Cover - USD ($)	12 Months Ended
Cover - USD ($)	Dec. 31, 2019	Jan. 31, 2020	Jun. 28, 2019
Document Information [Line Items]
Document Type	10-K
Amendment Flag	false
Document Annual Report	true
Document Period End Date	Dec. 31, 2019
Document Transition Report	false
Entity File Number	001-31924
Entity Registrant Name	NELNET, INC
Entity Central Index Key	0001258602
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	FY
Entity Incorporation, State or Country Code	NE
Entity Tax Identification Number	84-0748903
Entity Address, Address Line One	121 South 13th Street, Suite 100
Entity Address, City or Town	Lincoln,
Entity Address, State or Province	NE
Entity Address, Postal Zip Code	68508
City Area Code	402
Local Phone Number	458-2370
Title of 12(b) Security	Class A Common Stock, Par Value $0.01 per Share
Trading Symbol	NNI
Security Exchange Name	NYSE
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Public Float			$ 1,195,786,762
Documents Incorporated by Reference	Portions of the registrant’s definitive Proxy Statement to be filed for its 2020 Annual Meeting of Shareholders, scheduled to be held May 21, 2020, are incorporated by reference into Part III of this Form 10-K.
Class A
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		28,462,915
Class B
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		11,271,609

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Assets:
Loans receivable (net of allowance for loan losses of $61,914 and $60,388 respectively)	$ 20,669,371	$ 22,377,142
Cash and cash equivalents:
Cash and cash equivalents - not held at a related party	13,922	9,472
Cash and cash equivalents - held at a related party	119,984	111,875
Total cash and cash equivalents	133,906	121,347
Investments and notes receivable	246,973	249,370
Restricted cash	650,939	701,366
Restricted cash - due to customers	437,756	369,678
Accrued interest receivable	733,623	679,197
Accounts receivable (net of allowance for doubtful accounts of $4,455 and $3,271, respectively)	115,391	59,531
Goodwill	156,912	156,912
Intangible assets, net	81,532	114,290
Property and equipment, net	348,259	344,784
Other assets	134,308	45,533
Fair value of derivative instruments	0	1,818
Total assets	23,708,970	25,220,968
Liabilities:
Bonds and notes payable	20,529,054	22,218,740
Accrued interest payable	47,285	61,679
Other liabilities	303,781	256,092
Due to customers	437,756	369,678
Total liabilities	21,317,876	22,906,189
Commitments and contingencies
Nelnet, Inc. shareholders' equity:
Preferred stock, $0.01 par value. Authorized 50,000,000 shares; no shares issued or outstanding	0	0
Common stock:
Additional paid-in capital	5,715	622
Retained earnings	2,377,627	2,299,556
Accumulated other comprehensive earnings	2,972	3,883
Total Nelnet, Inc. shareholders' equity	2,386,712	2,304,464
Noncontrolling interests	4,382	10,315
Total equity	2,391,094	2,314,779
Total liabilities and equity	23,708,970	25,220,968
Class A
Common stock:
Common stock	285	288
Class B
Common stock:
Common stock	113	115
Variable Interest Entity, Primary Beneficiary
Assets:
Loans receivable (net of allowance for loan losses of $61,914 and $60,388 respectively)	20,664,126	22,359,655
Cash and cash equivalents:
Restricted cash	639,816	677,611
Other assets	735,286	679,735
Liabilities:
Bonds and notes payable	20,742,798	22,146,374
Other liabilities	158,067	163,327
Common stock:
Net assets of consolidated education and other lending variable interest entities	$ 1,138,363	$ 1,407,300

Consolidated Balance Sheets (Parentheticals) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Allowance for loan losses	$ 61,914	$ 60,388
Allowance for doubtful accounts	$ 4,455	$ 3,271
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, authorized shares (in shares)	50,000,000	50,000,000
Preferred stock, issued shares (in shares)	0	0
Preferred stock, outstanding shares (in shares)	0	0
Class A
Par value (in dollars per share)	$ 0.01	$ 0.01
Shares authorized (in shares)	600,000,000	600,000,000
Shares issued (in shares)	28,458,495	28,798,464
Shares outstanding (in shares)	28,458,495	28,798,464
Class B
Par value (in dollars per share)	$ 0.01	$ 0.01
Shares authorized (in shares)	60,000,000	60,000,000
Shares issued (in shares)	11,271,609	11,459,641
Shares outstanding (in shares)	11,271,609	11,459,641

