the ~~periods~~period presented that resulted in a TDR. Additionally, the table summarizes charge-offs occurring in the TDR portfolio, as well as TDRs for which a payment default occurred in the current period within 12 months of the loan first being designated as a TDR. We define payment default as 60 days past due for this disclosure.


	Three Months Ended March 31,				Three Months Ended March 31,
(Dollars in millions)	2022		2021		2022
Modified loans	$	55	$	40	$	55
Charge-offs	$	56	$	26	$	56
Payment default	$	9	$	5	$	9

5055

NAVIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, ~~2022~~2023 and for the three months ended

March 31, ~~2022~~2023 and ~~2021~~2022 is unaudited)

~~2. Allowance for Loan Losses (Continued)~~

~~Key Credit Quality Indicators~~

~~FFELP Loans~~

~~FFELP Loans are substantially insured and guaranteed as to their principal and accrued interest in the event of default. The key credit quality indicators are loan status and loan type.~~

FFELP Loan Delinquencies

March 31, 2022

December 31, 2021

March 31, 2021

(Dollars in millions)

Balance

%

Balance

%

Balance

%

Loans in-school/grace/deferment⁽¹⁾

$
2,232

$
2,220

$
2,781

Loans in forbearance⁽²⁾

6,312

6,292

8,452

Loans in repayment and percentage of each status:

Loans current

36,948

86.5
%

39,679

89.4
%

42,127

91.7
%
Loans delinquent 31-60 days⁽³⁾

1,888

4.4

1,696

3.8

1,377

3.0

Loans delinquent 61-90 days⁽³⁾

1,148

2.7

904

2.0

813

1.8

Loans delinquent greater than 90 days⁽³⁾

2,740

6.4

2,112

4.8

1,605

3.5

Total FFELP Loans in repayment

42,724

100
%

44,391

100
%

45,922

100
%
Total FFELP Loans

51,268

52,903

57,155

FFELP Loan allowance for losses

(255
)

(262
)

(282
)

FFELP Loans, net

$
51,013

$
52,641

$
56,873

Percentage of FFELP Loans in repayment

83.3
%

83.9
%

80.3
%
Delinquencies as a percentage of FFELP Loans in
repayment

13.5
%

10.6
%

��
8.3
%
FFELP Loans in forbearance as a percentage of
loans in repayment and forbearance

12.9
%

12.4
%

15.5
%

⁽¹⁾

⁽²⁾

Loans for customers who have used their allowable deferment time or do not qualify for deferment, that need additional time to obtain employment or who have temporarily ceased making full payments due to hardship or other factors such as disaster relief, including COVID-19 relief programs, 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.~~

~~Loan type~~:

(Dollars in millions)

March 31, 2022

March 31, 2021

Change

Stafford Loans

$
15,975

$
17,327

$
(1,352
)
Consolidation Loans

30,665

34,961

(4,296
)
Rehab Loans

4,628

4,867

(239
)
Total loans, gross

$
51,268

$
57,155

$
(5,887
)

3. Borrowings

The following table summarizes our borrowings.


	March 31, 2023									December 31, 2022
(Dollars in millions)	Short Term			Long Term			Total			Short Term			Long Term			Total
Unsecured borrowings:
Senior unsecured debt(1)	$	1,149		$	4,864		$	6,013		$	1,301		$	5,711		$	7,012
Total unsecured borrowings		1,149			4,864			6,013			1,301			5,711			7,012
Secured borrowings:
FFELP Loan securitizations(2)(3)		68			40,275			40,343			76			42,675			42,751
Private Education Loan securitizations(4)		648			12,187			12,835			725			12,744			13,469
FFELP Loan ABCP facilities		887			428			1,315			923			386			1,309
Private Education Loan ABCP facilities		2,917			—			2,917			2,734			—			2,734
Other(5)		105			—			105			121			—			121
Total secured borrowings		4,625			52,890			57,515			4,579			55,805			60,384
Total before hedge accounting adjustments		5,774			57,754			63,528			5,880			61,516			67,396
Hedge accounting adjustments		(21	)		(366	)		(387	)		(10	)		(490	)		(500	)
Total	$	5,753		$	57,388		$	63,141		$	5,870		$	61,026		$	66,896

(1)

Includes principal amount of $1.1 billion and $1.3 of short-term debt as of March 31, 2023 and December 31, 2022, respectively. Includes principal amount of $4.9 billion and $5.7 billion of long-term debt as of March 31, 2023 and December 31, 2022, respectively.

(2)

Includes $68 million and $76 million of short-term debt related to the FFELP Loan ABS repurchase facilities (FFELP Loan Repurchase Facilities) as of March 31, 2023 and December 31, 2022, respectively.

(3)

Includes defaulted FFELP secured debt tranches with a remaining principal amount of $685 million as of March 31, 2023 as a result of not maturing by their respective contractual maturity dates. Notices were delivered to the trustee, rating agencies and bondholders alerting them to these maturity date defaults. At this time, it is expected the bonds will be paid in full between 2030 and 2035. There is no impact to the principal amount owed or the coupon at which the bonds accrue, and there is no revised contractual maturity date.

(4)

Includes $648 million and $725 million of short-term debt related to the Private Education Loan ABS repurchase facilities (Private Education Loan Repurchase Facilities) as of March 31, 2023 and December 31, 2022, respectively.

(5)

“Other” primarily includes the obligation to return cash collateral held related to derivative exposure.

NAVIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, ~~2022~~2023 and for the three months ended

March 31, ~~2022~~2023 and ~~2021~~2022 is unaudited)

~~2. Allowance for Loan Losses (Continued)~~

~~Private Education Loans~~

The key credit quality indicators are credit scores (FICO scores), loan status, loan seasoning, whether a loan is a TDR, the existence of a cosigner and school type. The FICO score is the higher of the borrower or co-borrower score and is updated at least every six months while school type is assessed at origination. The other Private Education Loan key quality indicators are updated quarterly.

Private Education Loan Credit Quality Indicators by Origination Year

March 31, 2022

(Dollars in millions)

March 31, 2022

2021

2020

2019

2018

Prior

Total

% of Total

Credit Quality
   Indicators

FICO Scores:

640 and above

$
948

$
5,037

$
1,783

$
1,683

$
626

$
9,314

$
19,391

92
%
Below 640

8

44

16

37

21

1,535

$
1,661

8

Total

$
956

$
5,081

$
1,799

$
1,720

$
647

$
10,849

$
21,052

100
%
Loan Status:

In-school/grace/
   deferment/forbearance

$
5

$
64

$
25

$
34

$
13

$
654

$
795

4
%
Current/90 days or
   less delinquent

951

5,015

1,772

1,684

632

9,889

$
19,943

95

Greater than 90 days
   delinquent

—

2

2

2

2

306

314

1

Total

$
956

$
5,081

$
1,799

$
1,720

$
647

$
10,849

$
21,052

100
%
Seasoning⁽¹⁾:

1-12 payments

$
951

$
4,740

$
26

$
17

$
3

$
115

$
5,852

28
%
13-24 payments

—

300

1,555

108

11

134

$
2,108

10

25-36 payments

—

—

201

1,507

46

225

$
1,979

9

37-48 payments

—

—

—

68

545

369

$
982

5

More than 48
   payments

—

—

—

—

35

9,719

$
9,754

46

Loans in-school/
   grace/deferment

5

41

17

20

7

287

377

2

Total

$
956

$
5,081

$
1,799

$
1,720

$
647

$
10,849

$
21,052

100
%
TDR Status:

TDR

$
—

$
9

$
15

$
43

$
28

$
6,998

$
7,093

34
%
Non-TDR

956

5,072

1,784

1,677

619

3,851

13,959

66

Total

$
956

$
5,081

$
1,799

$
1,720

$
647

$
10,849

$
21,052

100
%
Cosigners:

With cosigner⁽²⁾

$
11

$
97

$
31

$
11

$
—

$
6,994

$
7,144

34
%
Without cosigner

945

4,984

1,768

1,709

647

3,855

13,908

66

Total

$
956

$
5,081

$
1,799

$
1,720

$
647

$
10,849

$
21,052

100
%
School Type:

Not-for-profit

$
893

$
4,786

$
1,719

$
1,602

$
595

$
9,048

$
18,643

89
%
For-profit

63

295

80

118

52

1,801

2,409

11

Total

$
956

$
5,081

$
1,799

$
1,720

$
647

$
10,849

$
21,052

100
%
Allowance for loan
   losses

(964
)

Total loans, net

$
20,088

⁽¹⁾	~~Number of months in active repayment for which a scheduled payment was received.~~

⁽²⁾	~~Excluding Private Education Refinance Loans, which do not have a cosigner, the cosigner rate was65% for total loans at March 31, 2022.~~

~~NAVIENT CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Information at March 31, 2022 and for the three months ended~~

~~March 31, 2022 and 2021 is unaudited)~~

~~2. Allowance for Loan Losses (Continued)~~

Private Education Loan Credit Quality Indicators by Origination Year

March 31, 2021

(Dollars in millions)

March 31, 2021

2020

2019

2018

2017

Prior

Total

% of Total

Credit Quality
   Indicators

FICO Scores:

640 and above

$
1,485

$
2,835

$
2,553

$
929

$
291

$
10,736

$
18,829

91
%
Below 640

10

12

35

24

9

1,815

$
1,905

9

Total

$
1,495

$
2,847

$
2,588

$
953

$
300

$
12,551

$
20,734

100
%
Loan Status:

In-school/grace/
   deferment/forbearance

$
6

$
29

$
45

$
23

$
8

$
1,143

$
1,254

6
%
Current/90 days or
   less delinquent

1,489

2,817

2,541

929

291

11,232

$
19,299

93

Greater than 90 days
   delinquent

—

1

2

1

1

176

181

1

Total

$
1,495

$
2,847

$
2,588

$
953

$
300

$
12,551

$
20,734

100
%
Seasoning⁽¹⁾:

1-12 payments

$
1,491

$
2,517

$
131

$
6

$
1

$
159

$
4,305

21
%
13-24 payments

—

314

2,330

54

5

198

$
2,901

14

25-36 payments

—

—

105

823

28

327

$
1,283

6

37-48 payments

—

—

—

58

251

512

$
821

4

More than 48
   payments

—

—

—

—

12

10,955

$
10,967

53

Loans in-school/
   grace/deferment

4

16

22

12

3

400

457

2

Total

$
1,495

$
2,847

$
2,588

$
953

$
300

$
12,551

$
20,734

100
%
TDR Status:

TDR

$
—

$
2

$
18

$
25

$
31

$
7,742

$
7,818

38
%
Non-TDR

1,495

2,845

2,570

928

269

4,809

12,916

62

Total

$
1,495

$
2,847

$
2,588

$
953

$
300

$
12,551

$
20,734

100
%
Cosigners:

