NAVI 10-Q Quarter ended March 31, 2024

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2024

or

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

For the transition period from to

Commission File Number: 001-36228

Navient Corporation

(Exact name of registrant as specified in its charter)

Delaware	46-4054283
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
13865 Sunrise Valley Drive , Herndon , Virginia 20171	( 703 ) 810-3000
(Address of principal executive offices)	(Telephone Number)

( 703 ) 810-3000

(Registrant’s telephone number, including area code)

(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 . 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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

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

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 ☑

Securities registered pursuant to Section 12(b) of the Act.

Title of each class		Trading Symbol(s)		Name of each exchange on which 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

As of March 31, 2024 , there were 111,824,749 shares of common stock outstanding.

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TABLE OF CONTENTS

Organization of Our Form 10-Q

The order and presentation of content in our Quarterly Report on Form 10-Q (Form 10-Q) differs from the traditional Securities and Exchange Commission (SEC) Form 10-Q format. Our format is designed to improve readability and to better present 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.

	Page Number
Forward-Looking and Cautionary Statements	1
Use of Non-GAAP Financial Measures	2
Business	3
Overview and Fundamentals of Our Business	3
Recent Business Developments	5
How We Organize Our Business	5
Management’s Discussion and Analysis of Financial Condition and Results of Operations	7
Selected Historical Financial Information and Ratios	7
The Quarter in Review	8
Results of Operations	9
Segment Results	11
Financial Condition	18
Liquidity and Capital Resources	22
Critical Accounting Policies and Estimates	25
Non-GAAP Financial Measures	25
Legal Proceedings	33
Risk Factors	33
Quantitative and Qualitative Disclosures about Market Risk	35
Purchases of Equity Securities by the Issuer and Affiliated Purchasers	38
Controls and Procedures	40
Exhibits	41
Financial Statements	42
Signatures	76
Appendix A – Form 10-Q Cross-Reference Index	77

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FORWARD-LOOKING AND CAUTIONARY STATEMENTS

This 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.

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USE OF NON-GAAP FINANCIAL MEASURES

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 is our 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: Tangible Equity, Adjusted Tangible Equity Ratio, 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.

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Business

O verview and Fundamentals of Our Business

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 $35.9 billion of federally guaranteed Federal Family Education Loan Program (FFELP) Loans. As a servicer on our own portfolio and for third parties, 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 help students and families succeed through the college journey with innovative planning tools, student loans and refinancing products. Our $16.6 billion Private Education Loan portfolio demonstrates high customer success rates. In the first quarter of 2024, we originated approximately $259 million of Private Education Loans.

We leverage our loan servicing expertise to provide business processing solutions for approximately 500 public sector and healthcare organizations, and their tens of millions of clients, patients, and constituents. Our suite of omnichannel customer experience, digital processing and revenue cycle solutions enables our clients to deliver better results for the people they 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.

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Navient is committed to a sustainable future. We leverage technologies that minimize energy use in our office buildings and promote widespread adoption of “paperless” digital customer communications. Navient prioritizes the usage of power-saving features to our buildings to reduce energy usage. Energy efficiency and reducing carbon dioxide (CO2) and CO2 equivalents are among the many factors considered in our real estate decisions.

Strong Financial Performance Resulting in a Strong Capital Return

Our first-quarter 2024 results continue to demonstrate the strength of our business model and our ability to deliver predictable and meaningful cash flow and earnings in a variety of economic environments.

Our significant earnings generate significant capital which 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 of Directors approved a share repurchase program authorizing the purchase of up to $1 billion of the Company’s outstanding common stock. At March 31, 2024, $247 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 GAAP equity-to-asset ratio was 4.7% and our Adjusted Tangible Equity Ratio (1) was 8.4% as of March 31, 2024.

(Dollars and shares in millions)		Q1-24				Q1-23
Shares repurchased			2.6				4.9
Reduction in shares outstanding			1	%			3	%
Total repurchases in dollars		$	43			$	85
Dividends paid		$	18			$	21
Total Capital Returned (2)		$	61			$	106
GAAP equity-to-asset ratio			4.7	%			4.4	%
Adjusted Tangible Equity Ratio (1)			8.4	%			8.5	%

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Recent Business Developments

On January 30, 2024, as a result of an in-depth review of our business, Navient announced strategic actions to simplify our company, reduce our expense base, and enhance our flexibility. The three strategic actions are:

Since the announcement on January 30, 2024, we have made substantial progress on the above strategic actions. We are nearing completion of a final outsourcing agreement with MOHELA. Further, we expect to learn much more about the possible range of outcomes from the business processing segment divestment process during the second quarter. We are beginning to execute our plans for a leaner company. We continue to expect to be largely complete with these strategic actions by mid to end of 2025.

How We Organi ze Our Business

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

Federal Education Loans Segment

Navient owns FFELP Loans and performs servicing on this portfolio. We also service 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.

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Consumer Lending Segment

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

Through our Earnest brand, we help students and families on the planning and paying for college journey. Our digital tools empower people to find scholarships and compare financial aid offers. We believe our 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, generating attractive long-term, risk-adjusted returns.

Business Processing Segment

Navient 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 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:

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.

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

S elected Historical Financial Information and Ratios

		Three Months Ended March 31,
(In millions, except per share data)		2024				2023
GAAP Basis
Net income		$	73			$	111
Diluted earnings per common share		$	.64			$	.86
Weighted average shares used to compute diluted earnings per share			114				130
Return on common stockholders' equity			.51	%			.68	%
Core Earnings Basis (1)
Net income (1)		$	54			$	133
Diluted earnings per common share (1)		$	.47			$	1.02
Weighted average shares used to compute diluted earnings per share			114				130
Net interest margin, Federal Education Loans segment			.55	%			1.12	%
Net interest margin, Consumer Lending segment			2.99	%			3.12	%
Return on assets			.37	%			.82	%
Education Loan Portfolios
Ending FFELP Loans, net		$	35,879			$	42,148
Ending Private Education Loans, net			16,608				18,275
Ending total education loans, net		$	52,487			$	60,423
Average FFELP Loans		$	37,158			$	43,263
Average Private Education Loans			17,385				19,289
Average total education loans		$	54,543			$	62,552

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T he Quarter i n 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 2024 GAAP net income was $73 million ($0.64 diluted earnings per share), compared with $111 million ($0.86 diluted earnings per share) for the year-ago quarter. See “Results of Operations – GAAP Comparison of First-Quarter 2024 Results with First-Quarter 2023" for a discussion of the primary contributors to the change in GAAP earnings between periods.

First-quarter 2024 Core Earnings net income was $54 million ($0.47 diluted Core Earnings per share), compared with $133 million ($1.02 diluted Core Earnings per share) for the year-ago quarter. See “Segment Results” for a discussion of the primary contributors to the change in Core Earnings between periods.

GAAP and Core Earnings results included a net reduction to pre-tax income of $23 million ($0.16 diluted loss per share) comprised of the following items:

Financial highlights of first-quarter 2024 include:

Federal Education Loans segment:

Consumer Lending segment:

Business Processing segment:

Capital, funding and liquidity:

Operating Expenses:

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R esults of Operations

GAAP Income Statements (Unaudited)

		Three Months Ended March 31,								Increase (Decrease)
(In millions, except per share data)		2024				2023				$				%
Interest income
FFELP Loans		$	661			$	693			$	(32	)			(5	)%
Private Education Loans			328				344				(16	)			(5	)
Cash and investments			38				34				4				12
Total interest income			1,027				1,071				(44	)			(4	)
Total interest expense			875				837				38				5
Net interest income			152				234				(82	)			(35	)
Less: provisions for loan losses			12				(14	)			26				186
Net interest income after provisions for loan losses			140				248				(108	)			(44	)
Other income (loss):
Servicing revenue			17				17				—				—
Asset recovery and business processing revenue			77				72				5				7
Other income			9				7				2				29
Gains (losses) on derivative and hedging activities, net			32				(8	)			40				500
Total other income			135				88				47				53
Expenses:
Operating expenses			183				185				(2	)			(1	)
Goodwill and acquired intangible assets impairment and amortization expense			3				3				—				—
Restructuring/other reorganization expenses			1				4				(3	)			(75	)
Total expenses			187				192				(5	)			(3	)
Income before income tax expense			88				144				(56	)			(39	)
Income tax expense			15				33				(18	)			(55	)
Net income		$	73			$	111			$	(38	)			(34	)%
Basic earnings per common share		$	.65			$	.87			$	(.22	)			(25	)%
Diluted earnings per common share		$	.64			$	.86			$	(.22	)			(26	)%
Dividends per common share		$	.16			$	.16			$	—				—

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GAAP Comparison of First-Quarter 2024 Results with First-Quarter 2023

For the three months ended March 31, 2024, net income was $73 million, or $0.64 diluted earnings per common share, compared with net income of $111 million, or $0.86 diluted earnings per common share, for the year-ago period.