Consolidated Statements of Income - USD ($) $ in Thousands	12 Months Ended
Consolidated Statements of Income - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Interest income:
Loan interest	$ 914,256	$ 897,666	$ 757,731
Investment interest	34,421	26,600	12,695
Total interest income	948,677	924,266	770,426
Interest expense:
Interest on bonds and notes payable	699,327	669,906	465,188
Net interest income	249,350	254,360	305,238
Less provision for loan losses	39,000	23,000	14,450
Net interest income after provision for loan losses	210,350	231,360	290,788
Other income:
Other income	65,179	54,805	55,728
Derivative market value and foreign currency transaction adjustments and derivative settlements, net	(30,789)	71,085	(18,554)
Total other income	831,245	832,532	479,062
Cost of services:
Cost of services	102,026	76,492	58,628
Operating expenses:
Salaries and benefits	463,503	436,179	301,885
Depreciation and amortization	105,049	86,896	39,541
Other expenses	194,272	178,031	143,112
Total operating expenses	762,824	701,106	484,538
Income before income taxes	176,745	286,294	226,684
Income tax expense	35,451	58,770	64,863
Net income	141,294	227,524	161,821
Net loss attributable to noncontrolling interests	509	389	11,345
Net income attributable to Nelnet, Inc.	$ 141,803	$ 227,913	$ 173,166
Earnings per common share:
Net income attributable to Nelnet, Inc. shareholders - basic and diluted (in dollars per share)	$ 3.54	$ 5.57	$ 4.14
Weighted average common shares outstanding - basic and diluted (in shares)	40,047,402	40,909,022	41,791,941
Loan servicing and systems revenue
Other income:
Revenue	$ 455,255	$ 440,027	$ 223,000
Education technology services and payment processing services
Other income:
Revenue	277,331	221,962	193,188
Cost of services:
Cost of services	81,603	59,566	48,678
Communications revenue
Other income:
Revenue	64,269	44,653	25,700
Cost of services:
Cost of services	$ 20,423	$ 16,926	$ 9,950

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Statement of Comprehensive Income [Abstract]
Net income	$ 41,834	$ 33,135	$ 24,678	$ 41,647	$ 21,674	$ 43,126	$ 49,539	$ 113,185	$ 141,294	$ 227,524	$ 161,821
Available-for-sale securities:
Unrealized holding (losses) gains arising during period, net									(1,199)	1,056	2,349
Reclassification adjustment for gains recognized in net income, net of losses									0	(978)	(2,528)
Income tax effect									288	(69)	66
Total other comprehensive (loss) income									(911)	9	(113)
Comprehensive income									140,383	227,533	161,708
Comprehensive loss attributable to noncontrolling interests									509	389	11,345
Comprehensive income attributable to Nelnet, Inc.									$ 140,892	$ 227,922	$ 173,053

Consolidated Statements of Shareholders' Equity - USD ($) $ in Thousands	Total	Preferred stock shares	Common stock shares Class A	Common stock shares Class B	Additional paid-in capital	Retained earnings	Accumulated other comprehensive earnings	Noncontrolling interests
Beginning balance (in shares) at Dec. 31, 2016		0	30,628,112	11,476,932
Beginning balance at Dec. 31, 2016	$ 2,070,925	$ 0	$ 306	$ 115	$ 420	$ 2,056,084	$ 4,730	$ 9,270
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of noncontrolling interests	19,578							19,578
Net income (loss)	161,821					173,166		(11,345)
Other comprehensive income (loss)	(113)						(113)
Distribution to noncontrolling interests	(1,645)							(1,645)
Cash dividends on Class A and Class B common stock	(24,097)					(24,097)
Issuance of common stock, net of forfeitures (in shares)			178,114
Issuance of common stock, net of forfeitures	3,621		$ 2		3,619
Compensation expense for stock based awards	4,193				4,193
Repurchase of common stock (in shares)			(1,473,054)
Repurchase of common stock	(68,896)		$ (15)		(7,711)	(61,170)
Conversion of common stock (in shares)			8,345	(8,345)
Ending balance at Dec. 31, 2017	2,165,387	$ 0	$ 293	$ 115	521	2,143,983	4,617	15,858
Ending balance (in shares) at Dec. 31, 2017		0	29,341,517	11,468,587
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of noncontrolling interests	1,023							1,023
Net income (loss)	227,524					227,913		(389)
Other comprehensive income (loss)	9						9
Distribution to noncontrolling interests	(525)							(525)
Cash dividends on Class A and Class B common stock	(26,839)					(26,839)
Issuance of common stock, net of forfeitures (in shares)			316,148
Issuance of common stock, net of forfeitures	5,174		$ 3		5,171
Compensation expense for stock based awards	6,194				6,194
Repurchase of common stock (in shares)			(868,147)
Repurchase of common stock	(45,331)		$ (8)		(11,264)	(34,059)
Acquisition of noncontrolling interest	(19,101)					(13,449)		(5,652)
Conversion of common stock (in shares)			8,946	(8,946)
Ending balance at Dec. 31, 2018	2,314,779	$ 0	$ 288	$ 115	622	2,299,556	3,883	10,315
Ending balance (in shares) at Dec. 31, 2018		0	28,798,464	11,459,641
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of noncontrolling interests	4,756							4,756
Net income (loss)	141,294					141,803		(509)
Other comprehensive income (loss)	(911)						(911)
Distribution to noncontrolling interests	(4,103)							(4,103)
Cash dividends on Class A and Class B common stock	(29,485)					(29,485)
Issuance of common stock, net of forfeitures (in shares)			198,272
Issuance of common stock, net of forfeitures	4,851		$ 2		4,849
Compensation expense for stock based awards	6,401				6,401
Repurchase of common stock (in shares)			(726,273)
Repurchase of common stock	(40,411)		$ (7)		(6,157)	(34,247)
Conversion of common stock (in shares)			188,032	(188,032)
Conversion of common stock			$ 2	$ (2)
Ending balance at Dec. 31, 2019	$ 2,391,094	$ 0	$ 285	$ 113	$ 5,715	$ 2,377,627	$ 2,972	$ 4,382
Ending balance (in shares) at Dec. 31, 2019		0	28,458,495	11,271,609