With cosigner⁽²⁾

$
3

$
32

$
13

$
1

$
43

$
8,249

$
8,341

40
%
Without cosigner

1,492

2,815

2,575

952

257

4,302

12,393

60

Total

$
1,495

$
2,847

$
2,588

$
953

$
300

$
12,551

$
20,734

100
%
School Type:

Not-for-profit

$
1,408

$
2,718

$
2,416

$
879

$
287

$
10,417

$
18,125

87
%
For-profit

87

129

172

74

13

2,134

2,609

13

Total

$
1,495

$
2,847

$
2,588

$
953

$
300

$
12,551

$
20,734

100
%
Allowance for loan
   losses

(992
)

Total loans, net

$
19,742

⁽¹⁾	~~Number of months in active repayment for which a scheduled payment was received.~~

⁽²⁾	~~Excluding Private Education Refinance Loans, which do not have a cosigner, the cosigner rate was65% for total loans at March 31, 2021.~~

~~NAVIENT CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Information at March 31, 2022 and for the three months ended~~

~~March 31, 2022 and 2021 is unaudited)~~

~~2. Allowance for Loan Losses (Continued)~~

Private Education Loan Delinquencies

TDRs

March 31, 2022

December 31, 2021

March 31, 2021

(Dollars in millions)

Balance

%

Balance

%

Balance

%

Loans in-school/grace/deferment⁽¹⁾

$
191

$
194

$
255

Loans in forbearance⁽²⁾

338

446

668

Loans in repayment and percentage of each status:

Loans current

5,823

88.7
%

6,023

91.0
%

6,477

94.0
%
Loans delinquent 31-60 days⁽³⁾

259

3.9

199

3.0

160

2.3

Loans delinquent 61-90 days⁽³⁾

189

2.9

120

1.8

92

1.3

Loans delinquent greater than 90 days⁽³⁾

293

4.5

274

4.2

166

2.4

Total TDR loans in repayment

6,564

100
%

6,616

100
%

6,895

100
%
Total TDR loans

7,093

7,256

7,818

TDR loans allowance for losses

(785
)

(829
)

(857
)

TDR loans, net

$
6,308

$
6,427

$
6,961

Percentage of TDR loans in repayment

92.5
%

91.2
%

88.2
%
Delinquencies as a percentage of TDR loans in
repayment

11.3
%

9.0
%

6.0
%
Loans in forbearance as a percentage of TDR
loans in repayment and forbearance

4.9
%

6.3
%

8.8
%

⁽¹⁾

⁽²⁾

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

~~NAVIENT CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Information at March 31, 2022 and for the three months ended~~

~~March 31, 2022 and 2021 is unaudited)~~

~~2. Allowance for Loan Losses (Continued)~~

Private Education Loan Delinquencies

Non-TDRs

March 31, 2022

December 31, 2021

March 31, 2021

(Dollars in millions)

Balance

%

Balance

%

Balance

%

Loans in-school/grace/deferment⁽¹⁾

$
186

$
167

$
202

Loans in forbearance⁽²⁾

80

89

129

Loans in repayment and percentage of each status:

Loans current

13,624

99.5
%

13,611

99.6
%

12,543

99.7
%
Loans delinquent 31-60 days⁽³⁾

31

.2

23

.2

19

.1

Loans delinquent 61-90 days⁽³⁾

17

.1

11

.1

8

.1

Loans delinquent greater than 90 days⁽³⁾

21

.2

23

.1

15

.1

Total non-TDR loans in repayment

13,693

100
%

13,668

100
%

12,585

100
%
Total non-TDR loans

13,959

13,924

12,916

Non-TDR loans allowance for losses

(179
)

(180
)

(135
)

Non-TDR loans, net

$
13,780

$
13,744

$
12,781

Percentage of non-TDR loans in repayment

98.1
%

98.2
%

97.4
%
Delinquencies as a percentage of non-TDR loans in
repayment

.5
%

.4
%

.3
%
Loans in forbearance as a percentage of non-TDR
loans in repayment and forbearance

.6
%

.6
%

1.0
%

⁽¹⁾

⁽²⁾

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

~~NAVIENT CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Information at March 31, 2022 and for the three months ended~~

~~March 31, 2022 and 2021 is unaudited)~~

~~3. Borrowings~~

~~The following table summarizes our borrowings.~~

March 31, 2022

December 31, 2021

(Dollars in millions)

Short
Term

Long
Term

Total

Short
Term

Long
Term

Total

Unsecured borrowings:

Senior unsecured debt⁽¹⁾

$
999

$
6,018

$
7,017

$
—

$
7,014

$
7,014

Total unsecured borrowings

999

6,018

7,017

—

7,014

7,014

Secured borrowings:

FFELP Loan securitizations⁽²⁾⁽³⁾

—

49,622

49,622

—

51,841

51,841

Private Education Loan securitizations⁽⁴⁾

515

14,038

14,553

543

14,074

14,617

FFELP Loan ABCP facilities

619

145

764

282

150

432

Private Education Loan ABCP facilities

1,462

1,114

2,576

1,363

1,152

2,515

Other⁽⁵⁾

204

—

204

302

—

302

Total secured borrowings

2,800

64,919

67,719

2,490

67,217

69,707

Total before hedge accounting adjustments

3,799

70,937

74,736

2,490

74,231

76,721

Hedge accounting adjustments

3

(112
)

(109
)

—

257

257

Total

$
3,802

$
70,825

$
74,627

$
2,490

$
74,488

$
76,978

⁽¹⁾	Includes principal amount of $1.0 billion and $0 of short-term debt as of March 31, 2022 and December 31, 2021, respectively. Includes principal amount of $6.0 billion and $7.0 billion of long-term debt as of March 31, 2022 and December 31, 2021, respectively.

⁽²⁾	Includes $93 million and $49 million of long-term debt related to the FFELP Loan asset-backed securitization repurchase facilities (FFELP Loan Repurchase Facilities) as of March 31, 2022 and December 31, 2021, respectively.

⁽³⁾

Includes defaulted FFELP secured debt tranches with a remaining principal amount of $683 million as of March 31, 2022 as a result of not maturing by their respective contractual maturity dates. Notices were delivered to the trustee, rating agencies and bondholders alerting them to these maturity date defaults. At this time, it is expected the bonds will be paid in full between 2029 and 2035. There is no impact to the principal amount owed or the coupon at which the bonds accrue, and there is no revised contractual maturity date.

⁽⁴⁾	Includes $515 million and $543 million of short-term debt related to the Private Education Loan asset-backed securitization repurchase facilities (Private Education Loan Repurchase Facilities) as of March 31, 2022 and December 31, 2021, respectively.

⁽⁵⁾	~~“Other” primarily includes the obligation to return cash collateral held related to derivative exposures.~~

~~NAVIENT CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Information at March 31, 2022 and for the three months ended~~

~~March 31, 2022 and 2021 is unaudited)~~

3. Borrowings (Continued)

Variable Interest Entities

We consolidated the following financing VIEs as of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, as we are the primary beneficiary. As a result, these VIEs are accounted for as secured borrowings.


	March 31, 2022																		March 31, 2023
	Debt Outstanding								Carrying Amount of Assets Securing Debt Outstanding										Debt Outstanding								Carrying Amount of Assets Securing Debt Outstanding
(Dollars in millions)	Short Term		Long Term			Total			Loans		Cash		Other Assets			Total			Short Term		Long Term			Total			Loans		Cash		Other Assets			Total
Secured Borrowings — VIEs:
FFELP Loan securitizations	$	—	$	49,622		$	49,622		$	50,024	$	1,860	$	1,535		$	53,419		$	68	$	40,275		$	40,343		$	40,755	$	1,612	$	1,578		$	43,945
Private Education Loan securitizations		515		14,038			14,553			15,467		518		138			16,123			648		12,187			12,835			13,609		396		97			14,102
FFELP Loan ABCP facilities		619		145			764			755		14		26			795			887		428			1,315			1,331		35		46			1,412
Private Education Loan ABCP facilities		1,462		1,114			2,576			2,757		79		30			2,866			2,917		—			2,917			3,213		137		40			3,390
Total before hedge accounting adjustments		2,596		64,919			67,515			69,003		2,471		1,729			73,203			4,520		52,890			57,410			58,908		2,180		1,761			62,849
Hedge accounting adjustments		—		(164	)		(164	)		—		—		(229	)		(229	)		—		(176	)		(176	)		—		—		(227	)		(227	)
Total	$	2,596	$	64,755		$	67,351		$	69,003	$	2,471	$	1,500		$	72,974		$	4,520	$	52,714		$	57,234		$	58,908	$	2,180	$	1,534		$	62,622


	December 31, 2022
	Debt Outstanding								Carrying Amount of Assets Securing Debt Outstanding
(Dollars in millions)	Short Term		Long Term			Total			Loans		Cash		Other Assets			Total
Secured Borrowings — VIEs:
FFELP Loan securitizations	$	76	$	42,675		$	42,751		$	42,148	$	2,705	$	1,544		$	46,397
Private Education Loan securitizations		725		12,744			13,469			14,168		367		105			14,640
FFELP Loan ABCP facilities		923		386			1,309			1,317		39		44			1,400
Private Education Loan ABCP facilities		2,734		—			2,734			3,039		122		(81	)		3,080
Total before hedge accounting adjustments		4,458		55,805			60,263			60,672		3,233		1,612			65,517
Hedge accounting adjustments		—		(207	)		(207	)		—		—		(256	)		(256	)
Total	$	4,458	$	55,598		$	60,056		$	60,672	$	3,233	$	1,356		$	65,261

December 31, 2021

Debt Outstanding

Carrying Amount of Assets Securing
Debt Outstanding

(Dollars in millions)

Short
Term

Long
Term

Total

Loans

Cash

Other
Assets

Total

Secured Borrowings — VIEs:

FFELP Loan securitizations

$
—

$
51,841

$
51,841

$
52,066

$
2,073

$
1,520

$
55,659

Private Education Loan securitizations

543

14,074

14,617

15,506

505

150

16,161

FFELP Loan ABCP facilities

282

150

432

436

8

15

459

Private Education Loan ABCP facilities

1,363

1,152

2,515

2,641

63

32

2,736

Total before hedge accounting
adjustments

2,188

67,217

69,405

70,649

2,649

1,717

75,015

Hedge accounting adjustments

—

(110
)

(110
)

—

—

(195
)

(195
)
Total

$
2,188

$
67,107

$
69,295

$
70,649

$
2,649

$
1,522

$
74,820

NAVIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, ~~2022~~2023 and for the three months ended

March 31, ~~2022~~2023 and ~~2021~~2022 is unaudited)

4. Derivative Financial Instruments

Summary of Derivative Financial Statement Impact

The following tables summarize the fair values and notional amounts of all derivative instruments and their impact on net income and other comprehensive income.