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

The FFELP Loan provision for loan losses of $1 million in the current period was the result of relatively stable credit trends.

The Private Education Loan provision for loan losses of $11 million in the current period included $5 million in connection with loan originations and $6 million related to a general reserve build. The provision of $(24) million in the year-ago period included $(52) million in connection with the adoption of Accounting Standards Update (ASU) No. 2022-02, "Financial Instruments – Credit Losses: Troubled Debt Restructurings and Vintage Disclosures," $5 million in connection with loan originations and $23 million in connection with the resolution of certain private legacy loans in bankruptcy. See our Annual Report on Form 10-K for the year ended December 31, 2023 (the 2023 Form 10-K) for further discussion on the adoption of ASU No. 2022-02, as well as the resolution of certain private legacy loans in bankruptcy.

We repurchased 2.6 million and 4.9 million shares of our common stock during the first quarters of 2024 and 2023, respectively. As a result of repurchases, our average outstanding diluted shares decreased by 16 million common shares (or 12%) from the year-ago period.

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Segment Res ults

Federal Education Loans Segment

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

		Three Months Ended March 31,								% Increase (Decrease)
(Dollars in millions)		2024				2023				2024 vs. 2023
Interest income:
FFELP Loans		$	661			$	695				(5	)%
Cash and investments			23				20				15
Total interest income			684				715				(4	)
Total interest expense			631				590				7
Net interest income			53				125				(58	)
Less: provision for loan losses			1				10				(90	)
Net interest income after provision for loan losses			52				115				(55	)
Other income (loss):
Servicing revenue			13				14				(7	)
Other income			4				5				(20	)
Total other income			17				19				(11	)
Direct operating expenses			17				20				(15	)
Income before income tax expense			52				114				(54	)
Income tax expense			12				27				(56	)
Net income		$	40			$	87				(54	)%

Comparison of First-Quarter 2024 Results with First-Quarter 2023

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Key performance metrics are as follows:

		Three Months Ended March 31,
(Dollars in millions)		2024				2023
Segment net interest margin			.55	%			1.12	%
FFELP Loans:
FFELP Loan spread			.66	%			1.25	%
Provision for loan losses		$	1			$	10
Net charge-offs		$	10			$	18
Net charge-off rate			.13	%			.22	%
Greater than 30-days delinquency rate			13.2	%			14.4	%
Greater than 90-days delinquency rate			6.6	%			7.9	%
Forbearance rate			16.0	%			16.9	%
Average FFELP Loans		$	37,158			$	43,263
Ending FFELP Loans, net		$	35,879			$	42,148
(Dollars in billions)
Total federal loans serviced		$	42			$	49

Net Interest Margin

The following table details the net interest margin.

		Three Months Ended March 31,
		2024				2023
FFELP Loan yield			6.91	%			6.07	%
Floor Income			.24				.45
FFELP Loan net yield			7.15				6.52
FFELP Loan cost of funds			(6.49	)			(5.27	)
FFELP Loan spread			.66				1.25
Other interest-earning asset spread impact			(.11	)			(.13	)
Net interest margin (1)			.55	%			1.12	%

		Three Months Ended March 31,
(Dollars in millions)		2024				2023
FFELP Loans		$	37,158			$	43,263
Other interest-earning assets			1,861				1,972
Total FFELP Loan interest-earning assets		$	39,019			$	45,235

The decrease in the net interest margin is primarily due to the impact of increased interest rates on the different index resets for the segment's assets and debt which resulted in a decrease of floor income and an increased cost of funds. In addition, there was an increase in prepayments which contributed to an increase in the amortization of loan premium, a non-cash reduction to interest margin.

As of March 31, 2024, our FFELP Loan portfolio totaled $35.9 billion, comprised of $12.7 billion of FFELP Stafford Loans and $23.2 billion of FFELP Consolidation Loans. The weighted-average life of these portfolios as of March 31, 2024 was 7 years and 8 years, respectively, assuming a Constant Prepayment Rate (CPR) of 7% 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, 2024 and 2023, based on interest rates as of those dates.

(Dollars in billions)		March 31, 2024				March 31, 2023
Education loans eligible to earn Floor Income		$	35.6			$	41.8
Less: post-March 31, 2006 disbursed loans required to rebate Floor Income			(16.9	)			(19.9	)
Less: economically hedged Floor Income			(2.0	)			(9.1	)
Education loans eligible to earn Floor Income after rebates and economically hedged		$	16.7			$	12.8
Education loans earning Floor Income		$	1.1			$	—

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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, 2024 to December 31, 2028.

(Dollars in billions)		April 1, 2024 to December 31, 2024				2025				2026				2027				2028
Average balance of FFELP Consolidation Loans whose Floor Income is economically hedged		$	1.7			$	.9			$	.7			$	.3			$	.3

Operating Expenses

Operating expenses for the Federal Education Loans segment primarily include costs incurred to perform servicing on our FFELP Loan portfolio and federal education loans held by other institutions. Expenses were $3 million lower as a result of the paydown of the loan portfolio.

Various Federal Loan Forgiveness Plans

On August 24, 2022, the Biden-Harris Administration announced its Student Debt Relief (SDR) Plan. The SDR Plan would have provided up to $20,000 in one-time debt relief to income-qualified recipients with ED held student loans and a repayment pause on ED held loans. Privately held FFELP Loans, like ours, were not eligible for debt forgiveness.

A number of states and private organizations initiated legal challenges to the SDR Plan in various courts throughout the country. On June 30, 2023, the Supreme Court ruled that ED was prohibited from implementing the SDR Plan, and student loan payments on ED held loans resumed in October 2023. After the invalidation of the SDR Plan, ED announced that it had begun a new rulemaking process to consider other ways to provide debt relief to borrowers, which could include borrowers with privately held FFELP Loans. ED held several public meeting sessions with a negotiated rulemaking committee in the fourth quarter of 2023 and in the first quarter of 2024. ED is expected to publish proposed regulations for public comment in May 2024.

In addition, on July 10, 2023, ED issued final regulations on income-driven repayment plans for Direct loans, which are student loans held by ED. Eligible FFELP borrowers can access the new changes by consolidating their loans into the Direct Loan Program. The new regulations are effective July 1, 2024; however, ED has elected early implementation for some features starting July 30, 2023. The regulations provide a lower monthly loan payment on a Direct loan by decreasing discretionary income (i.e., taxable income over 225% of the federal poverty guideline), decreasing the percentage of discretionary income that must be paid toward a Direct loan to 5% (for undergraduates), and providing the option for married borrowers to exclude their spouse’s income from being factored by filing a separate tax return. Other changes provide for the elimination of accrued interest that is not covered by the monthly payment amount, provide credit towards loan forgiveness that counts certain periods of deferment and forbearance, a shorter loan forgiveness period (10-years) for borrowers with an original principal balance less than or equal to $12,000, and credit toward loan forgiveness for eligible payments on a Direct or FFELP loan that is repaid by a Direct Consolidation loan.

Several lawsuits have been filed or announced (which Navient is not party to) looking to overturn these regulations.

The proposed borrower debt relief regulations as well as the new income-driven repayment plan have increased, and may continue to increase, consolidation activity in the future as FFELP borrowers consolidate their loans into the Direct Loan Program in order to be eligible for potential debt relief and the new income-driven repayment plan. This consolidation activity could have a material impact on the Company’s results.