Consolidated Statements of Shareholders' Equity (Parentheticals) - $ / shares	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Class A
Cash dividend on Class A and Class B common stock (in dollars per share)	$ 0.74	$ 0.66	$ 0.58
Class B
Cash dividend on Class A and Class B common stock (in dollars per share)	$ 0.74	$ 0.66	$ 0.58

Consolidated Statements of Cash Flows - USD ($)
$ in Thousands

12 Months Ended

Dec. 31, 2019

Dec. 31, 2018

Dec. 31, 2017

Statement of Cash Flows [Abstract]

Net income attributable to Nelnet, Inc.

$ 141,803

$ 227,913

$ 173,166

Net loss attributable to noncontrolling interests

(509)

(389)

(11,345)

Net income

141,294

227,524

161,821

Adjustments to reconcile net income to net cash provided by operating activities, net of acquisitions:

Depreciation and amortization, including debt discounts and loan premiums and deferred origination costs

192,662

184,682

137,823

Loan discount accretion

(35,824)

(40,800)

(44,812)

Provision for loan losses

39,000

23,000

14,450

Derivative market value adjustments

76,195

(1,014)

(26,379)

Unrealized foreign currency transaction adjustment

0

45,600

(Payments to) proceeds from termination of derivative instruments, net

(12,530)

10,283

(30,382)

Loss on extinguishment of debt

16,689

0

(Payments to) proceeds from clearinghouse - initial and variation margin, net

(70,685)

40,382

76,325

Gain from sale of loans

(17,261)

0

Deferred income tax (benefit) expense

(7,265)

10,981

(1,544)

Non-cash compensation expense

6,781

6,539

4,416

Impairment expense

0

11,721

3,626

Other

(2,647)

(11,049)

(2,410)

Increase in accrued interest receivable

(54,586)

(248,869)

(39,203)

(Increase) decrease in accounts receivable

(55,949)

3,059

(4,234)

Increase in other assets

(11,065)

(4,069)

(42,270)

(Decrease) increase in accrued interest payable

(14,394)

11,640

4,362

Increase (decrease) in other liabilities

40,422

(12,506)

(2,341)

Increase in due to customers

68,078

59,388

67,419

Net cash provided by operating activities

298,915

270,892

322,267

Cash flows from investing activities, net of acquisitions:

Purchases of loans

(2,008,207)

(3,922,251)

(325,476)

Net proceeds from loan repayments, claims, and capitalized interest

3,462,391

3,322,783

3,363,526

Proceeds from sale of loans

196,564

23,712

53,203

Purchases of available-for-sale securities

(1,010)

(46,424)

(128,523)

Proceeds from sales of available-for-sale securities

105

71,415

156,540

Purchases of investments and issuance of notes receivable

(103,250)

(67,040)

(29,339)

Proceeds from investments and notes receivable

70,472

23,039

11,545

Purchases of property and equipment

(92,499)

(125,023)

(156,005)

Business (acquisitions) sale, net of cash and restricted cash acquired

0

(12,562)

4,511

Net cash provided by (used in) investing activities

1,524,566

(732,351)

2,949,982

Cash flows from financing activities:

Payments on bonds and notes payable

(4,698,878)

(3,113,503)

(5,403,224)

Proceeds from issuance of bonds and notes payable

2,997,972

3,922,962

1,984,558

Payments of debt issuance costs

(14,406)

(13,808)

(6,497)

Payments to extinguish debt

(14,030)

0

Payment of contingent consideration

0

(850)

Dividends paid

(29,485)

(26,839)

(24,097)

Repurchases of common stock

(40,411)

(45,331)

(68,896)

Proceeds from issuance of common stock

1,552

1,359

678

Acquisition of noncontrolling interest

0

(13,449)

0

Issuance of noncontrolling interests

4,650

918

19,473

Distribution to noncontrolling interests

(235)

(525)

(1,645)

Net cash (used in) provided by financing activities

(1,793,271)

711,784

(3,500,500)

Net increase (decrease) in cash, cash equivalents and restricted cash

30,210

250,325

(228,251)

Cash, cash equivalents, and restricted cash, beginning of year

1,192,391

942,066

1,170,317

Cash, cash equivalents, and restricted cash, end of year

1,222,601

1,192,391

942,066

Supplemental disclosures of cash flow information:

Cash disbursements made for interest

657,436

591,394

390,278

Cash disbursements made for income taxes, net of refunds and credits

^[1]

17,672

473

96,271

Noncash investing and financing activity:

Receipt of beneficial interest in consumer loan securitizations

39,780

0

Distribution to noncontrolling interests

3,868

0

Cash and cash equivalents:

Cash, cash equivalents, and restricted cash

$ 1,192,391

$ 942,066

[1]	For 2019 and 2018, the Company utilized $31.8 million and $14.7 million of federal and state tax credits, respectively, related primarily to renewable energy.