Impact of Derivatives on Balance Sheet


		Cash Flow				Fair Value(3)						Trading						Total
(Dollars in millions)	Hedged Risk Exposure	Mar 31, 2023		Dec 31, 2022		Mar 31, 2023			Dec 31, 2022			Mar 31, 2023			Dec 31, 2022			Mar 31, 2023			Dec 31, 2022
Fair Values(1)
Derivative Assets:
Interest rate swaps	Interest rate	$	—	$	—	$	72		$	55		$	1		$	1		$	73		$	56
Cross-currency interest rate swaps	Foreign currency and interest rate		—		—		—			—			—			—			—			—
Total derivative assets(2)			—		—		72			55			1			1			73			56
Derivative Liabilities:
Interest rate swaps	Interest rate		—		—		—			(2	)		(3	)		(3	)		(3	)		(5	)
Floor Income Contracts	Interest rate		—		—		—			—			—			—			—			—
Cross-currency interest rate swaps	Foreign currency and interest rate		—		—		(224	)		(253	)		—			—			(224	)		(253	)
Total derivative liabilities(2)			—		—		(224	)		(255	)		(3	)		(3	)		(227	)		(258	)
Net total derivatives		$	—	$	—	$	(152	)	$	(200	)	$	(2	)	$	(2	)	$	(154	)	$	(202	)

Cash Flow

Fair Value⁽³⁾

Trading

Total

(Dollars in millions)

Hedged Risk
Exposure

Mar 31, 2022

Dec 31, 2021

Mar 31, 2022

Dec 31, 2021

Mar 31, 2022

Dec 31, 2021

Mar 31, 2022

Dec 31, 2021

Fair Values⁽¹⁾

Derivative Assets:

Interest rate swaps

Interest rate

$
—

$
—

$
150

$
222

$
1

$
2

$
151

$
224

Cross-currency interest rate
swaps

Foreign currency and
interest rate

—

—

—

—

—

—

—

—

Total derivative assets⁽²⁾

—

—

150

222

1

2

151

224

Derivative Liabilities:

Interest rate swaps

Interest rate

—

—

—

—

(4
)

(5
)

(4
)

(5
)
Floor Income Contracts

Interest rate

—

—

—

—

(9
)

(65
)

(9
)

(65
)
Cross-currency interest rate
swaps

Foreign currency and
interest rate

—

—

(226
)

(190
)

—

—

(226
)

(190
)
Total derivative liabilities⁽²⁾

—

—

(226
)

(190
)

(13
)

(70
)

(239
)

(260
)
Net total derivatives

$
—

$
—

$
(76
)

$
32

$
(12
)

$
(68
)

$
(88
)

$
(36
)
(1)

Fair values reported are exclusive of collateral held and pledged and accrued interest. Assets and liabilities are presented without consideration of master netting agreements. Derivatives are carried on the balance sheet based on net position by counterparty under master netting agreements and classified in other assets or other liabilities depending on whether in a net positive or negative position.

(2)

The following table reconciles gross positions without the impact of master netting agreements to the balance sheet classification:

⁽¹⁾

⁽²⁾	~~The following table reconciles gross positions without the impact of master netting agreements to the balance sheet classification:~~


	Other Assets						Other Liabilities
(Dollar in millions)	March 31, 2023			December 31, 2022			March 31, 2023			December 31, 2022
Gross position	$	73		$	56		$	(227	)	$	(258	)
Impact of master netting agreements		—			—			—			—
Derivative values with impact of master netting agreements (as carried on balance sheet)		73			56			(227	)		(258	)
Cash collateral (held) pledged		(65	)		(80	)		51			62
Net position	$	8		$	(24	)	$	(176	)	$	(196	)

Other Assets

Other Liabilities

(Dollar in millions)

March 31, 2022

December 31, 2021

March 31, 2022

December 31, 2021

Gross position

$
151

$
224

$
(239
)

$
(260
)
Impact of master netting agreements

—

(6
)

—

6

Derivative values with impact of master netting
agreements (as carried on balance sheet)

151

218

(239
)

(254
)
Cash collateral (held) pledged

(152
)

(244
)

95

147

Net position

$
(1
)

$
(26
)

$
(144
)

$
(107
)

⁽³⁾	~~The following table shows the carrying value of liabilities in fair value hedges and the related fair value hedging adjustments to these liabilities:~~

As of March 31, 2022

As of December 31, 2021

(Dollar in millions)

Carrying
Value

Hedge Basis Adjustments

Carrying
Value

Hedge Basis Adjustments

Short-term borrowings

$
1,000

$
3

$
—

$
—

Long-term borrowings

$
7,076

$
(116
)

$
8,503

$
252

(3)

The following table shows the carrying value of liabilities in fair value hedges and the related fair value hedging adjustments to these liabilities:


	As of March 31, 2023					As of December 31, 2022
(Dollar in millions)	Carrying Value		Hedge Basis Adjustments			Carrying Value		Hedge Basis Adjustments
Short-term borrowings	$	1,126	$	(21	)	$	1,289	$	(10	)
Long-term borrowings	$	5,374	$	(370	)	$	6,188	$	(494	)

NAVIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, ~~2022~~2023 and for the three months ended

March 31, ~~2022~~2023 and ~~2021~~2022 is unaudited)

4. Derivative Financial Instruments (Continued)

The above fair values include adjustments when necessary for counterparty credit risk for both when we are exposed to the counterparty, net of collateral postings, and when the counterparty is exposed to us, net of collateral postings. The net adjustments decreased the asset position at March, 31, ~~2022~~2023 and December 31, ~~2021~~2022 by $9$5 million and $8$6 million, respectively. In addition, the above fair values reflect adjustments for illiquid derivatives as indicated by a wide bid/ask spread in the interest rate indices to which the derivatives are indexed. These adjustments decreased the overall net asset positions at March 31, ~~2022~~2023 and December 31, ~~2021~~2022 by $2$1 million and $2$1 million, respectively.


	Cash Flow				Fair Value				Trading				Total
(Dollars in billions)	Mar 31, 2023		Dec 31, 2022		Mar 31, 2023		Dec 31, 2022		Mar 31, 2023		Dec 31, 2022		Mar 31, 2023		Dec 31, 2022
Notional Values:
Interest rate swaps	$	6.4	$	8.3	$	5.2	$	6.2	$	13.3	$	17.4	$	24.9	$	31.9
Floor Income Contracts		—		—		—		—		6.0		6.0		6.0		6.0
Cross-currency interest rate swaps		—		—		1.7		1.8		—		—		1.7		1.8
Total derivatives	$	6.4	$	8.3	$	6.9	$	8.0	$	19.3	$	23.4	$	32.6	$	39.7

Cash Flow

Fair Value

Trading

Total

(Dollars in billions)

Mar 31, 2022

Dec 31, 2021

Mar 31, 2022

Dec 31, 2021

Mar 31, 2022

Dec 31, 2021

Mar 31, 2022

Dec 31, 2021

Notional Values:

Interest rate swaps

$
11.4

$
12.1

$
6.2

$
6.2

$
26.8

$
28.4

$
44.4

$
46.7

Floor Income Contracts

—

—

—

—

8.1

12.5

8.1

12.5

Cross-currency interest rate swaps

—

—

2.0

2.1

—

—

2.0

2.1

Total derivatives

$
11.4

$
12.1

$
8.2

$
8.3

$
34.9

$
40.9

$
54.5

$
61.3

~~Mark-to-Market~~

Mark-to-MarketImpact of Derivatives on Statements of Income


	Total Gains (Losses)
	Three Months Ended March 31,
(Dollars in millions)	2023			2022
Fair Value Hedges:
Interest Rate Swaps
Gains (losses) recognized in net income on derivatives	$	78		$	(288	)
Gains (losses) recognized in net income on hedged items		(82	)		313
Net fair value hedge ineffectiveness gains (losses)		(4	)		25
Cross currency interest rate swaps
Gains (losses) recognized in net income on derivatives		29			(36	)
Gains (losses) recognized in net income on hedged items		(31	)		52
Net fair value hedge ineffectiveness gains (losses)		(2	)		16
Total fair value hedges(1)(2)		(6	)		41
Cash Flow Hedges:
Total cash flow hedges(2)		—			—
Trading:
Interest rate swaps		(8	)		62
Floor income contracts		—			36
Cross currency interest rate swaps		—			—
Other		—			—
Total trading derivatives(3)		(8	)		98
Mark-to-market gains (losses) recognized	$	(14	)	$	139

Total Gains (Losses)

Three Months Ended March 31,

(Dollars in millions)

2022

2021

Fair Value Hedges:

Interest Rate Swaps

Gains (losses) recognized in net income on derivatives

$
(288
)

$
(197
)
Gains (losses) recognized in net income on hedged items

313

212

Net fair value hedge ineffectiveness gains (losses)

25

15

Cross currency interest rate swaps

Gains (losses) recognized in net income on derivatives

(36
)

70

Gains (losses) recognized in net income on hedged items

52

(40
)
Net fair value hedge ineffectiveness gains (losses)

16

30

Total fair value hedges⁽¹⁾⁽²⁾

41

45

Cash Flow Hedges:

Total cash flow hedges⁽²⁾

—

—

Trading:

Interest rate swaps

62

22

Floor income contracts

36

14

Cross currency interest rate swaps

—

—

Other

—

—

Total trading derivatives⁽³⁾

98

36

Mark-to-market gains (losses) recognized

$
139

$
81

(1)

Recorded in interest expense in the consolidated statements of income.

(2)

The accrued interest income (expense) on fair value hedges and cash flow hedges is recorded in interest expense and is excluded from this table.

(3)

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

⁽¹⁾	~~Recorded in interest expense in the consolidated statements of income.~~

⁽²⁾	~~The accrued interest income (expense) on fair value hedges and cash flow hedges is recorded in interest expense and is excluded from this table.~~

⁽³⁾	~~Recorded in “gains (losses) on derivative and hedging activities, net” in the consolidated statements of income.~~

NAVIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, ~~2022~~2023 and for the three months ended

March 31, ~~2022~~2023 and ~~2021~~2022 is unaudited)

4. Derivative Financial Instruments (Continued)

Impact of Derivatives on Other Comprehensive Income (Equity)


	Three Months Ended March 31,
(Dollars in millions)	2023			2022
Total gains (losses) on cash flow hedges	$	(3	)	$	93
Reclassification adjustments for derivative (gains) losses included in net income (interest expense)(1)		(18	)		21
Net changes in cash flow hedges, net of tax	$	(21	)	$	114

(1)

Includes net settlement income/expense.