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Consumer Lending Segment

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

		Three Months Ended March 31,								% Increase (Decrease)
(Dollars in millions)		2024				2023				2024 vs. 2023
Interest income:
Private Education Loans		$	328			$	344				(5	)%
Cash and investments			7				6				17
Interest income			335				350				(4	)
Interest expense			201				197				2
Net interest income			134				153				(12	)
Less: provision for loan losses			11				(24	)			146
Net interest income after provision for loan losses			123				177				(31	)
Other income (loss):
Servicing revenue			4				3				33
Other revenue			—				—				—
Total other income			4				3				33
Direct operating expenses			32				37				(14	)
Income before income tax expense			95				143				(34	)
Income tax expense			22				33				(33	)
Net income		$	73			$	110				(34	)%

Comparison of First-Quarter 2024 Results with First-Quarter 2023

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Key performance metrics are as follows:

		Three Months Ended March 31,
(Dollars in millions)		2024				2023
Segment net interest margin			2.99	%			3.12	%
Private Education Loans (including Refinance Loans):
Private Education Loan spread			3.10	%			3.28	%
Provision for loan losses		$	11			$	(24	)
Net charge-offs		$	99			$	75
Net charge-off rate			2.40	%			1.63	%
Greater than 30-days delinquency rate			5.0	%			4.5	%
Greater than 90-days delinquency rate			2.1	%			2.0	%
Forbearance rate			1.8	%			1.9	%
Average Private Education Loans		$	17,385			$	19,289
Ending Private Education Loans, net		$	16,608			$	18,275
Private Education Refinance Loans:
Net charge-offs		$	11			$	8
Greater than 90-day delinquency rate			.5	%			.3	%
Average balance of Private Education Refinance Loans		$	8,796			$	9,521
Ending balance of Private Education Refinance Loans		$	8,619			$	9,274
Private Education Refinance Loan originations		$	228			$	135

Net Interest Margin

The following table details the net interest margin.

		Three Months Ended March 31,
		2024				2023
Private Education Loan yield			7.58	%			7.24	%
Private Education Loan cost of funds			(4.48	)			(3.96	)
Private Education Loan spread			3.10				3.28
Other interest-earning asset spread impact			(.11	)			(.16	)
Net interest margin (1)			2.99	%			3.12	%

		Three Months Ended March 31,
(Dollars in millions)		2024				2023
Private Education Loans		$	17,385			$	19,289
Other interest-earning assets			543				625
Total Private Education Loan interest-earning assets		$	17,928			$	19,914

As of March 31, 2024, our Private Education Loan portfolio totaled $16.6 billion, comprised of $8.6 billion of refinance loans and $8.0 billion of non-refinance loans. The weighted-average life of these portfolios as of March 31, 2024 was 5 years and 5 years, respectively, assuming a CPR of 10% and 10%, respectively.

Provision for Loan Losses

The provision for Private Education Loan losses increased $35 million. The provision for loan losses of $11 million in the current period included $5 million in connection with loan originations and $6 million related to a general reserve build. The provision of $(24) million in the year-ago quarter included $(52) million in connection with the adoption of a new accounting standard (ASU No. 2022-02), $5 million in connection with loan originations and $23 million in connection with the resolution of certain private legacy loans in bankruptcy.

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 $5 million primarily due to lower in-school loan marketing spend.

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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)		2024				2023				2024 vs. 2023
Business processing revenue		$	77			$	72				7	%
Direct operating expenses			69				67				3
Income before income tax expense			8				5				60
Income tax expense			2				1				100
Net income		$	6			$	4				50	%

Comparison of First-Quarter 2024 Results with First-Quarter 2023

Key performance metrics are as follows:

		Three Months Ended March 31,
(Dollars in millions)		2024				2023
Revenue from government services		$	48			$	40
Revenue from healthcare services			29				32
Total fee revenue		$	77			$	72
EBITDA (1)		$	9			$	5
EBITDA margin (1)			11	%			7	%

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Other Segment

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

		Three Months Ended March 31,								% Increase (Decrease)
(Dollars in millions)		2024				2023				2024 vs. 2023
Net interest loss after provision for loan losses		$	(24	)		$	(25	)			(4	)%
Other revenue			5				2				150
Expenses:
Unallocated shared services operating expenses:
Unallocated information technology costs			22				19				16
Unallocated corporate costs			43				42				2
Total unallocated shared services operating expenses			65				61				7
Restructuring/other reorganization expenses			1				4				(75	)
Total expenses			66				65				2
Loss before income tax benefit			(85	)			(88	)			(3	)
Income tax benefit			(20	)			(20	)			—
Net income (loss)		$	(65	)		$	(68	)			(4	)%

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 amount of the net interest loss is primarily a result of the size of the liquidity portfolio as well as the cost of funds of the debt funding the corporate liquidity portfolio.

Unallocated Shared Services Operating Expenses

Unallocated shared services operating expenses are 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. Expenses increased $1 million from the year-ago quarter primarily as a result of an $11 million increase in regulatory-related expenses. Regulatory-related expenses were $13 million and $2 million in first-quarter 2024 and first-quarter 2023, respectively, with first quarter 2024 including a $12 million contingency loss accrual related to recent developments in connection to CFPB matters. The remaining $10 million decrease in expenses was primarily the result of ongoing initiatives to reduce costs and improve operating efficiency.

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 certain 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 certain 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

These expenses declined $3 million and primarily related to severance and facility exit costs.

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F inancial 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, 2024
(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)		$	13			$	—			$	13			$	91			$	104
Grace, repayment and other (2)			12,816				23,256				36,072				17,055				53,127
Total			12,829				23,256				36,085				17,146				53,231
Allowance for loan losses			(152	)			(54	)			(206	)			(538	)			(744	)
Total education loan portfolio		$	12,677			$	23,202			$	35,879			$	16,608			$	52,487
% of total FFELP			35	%			65	%			100	%
% of total			24	%			44	%			68	%			32	%			100	%

		December 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)		$	12			$	—			$	12			$	70			$	82
Grace, repayment and other (2)			13,708				24,420				38,128				17,449				55,577
Total			13,720				24,420				38,140				17,519				55,659
Allowance for loan losses			(156	)			(59	)			(215	)			(617	)			(832	)
Total education loan portfolio		$	13,564			$	24,361			$	37,925			$	16,902			$	54,827
% of total FFELP			36	%			64	%			100	%
% of total			25	%			44	%			69	%			31	%			100	%

		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	%

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Education Loan Activity

		Three Months Ended March 31, 2024
(Dollars in millions)		FFELP Stafford and Other				FFELP Consolidation Loans				Total FFELP Loans				Private Education Loans				Total Portfolio
Beginning balance		$	13,564			$	24,361			$	37,925			$	16,902			$	54,827
Acquisitions (originations and purchases) (1)			—				—				—				363				363
Capitalized interest and premium/discount amortization			134				140				274				60				334
Refinancings and consolidations to third parties			(482	)			(788	)			(1,270	)			(51	)			(1,321	)
Repayments and other			(539	)			(511	)			(1,050	)			(666	)			(1,716	)
Ending balance		$	12,677			$	23,202			$	35,879			$	16,608			$	52,487

		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

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FFELP Loan Portfolio Performance

		March 31, 2024								December 31, 2023								March 31, 2023
(Dollars in millions)		Balance				%				Balance				%				Balance				%
Loans in-school/grace/deferment (1)		$	1,562							$	1,557							$	1,778
Loans in forbearance (2)			5,538								6,147								6,844
Loans in repayment and percentage of each status:
Loans current			25,162				86.8	%			26,204				86.1	%			28,886				85.6	%
Loans delinquent 31-60 days (3)			1,163				4.0				1,193				3.9				1,270				3.8
Loans delinquent 61-90 days (3)			747				2.6				746				2.5				902				2.7
Loans delinquent greater than 90 days (3)			1,913				6.6				2,293				7.5				2,682				7.9
Total FFELP Loans in repayment			28,985				100	%			30,436				100	%			33,740				100	%
Total FFELP Loans			36,085								38,140								42,362
FFELP Loan allowance for losses			(206	)							(215	)							(214	)
FFELP Loans, net		$	35,879							$	37,925							$	42,148
Percentage of FFELP Loans in repayment							80.3	%							79.8	%							79.6	%
Delinquencies as a percentage of FFELP Loans in repayment							13.2	%							13.9	%							14.4	%
FFELP Loans in forbearance as a percentage of loans in repayment and forbearance							16.0	%							16.8	%							16.9	%