Consolidated Statements of Cash Flows (Parenthetical) - USD ($) $ in Millions	Dec. 31, 2019	Dec. 31, 2018
Statement of Cash Flows [Abstract]
Tax credit utilized in period	$ 31.8	$ 14.7

Description of Business	12 Months Ended
Description of Business	Dec. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Description of Business	Description of Business Nelnet, Inc. and its subsidiaries (“Nelnet” or the “Company”) is a diverse company with a purpose to serve others and a vision to make customers' dreams possible by delivering customer focused products and services. The largest operating businesses engage in loan servicing; education technology, services, and payment processing; and communications. A significant portion of the Company's revenue is net interest income earned on a portfolio of federally insured student loans. The Company also makes investments to further diversify the Company both within and outside of its historical core education-related businesses, including, but not limited to, investments in real estate, early-stage and emerging growth companies, and renewable energy. Substantially all revenue from external customers is earned, and all long-lived assets are located, in the United States. The Company was formed as a Nebraska corporation in 1978 to service federal student loans for two local banks. The Company built on this initial foundation as a servicer to become a leading originator, holder, and servicer of federal student loans, principally consisting of loans originated under the Federal Family Education Loan Program (“FFELP” or “FFEL Program”) of the U.S. Department of Education (the “Department”). The Health Care and Education Reconciliation Act of 2010 (the “Reconciliation Act of 2010”) discontinued new loan originations under the FFEL Program, effective July 1, 2010, and requires that all new federal student loan originations be made directly by the Department through the Federal Direct Loan Program. This law does not alter or affect the terms and conditions of existing FFELP loans. As a result of this law, the Company no longer originates new FFELP loans. To reduce its reliance on interest income on student loans, the Company has expanded its services and products. This expansion has been accomplished through internal growth and innovation as well as business acquisitions. The Company has four reportable operating segments. The Company's reportable operating segments include: • Loan Servicing and Systems (“LSS”) • Education Technology, Services, and Payment Processing (“ETS&PP”) • Communications • Asset Generation and Management (“AGM”) A description of each reportable operating segment is included below. See note 14 for additional information on the Company's segment reporting. Loan Servicing and Systems The primary service offerings of the Loan Servicing and Systems operating segment include: •Servicing federally-owned student loans for the Department of Education •Servicing FFELP loans •Originating and servicing private education and consumer loans •Providing student loan servicing software and other information technology products and services •Providing outsourced services including call center, processing, and marketing services LSS provides for the servicing of the Company's student loan portfolio and the portfolios of third parties. The loan servicing activities include loan conversion activities, application processing, borrower updates, customer service, payment processing, due diligence procedures, funds management reconciliations, and claim processing. These activities are performed internally for the Company's portfolio in addition to generating external fee revenue when performed for third-party clients. On February 7, 2018, the Company acquired Great Lakes Educational Loan Services, Inc. (“Great Lakes”). See note 7 for additional information related to this acquisition. Nelnet Servicing, LLC, (“Nelnet Servicing”), a subsidiary of the Company, and Great Lakes are two of four large private sector companies (referred to as Title IV Additional Servicers, or “TIVAS”) awarded a student loan servicing contract by the Department to provide additional servicing capacity for loans owned by the Department. This segment also provides student loan servicing software, which is used internally by the Company and licensed to third-party student loan holders and servicers. These software systems have been adapted so that they can be offered as hosted servicing software solutions usable by third parties to service various types of student loans, including Federal Direct Loan Program and FFEL Program loans. This segment also provides business process outsourcing primarily specializing in contact center management. The contact center solutions and services include taking inbound calls, helping with outreach campaigns and sales, and interacting with customers through multi-channels. Education Technology, Services, and Payment Processing NBS provides service and technology to administrators, teachers, students, and families of K-12 schools and higher education institutions. The Company's payment processing services and technologies also serve customers outside of education. In the K-12 market, the Company (known as FACTS) offers (i) financial management, including actively managed tuition payment plans, financial needs assessment (grant and aid), incidental billing, advanced accounting, and payment forms; (ii) school administration solutions, including school information system software that automates the flow of information between school administrators, teachers, and parents and includes administrative processes such as admissions, enrollment, scheduling, cafeteria management, attendance, and grade book management; (iii) advancement (giving management), including a comprehensive donation platform that streamlines donor communications, organizes donor information, and provides access to data analysis and reporting; (iv) enrollment and communications, including website design and cost effective admissions software; (v) professional development and educational instruction services; and (vi) innovative technology products that aid in teacher and student evaluations. In the higher education market, the Company (known as Nelnet Campus Commerce) offers solutions including (i) actively managed tuition payment plans and (ii) payment technology and processing. Outside of the education market, the Company also offers technology and payment services including electronic transfer and credit card processing, reporting, billing and invoicing, mobile and virtual terminal solutions, and specialized integrations to business software. In addition, this operating segment offers mobile first technology focused on increasing engagement, online giving, and communication for church and not-for-profit customers. Additionally, the Company may earn revenue for payment processing fees when families make tuition payments. Communications ALLO Communications LLC (“ALLO”) provides pure fiber optic service to homes and businesses for internet, television, and telephone services. The acquisition of ALLO in 2015 provides additional diversification of the Company's revenues and cash flows outside of education. In addition, the acquisition leverages the Company's existing infrastructure, customer service capabilities and call centers, and financial strength and liquidity for continued growth. ALLO derives its revenue primarily from the sale of communication services to residential, governmental, and business customers in Nebraska and Colorado. Internet and television services include revenue from residential and business customers for subscriptions to ALLO's data and video products. ALLO data services provide high-speed internet access over ALLO's all-fiber network at various symmetrical speeds of up to 1 gigabit per second for residential customers and is capable of providing symmetrical speeds of over 1 gigabit per second for business customers. Telephone services include local and long distance telephone service, hostedPBX services, and other services. Asset Generation and Management The Company's Asset Generation and Management operating segment includes the acquisition, management, and ownership of the Company's loan assets. Substantially all loan assets included in this segment are student loans originated under the FFEL Program, including the Stafford Loan Program, the PLUS Loan program, and loans that reflect the consolidation into a single loan of certain previously separate borrower obligations (“Consolidation” loans). The Company also acquires private education and consumer loans. The Company generates a substantial portion of its earnings from the spread, referred to as the Company's loan spread, between the yield it receives on its loan portfolio and the associated costs to finance such portfolio. The loan assets are held in a series of lending subsidiaries and associated securitization trusts designed specifically for this purpose. In addition to the loan spread earned on its portfolio, all costs and activity associated with managing the portfolio, such as servicing of the assets and debt maintenance, are included in this segment. Corporate and Other Activities Other business activities and operating segments that are not reportable are combined and included in Corporate and Other Activities. Corporate and Other Activities include the following items: •The operating results of Whitetail Rock Capital Management, LLC (“WRCM”), the Company's SEC-registered investment advisor subsidiary •Income earned on certain investment activities, including real estate and renewable energy (solar) •Interest expense incurred on unsecured debt transactions •Other product and service offerings that are not considered reportable operating segments Corporate and Other Activities also include certain corporate activities and overhead functions related to executive management, internal audit, human resources, accounting, legal, enterprise risk management, information technology, occupancy, and marketing. These costs are allocated to each operating segment based on estimated use of such activities and services.