Collateral

Three Months Ended March 31,

(Dollars in millions)

2022

2021

Total gains (losses) on cash flow hedges

$
93

$
27

Reclassification adjustments for derivative (gains) losses
included in net income (interest expense)⁽¹⁾

21

21

Net changes in cash flow hedges, net of tax

$
114

$
48

⁽¹⁾

~~Includes net settlement income/expense.~~

~~Collateral~~

The following table details collateral held and pledged related to derivative exposure between us and our derivative counterparties:


(Dollars in millions)	March 31, 2023		December 31, 2022
Collateral held:
Cash (obligation to return cash collateral is recorded in short-term borrowings)	$	65	$	80
Securities at fair value — corporate derivatives (not recorded in financial statements)(1)		—		—
Securities at fair value — on-balance sheet securitization derivatives (not recorded in financial statements)(2)		—		—
Total collateral held	$	65	$	80
Derivative asset at fair value including accrued interest	$	73	$	85
Collateral pledged to others:
Cash (right to receive return of cash collateral is recorded in investments)	$	51	$	62
Total collateral pledged	$	51	$	62
Derivative liability at fair value including accrued interest and premium receivable	$	235	$	266

(Dollars in millions)

March 31, 2022

December 31, 2021

Collateral held:

Cash (obligation to return cash collateral is recorded in short-term borrowings)

$
152

$
244

Securities at fair value — corporate derivatives (not recorded in financial
   statements)⁽¹⁾

—

—

Securities at fair value — on-balance sheet securitization derivatives (not
   recorded in financial statements)⁽²⁾

—

1

Total collateral held

$
152

$
245

Derivative asset at fair value including accrued interest

$
159

$
242

Collateral pledged to others:

Cash (right to receive return of cash collateral is recorded in investments)

$
95

$
147

Total collateral pledged

$
95

$
147

Derivative liability at fair value including accrued interest and premium
   receivable

$
256

$
271

(1)

The Company has the ability to sell or re-pledge securities it holds as collateral.

⁽¹⁾	~~The Company has the ability to sell or re-pledge securities it holds as collateral.~~

⁽²⁾	~~The trusts do not have the ability to sell or re-pledge securities they hold as collateral.~~

(2)

The trusts do not have the ability to sell or re-pledge securities they hold as collateral.

~~NAVIENT CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Information at March 31, 2022 and for the three months ended~~

~~March 31, 2022 and 2021 is unaudited)~~

~~4. Derivative Financial Instruments (Continued)~~

Our corporate derivatives contain credit contingent features. At our current unsecured credit rating, we have fully collateralized our corporate derivative liability position (including accrued interest and net of premiums receivable) of ~~$24 million~~$0 with our counterparties. Downgrades in our unsecured credit rating would not result in any additional collateral requirements. Trust related derivatives do not contain credit contingent features related to our or the trusts’ credit ratings. At March 31, 2022 and December 31, 2021, we had a net positive exposure (derivative gain positions to us less collateral which has been posted by counterparties to us) related to Navient Corporation derivatives of $15 million and $9 million, respectively. The trusts are not required to post collateral to the counterparties. At March 31, 2022 and December 31, 2021, the net positive exposure on swaps in securitization trusts was $0 and $0, respectively

The table below highlights credit exposure related to our derivative counterparties at March 31, ~~2022.~~2023.


(Dollars in millions)	Corporate Contracts			Securitization Trust Contracts
Exposure, net of collateral	$	13		$	—
Percent of exposure to counterparties with credit ratings below S&P AA- or Moody’s Aa3		100	%		—	%
Percent of exposure to counterparties with credit ratings below S&P A- or Moody’s A3		—	%		—	%

NAVIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, 2023 and for the three months ended

March 31, 2023 and 2022 is unaudited)

(Dollars in millions)

Corporate
Contracts

Securitization
Trust
Contracts

Exposure, net of collateral

$
15

$
—

Percent of exposure to counterparties with credit ratings
below S&P AA- or Moody’s Aa3

100
%

—
%
Percent of exposure to counterparties with credit ratings
below S&P A- or Moody’s A3

32
%

—
%

5. Other Assets

The following table provides the detail of our other assets.


(Dollars in millions)	March 31, 2022		December 31, 2021		March 31, 2023		December 31, 2022
Accrued interest receivable	$	1,834	$	1,881	$	2,043	$	2,031
Benefit and insurance-related investments		456		462		454		452
Income tax asset, net		255		369		111		132
Derivatives at fair value		151		218		73		56
Accounts receivable		109		159		78		83
Fixed assets		91		95		69		74
Other		15		39		28		38
Total	$	2,911	$	3,223	$	2,856	$	2,866

NAVIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, ~~2022~~2023 and for the three months ended

March 31, ~~2022~~2023 and ~~2021~~2022 is unaudited)

6. Stockholders’ Equity

The following table summarizes common share repurchases, issuances and dividends paid.


	Three Months Ended March 31,
(Dollars and shares in millions, except per share amounts)	2023		2022
Common stock repurchased(1)		4.9		6.2
Common stock repurchased (in dollars)(1)	$	85	$	115
Average purchase price per share(1)	$	17.40	$	18.41
Remaining common stock repurchase authority(1)	$	515	$	885
Shares repurchased related to employee stock-based compensation plans(2)		1.3		1.1
Average purchase price per share(2)	$	18.44	$	17.92
Common shares issued(3)		2.4		2.4
Dividends paid	$	21	$	24
Dividends per share	$	.16	$	.16

Three Months Ended March 31,

(Dollars and shares in millions, except per share amounts)

2022

2021

Common stock repurchased⁽¹⁾

6.2

8.2

Common stock repurchased (in dollars)⁽¹⁾

$
115

$
100

Average purchase price per share⁽¹⁾

$
18.41

$
12.23

Remaining common stock repurchase authority⁽¹⁾

$
885

$
500

Shares repurchased related to employee stock-
based compensation plans⁽²⁾

1.1

2.2

Average purchase price per share⁽²⁾

$
17.92

$
11.91

Common shares issued⁽³⁾

2.4

3.6

Dividends paid

$
24

$
29

Dividends per share

$
.16

$
.16

(1)

Common shares purchased under our share repurchase program. Our board of directors authorized a $1 billion multi-year share repurchase program in December 2021.

(2)

Comprises shares withheld from stock option exercises and vesting of restricted stock for employees’ tax withholding obligations and shares tendered by employees to satisfy option exercise costs.

(3)

Common shares issued under our various compensation and benefit plans.

⁽¹⁾	~~Common shares purchased under our share repurchase program. Our board of directors authorized a $1 billion multi-year share repurchase program in December 2021.~~

⁽²⁾	~~Comprises shares withheld from stock option exercises and vesting of restricted stock for employees’ tax withholding obligations and shares tendered by employees to satisfy option exercise costs.~~

⁽³⁾	~~Common shares issued under our various compensation and benefit plans.~~

The closing price of our common stock on March 31, ~~2022~~2023 was ~~$17.04.~~

$15.99.

~~NAVIENT CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Information at March 31, 2022 and for the three months ended~~

~~March 31, 2022 and 2021 is unaudited)~~

7. Earnings (Loss) per Common Share

Basic earnings (loss) per common share (EPS) are calculated using the weighted average number of shares of common stock outstanding during each period. A reconciliation of the numerators and denominators of the basic and diluted EPS calculations on a GAAP basis follows.


	Three Months Ended March 31,
(In millions, except per share data)	2023		2022
Numerator:
Net income	$	111	$	255
Denominator:
Weighted average shares used to compute basic EPS		129		151
Effect of dilutive securities:
Dilutive effect of stock options, restricted stock, restricted stock units, performance stock units, and Employee Stock Purchase Plan (ESPP)(1)		1		2
Dilutive potential common shares(2)		1		2
Weighted average shares used to compute diluted EPS		130		153
Basic earnings per common share	$	.87	$	1.69
Diluted earnings per common share	$	.86	$	1.67

Three Months Ended March 31,

(In millions, except per share data)

2022

2021

Numerator:

Net income

$
255

$
370

Denominator:

Weighted average shares used to compute basic EPS

151

183

Effect of dilutive securities:

Dilutive effect of stock options, restricted stock,
   restricted stock units, performance stock units,
   and Employee Stock Purchase Plan (ESPP)⁽¹⁾

2

2

Dilutive potential common shares⁽²⁾

2

2

Weighted average shares used to compute
   diluted EPS

153

185

Basic earnings per common share

$
1.69

$
2.02

Diluted earnings per common share

$
1.67

$
2.00

(1)

Includes the potential dilutive effect of additional common shares that are issuable upon exercise of outstanding stock options, restricted stock, restricted stock units, performance stock units and the outstanding commitment to issue shares under applicable ESPPs, determined by the treasury stock method.

(2)

For the three months ended March 31, 2023 and 2022, securities covering approximately 0 million and 0 million shares, respectively, were outstanding but not included in the computation of diluted earnings per share because they were anti-dilutive.

NAVIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, 2023 and for the three months ended

March 31, 2023 and 2022 is unaudited)

⁽¹⁾

⁽²⁾	For the three months ended March 31, 2022 and 2021, securities covering approximately 0 million and 2 million shares, respectively, were outstanding but not included in the computation of diluted earnings per share because they were anti-dilutive.

8. 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. ~~See “Note 11 – Fair Value Measurements”~~The fair value of the items discussed below are separately disclosed in ~~our 2021 Form 10-K for a full discussion.~~this footnote.

During the three months ended March 31, ~~2022,~~2023, there were no significant transfers of financial instruments between levels, or changes in our methodology used to value our financial instruments.

~~NAVIENT CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Information at March 31, 2022 and for the three months ended~~

~~March 31, 2022 and 2021 is unaudited)~~

8.~~Fair Value Measurements (Continued)~~

The following table summarizes the valuation of our financial instruments that are marked-to-market on a recurring basis. During the ~~third~~first quarters of ~~2022~~2023 and ~~2021,~~2022, there were no significant transfers of financial instruments between levels.


	Fair Value Measurements on a Recurring Basis
	March 31, 2023										December 31, 2022
(Dollars in millions)	Level 1		Level 2		Level 3			Total			Level 1		Level 2			Level 3			Total
Assets
Derivative instruments:(1)
Interest rate swaps		—		72		1			73			—		55			1			56
Cross-currency interest rate swaps		—		—		—			—			—		—			—			—
Total derivative assets(2)		—		72		1			73			—		55			1			56
Total	$	—	$	72	$	1		$	73		$	—	$	55		$	1		$	56
Liabilities(3)
Derivative instruments(1)
Interest rate swaps	$	—	$	—	$	(3	)	$	(3	)	$	—	$	(2	)	$	(3	)	$	(5	)
Floor Income Contracts		—		—		—			—			—		—			—			—
Cross-currency interest rate swaps		—		—		(224	)		(224	)		—		—			(253	)		(253	)
Total derivative liabilities(2)		—		—		(227	)		(227	)		—		(2	)		(256	)		(258	)
Total	$	—	$	—	$	(227	)	$	(227	)	$	—	$	(2	)	$	(256	)	$	(258	)

Fair Value Measurements on a Recurring Basis

March 31, 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

—

150

1

151

—

223

1

224

Cross-currency interest rate swaps

—

—

—

—

—

—

—

—

Total derivative assets⁽²⁾

—

150

1

151

—

223

1

224

Total

$
—

$
150

$
1

$
151

$
—

$
223

$
1

$
224

Liabilities⁽³⁾

Derivative instruments⁽¹⁾

Interest rate swaps

$
—

$
—

$
(4
)

$
(4
)

$
—

$
—

$
(5
)

$
(5
)
Floor Income Contracts

—

(9
)

—

(9
)

—

(65
)

—

(65
)
Cross-currency interest rate swaps

—

—

(226
)

(226
)

—

—

(190
)

(190
)
Total derivative liabilities⁽²⁾

—

(9
)

(230
)

(239
)

—

(65
)

(195
)

(260
)
Total

$
—

$
(9
)

$
(230
)

$
(239
)

$
—

$
(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.