Private Education Loan Portfolio Performance

		March 31, 2024								December 31, 2023								March 31, 2023
(Dollars in millions)		Balance				%				Balance				%				Balance				%
Loans in-school/grace/deferment (1)		$	369							$	360							$	369
Loans in forbearance (2)			297								363								354
Loans in repayment and percentage of each status:
Loans current			15,661				95.0	%			15,935				94.9	%			17,439				95.5	%
Loans delinquent 31-60 days (3)			303				1.9				308				1.8				290				1.6
Loans delinquent 61-90 days (3)			165				1.0				173				1.0				165				.9
Loans delinquent greater than 90 days (3)			351				2.1				380				2.3				364				2.0
Total Private Education Loans in repayment			16,480				100	%			16,796				100	%			18,258				100	%
Total Private Education Loans			17,146								17,519								18,981
Private Education Loan allowance for losses			(538	)							(617	)							(706	)
Private Education Loans, net		$	16,608							$	16,902							$	18,275
Percentage of Private Education Loans in repayment							96.1	%							95.9	%							96.2	%
Delinquencies as a percentage of Private Education Loans in repayment							5.0	%							5.1	%							4.5	%
Loans in forbearance as a percentage of loans in repayment and forbearance							1.8	%							2.1	%							1.9	%
Percentage of Private Education Loans with a cosigner (4)							33	%							33	%							33	%

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Allowance for Loan Losses

		Three Months Ended March 31,
		2024												2023
(Dollars in millions)		FFELP Loans				Private Education Loans				Total				FFELP Loans				Private Education Loans				Total
Beginning balance		$	215			$	617			$	832			$	222			$	800			$	1,022
Total provision			1				11				12				10				(24	)			(14	)
Charge-offs:
Gross charge-offs			(10	)			(110	)			(120	)			(18	)			(88	)			(106	)
Expected future recoveries on current period gross charge-offs			—				11				11				—				13				13
Net charge-offs (1)(2)			(10	)			(99	)			(109	)			(18	)			(75	)			(93	)
Decrease in expected future recoveries on previously fully charged-off loans (3)			—				9				9				—				5				5
Allowance at end of period (GAAP)			206				538				744				214				706				920
Plus: expected future recoveries on previously fully charged-off loans (3)			—				217				217				—				268				268
Allowance at end of period excluding expected future recoveries on previously fully charged-off loans (Non-GAAP Financial Measure) (4)		$	206			$	755			$	961			$	214			$	974			$	1,188
Net charge-offs as a percentage of average loans in repayment (annualized)			.13	%			2.40	%							.22	%			1.63	%
Allowance coverage of charge-offs (annualized) (4)			5.3				1.8			(Non-GAAP)					2.9				3.2			(Non-GAAP)
Allowance as a percentage of the ending total loan balance (4)			.6	%			4.4	%		(Non-GAAP)					.5	%			5.1	%		(Non-GAAP)
Allowance as a percentage of ending loans in repayment (4)			.7	%			4.6	%		(Non-GAAP)					.6	%			5.4	%		(Non-GAAP)
Ending total loans		$	36,085			$	17,146							$	42,362			$	18,981
Average loans in repayment		$	29,736			$	16,671							$	34,305			$	18,552
Ending loans in repayment		$	28,985			$	16,480							$	33,740			$	18,258

		Three Months Ended March 31,
(Dollars in millions)		2024				2023
Beginning of period expected future recoveries on previously fully charged-off loans		$	226			$	274
Expected future recoveries of current period defaults			11				13
Recoveries (cash collected)			(11	)			(13	)
Charge-offs (as a result of lower recovery expectations)			(9	)			(6	)
End of period expected future recoveries on previously fully charged-off loans		$	217			$	268
Change in balance during period		$	(9	)		$	(5	)

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L iquidity 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 segment requires minimal liquidity and funding.

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 $5.9 billion at March 31, 2024. 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 $0.6 billion of senior unsecured notes that mature in the short term (i.e., over the next 12 months) and the remaining $5.3 billion of senior unsecured notes that mature in the long term (from 2025 to 2043 with 60% maturing by 2029), through a number of sources. These sources 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 asset-backed commercial paper (ABCP) facilities, issue term ABS, enter into additional Private Education Loan and FFELP Loan ABS repurchase facilities, or issue additional unsecured debt.

We originate Private Education Loans (a portion of which 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. Loan originations and purchases are part of our ongoing liquidity needs. We purchased 2.6 million shares of common stock for $43 million in the first quarter of 2024 and have $247 million of unused share repurchase authority as of March 31, 2024.

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Sources of Primary Liquidity

(Dollars in millions)		March 31, 2024				December 31, 2023				March 31, 2023
Ending Balances:
Total unrestricted cash and liquid investments		$	823			$	839			$	570
Unencumbered FFELP Loans			133				92				62
Unencumbered Private Education Refinance Loans			88				236				37
Total		$	1,044			$	1,167			$	669

		Three Months Ended
(Dollars in millions)		March 31, 2024				December 31, 2023				March 31, 2023
Average Balances:
Total unrestricted cash and liquid investments		$	767			$	1,167			$	825
Unencumbered FFELP Loans			115				92				85
Unencumbered Private Education Refinance Loans			218				137				66
Total		$	1,100			$	1,396			$	976

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 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 2024 to April 2026.

(Dollars in millions)		March 31, 2024				December 31, 2023				March 31, 2023
Ending Balances:
FFELP Loan ABCP facilities		$	409			$	408			$	57
Private Education Loan ABCP facilities			1,340				1,719				1,028
Total		$	1,749			$	2,127			$	1,085

		Three Months Ended
(Dollars in millions)		March 31, 2024				December 31, 2023				March 31, 2023
Average Balances:
FFELP Loan ABCP facilities		$	408			$	203			$	107
Private Education Loan ABCP facilities			1,563				1,693				1,141
Total		$	1,971			$	1,896			$	1,248

At March 31, 2024, we had a total of $2.8 billion of unencumbered tangible assets inclusive of those listed in the table above as sources of primary liquidity. Total unencumbered education loans comprised $1.1 billion principal of our unencumbered tangible assets of which $957 million and $133 million related to Private Education Loans and FFELP Loans, respectively. In addition, as of March 31, 2024, we had $5.5 billion of encumbered net assets (i.e., overcollateralization) in our various financing facilities (consolidated variable interest entities). We enter into repurchase facilities at times to borrow against the encumbered net assets of these financing vehicles. As of March 31, 2024, $0.6 billion of repurchase facility borrowings were outstanding.