Summary of Significant Accounting Policies and Practices

12 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies and Practices

Consolidation

The consolidated financial statements include the accounts of Nelnet, Inc. and its consolidated subsidiaries. In addition, the accounts of all variable interest entities (“VIEs”) of which the Company has determined that it is the primary beneficiary are included in the consolidated financial statements. All significant intercompany balances and transactions have been eliminated in consolidation.

Variable Interest Entities

The Company assesses its partnerships and joint ventures to determine if the entity meets the qualifications of a VIE. The Company performs a qualitative assessment of each VIE to determine if it is the primary beneficiary. The primary beneficiary is the entity which has both: (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (2) the obligation to absorb losses or receive benefits of the entity that could potentially be significant to the VIE. The Company examines specific criteria and uses judgment when determining whether an entity is a VIE and whether it is the primary beneficiary. The Company performs this review initially at the time it enters into a partnership or joint venture agreement and reassess upon reconsideration events.

VIEs - Consolidated

The Company is required to consolidate VIEs in which it has determined it is the primary beneficiary.

The Company's education and other lending subsidiaries are engaged in the securitization of finance assets. These lending subsidiaries hold beneficial interests in eligible loans, subject to creditors with specific interests. The liabilities of the Company's lending subsidiaries are not the direct obligations of Nelnet, Inc. or any of its other subsidiaries. Each lending subsidiary is structured to be bankruptcy remote, meaning that it should not be consolidated in the event of bankruptcy of the parent company or any other subsidiary. The Company is generally the administrator and master servicer of the securitized assets held in its lending subsidiaries and owns the residual interest of the securitization trusts. For accounting purposes, the transfers of loans to the securitization trusts do not qualify as sales. Accordingly, all the financial activities and related assets and liabilities, including debt, of the securitizations are reflected in the Company's consolidated financial statements and are summarized as supplemental information on the balance sheet.