⁽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.

6463

NAVIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, ~~2022~~2023 and for the three months ended

March 31, ~~2022~~2023 and ~~2021~~2022 is unaudited)

8. 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 March 31,
	2023											2022
	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	$	(2	)	$	(253	)	$	—	$	(255	)	$	(4	)	$	(190	)	$	—	$	(194	)
Total gains/(losses):
Included in earnings(1)		—			15			—		15			1			(41	)		—		(40	)
Included in other comprehensive income		—			—			—		—			—			—			—		—
Settlements		—			14			—		14			—			5			—		5
Transfers in and/or out of level 3		—			—			—		—			—			—			—		—
Balance, end of period	$	(2	)	$	(224	)	$	—	$	(226	)	$	(3	)	$	(226	)	$	—	$	(229	)
Change in mark-to- market gains/(losses) relating to instruments still held at the reporting date(2)	$	—		$	29		$	—	$	29		$	1		$	(36	)	$	—	$	(35	)

Three Months Ended March 31,

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

(41
)

0

(40
)

1

62

—

63

Included in other comprehensive income

0

0

0

0

0

0

0

0

Settlements

0

5

0

5

—

7

—

7

Transfers in and/or out of level 3

0

0

0

0

0

0

0

0

Balance, end of period

$
(3
)

$
(226
)

$
0

$
(229
)

$
(7
)

$
(225
)

$
—

$
(232
)
Change in mark-to-market gains/(losses)
relating to instruments still held at the
reporting date⁽²⁾

$
1

$
(36
)

$
0

$
(35
)

$
1

$
(91
)

$
—

$
(90
)

(1)

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

⁽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 March 31,
(Dollars in millions)	2023		2022
Gains (losses) on derivative and hedging activities, net	$	—	$	1
Interest expense		15		(41	)
Total	$	15	$	(40	)

Three Months Ended March 31,

(Dollars in millions)

2022

2021

Gains (losses) on derivative and hedging activities, net

$
1

$
1

Interest expense

(41
)

62

Total

$
(40
)

$
63

(2)

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

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

6564

NAVIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, ~~2022~~2023 and for the three months ended

March 31, ~~2022~~2023 and ~~2021~~2022 is unaudited)

8. 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 March 31, 2023			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		(224	)	Discounted cash flow	Constant Prepayment Rate	5%
Other		—
Total	$	(226	)

(Dollars in millions)

Fair Value at March 31, 2022

Valuation
Technique

Input

Range and
Weighted
Average

Derivatives

Prime/LIBOR basis swaps

$
(3
)

Discounted cash flow

Constant Prepayment Rate

9%

Bid/ask adjustment to
discount rate

.08%

Cross-currency interest rate swaps

(226
)

Discounted cash flow

Constant Prepayment Rate

5%

Other

—

Total

$
(229
)

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


	March 31, 2022									December 31, 2021									March 31, 2023									December 31, 2022
(Dollars in millions)	Fair Value			Carrying Value			Difference			Fair Value			Carrying Value			Difference			Fair Value			Carrying Value			Difference			Fair Value			Carrying Value			Difference
Earning assets
FFELP Loans	$	50,375		$	51,013		$	(638	)	$	53,632		$	52,641		$	991		$	39,970		$	42,148		$	(2,178	)	$	41,426		$	43,525		$	(2,099	)
Private Education Loans		20,213			20,088			125			21,140			20,171			969			17,530			18,275			(745	)		17,880			18,725			(845	)
Cash and investments		3,424			3,424			—			3,845			3,845			—			2,931			2,931			—			4,974			4,974			—
Total earning assets		74,012			74,525			(513	)		78,617			76,657			1,960			60,431			63,354			(2,923	)		64,280			67,224			(2,944	)
Interest-bearing liabilities
Short-term borrowings		3,813			3,802			(11	)		2,492			2,490			(2	)		5,758			5,753			(5	)		5,879			5,870			(9	)
Long-term borrowings		69,515			70,825			1,310			74,548			74,488			(60	)		54,261			57,388			3,127			57,652			61,026			3,374
Total interest-bearing liabilities		73,328			74,627			1,299			77,040			76,978			(62	)		60,019			63,141			3,122			63,531			66,896			3,365
Derivative financial instruments
Floor Income Contracts		(9	)		(9	)		—			(65	)		(65	)		—			—			—			—			—			—			—
Interest rate swaps		147			147			—			219			219			—			70			70			—			51			51			—
Cross-currency interest rate swaps		(226	)		(226	)		—			(190	)		(190	)		—			(224	)		(224	)		—			(253	)		(253	)		—
Other		—			—			—			—			—			—			—			—			—			—			—			—
Excess of net asset fair value over carrying value							$	786								$	1,898								$	199								$	421

6665

NAVIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, ~~2022~~2023 and for the three months ended

March 31, ~~2022~~2023 and ~~2021~~2022 is unaudited)

9. Commitments, Contingencies and ~~Contingencies~~Guarantees

Legal Proceedings

We and our subsidiaries and affiliates are subject to various claims, lawsuits and other actions that arise in the normal course of business. We believe that these claims, lawsuits and other actions will not, individually or in the aggregate, have a material adverse effect on our business, financial condition or results of operations, except as otherwise disclosed. Most of these matters are claims including individual and class action lawsuits against our servicing or business processing subsidiaries alleging the violation of state or federal laws in connection with servicing or collection activities on their education loans and other debts.

In the ordinary course of our business, the Company and our subsidiaries and affiliates receive information and document requests and investigative demands from various entities including State Attorneys General, U.S. Attorneys, legislative committees, individual members of Congress and administrative agencies. These requests may be informational, regulatory or enforcement in nature and may relate to our business practices, the industries in which we operate, or companies with whom we conduct business. Generally, our practice has been and continues to be to cooperate with these bodies and to be responsive to any such requests.

The number of these inquiries and the volume of related information demands continue to increase and therefore continue to increase the time, costs and resources we must dedicate to timely respond to these requests and may, depending on their outcome, result in payments of restitution, fines and penalties.

Certain Cases

~~During~~In January 2017, the Consumer Financial Protection Bureau (the CFPB) and Attorneys General for the State of Illinois and the State of Washington initiated civil actions naming Navient Corporation and several of its subsidiaries as defendants alleging violations of certain Federal and State consumer protection statutes, including the CFPA, FCRA, FDCPA and various state consumer protection laws. The Attorneys General for the States of Pennsylvania, California, Mississippi, and New Jersey also initiated actions against the Company and certain subsidiaries alleging violations of various state and federal consumer protection laws based upon similar alleged acts or failures to act. In addition to these matters, a number of lawsuits have been filed by nongovernmental parties or, in the future, may be filed by additional governmental or nongovernmental parties seeking damages or other remedies related to similar issues raised by the CFPB and the State Attorneys General. In January 2022, we entered into a series of Consent Judgment and Orders (the “Agreements”) with 40 State Attorneys General to resolve all matters in dispute related to the State Attorneys General cases as well as the related investigations, subpoenas, civil investigative demands and inquiries from various other state regulators. These Agreements do not resolve the litigation involving the Company and the CFPB.

As the Company has previously stated, we believe the allegations in the CFPB suit are false and that they improperly seek to impose penalties on Navient based on new, previously unannounced servicing standards applied retroactively against only one servicer. We therefore have denied these allegations and are vigorously defending against the allegations in that case. At this point in time, it is reasonably possible that a loss contingency exists; however, the Company is unable to anticipate the timing of a resolution or the impact that an adverse ruling in the CFPB case may have on the Company’s consolidated financial position, liquidity, results of operation or cash flows. As a result, it is not possible at this time to estimate a range of potential exposure, if any, for amounts that may be payable in connection with this matter and reserves have not been established. It is possible that an adverse ruling or rulings may have a material adverse impact on the Company.

On April 12, 2023, the Company reached an agreement in principle (“Settlement”) with certain plaintiffs for a nationwide settlement of claims raised in the following bankruptcy adversary actions: Coyle v. Navient Solutions, LLC, No. 22-80018 (Bankr. W.D. Mich.); Homaidan v. SLM Corp., No. 1:17-ap-01085 (Bankr. E.D.N.Y.); Mazloom v. Navient Solutions, LLC, No. 20-80033-6 (Bankr. N.D.N.Y.); and Woodard v. Navient Solutions, LLC, No. 08-81442 (Bankr. D. Neb.) collectively referred to as the “Bankruptcy Cases.” This settlement in principle is subject, among other things, to final documentation and final court approval. Under the Settlement, Navient will forego the collection of defined balances for borrowers or co-borrowers of certain private loans — all of which were originated prior to our company separation — who have received a discharge in bankruptcy during the periods covered by the agreements. As a result, we recorded $23 million additional private loan provision for loan losses in the first quarter of ~~2016, Navient Corporation, certain Navient officers and directors, and~~2023 related to the underwriters of certain Navient securities offerings were sued in three putative securities class action lawsuits filed on behalf of certain investors in Navient stock or Navient unsecured debt. These 3 cases, which were filedestimated future charge offs that are expected to occur. The Company has also agreed to fund settlement funds. It anticipates that any cash contribution it will be required to make to these funds will not exceed $44 million in the ~~U.S. District Court~~aggregate and will be fully covered by insurance. The net impact to operating expense for this element of the settlement for the ~~District~~first quarter of ~~Delaware, were consolidated by~~2023 was $0 due to the ~~District Court, with Lord Abbett Funds appointed as Lead Plaintiff. The caption~~accrual of the ~~consolidated case is~~ offsetting insurance reimbursements.

~~Lord Abbett Affiliated Fund, Inc., et al. v. Navient Corporation, et al.~~ ~~Additionally, two putative class actions have been filed in the U.S. District Court~~

NAVIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, 2023 and for the ~~District of New Jersey captioned~~ three months ended~~Eli Pope v. Navient Corporation, John F. Remondi, Somsak Chivavibul~~

March 31, 2023 and ~~Christian Lown,~~ 2022 is unaudited)~~and~~ ~~Melvin Gross v. Navient Corporation, John F. Remondi, Somsak Chivavibul and Christian M. Lown,~~ ~~both of which~~

~~allege violations of the federal securities laws under Sections 10(b)~~

9.Commitments, Contingencies and ~~20(a) of the Securities Exchange Act of 1934. The cases were consolidated by the Court in February 2018 under the caption~~ ~~In Re Navient Corporation Securities Litigation~~ Guarantees (Continued)and the plaintiffs filed a consolidated amended complaint in April 2018. In the third quarter of 2021, the Company reached tentative agreements to settle both cases. The settlements, in which the Company and other defendants expressly deny any admission or concession of wrongdoing or fault, have received final court approval and are covered by insurance.