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

(Dollars in billions)		March 31, 2024				December 31, 2023
Net assets of consolidated variable interest entities (encumbered assets) — FFELP Loans		$	3.3				3.4
Net assets of consolidated variable interest entities (encumbered assets) — Private Education Loans			2.2				2.1
Tangible unencumbered assets (1)			2.8				3.0
Senior unsecured debt			(5.9	)			(5.9	)
Mark-to-market on unsecured hedged debt (2)			.2				.2
Other liabilities, net			(.5	)			(.7	)
Total Tangible Equity (3)		$	2.1			$	2.1

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Borrowings

Ending Balances

		March 31, 2024												December 31, 2023
(Dollars in millions)		Short Term				Long Term				Total				Short Term				Long Term				Total
Unsecured borrowings:
Senior unsecured debt		$	556			$	5,303			$	5,859			$	506			$	5,351			$	5,857
Total unsecured borrowings			556				5,303				5,859				506				5,351				5,857
Secured borrowings:
FFELP Loan securitizations			55				33,787				33,842				59				35,626				35,685
Private Education Loan securitizations			383				11,214				11,597				435				11,754				12,189
FFELP Loan ABCP facilities			1,719				89				1,808				1,854				89				1,943
Private Education Loan ABCP facilities			1,659				784				2,443				1,286				821				2,107
Other			62				39				101				95				39				134
Total secured borrowings			3,878				45,913				49,791				3,729				48,329				52,058
Core Earnings basis borrowings (1)			4,434				51,216				55,650				4,235				53,680				57,915
Adjustment for GAAP accounting treatment			(7	)			(368	)			(375	)			(9	)			(278	)			(287	)
GAAP basis borrowings		$	4,427			$	50,848			$	55,275			$	4,226			$	53,402			$	57,628

Average Balances

		Three Months Ended March 31,
		2024								2023
(Dollars in millions)		Average Balance				Average Rate				Average Balance				Average Rate
Unsecured borrowings:
Senior unsecured debt		$	5,858				9.25	%		$	6,279				8.14	%
Total unsecured borrowings			5,858				9.25				6,279				8.14
Secured borrowings:
FFELP Loan securitizations			34,860				6.35				41,377				5.15
Private Education Loan securitizations			11,907				3.56				13,172				3.25
FFELP Loan ABCP facilities			1,893				6.98				1,288				5.90
Private Education Loan ABCP facilities			2,242				7.27				2,828				6.25
Other			111				(1.67	)			108				5.03
Total secured borrowings			51,013				5.75				58,773				4.79
Core Earnings basis borrowings (1)			56,871				6.11				65,052				5.11
Adjustment for GAAP accounting treatment			—				.08				—				.11
GAAP basis borrowings		$	56,871				6.19	%		$	65,052				5.22	%

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C ritical 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, premium and discount amortization, and the impact of the SDR Plan on our accounting policies and estimates, can be found in our 2023 Form 10-K. See "Segment Results —Federal Education Loans Segment — Various Federal Loan Forgiveness Plans" for an update on the SDR Plan.

N on-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, (2) Tangible Equity (as well as the Adjusted Tangible Equity Ratio), (3) EBITDA for the Business Processing 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:

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.

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The following tables show our consolidated GAAP results, Core Earnings results (including for each reportable segment) along with the adjustments made to the income/expense items to reconcile the consolidated GAAP results to the Core Earnings results as required by GAAP and reported in “Note 11 — Segment Reporting.”

		Three Months Ended March 31, 2024
						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		$	989																			$	661			$	328			$	—			$	—
Cash and investments			38																				23				7				—				8
Total interest income			1,027																				684				335				—				8
Total interest expense			875																				631				201				—				32
Net interest income (loss)			152			$	10			$	1			$	11			$	163				53				134				—				(24	)
Less: provisions for loan losses			12																12				1				11				—				—
Net interest income (loss) after provisions for loan losses			140																				52				123				—				(24	)
Other income (loss):
Servicing revenue			17																				13				4				—				—
Asset recovery and business processing revenue			77																				—				—				77				—
Other revenue			41																				4				—				—				5
Total other income (loss)			135				(10	)			(22	)			(32	)			103				17				4				77				5
Expenses:
Direct operating expenses			118																				17				32				69				—
Unallocated shared services expenses			65																				—				—				—				65
Operating expenses			183				—				—				—				183				17				32				69				65
Goodwill and acquired intangible asset impairment and amortization			3				—				(3	)			(3	)			—				—				—				—				—
Restructuring/other reorganization expenses			1				—				—				—				1				—				—				—				1
Total expenses			187				—				(3	)			(3	)			184				17				32				69				66
Income (loss) before income tax expense (benefit)			88				—				(18	)			(18	)			70				52				95				8				(85	)
Income tax expense (benefit) (2)			15				—				1				1				16				12				22				2				(20	)
Net income (loss)		$	73			$	—			$	(19	)		$	(19	)		$	54			$	40			$	73			$	6			$	(65	)

		Three Months Ended March 31, 2024
(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		$	11			$	—			$	11
Total other income (loss)			(32	)			—				(32	)
Goodwill and acquired intangible asset impairment and amortization			—				(3	)			(3	)
Total Core Earnings adjustments to GAAP		$	(21	)		$	3				(18	)
Income tax expense (benefit)											1
Net income (loss)										$	(19	)

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		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 revenue			(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, 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

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The following discussion summarizes the differences between GAAP and Core Earnings net income and details each specific adjustment required to reconcile our GAAP earnings to our Core Earnings segment presentation.

		Three Months Ended March 31,
(Dollars in millions)		2024				2023
GAAP net income		$	73			$	111
Core Earnings adjustments to GAAP:
Net impact of derivative accounting			(21	)			27
Net impact of goodwill and acquired intangible assets			3				3
Net income tax effect			(1	)			(8	)
Total Core Earnings adjustments to GAAP			(19	)			22
Core Earnings net income		$	54			$	133

(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 interest rate 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. See our 2023 Form 10-K for further discussion.

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

		Three Months Ended March 31,
(Dollars in millions)		2024				2023
Core Earnings derivative adjustments:
(Gains) losses on derivative and hedging activities, net, included in other income		$	(32	)		$	8
Plus: (Gains) losses on fair value hedging activity included in interest expense			—				6
Total (gains) losses in GAAP net income			(32	)			14
Plus: Reclassification of settlement income (expense) on derivative and hedging activities, net (1)			10				12
Mark-to-market (gains) losses on derivative and hedging activities, net (2)			(22	)			26
Amortization of net premiums on Floor Income Contracts in net interest income for Core Earnings			—				2
Other derivative accounting adjustments (3)			1				(1	)
Total net impact of derivative accounting		$	(21	)		$	27

		Three Months Ended March 31,
(Dollars in millions)		2024				2023
Reclassification of settlements on derivative and hedging activities:
Net settlement expense on Floor Income Contracts reclassified to net interest income		$	—			$	—
Net settlement income (expense) on interest rate swaps reclassified to net interest income			10				12
Total reclassifications of settlement income (expense) on derivative and hedging activities		$	10			$	12

		Three Months Ended March 31,
(Dollars in millions)		2024				2023
Fair value hedges		$	(3	)		$	4
Foreign currency hedges			3				2
Floor Income Contracts			—				—
Basis swaps			—				2
Other			(22	)			18
Total mark-to-market (gains) losses on derivative and hedging activities, net		$	(22	)		$	26

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Cumulative Impact of Derivative Accounting under GAAP compared to Core Earnings

As of March 31, 2024, derivative accounting has increased GAAP equity by approximately $11 million as a result of cumulative net mark-to-market 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)		2024				2023
Beginning impact of derivative accounting on GAAP equity		$	(1	)		$	122
Net impact of net mark-to-market gains (losses) under derivative accounting (1)			12				(41	)
Ending impact of derivative accounting on GAAP equity		$	11			$	81

		Three Months Ended March 31,
(Dollars in millions)		2024				2023
Total pre-tax net impact of derivative accounting recognized in net income (2)		$	21			$	(27	)
Tax and other impacts of derivative accounting adjustments			(5	)			7
Change in mark-to-market gains (losses) on derivatives, net of tax recognized in other comprehensive income			(4	)			(21	)
Net impact of net mark-to-market gains (losses) under derivative accounting		$	12			$	(41	)

Hedging Embedded Floor Income

We use Floor Income Contracts, pay-fixed swaps and fixed rate debt to economically hedge embedded Floor Income 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 future. Under GAAP, the Floor Income Contracts do not qualify for hedge accounting and the pay-fixed swaps are accounted for as cash flow hedges. The table below shows the amount of hedged Floor Income that will be recognized in Core Earnings in future periods based on these hedge strategies.