As of December 31, 2019, the Company owned 98.9 percent of the economic rights of ALLO Communications LLC and has a disproportional 80 percent of the voting rights related to all operating decisions for ALLO's business. See note 1, “Description of Business,” for a description of ALLO, including the primary services offered. In addition to the Company’s original equity investment, Nelnet, Inc. (the parent) contributed additional equity with a yield-based preferred return of future earnings due on the newly contributed equity. The Company will continue to increase its ownership interests as it makes cash contributions to fund ALLO's operating losses and capital expenditures. In addition, ALLO's management, as current minority members, has the opportunity to earn ownership interests based on the financial performance of ALLO. Nelnet, Inc.’s maximum exposure to loss as a result of its involvement with ALLO is equal to its ownership interests investment. All of ALLO’s financial activities and related assets and liabilities are reflected in the Company’s consolidated financial statements. See note 14, “Segment Reporting,” for disclosure of ALLO’s total assets and results of operations (included in the "Communications" operating segment), note 15, "Disaggregated Revenue and Deferred Revenue," for disclosure of ALLO's disaggregated revenue and deferred revenue, note 9, "Goodwill," for disclosure of ALLO's goodwill, and note 10, “Property and Equipment,” for disclosure of ALLO’s fixed assets. ALLO's goodwill and property and equipment comprise the majority of its assets. The assets recognized as a result of consolidating ALLO are the property of ALLO and are not available for any other purpose.

VIEs - Not consolidated

The Company is not required to consolidate VIEs in which it has determined it is not the primary beneficiary.

The Company makes investments in entities that promote renewable energy sources (solar). The Company’s investments in these entities generate a return primarily through the realization of federal income tax credits, operating cash flows, and other tax benefits, such as tax deductions from operating losses of the investments, over specified time periods. These investments are included in "investments and notes receivable" on the consolidated balance sheets. The carrying value of these investments are reduced by tax credits earned when the solar project is placed in service. The Company’s unfunded capital and other commitments related to these unconsolidated VIEs are included in “other liabilities” on the consolidated balance sheet. The Company’s maximum exposure to loss from these unconsolidated VIEs include the investment, unfunded capital commitments, and previously recorded tax credits which remain subject to recapture by taxing authorities based on compliance features required to be met at the project level. The tax credit recapture period ratably decreases over five years from when the project is placed in service. While the Company believes potential losses from these investments are remote, the maximum exposure was determined by assuming a scenario where the energy-producing projects completely fail and do not meet certain government compliance requirements resulting in recapture of the related tax credits.

The following table provides a summary of solar investment VIEs that the Company has not consolidated:


	As of December 31,
	2019		2018
Investment carrying amount	$	7,562	2,724
Tax credits subject to recapture	67,069		11,345
Unfunded capital and other commitments	14,006		—
Maximum exposure to loss (a)	$	88,637	14,069

(a) Amount includes $3.0 million as of December 31, 2019 syndicated to other investors in certain solar projects.

Accounting Standard Adopted in 2019

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Codification Topic 842, Leases ("ASC Topic 842"). The standard requires the identification of arrangements that should be accounted for as leases by lessees and the disclosure of key information about leasing arrangements. The standard establishes a right-of-use ("ROU") model that requires a lessee to recognize a ROU asset and lease liability for all leases with a term longer than twelve months and classify the lease as either operating or financing, with the income statement reflecting lease expense for operating leases and amortization/interest expense for financing leases.

The Company adopted the standard effective January 1, 2019, using the effective date as its date of initial application. Consequently, financial information is not updated and the disclosures required under the new standard are not provided for dates and periods before January 1, 2019. The Company elected to utilize the ‘package of practical expedients’, which permitted it to not reassess under the new standard its prior conclusions about lease identification, lease classification, and initial direct costs.

The most significant impact of the standard relates to (1) the recognition of new ROU assets and lease liabilities on the Company's consolidated balance sheet; (2) the deconsolidation of assets and liabilities for certain sale-leaseback transactions arising from build-to-suit lease arrangements for which construction was completed and the Company is leasing the constructed assets that did not qualify for sale accounting prior to the adoption of the new standard; and (3) significant new disclosures about the Company’s leasing activities. The build-to-suit lease arrangements have been reassessed as operating leases as of the effective date under ASC Topic 842.

Adoption of the new standard resulted in recognizing lease liabilities of $33.7 million based on the present value of the remaining minimum rental payments. In addition, the Company recognized ROU assets of $32.8 million, which corresponds to the lease liabilities reduced by deferred rent expense as of the effective date. The Company also deconsolidated total assets of $43.8 million and total liabilities of $34.8 million for entities that had been consolidated due to sale-leaseback transactions that failed to qualify for recognition as sales under the prior guidance. Deconsolidation of these entities reduced noncontrolling

interests by $6.1 million. The cumulative effect of the changes made to the Company's consolidated balance sheet as of January 1, 2019 for the adoption of the new lease standard was as follows:


			Adjustments from adoption of new lease standard
	Balances at December 31, 2018		ROU assets and lease liabilities	Deconsolidation of sale-leaseback transactions	Balances at January 1, 2019
Assets
Cash and cash equivalents	$	121,347	—	(646)	120,701
Investments and notes receivable	249,370		—	(23,134)	226,236
Accounts receivable	59,531		—	(89)	59,442
Property and equipment, net	344,784		—	(16,974)	327,810
Other assets	45,533		32,831	(27)	78,337
Liabilities
Bonds and notes payable	22,218,740		—	(33,182)	22,185,558
Other liabilities	256,092		32,831	(1,611)	287,312
Equity
Noncontrolling interests	10,315		—	(6,077)	4,238

Reclassifications

Certain amounts previously reported within the Company’s consolidated statements of income have been reclassified to conform to the current period presentation. These reclassifications include:

•Reclassifying “gain from debt repurchases” to “other income”; and

•Reclassifying “loan servicing fees to third parties” to “other expenses.”