Regulatory Matters

The Company has been named as defendant in a number of putative class action cases alleging violations of various state and federal consumer protection laws including the Telephone Consumer Protection Act (TCPA), the Consumer Financial Protection Act of 2010 (CFPA), the Fair Credit Reporting Act (FCRA), the Fair Debt Collection Practices Act (FDCPA), in adversarial proceedings under the U.S. Bankruptcy Code, and various state consumer protection laws. At this point in time, the Company is unable to anticipate the timing of a resolution or the impact that these legal proceedings may have on the Company’s consolidated financial position, liquidity, results of operation or cash flows. As a result, it is not possible at this time to estimate a range of potential exposure, if any, for amounts that may be payable in connection with these matters and reserves have not been established. It is possible that an adverse ruling or rulings may have a material adverse impact on the Company.

~~NAVIENT CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Information at March 31, 2022 and for the three months ended~~

~~March 31, 2022 and 2021 is unaudited)~~

9.~~Commitments and Contingencies (Continued)~~

In January 2017, the Consumer Financial Protection Bureau (the CFPB) and Attorneys General for the State of Illinois and the State of Washington initiated civil actions naming Navient Corporation and several of its subsidiaries as defendants alleging violations of certain Federal and State consumer protection statutes, including the CFPA, FCRA, FDCPA and various state consumer protection laws. The Attorneys General for the States of Pennsylvania, California, Mississippi, and New Jersey also initiated actions against the Company and certain subsidiaries alleging violations of various state and federal consumer protection laws based upon similar alleged acts or failures to act. In addition to these matters, a number of lawsuits have been filed by nongovernmental parties or, in the future, may be filed by additional governmental or nongovernmental parties seeking damages or other remedies related to similar issues raised by the CFPB and the State Attorneys General. In January 2022, we entered into a series of Consent Judgment and Orders (the “Agreements”) with 40 State Attorneys General to resolve all matters in dispute related to the State Attorneys General cases as well as the related investigations, subpoenas, civil investigative demands and inquiries from various other state regulators. These Agreements do not resolve the litigation involving the Company and the CFPB. The Company will cancel the loan balance of approximately 66,000 borrowers with qualifying private education loans that were originated largely between 2002 and 2010 and later defaulted and charged off. The loans to be cancelled have aggregate outstanding balances of approximately $1.7 billion. The expense to the Company to cancel these loans is approximately $50 million which represents the amount of expected future recoveries of these charged-off loans on the balance sheet. In addition, the Company agreed to make a one-time payment of approximately $145 million to the states. In the fourth quarter of 2021 when such loss became probable, the Company recognized total regulatory expenses of approximately $205 million related to this matter.

~~Regulatory Matters~~

In addition, Navient and its subsidiaries are subject to examination or regulation by various federal regulatory, state licensing or other regulatory agencies as part of its ordinary course of business including the SEC, CFPB, FFIEC and ED. Items or matters similar to or different from those described above may arise during the course of those examinations. We also routinely receive inquiries or requests from various regulatory entities or bodies or government agencies concerning our business or our assets. Generally, the Company endeavors to cooperate with each such inquiry or request. The Company has received separate CIDs or subpoenas from multiple State Attorneys General, including for the District of Columbia, Kansas, Oregon, Colorado, New Jersey, New York and Indiana that are similar to the CIDs or subpoenas that preceded the lawsuits referenced above. Those CIDs and subpoenas have been resolved as part of the Company’s settlement with the State Attorneys General. Nevertheless, we have and, in the future, may receive additional CIDs or subpoenas and other inquiries from these or other Attorneys General with respect to similar or different matters.

Under the terms of the Separation and Distribution Agreement between the Company and SLM BankCo, Navient agreed to indemnify SLM BankCo for claims, actions, damages, losses or expenses that may arise from the conduct of activities of pre-Spin-Off SLM BankCo occurring prior to the Spin-Off other than those specifically excluded in that agreement. Also, as part of the Separation and Distribution Agreement, SLM BankCo agreed to indemnify Navient for certain claims, actions, damages, losses or expenses subject to the terms, conditions and limitations set forth in that agreement. As a result, subject to the terms, conditions and limitations set forth in that agreement, Navient agreed to indemnify and hold harmless Sallie Mae and its subsidiaries, including Sallie Mae Bank from liabilities arising out of the regulatory matters and CFPB and State Attorneys General lawsuits mentioned above. In addition, we asserted various claims for indemnification against Sallie Mae and Sallie Mae Bank for such specifically excluded items arising out of the CFPB and the State Attorneys General lawsuits if and to the extent any indemnified liabilities exist now or in the ~~future toward conclusion.~~future. Navient has 0no reserves related to indemnification matters with SLM BankCo as of March 31, ~~2022.~~2023.

Contingencies

~~NAVIENT CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Information at March 31, 2022 and for the three months ended~~

~~March 31, 2022 and 2021 is unaudited)~~

9.~~Commitments and Contingencies (Continued)~~

~~OIG Audit~~

The Office of the Inspector General (the OIG) of ED commenced an audit regarding Special Allowance Payments (SAP) on September 10, 2007. In September 2013, we received the final audit determination of Federal Student Aid (the Final Audit Determination) on the final audit report issued by the OIG in August 2009 related to this audit. The Final Audit Determination concurred with the final audit report issued by the OIG and instructed us to make adjustment to our government billing to reflect the policy determination. In August 2016, we filed our notice of appeal to the Administrative Actions and Appeals Service Group of ED, and a hearing was held in April 2017. In March 2019, the administrative law judge hearing the appeal affirmed the audit’s findings, holding the then-existing Dear Colleague letter relied upon by the Company and other industry participants was inconsistent with the statutory framework creating the SAP rules applicable to loans funded by certain types of debt obligations at issue. We appealed the administrative law judge’s decision to the Secretary of Education given Navient’s adherence to ED-issued guidance and the potential impact on participants in any ED program student loan servicers if such guidance is deemed unreliable and may not be relied upon. In January 2021, the Acting Secretary of Education upheld the decision of the administrative law judge. In March 2021, we filed a complaint for declaratory judgment in federal court seeking to set aside the Acting Secretary’s decision. We continue to believe that our SAP billing practices were proper, considering then-existing ED guidance and lack of applicable regulations. We filed a lawsuit in federal court challenging the Acting Secretary’s decision. That case is pending. The Company first established a reserve for this matter in 2014 and increased the reserve in 2020 in response to the decision by the Acting Secretary. We do not believe, at this time, that an adverse ruling will have a material effect on the Company as a whole.

~~Contingencies~~

In the ordinary course of business, we and our subsidiaries are defendants in or parties to pending and threatened legal actions and proceedings including actions brought on behalf of various classes of claimants. These actions and proceedings may be based on alleged violations of consumer protection, securities, employment and other laws. In certain of these actions and proceedings, claims for substantial monetary damage are asserted against us and our subsidiaries. We and our subsidiaries are also subject to potential unasserted claims by third parties.

In the ordinary course of business, we and our subsidiaries are subject to regulatory examinations, information gathering requests, inquiries and investigations. In connection with formal and informal inquiries in these cases, we and our subsidiaries receive requests, subpoenas and orders for documents, testimony and information in connection with various aspects of our regulated activities.

We are required to establish reserves for litigation and regulatory matters where those matters present loss contingencies that are both probable and estimable. When loss contingencies are not both probable and estimable, we do not establish reserves.

In view of the inherent difficulty of predicting the outcome of litigation and regulatory matters, we may not be able to predict what the eventual outcome of the pending matters will be, what the timing or the ultimate resolution of these matters will be, or what the eventual loss, fines or penalties, if any, related to each pending matter may be.

Based on current knowledge, reserves have been established for certain litigation, regulatory matters, and unasserted contract claims where the loss is both probable and estimable. Based on current knowledge, management does not believe that loss contingencies, if any, arising from pending investigations, litigation or regulatory matters will have a material adverse effect on our consolidated financial position, liquidity, results of operations or cash flows, except as otherwise ~~disclosed.~~disclosed.

6967

NAVIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, ~~2022~~2023 and for the three months ended

March 31, ~~2022~~2023 and ~~2021~~2022 is unaudited)

NAVIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, 2023 and for the three months ended

March 31, 2023 and 2022 is unaudited)

10. Revenue from Contracts with Customers Accounted for in Accordance with ASC 606

The following tables illustrate the disaggregation of revenue from contracts accounted for under ASC 606 with customers according to service type and client type by reportable operating segment.

Revenue by Service Type


	Three Months Ended March 31,												Three Months Ended March 31,
	2022						2021						2023						2022
(Dollars in millions)	Federal Education Loans		Business Processing		Total Revenue		Federal Education Loans		Business Processing		Total Revenue		Federal Education Loans		Business Processing		Total Revenue		Federal Education Loans		Business Processing		Total Revenue
Federal Education Loan asset recovery services	$	1	$	—	$	1	$	5	$	—	$	5	$	—	$	—	$	—	$	1	$	—	$	1
Government services		—		49		49		—		63		63		—		40		40		—		49		49
Healthcare services		—		45		45		—		62		62		—		32		32		—		45		45
Total	$	1	$	94	$	95	$	5	$	125	$	130	$	—	$	72	$	72	$	1	$	94	$	95

Revenue by Client Type


	Three Months Ended March 31,												Three Months Ended March 31,
	2022						2021						2023						2022
(Dollars in millions)	Federal Education Loans		Business Processing		Total Revenue		Federal Education Loans		Business Processing		Total Revenue		Federal Education Loans		Business Processing		Total Revenue		Federal Education Loans		Business Processing		Total Revenue
Federal government	$	—	$	2	$	2	$	1	$	8	$	9	$	—	$	2	$	2	$	—	$	2	$	2
Guarantor agencies		1		—		1		4		—		4		—		—		—		1		—		1
Other institutions		—		—		—		—		—		—		—		—		—		—		—		—
State and local government		—		33		33		—		42		42		—		22		22		—		33		33
Tolling authorities		—		14		14		—		13		13		—		16		16		—		14		14
Hospitals and other healthcare providers		—		45		45		—		62		62		—		32		32		—		45		45
Total	$	1	$	94	$	95	$	5	$	125	$	130	$	—	$	72	$	72	$	1	$	94	$	95

As of March 31, ~~2022~~2023 and March 31, ~~2021,~~2022, there was ~~$90~~$68 million and ~~$113~~$90 million respectively, of net accounts receivable related to these contracts. Navient had 0no material contract assets or contract liabilities.