(Dollars in millions)		March 31, 2024				March 31, 2023
Total hedged Floor Income, net of tax (1)(2)		$	80			$	166

(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,
(Dollars in millions)		2024				2023
Core Earnings goodwill and acquired intangible asset adjustments		$	3			$	3

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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, 2024				March 31, 2023
Navient Corporation's stockholders' equity		$	2,766			$	2,958
Less: Goodwill and acquired intangible assets			692				703
Tangible Equity			2,074				2,255
Less: Equity held for FFELP Loans			179				211
Adjusted Tangible Equity		$	1,895			$	2,044
Divided by:
Total assets		$	59,029			$	66,913
Less:
Goodwill and acquired intangible assets			692				703
FFELP Loans			35,879				42,148
Adjusted tangible assets		$	22,458			$	24,062
Adjusted Tangible Equity Ratio			8.4	%			8.5	%

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)		2024				2023
Pre-tax income		$	8			$	5
Plus:
Depreciation and amortization expense (1)			1				—
EBITDA		$	9			$	5
Divided by:
Total revenue		$	77			$	72
EBITDA margin			11	%			7	%

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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, 2024, the $755 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 $17,146 million Private Education Loan portfolio. The $217 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 $17,146 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)		2024				2023
Allowance at end of period (GAAP)		$	538			$	706
Plus: expected future recoveries on previously fully charged-off loans			217				268
Allowance at end of period excluding expected future recoveries on previously fully charged-off loans (Non-GAAP Financial Measure)		$	755			$	974
Ending total loans		$	17,146			$	18,981
Ending loans in repayment		$	16,480			$	18,258
Net charge-offs		$	99			$	75
Allowance coverage of charge-offs (annualized):
GAAP			1.3				2.3
Adjustment (1)			.5				.9
Non-GAAP Financial Measure (1)			1.8				3.2
Allowance as a percentage of the ending total loan balance:
GAAP			3.1	%			3.7	%
Adjustment (1)			1.3				1.4
Non-GAAP Financial Measure (1)			4.4	%			5.1	%
Allowance as a percentage of the ending loans in repayment:
GAAP			3.3	%			3.9	%
Adjustment (1)			1.3				1.5
Non-GAAP Financial Measure (1)			4.6	%			5.4	%

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Legal Proc eedings

For a discussion of legal matters as of March 31, 2024, 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.

R isk Factors

The risk factors disclosed in our 2023 Form 10-K should be considered together with information included in this Form 10-Q. These are not the only risks to which we are exposed. The following information amends and restates in its entirety the previously disclosed risk factor in our 2023 Form 10-K relating to potential impacts of prepayments on our loans. Except for such additional information, we believe there have been no material changes from the risk factors previously disclosed in our 2023 Form 10-K.

Prepayments on our loans can materially impact our profitability, results of operations, financial condition, cash flows or future business prospects.

The rate at which borrowers prepay their loans can have a material impact on profitability, results of operations, financial condition, cash flows or future business prospects by affecting our net interest margin, the future cash flows from our loans including loans held by our securitization trusts. Higher or lower prepayments can result from a variety of causes including borrower activity and changes in the education loan market as a result of market conditions, interest rate movements, loan forgiveness or other government sponsored initiatives or programs. FFELP Loans and Private Education Loans may be voluntarily prepaid without penalty by the borrower, refinanced or consolidated with the borrower’s other loans through refinancing or repaid by the Department of Education (ED) in connection with certain government sponsored programs. Prepayment rates on education loans are subject to a variety of economic, political, competitive and other factors, including changes in our competitors’ business strategies, changes in interest rates, availability of alternative financings (including refinance and consolidations), legislative, executive, policy and regulatory changes affecting the education loan market and the general economy. Refinance products offered by us, our competitors, and the Federal Government may increase the repayment rate on our FFELP Loans and Private Education Loans.

In particular, new interpretations of current laws, rules or regulations or future laws, executive orders or other policy initiatives which operate to encourage or require consolidation, abolish existing or create additional income-based repayment or debt forgiveness programs or establish other policies and programs also may increase or decrease the prepayment rates on education loans. In addition, the timing of the implementation and execution of certain government sponsored programs, like the Borrower Defense Loan Discharge program, may also increase or decrease the prepayment rates on FFELP Loans. For example, after the invalidation of the Student Debt Relief (SDR) Plan, ED announced that it had begun a new rulemaking process to consider other ways to provide debt relief to borrowers, which could include borrowers with privately held FFELP Loans. ED held several public meeting sessions with a negotiated rulemaking committee in the fourth quarter of 2023 and in the first quarter of 2024. ED is expected to publish proposed regulations for public comment in May 2024. Further, on July 10, 2023, ED issued final regulations on income-driven repayment plans for Direct loans, which are student loans held by ED. Eligible FFELP borrowers can access the new changes by consolidating their loans into the Direct Loan Program. This new income-driven repayment plan may increase consolidation activity in the future as FFELP borrowers consolidate their loans into the Direct Loan Program in order to be eligible for the new income-driven repayment plan.

These proposed borrower debt relief regulations, the new income-driven repayment plan and the timing of the implementation and execution of certain government sponsored programs have increased, and may continue to increase, the prepayment rates of our existing education loan portfolio and could materially and adversely impact our profitability, results of operations, financial condition, cash flows or future business prospects. We cannot predict what (if any) plans or policies regarding debt relief or other related policies or programs may ultimately be implemented, the timing of when such plans or policies may be implemented, and/or the outcome of such actions.

FFELP Loans may also be repaid after default by the Guarantors of FFELP Loans. Conversely, borrowers might not choose to prepay their education loans, or the terms of their education loans may be extended as a result of grace periods, deferment periods, income-driven repayment plans, or other repayment terms or monthly payment amount modifications agreed to by the servicer, for example. FFELP Loan borrowers may be eligible for various existing income-based repayment programs under which borrowers can qualify for reduced or zero monthly payment or even debt forgiveness after a certain number of years of repayment. Prolonged introductions of significant amounts of subsidized funding at below market interest rates — whether from federal or private sources — could increase the prepayment rates of our existing Private Education Loans and have a material adverse effect on our profitability, results of operations, financial condition, cash flows or future business prospects.

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With respect to our securitization trusts when, as a result of unanticipated prepayment levels, education loans within a securitization trust amortize faster than originally contracted, the trust’s pool balance may decline at a rate faster than the prepayment rate assumed when the trust’s bonds were originally issued. If the trust’s pool balance declines faster than originally anticipated, in most of our securitization structures, the bonds issued by that trust will also be repaid faster than originally anticipated. In such cases, our net interest income may decrease and our future cash flows from the trust may similarly decline. Conversely, when education loans within a securitization trust amortize more slowly than originally contracted, the trust’s pool balance may decline more slowly than the prepayment rate assumed when the trust’s bonds were originally issued, and the bonds may be repaid more slowly than originally anticipated. In these cases, our net interest income increases and our future cash flows from the trust may increase. It is also possible, if the prepayment rate is especially slow and certain rights of the sellers or the servicer are not exercised or are insufficient or other action is not taken to counter the slower prepayment rate, the trust’s bonds may not be repaid by their legal final maturity date(s), which could result in an event of default under the underlying securitization agreements.

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Quantitative and Qualitat ive Disclosures about Market Risk

Interest Rate Sensitivity Analysis

Our interest rate risk management seeks to limit the impact of 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, 2024 and 2023, 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, 2024								As of March 31, 2023
		Impact on Annual Earnings If:								Impact on Annual Earnings If:
		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
Effect on Earnings:
Change in pre-tax net income before mark-to -market gains (losses) on derivative and hedging activities		$	16			$	2			$	39			$	(26	)
Mark-to-market gains (losses) on derivative and hedging activities			58				(60	)			32				(33	)
Increase (decrease) in income before taxes		$	74			$	(58	)		$	71			$	(59	)
Increase (decrease) in net income after taxes		$	57			$	(45	)		$	55			$	(45	)
Increase (decrease) in diluted earnings per common share		$	.51			$	(.40	)		$	.43			$	(.36	)

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		At March 31, 2024
						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		$	51,343			$	(75	)			—	%		$	111				—	%
Other earning assets			3,077				—				—				—				—
Other assets			3,465				29				1				27				1
Total assets gain/(loss)		$	57,885			$	(46	)			—	%		$	138				—	%
Liabilities
Interest-bearing liabilities		$	53,882			$	(261	)			—	%		$	277				1	%
Other liabilities			988				121				12				(69	)			(7	)
Total liabilities (gain)/loss		$	54,870			$	(140	)			—	%		$	208				—	%

		At December 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		$	52,877			$	(88	)			—	%		$	130				—	%
Other earning assets			2,939				—				—				—				—
Other assets			3,609				7				—				50				1
Total assets gain/(loss)		$	59,425			$	(81	)			—	%		$	180				—	%
Liabilities
Interest-bearing liabilities		$	55,803			$	(274	)			—	%		$	295				1	%
Other liabilities			987				113				11				(67	)			(7	)
Total liabilities (gain)/loss		$	56,790			$	(161	)			—	%		$	228				—	%

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. We use Floor Income Contracts, pay-fixed swaps and fixed rate debt to economically hedge embedded Floor Income 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 future. The result of these hedging transactions is to fix the relative spread between the education loan asset rate and the funding instrument rate.