Noncontrolling Interests

Amounts for noncontrolling interests reflect the proportionate share of membership interest (equity) and net income attributable to the holders of minority membership interests in the following entities:

•Whitetail Rock Capital Management, LLC - WRCM is the Company’s SEC-registered investment advisor subsidiary. WRCM issued 10 percent minority membership interests on January 1, 2012.

•ALLO Communications LLC - On December 31, 2015, the Company purchased 92.5 percent of the ownership interests in ALLO. On January 1, 2016, the Company sold a 1.0 percent ownership interest in ALLO to a non-related third party. Subsequently, the Company contributed additional equity to increase its ownership interest in ALLO to 98.9 percent. Per ALLO's operating agreement, currently all operating results of ALLO are allocated to the Company.

In addition, the Company has established entities for the purpose of investing in renewable energy (solar) and federal opportunity zone programs in which it has noncontrolling members.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities, reported amounts of revenues and expenses, and other disclosures. Actual results may differ from those estimates.

Loans Receivable

Loans consist of federally insured student loans, private education loans, and consumer loans. If the Company has the ability and intent to hold loans for the foreseeable future, such loans are held for investment and carried at amortized cost. Amortized cost includes the unamortized premium or discount and capitalized origination costs and fees, all of which are amortized to interest income. Loans which are held-for-investment also have an allowance for loan loss as needed. Any loans the Company has the ability and intent to sell are classified as held for sale and are carried at the lower of cost or fair value. Loans which are held for sale do not have the associated premium or discount and origination costs and fees amortized into interest income and

there is also no related allowance for loan losses. There were no loans classified as held for sale as of December 31, 2019 and 2018.

Federally insured loans were originated under the FFEL Program by certain eligible lenders as defined by the Higher Education Act of 1965, as amended (the “Higher Education Act”). These loans, including related accrued interest, are guaranteed at their maximum level permitted under the Higher Education Act by an authorized guaranty agency, which has a contract of reinsurance with the Department. The terms of the loans, which vary on an individual basis, generally provide for repayment in monthly installments of principal and interest. Generally, Stafford and PLUS loans have repayment periods between five and ten years. Consolidation loans have repayment periods of twelve to thirty years. FFELP loans do not require repayment while the borrower is in-school, and during the grace period immediately upon leaving school. The borrower may also be granted a deferment or forbearance for a period of time based on need, during which time the borrower is not considered to be in repayment. Interest continues to accrue on loans in the in-school, deferment, and forbearance program periods. In addition, eligible borrowers may qualify for income-driven repayment plans offered by the Department. These plans determine the borrower's payment amount based on their discretionary income and may extend their repayment period. Interest rates on federally insured student loans may be fixed or variable, dependent upon the type of loan, terms of the loan agreements, and date of origination.

Substantially all FFELP loan principal and related accrued interest is guaranteed as provided by the Higher Education Act. These guarantees are subject to the performance of certain loan servicing due diligence procedures stipulated by applicable Department regulations. If these due diligence requirements are not met, affected student loans may not be covered by the guarantees in the event of borrower default. Such student loans are subject to “cure” procedures and reinstatement of the guarantee under certain circumstances.

Loans also include private education and consumer loans. Private education loans are loans to students or their families that are non-federal loans and loans not insured or guaranteed under the FFEL Program. These loans are used primarily to bridge the gap between the cost of higher education and the amount funded through financial aid, federal loans, or borrowers' personal resources. The terms of the private education loans, which vary on an individual basis, generally provide for repayment in monthly installments of principal and interest over a period of up to 30 years. The private education loans are not covered by a guarantee or collateral in the event of borrower default. Consumer loans are unsecured loans to an individual for personal, family, or household purposes. The terms of the consumer loans, which vary on an individual basis, generally provide for repayment in weekly or monthly installments of principal and interest over a period of up to 6 years.

Allowance for Loan Losses

The allowance for loan losses represents management's estimate of probable losses on loans. The provision for loan losses reflects the activity for the applicable period and provides an allowance at a level that the Company's management believes is appropriate to cover probable losses inherent in the loan portfolio. The Company evaluates the adequacy of the allowance for loan losses using a historical loss rate methodology adjusted for qualitative factors separately on each of its federally insured, private education, and consumer loan portfolios. These evaluation processes are subject to numerous judgments and uncertainties including the selection of loss rates over time and determination of the loss emergence period.

The allowance for the federally insured loan portfolio is based on periodic evaluations of the Company's loan portfolios considering loans in repayment versus those in a nonpaying status, delinquency status, trends in defaults in the portfolio based on Company and industry data, past experience, trends in student loan claims rejected for payment by guarantors, changes to federal student loan programs, current economic conditions, and other relevant qualitative factors. The federal government guarantees 97 percent of the principal of and the interest on federally insured student loans disbursed on and after July 1, 2006 (and 98 percent for those loans disbursed on and after October 1, 1993 and prior to July 1, 2006), which limits the Company's loss exposure on the outstanding balance of the Company's federally insured portfolio. Student loans disbursed prior to October 1, 1993 are fully insured.