7069

NAVIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, ~~2022~~2023 and for the three months ended

March 31, ~~2022~~2023 and ~~2021~~2022 is unaudited)

11. Segment Reporting

We monitor and assess our ongoing operations and results based on the following 4four reportable operating segments: Federal Education Loans, Consumer Lending, Business Processing and Other.

These segments meet the quantitative thresholds for reportable operating segments. Accordingly, the results of operations of these reportable operating segments are presented separately. The underlying operating segments are used by the Company’s chief operating decision maker to manage the business, review operating performance and allocate resources, and qualify to be aggregated as part of the primary reportable operating segments. As discussed further below, we measure the profitability of our operating segments based on Core Earnings net income. Accordingly, information regarding our reportable operating segments net income is provided on a Core Earnings basis.

Federal Education Loans Segment

We generate revenue primarily through net interest income on ~~the~~our FFELP ~~Loan portfolio as well as servicing~~Loans and ~~asset recovery services revenue. This segment is expected to generate significant earnings and cash flow over the remaining life of the portfolio.~~servicing-related fee income.

The following table includes asset information for our Federal Education Loans segment.


(Dollars in millions)	March 31, 2023		December 31, 2022
FFELP Loans, net	$	42,148	$	43,525
Cash and investments(1)		1,650		2,746
Other		2,133		2,229
Total assets	$	45,931	$	48,500

(Dollars in millions)

March 31, 2022

December 31, 2021

FFELP Loans, net

$
51,013

$
52,641

Cash and investments⁽¹⁾

1,879

2,071

Other

2,008

2,183

Total assets

$
54,900

$
56,895

(1)

Includes restricted cash and investments.

⁽¹⁾

~~Includes restricted cash and investments.~~

Consumer Lending Segment

Navient helps students and families through the going-to and paying-for-college journey. Our digital tools empower people to find grants and scholarships, compare financial aid offers and complete the FAFSA. Our Private Education Loans offer easy-to-understand payment options. After graduation, we offer student loan refinancing to help people simplify their repayment and earn a better rate. We believe our ~~more than 45~~50 years of experience, product design, digital marketing strategies, and origination and servicing platform provide a unique competitive advantage. We see meaningful growth opportunities in originating Private Education Loans to financially responsible consumers, generating attractive long-term, risk-adjusted returns. We generate revenue primarily through net interest income on our Private Education Loan portfolio.

The following table includes asset information for our Consumer Lending ~~segment~~segment.


(Dollars in millions)	March 31, 2023		December 31, 2022
Private Education Loans, net	$	18,275	$	18,725
Cash and investments(1)		635		617
Other		558		453
Total assets	$	19,468	$	19,795

(Dollars in millions)

March 31, 2022

December 31, 2021

Private Education Loans, net

$
20,088

$
20,171

Cash and investments⁽¹⁾

774

824

Other

720

815

Total assets

$
21,582

$
21,810

(1)

Includes restricted cash and investments.

⁽¹⁾

~~Includes restricted cash and investments.~~

7170

NAVIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, ~~2022~~2023 and for the three months ended

March 31, ~~2022~~2023 and ~~2021~~2022 is unaudited)

11. Segment Reporting (Continued)

Business Processing Segment

•

Government: We offer our solutions to federal agencies, state governments, tolling and parking authorities, and other public sector clients.

•

Healthcare:Our clients include hospitals, hospital systems, medical centers, large physician groups, other healthcare ~~clients.~~

providers and public health departments.

•

At March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, the Business Processing segment had total assets of ~~$402~~$379 million and ~~$397~~$390 million, respectively.

Other Segment

At March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, the Other segment had total assets of ~~$1.3~~$1.1 billion and ~~$1.5~~$2.1 billion, respectively.

7271

NAVIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, ~~2022~~2023 and for the three months ended

March 31, ~~2022~~2023 and ~~2021~~2022 is unaudited)

11. Segment Reporting (Continued)

Measure of Profitability

We prepare financial statements and present financial results in accordance with GAAP. However, we also evaluate our business segments and present financial results on a basis that differs from GAAP. We refer to this different basis of presentation as Core Earnings. We provide this Core Earnings basis of presentation on a consolidated basis and for each business segment because this is what we review internally when making management decisions regarding our performance and how we allocate resources. We also refer to this information in our presentations with credit rating agencies, lenders and investors. Because our Core Earnings basis of presentation corresponds to our segment financial presentations, we are required by GAAP to provide Core Earnings disclosure in the notes to our consolidated financial statements for our business segments.

The accounting for goodwill and acquired intangible assets.

~~The accounting for goodwill and acquired intangible assets.~~

7372

NAVIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, ~~2022~~2023 and for the three months ended

March 31, ~~2022~~2023 and ~~2021~~2022 is unaudited)

11. Segment Reporting (Continued)

Segment Results and Reconciliations to GAAP


	Three Months Ended March 31, 2023
				Adjustments												Reportable Segments
(Dollars in millions)	Total GAAP			Reclassi- fications			Additions/ (Subtractions)			Total Adjustments (1)			Total Core Earnings			Federal Education Loans		Consumer Lending			Business Processing		Other
Interest income:
Education loans	$	1,037														$	695	$	344		$	—	$	—
Cash and investments		34															20		6			—		8
Total interest income		1,071															715		350			—		8
Total interest expense		837															590		197			—		33
Net interest income (loss)		234		$	12		$	7		$	19		$	253			125		153			—		(25	)
Less: provisions for loan losses		(14	)											(14	)		10		(24	)		—		—
Net interest income (loss) after provisions for loan losses		248															115		177			—		(25	)
Other income (loss):
Servicing revenue		17															14		3			—		—
Asset recovery and business processing revenue		72															—		—			72		—
Other income (loss)		(1	)														5		—			—		2
Total other income (loss)		88			(12	)		20			8			96			19		3			72		2
Expenses:
Direct operating expenses		124															20		37			67		—
Unallocated shared services expenses		61															—		—			—		61
Operating expenses		185			—			—			—			185			20		37			67		61
Goodwill and acquired intangible asset impairment and amortization		3			—			(3	)		(3	)		—			—		—			—		—
Restructuring/other reorganization expenses		4			—			—			—			4			—		—			—		4
Total expenses		192			—			(3	)		(3	)		189			20		37			67		65
Income (loss) before income tax expense (benefit)		144			—			30			30			174			114		143			5		(88	)
Income tax expense (benefit)(2)		33			—			8			8			41			27		33			1		(20	)
Net income (loss)	$	111		$	—		$	22		$	22		$	133		$	87	$	110		$	4	$	(68	)

(1)

Core Earnings adjustments to GAAP:


	Three Months Ended March 31, 2023
(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	$	19	$	—		$	19
Total other income (loss)		8		—			8
Goodwill and acquired intangible asset impairment and amortization		—		(3	)		(3	)
Total Core Earnings adjustments to GAAP	$	27	$	3			30
Income tax expense (benefit)							8
Net income (loss)						$	22

(2)

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

NAVIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, 2023 and for the three months ended

March 31, 2023 and 2022 is unaudited)

11. Segment Reporting (Continued)

~~Segment Results and Reconciliations~~


	Three Months Ended March 31, 2022
			Adjustments											Reportable Segments
(Dollars in millions)	Total GAAP		Reclassi- fications			Additions/ (Subtractions)			Total Adjustments (1)			Total Core Earnings		Federal Education Loans		Consumer Lending		Business Processing		Other
Interest income:
Education loans	$	625												$	334	$	276	$	—	$	—
Cash and investments		1													—		1		—		—
Total interest income		626													334		277		—		—
Total interest expense		289													195		125		—		15
Net interest income (loss)		337	$	(19	)	$	(42	)	$	(61	)	$	276		139		152		—		(15	)
Less: provisions for loan losses		16											16		—		16		—		—
Net interest income (loss) after provisions for loan losses		321													139		136		—		(15	)
Other income (loss):
Servicing revenue		18													15		3		—		—
Asset recovery and business processing revenue		97													3		—		94		—
Other income (loss)		108													11		—		—		(1	)
Total other income (loss)		223		19			(117	)		(98	)		125		29		3		94		(1	)
Expenses:
Direct operating expenses		139													28		35		76		—
Unallocated shared services expenses		66													—		—		—		66
Operating expenses		205		—			—			—			205		28		35		76		66
Goodwill and acquired intangible asset impairment and amortization		4		—			(4	)		(4	)		—		—		—		—		—
Restructuring/other reorganization expenses		3		—			—			—			3		—		—		—		3
Total expenses		212		—			(4	)		(4	)		208		28		35		76		69
Income (loss) before income tax expense (benefit)		332		—			(155	)		(155	)		177		140		104		18		(85	)
Income tax expense (benefit)(2)		77		—			(35	)		(35	)		42		33		25		4		(20	)
Net income (loss)	$	255	$	—		$	(120	)	$	(120	)	$	135	$	107	$	79	$	14	$	(65	)

(1)

Core Earnings adjustments to ~~GAAP~~GAAP:


	Three Months Ended March 31, 2022
(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	$	(61	)	$	—		$	(61	)
Total other income (loss)		(98	)		—			(98	)
Goodwill and acquired intangible asset impairment and amortization		—			(4	)		(4	)
Total Core Earnings adjustments to GAAP	$	(159	)	$	4			(155	)
Income tax expense (benefit)								(35	)
Net income (loss)							$	(120	)

(2)

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

⁽¹⁾

~~Core Earnings adjustments to GAAP:~~

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

NAVIENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, ~~2022~~2023 and for the three months ended

March 31, ~~2022~~2023 and ~~2021~~2022 is unaudited)

11. Segment Reporting (Continued)

⁽¹⁾	~~Core Earnings adjustments to GAAP:~~

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

~~NAVIENT CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Information at March 31, 2022 and for the three months ended~~

~~March 31, 2022 and 2021 is unaudited)~~

~~11. Segment Reporting (Continued)~~

Summary of Core Earnings Adjustments to GAAP


	Three Months Ended March 31,
(Dollars in millions)	2023			2022
GAAP net income	$	111		$	255
Core Earnings adjustments to GAAP:
Net impact of derivative accounting(1)		27			(159	)
Net impact of goodwill and acquired intangible assets(2)		3			4
Net tax effect(3)		(8	)		35
Total Core Earnings adjustments to GAAP		22			(120	)
Core Earnings net income	$	133		$	135

Three Months Ended March 31,

(Dollars in millions)

2022

2021

Core Earnings net income

$
135

$
305

Core Earnings adjustments to GAAP:

Net impact of derivative accounting⁽¹⁾

159

91

Net impact of goodwill and acquired intangible assets⁽²⁾

(4
)

(5
)
Net tax effect⁽³⁾

(35
)

(21
)
Total Core Earnings adjustments to GAAP

120

65

GAAP net income

$
255

$
370

(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.