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) a portion of our unhedged FFELP Loans being in a fixed-rate mode due to Floor Income, while being funded with variable rate debt; (ii) certain FFELP fixed rate loans becoming variable interest rate loans when variable interest rates rise above a certain level (Special Allowance Payment or “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 (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) and (iii) have the opposite effect. The change due to the interest rate scenario where interest rates increase by 100 basis points in the current period is primarily a result of item (iii) as well as item (ii) having a more significant impact than item (i) as a result of interest rates being higher compared to the prior period. The change due to the interest scenario where interest rates decrease by 100 basis points in the current period is primarily a result of item (i) having a more significant impact (including annual reset floors in connection with a portion of the Stafford FFELP loan portfolio) than item (ii) as a result of interest rates being higher compared to the prior period. The relative changes from the prior period are a result of interest rates being lower in the prior period.

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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 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.

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 SOFR 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 table below presents our assets and liabilities (funding) arranged by underlying indices as of March 31, 2024. 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 present the asset and liability funding gap on a Core Earnings basis. 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.

Index (Dollars in billions)		Frequency of Variable Resets		Assets				Funding				Funding Gap
3 month Treasury bill		weekly		$	1.9			$	—			$	1.9
3 month Treasury bill		annual			.1				—				.1
Prime		annual			.1				—				.1
Prime		quarterly			1.0				—				1.0
Prime		monthly			3.4				—				3.4
3 month Term SOFR		quarterly			.2				1.2				(1.0	)
3 month Term SOFR (1)		monthly			—				.4				(.4	)
1 month Term SOFR		monthly			2.3				1.0				1.3
Overnight SOFR (2)		daily			33.7				34.7				(1.0	)
Non Discrete reset (1)		monthly			—				4.7				(4.7	)
Non Discrete reset (3)		daily/weekly			3.0				—				3.0
Fixed Rate (4)					13.5				17.2				(3.7	)
Total				$	59.2			$	59.2			$	—

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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 30-day average overnight SOFR reset daily and our cost of funds is primarily indexed to overnight SOFR but resetting at different times than the asset. 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 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 term SOFR rates and our cost of funds is primarily indexed to one-month or three-month term SOFR. 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.

Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The following tables provide information relating to our purchases of shares of our common stock in the three months ended March 31, 2024.

(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 (1)(2)				Approximate Dollar Value of Shares That May Yet Be Purchased Under Publicly Announced Plans or Programs (1)
Period:
January 1 — January 31, 2024			.9			$	17.69				.9			$	275
February 1 — February 29, 2024			.9				16.16				.9			$	261
March 1 — March 31, 2024			.8				16.70				.8			$	247
Total first-quarter 2024			2.6			$	16.84				2.6

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Execution Date	Total Number of Shares Purchased (1)			Average Price Paid per Share			Total Number of Shares Purchased as part of Publicly Announced Plans or Programs (1)(2)			Approximate Dollar Value of Shares that May Yet Be Purchased Under Publicly Announced Plans or Programs (1)
1/2/2024		38,510		$	18.53			38,510		$	289,296,075
1/3/2024		39,290		$	18.16			39,290		$	288,582,749
1/4/2024		39,284		$	18.16			39,284		$	287,869,332
1/5/2024		38,975		$	18.30			38,975		$	287,155,945
1/8/2024		39,423		$	18.05			39,423		$	286,444,234
1/9/2024		39,532		$	17.81			39,532		$	285,740,276
1/10/2024		40,804		$	17.46			40,804		$	285,027,899
1/11/2024		40,895		$	17.39			40,895		$	284,316,792
1/12/2024		41,167		$	17.33			41,167		$	283,603,360
1/16/2024		41,430		$	17.22			41,430		$	282,889,877
1/17/2024		41,099		$	17.05			41,099		$	282,188,942
1/18/2024		43,250		$	16.73			43,250		$	281,465,288
1/19/2024		42,133		$	16.95			42,133		$	280,751,175
1/22/2024		41,150		$	17.57			41,150		$	280,027,997
1/23/2024		40,589		$	17.60			40,589		$	279,313,675
1/24/2024		40,508		$	17.68			40,508		$	278,597,299
1/25/2024		40,250		$	17.81			40,250		$	277,880,507
1/26/2024		39,660		$	18.07			39,660		$	277,163,918
1/29/2024		38,969		$	18.13			38,969		$	276,457,434
1/30/2024		39,692		$	18.22			39,692		$	275,734,321
1/31/2024		41,214		$	17.59			41,214		$	275,009,511
2/5/2024		48,571		$	16.00			48,571		$	274,232,618
2/6/2024		48,205		$	16.12			48,205		$	273,455,630
2/7/2024		49,158		$	15.81			49,158		$	272,678,639
2/8/2024		48,511		$	16.02			48,511		$	271,901,648
2/9/2024		48,342		$	16.07			48,342		$	271,124,657
2/12/2024		46,941		$	16.57			46,941		$	270,346,671
2/13/2024		48,496		$	16.04			48,496		$	269,568,688
2/14/2024		48,262		$	16.12			48,262		$	268,790,710
2/15/2024		47,316		$	16.44			47,316		$	268,012,735
2/16/2024		47,451		$	16.40			47,451		$	267,234,748
2/20/2024		47,467		$	16.39			47,467		$	266,456,754
2/21/2024		48,413		$	16.07			48,413		$	265,678,762
2/22/2024		48,192		$	16.14			48,192		$	264,900,774
2/23/2024		47,501		$	16.38			47,501		$	264,122,789
2/26/2024		47,971		$	16.22			47,971		$	263,344,800
2/27/2024		48,504		$	16.04			48,504		$	262,566,805
2/28/2024		48,959		$	15.89			48,959		$	261,788,817
2/29/2024		48,068		$	16.19			48,068		$	261,010,822
3/1/2024		42,779		$	16.36			42,779		$	260,310,834
3/4/2024		42,500		$	16.43			42,500		$	259,612,385
3/5/2024		42,500		$	16.43			42,500		$	258,914,101
3/6/2024		42,700		$	16.35			42,700		$	258,215,862
3/7/2024		42,500		$	16.43			42,500		$	257,517,728
3/8/2024		42,500		$	16.44			42,500		$	256,818,862
3/11/2024		42,200		$	16.56			42,200		$	256,120,148
3/12/2024		41,700		$	16.69			41,700		$	255,424,383
3/13/2024		41,500		$	16.87			41,500		$	254,724,486
3/14/2024		41,713		$	16.62			41,713		$	254,031,124
3/15/2024		43,000		$	16.50			43,000		$	253,321,474
3/18/2024		42,563		$	16.45			42,563		$	252,621,478
3/19/2024		42,489		$	16.47			42,489		$	251,921,489
3/20/2024		41,819		$	16.74			41,819		$	251,221,497
3/21/2024		37,200		$	16.95			37,200		$	250,590,998
3/22/2024		46,484		$	16.89			46,484		$	249,805,721
3/25/2024		39,600		$	17.11			39,600		$	249,128,311
3/26/2024		44,700		$	17.18			44,700		$	248,360,321
3/27/2024		42,000		$	17.20			42,000		$	247,637,749
3/28/2024		35,250		$	17.39			35,250		$	247,024,857
		2,551,849		$	16.84			2,551,849

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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, 2024. Based on this evaluation, our Principal Executive and Principal Financial Officers concluded that, as of March 31, 2024, 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, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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E xhibits

10.1*		Form of Navient Corporation 2014 Omnibus Incentive Plan Performance Stock Unit Agreement.
31.1*		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*		Inline XBRL Instance Document–the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document.
101.SCH*		Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* Filed herewith

** Furnished herewith

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Financ ial Statements

NAVIENT CORPORATION

CONSOLIDATED BALANCE SHEETS

(In millions, except per share amounts)

(Unaudited)

		March 31, 2024				December 31, 2023
Assets
FFELP Loans (net of allowance for losses of $ 206 and $ 215 , respectively)		$	35,879			$	37,925
Private Education Loans (net of allowance for losses of $ 538 and $ 617 , respectively)			16,608				16,902
Investments			129				146
Cash and cash equivalents			823				839
Restricted cash and cash equivalents			2,125				1,954
Goodwill and acquired intangible assets, net			692				695
Other assets			2,773				2,914
Total assets		$	59,029			$	61,375
Liabilities
Short-term borrowings		$	4,427			$	4,226
Long-term borrowings			50,848				53,402
Other liabilities			988				987
Total liabilities			56,263				58,615
Commitments and contingencies
Equity
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: 465 million and 464 million shares issued, respectively			4				4
Additional paid-in capital			3,360				3,353
Accumulated other comprehensive income (net of tax expense of $ 4 and $ 6 , respectively)			15				19
Retained earnings			4,691				4,638
Total stockholders’ equity before treasury stock			8,070				8,014
Less: Common stock held in treasury at cost: 353 million and 350 million shares, respectively			( 5,304	)			( 5,254	)
Total equity			2,766				2,760
Total liabilities and equity		$	59,029			$	61,375

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

		March 31, 2024				December 31, 2023
FFELP Loans		$	35,745			$	37,832
Private Education Loans			15,603				15,759
Restricted cash			2,109				1,937
Other assets, net			1,580				1,744
Short-term borrowings			3,816				3,634
Long-term borrowings			45,724				48,169
Net assets of consolidated variable interest entities		$	5,497			$	5,469

See accompanying notes to consolidated financial statements.

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NAVIENT CORPORATION

CONSOLIDATED STAT EMENTS OF INCOME

(In millions, except per share amounts)

(Unaudited)

		Three Months Ended March 31,
		2024				2023
Interest income:
FFELP Loans		$	661			$	693
Private Education Loans			328				344
Cash and investments			38				34
Total interest income			1,027				1,071
Total interest expense			875				837
Net interest income			152				234
Less: provisions for loan losses			12				( 14	)
Net interest income after provisions for loan losses			140				248
Other income (loss):
Servicing revenue			17				17
Asset recovery and business processing revenue			77				72
Other income			9				7
Gains (losses) on derivative and hedging activities, net			32				( 8	)
Total other income			135				88
Expenses:
Salaries and benefits			101				105
Other operating expenses			82				80
Total operating expenses			183				185
Goodwill and acquired intangible asset impairment and amortization expense			3				3
Restructuring/other reorganization expenses			1				4
Total expenses			187				192
Income before income tax expense			88				144
Income tax expense			15				33
Net income		$	73			$	111
Basic earnings per common share		$	.65			$	.87
Average common shares outstanding			113				129
Diluted earnings per common share		$	.64			$	.86
Average common and common equivalent shares outstanding			114				130
Dividends per common share		$	.16			$	.16

See accompanying notes to consolidated financial statements.

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NAVIENT CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)

		Three Months Ended March 31,
		2024				2023
Net income		$	73			$	111
Net changes in cash flow hedges, net of tax (1)			( 4	)			( 21	)
Total comprehensive income		$	69			$	90

See accompanying notes to consolidated financial statements.

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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
														Common				Paid-In				Comprehensive				Retained				Treasury				Stockholders'				Noncontrolling				Total
		Issued				Treasury				Outstanding				Stock				Capital				Income (Loss)				Earnings				Stock				Equity				Interest				Equity
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
Balance at December 31, 2023			463,715,048				( 350,210,737	)			113,504,311			$	4			$	3,353			$	19			$	4,638			$	( 5,254	)		$	2,760			$	—			$	2,760
Comprehensive income (loss):
Net income			—				—				—				—				—				—				73				—				73				—				73
Other comprehensive income (loss), net of tax			—				—				—				—				—				( 4	)			—				—				( 4	)			—				( 4	)
Total comprehensive income (loss)			—				—				—				—				—				—				—				—				69				—				69
Cash dividends:			—
Common stock ($ .16 per share)			—				—				—				—				—				—				( 18	)			—				( 18	)			—				( 18	)
Dividend equivalent units related to employee stock-based compensation plans			—				—				—				—				—				—				( 2	)			—				( 2	)			—				( 2	)
Issuance of common shares			1,316,257				—				1,316,257				—				2				—				—				—				2				—				2
Stock-based compensation expense			—				—				—				—				5				—				—				—				5				—				5
Common stock repurchased			—				( 2,551,849	)			( 2,551,849	)			—				—				—				—				( 43	)			( 43	)			—				( 43	)
Shares repurchased related to employee stock-based compensation plans			—				( 443,970	)			( 443,970	)			—				—				—				—				( 7	)			( 7	)			—				( 7	)
Other			—				—				—				—				—				—				—				—				—				—				—
Balance at March 31, 2024			465,031,305				( 353,206,556	)			111,824,749			$	4			$	3,360			$	15			$	4,691			$	( 5,304	)		$	2,766			$	—			$	2,766

See accompanying notes to consolidated financial statements.

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NAVIENT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

		Three Months Ended March 31,
		2024				2023
Cash flows from operating activities
Net income		$	73			$	111
Adjustments to reconcile net income to net cash provided by operating activities:
Goodwill and acquired intangible asset impairment and amortization expense			3				3
Stock-based compensation expense			5				9
Mark-to-market (gains) losses on derivative and hedging activities, net			( 36	)			65
Provisions for loan losses			12				( 14	)
Decrease (increase) in accrued interest receivable			109				( 12	)
Decrease in accrued interest payable			( 15	)			( 49	)
Decrease in other assets			47				58
Decrease in other liabilities			( 16	)			( 26	)
Total adjustments			109				34
Net cash provided by operating activities			182				145
Cash flows from investing activities
Education loans originated and acquired			( 363	)			( 274	)
Proceeds from payments on education loans			2,679				2,118
Other investing activities, net			14				4
Net cash provided by investing activities			2,330				1,848
Cash flows from financing activities
Borrowings collateralized by loans in trust - repaid			( 2,450	)			( 3,047	)
Asset-backed commercial paper conduits, net			201				189
Long-term unsecured notes repaid			( 1	)			( 1,001	)
Other financing activities, net			( 46	)			( 57	)
Common stock repurchased			( 43	)			( 85	)
Common dividends paid			( 18	)			( 21	)
Net cash used in financing activities			( 2,357	)			( 4,022	)
Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents			155				( 2,029	)
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period			2,793				4,807
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period		$	2,948			$	2,778
Supplemental disclosure of cash flow information:
Cash disbursements made (refunds received) for:
Interest paid		$	866			$	845
Income taxes paid		$	8			$	6
Income taxes refunds received		$	—			$	( 2	)
Reconciliation of the Consolidated Statements of Cash Flows to the Consolidated Balance Sheets:
Cash and cash equivalents		$	823			$	570
Restricted cash and restricted cash equivalents			2,125				2,208
Total cash, cash equivalents, restricted cash and restricted cash equivalents at end of period		$	2,948			$	2,778

See accompanying notes to consolidated financial statements.

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S IGNATURES

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/ JOE FISHER
		Joe Fisher
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

Date: April 24, 2024

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APPEN DIX A

form 10-Q cross-reference index

		Page Number

Part I. Financial Information
Item 1.	Financial Statements	42 - 75
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	7 - 32
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	35 - 38
Item 4.	Controls and Procedures	40
Part II. Other Information
Item 1.	Legal Proceedings	33 , 66
Item 1A.	Risk Factors	33
Item 2.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	38
Item 3.	Defaults Upon Senior Securities	Not Applicable
Item 4.	Mine Safety Disclosures	Not Applicable
Item 5.	Other Information	40
Item 6.	Exhibits	41
Signatures		76

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