SIGNATURES

⁽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.~~

~~SIGNATURES~~

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.



	NAVIENT CORPORATION (Registrant)
	By:	~~/s/~~ /s/ JOE FISHER
		Joe Fisher
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

Date: April ~~27, 2022~~26, 2023

APPENDIX A

form 10-Q cross-reference index

Page

Number


Part I. Financial Information



Item 1.	Financial Statements	42-7675

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	76-33

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	35-39

Item 4.	Controls and Procedures	40

Part II. Other Information

Item 1.	Legal Proceedings	34, 6766

Item 1A.	Risk Factors	34

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40

Item 3.	Defaults Upon Senior Securities	Not Applicable

Item 4.	Mine Safety Disclosures	Not Applicable

Item 5.	Other Information	Not Applicable

Item 6.	Exhibits	41

Signatures		7776

7877


Delaware	46-4054283
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

123 Justison Street, Wilmington, Delaware19801	~~19801~~(302)283-8000
(Address of principal executive offices)	(~~Zip Code)~~Telephone Number)


Large accelerated filer	☒	☒	~~Accelerated filer~~	Accelerated filer	☐
Non-accelerated filer	☐	☐		Smaller reporting company	☐
	Emerging growth company		☐


Title of each classof~~each~~class	Trading Symbol(s)	NaName of each exchange on which registeredmeo~~f each~~exchangeon wh~~ich~~registered
Common stock, par value $.01 per share	NAVI	The NASDAQ Global Select Market
6% Senior Notes due December 15, 2043	JSM	The NASDAQ Global Select Market
Preferred Stock Purchase Rights	None	The NASDAQ Global Select Market


☑	☑		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	☐		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Page Number


Forward-Looking and Cautionary Statements	1
Use of Non-GAAP Financial Measures	2

Business	3
Overview and Fundamentals of Our Business	3
How We Organize Our Business	65

Management’s Discussion and Analysis of Financial Condition and Results of Operations	76
Selected Historical Financial Information and Ratios	76
The Quarter in Review	8
~~Navient’s Response to COVID-19~~		97
Results of Operations	98
Segment Results	1110
Financial Condition	18
Liquidity and Capital Resources	2322
Critical Accounting Policies and Estimates	2625
Non-GAAP Financial Measures	2625

Legal Proceedings	34
Risk Factors	34
Quantitative and Qualitative Disclosures about Market Risk	35

Unregistered Sales of Equity Securities and Use of Proceeds	40
Controls and Procedures	40
Exhibits	41
Financial Statements	42
Signatures	7776
Appendix A – Form 10-Q Cross-Reference Index	7877


(Dollars and shares in millions)	Q1-23			Q1-22
Shares repurchased		4.9			6.2
Reduction in shares outstanding		3	%		3	%
Total repurchases in dollars	$	85		$	115
Dividends paid	$	21		$	24
Total Capital Returned(2)	$	106		$	139
Adjusted Tangible Equity Ratio(1)		8.5	%		7.0	%

(Dollars and shares in millions)	Q1-22			Q1-21
Shares repurchased		6.2			8.2
Reduction in shares outstanding		3	%		4	%
Total repurchases in dollars	$	115		$	100
Dividends paid	$	24		$	29
Total Capital Returned⁽²⁾	$	139		$	129
Adjusted Tangible Equity Ratio⁽¹⁾		7.0	%		6.2	%

	Three Months Ended March 31, 2021
(Dollars in millions)	FFELP Stafford and Other			FFELP Consolidation Loans			Total FFELP Loans			Total Private Education Loans			Total Portfolio
Beginning balance	$	19,607		$	38,677		$	58,284		$	21,079		$	79,363
Acquisitions (originations and purchases)⁽¹⁾		2			2			4			1,730			1,734
Capitalized interest and premium/discount amortization		191			210			401			45			446
Refinancings and consolidations to third parties		(248	)		(432	)		(680	)		(139	)		(819	)
Loan sales		—			—			—			(1,465	)		(1,465	)
Repayments and other		(334	)		(802	)		(1,136	)		(1,508	)		(2,644	)
Ending balance	$	19,218		$	37,655		$	56,873		$	19,742		$	76,615

	At March 31, 2022
			Interest Rates:
			Change from Increase of 100 Basis Points						Change from Decrease of 100 Basis Points
(Dollars in millions)	Fair Value		$			%			$			%
Effect on Fair Values:
Assets
Education Loans	$	70,588	$	(152	)		—		$	231			—
Other earning assets		3,424		—			—			—			—
Other assets		3,633		18			—			85			2
Total assets gain/(loss)	$	77,645	$	(134	)		—	%	$	316			—	%
Liabilities
Interest-bearing liabilities	$	73,328	$	(321	)		—	%	$	347			—	%
Other liabilities		701		119			17			(8	)		(1	)
Total liabilities (gain)/loss	$	74,029	$	(202	)		—	%	$	339			—	%

	At December 31, 2021
			Interest Rates:
			Change from Increase of 100 Basis Points						Change from Decrease of 100 Basis Points
(Dollars in millions)	Fair Value		$			%			$		%
Effect on Fair Values:
Assets
Education Loans	$	74,772	$	(279	)		—		$	432		1	%
Other earning assets		3,845		—			—			—		—
Other assets		3,948		(124	)		(3	)		263		7
Total assets gain/(loss)	$	82,565	$	(403	)		—	%	$	695		1	%
Liabilities
Interest-bearing liabilities	$	77,040	$	(356	)		—	%	$	386		1	%
Other liabilities		1,019		(40	)		(4	)		193		19
Total liabilities (gain)/loss	$	78,059	$	(396	)		(1	)%	$	579		1	%

(In millions, except per share data)	Total Number of Shares Purchased⁽¹⁾		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs⁽²⁾		Approximate Dollar Value of Shares That May Yet Be Purchased Under Publicly Announced Plans or Programs⁽²⁾
Period:
January 1 — January 31, 2022		2.0	$	20.03		1.9	$	963
February 1 — February 28, 2022		3.5		18.12		2.7	$	913
March 1 — March 31, 2022		1.9		17.00		1.6	$	885
Total first-quarter 2022		7.4	$	18.33		6.2

	Private Education Loan Delinquencies
	TDRs
	March 31, 2022						December 31, 2021						March 31, 2021
(Dollars in millions)	Balance			%			Balance			%			Balance			%
Loans in-school/grace/deferment⁽¹⁾	$	191					$	194					$	255
Loans in forbearance⁽²⁾		338						446						668
Loans in repayment and percentage of each status:
Loans current		5,823			88.7	%		6,023			91.0	%		6,477			94.0	%
Loans delinquent 31-60 days⁽³⁾		259			3.9			199			3.0			160			2.3
Loans delinquent 61-90 days⁽³⁾		189			2.9			120			1.8			92			1.3
Loans delinquent greater than 90 days⁽³⁾		293			4.5			274			4.2			166			2.4
Total TDR loans in repayment		6,564			100	%		6,616			100	%		6,895			100	%
Total TDR loans		7,093						7,256						7,818
TDR loans allowance for losses		(785	)					(829	)					(857	)
TDR loans, net	$	6,308					$	6,427					$	6,961
Percentage of TDR loans in repayment					92.5	%					91.2	%					88.2	%
Delinquencies as a percentage of TDR loans in repayment					11.3	%					9.0	%					6.0	%
Loans in forbearance as a percentage of TDR loans in repayment and forbearance					4.9	%					6.3	%					8.8	%

	Private Education Loan Delinquencies
	Non-TDRs
	March 31, 2022						December 31, 2021						March 31, 2021
(Dollars in millions)	Balance			%			Balance			%			Balance			%
Loans in-school/grace/deferment⁽¹⁾	$	186					$	167					$	202
Loans in forbearance⁽²⁾		80						89						129
Loans in repayment and percentage of each status:
Loans current		13,624			99.5	%		13,611			99.6	%		12,543			99.7	%
Loans delinquent 31-60 days⁽³⁾		31			.2			23			.2			19			.1
Loans delinquent 61-90 days⁽³⁾		17			.1			11			.1			8			.1
Loans delinquent greater than 90 days⁽³⁾		21			.2			23			.1			15			.1
Total non-TDR loans in repayment		13,693			100	%		13,668			100	%		12,585			100	%
Total non-TDR loans		13,959						13,924						12,916
Non-TDR loans allowance for losses		(179	)					(180	)					(135	)
Non-TDR loans, net	$	13,780					$	13,744					$	12,781
Percentage of non-TDR loans in repayment					98.1	%					98.2	%					97.4	%
Delinquencies as a percentage of non-TDR loans in repayment					.5	%					.4	%					.3	%
Loans in forbearance as a percentage of non-TDR loans in repayment and forbearance					.6	%					.6	%					1.0	%

		Cash Flow				Fair Value⁽³⁾						Trading						Total
(Dollars in millions)	Hedged Risk Exposure	Mar 31, 2022		Dec 31, 2021		Mar 31, 2022			Dec 31, 2021			Mar 31, 2022			Dec 31, 2021			Mar 31, 2022			Dec 31, 2021
Fair Values⁽¹⁾
Derivative Assets:
Interest rate swaps	Interest rate	$	—	$	—	$	150		$	222		$	1		$	2		$	151		$	224
Cross-currency interest rate swaps	Foreign currency and interest rate		—		—		—			—			—			—			—			—
Total derivative assets⁽²⁾			—		—		150			222			1			2			151			224
Derivative Liabilities:
Interest rate swaps	Interest rate		—		—		—			—			(4	)		(5	)		(4	)		(5	)
Floor Income Contracts	Interest rate		—		—		—			—			(9	)		(65	)		(9	)		(65	)
Cross-currency interest rate swaps	Foreign currency and interest rate		—		—		(226	)		(190	)		—			—			(226	)		(190	)
Total derivative liabilities⁽²⁾			—		—		(226	)		(190	)		(13	)		(70	)		(239	)		(260	)
Net total derivatives		$	—	$	—	$	(76	)	$	32		$	(12	)	$	(68	)	$	(88	)	$	(36	)

	As of March 31, 2022					As of December 31, 2021
(Dollar in millions)	Carrying Value		Hedge Basis Adjustments			Carrying Value		Hedge Basis Adjustments
Short-term borrowings	$	1,000	$	3		$	—	$	—
Long-term borrowings	$	7,076	$	(116	)	$	8,503	$	252

(Dollars in millions)	Fair Value at March 31, 2022			Valuation Technique	Input	Range and Weighted Average
Derivatives
Prime/LIBOR basis swaps	$	(3	)	Discounted cash flow	Constant Prepayment Rate	9%
					Bid/ask adjustment to discount rate	.08%
Cross-currency interest rate swaps		(226	)	Discounted cash flow	Constant Prepayment Rate	5%
Other		—
Total	$	(229	)