In determining the appropriate allowance for loan losses on the private education and consumer loans, the Company considers several factors, including: loans in repayment versus those in a nonpaying status, delinquency status, type of program, trends in defaults in the portfolio based on Company and industry data, past experience, current economic conditions, and other relevant qualitative factors. The Company places private education and consumer loans on nonaccrual status when the collection of principal and interest is 90 days past due, and charges off the loan when the collection of principal and interest is 120 days or 180 days past due, depending on type of loan program. Collections, if any, are reflected as a recovery through the allowance for loan losses.

Management has determined that each of the federally insured, private education, and consumer loan portfolios meet the definition of a portfolio segment, which is defined as the level at which an entity develops and documents a systematic method for determining its allowance for credit losses. Accordingly, the portfolio segment disclosures are presented on this basis in note 3 for each of these portfolios. The Company does not disaggregate its portfolio segment loan portfolios into classes of financing receivables. The Company collectively evaluates loans for impairment and as of December 31, 2019 and 2018, the Company did not have any impaired loans as defined in the Receivables Topic of the FASB Accounting Standards Codification.

For loans purchased where there is evidence of credit deterioration since the origination of the loan, the Company records a credit discount, separate from the allowance for loan losses, which is non-accretable to interest income. Remaining discounts and premiums for purchased loans are recognized in interest income over the remaining estimated lives of the loans. The Company continues to evaluate credit losses associated with purchased loans based on current information and changes in expectations to determine the need for any additional allowance for loan losses.

Cash and Cash Equivalents and Statements of Cash Flows

For purposes of the consolidated statements of cash flows, the Company considers all investments with original maturities of three months or less to be cash equivalents.

Accrued interest on loans purchased and sold is included in cash flows from operating activities in the respective period. Net purchased loan accrued interest was $112.9 million and $181.0 million in 2019 and 2018, respectively. The amount of purchased loan accrued interest in 2017 was not significant.

Investments

The Company classifies its debt securities, primarily student loan and other asset-backed securities, as available-for-sale. These securities are carried at fair value, with the temporary changes in fair value, net of taxes, carried as a separate component of shareholders’ equity. The amortized cost of debt securities in this category is adjusted for amortization of premiums and accretion of discounts, which are amortized using the effective interest rate method. Other-than-temporary impairment is evaluated by considering several factors, including the length of time and extent to which the fair value has been less than the amortized cost basis, the financial condition and near-term prospects of the issuer of the security (considering factors such as adverse conditions specific to the security and ratings agency actions), and the intent and ability of the Company to retain the investment to allow for any anticipated recovery in fair value. The entire fair value loss on a security that has experienced an other-than-temporary impairment is recorded in earnings if the Company intends to sell the security or if it is more likely than not that the Company will be required to sell the security before the expected recovery of the loss. However, if the impairment is other-than-temporary, and either of those two conditions does not exist, the portion of the impairment related to credit losses is recorded in earnings and the impairment related to other factors is recorded in other comprehensive income. When an investment is sold, the cost basis is determined through specific identification of the security sold.

The Company classifies its residual interest in consumer loan securitizations as held-to-maturity beneficial interest investments. The Company measures accretable yield initially as the excess of all cash flows expected to be collected attributable to the beneficial interest estimated at the acquisition/transaction date over the initial investment and recognizes interest income over the life of the beneficial interest using the effective interest method. The Company continues to update, over the life of the beneficial interest, the expectation of cash flows to be collected. Beneficial interest investments are evaluated for impairment by comparing the present value of the remaining cash flows as estimated at the initial transaction date (or the last date previously revised) to the present value of the cash flows expected to be collected at the current financial reporting date, both discounted using the same effective rate equal to the current yield used to accrete the beneficial interest.

Equity investments with readily determinable fair values are measured at fair value, with changes in the fair value recognized through net income (other than those equity investments accounted for under the equity method of accounting or those that result in consolidation of the investee).

For equity investments without readily determinable fair value, the Company uses the measurement alternative of cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The Company uses qualitative factors to identify impairment on these investments.

The Company accounts for equity investments over which it has significant influence but not a controlling financial interest using the equity method of accounting. Equity method investments are recorded at cost and subsequently increased or decreased by the amount of the Company’s proportionate share of the net earnings or losses and other comprehensive income of the

investee. Equity method investments are evaluated for other-than-temporary impairment using certain impairment indicators such as a series of operating losses of an investee or other factors. These factors may indicate that a decrease in value of the investment has occurred that is other-than-temporary and shall be recognized.

For periods prior to January 1, 2018, equity securities with readily determinable fair values were primarily classified as available-for-sale and stated at fair value with unrealized gains and losses reported as a separate component of accumulated other comprehensive income, net of tax. Equity securities without readily determinable fair values were recorded at cost less impairment, if any.

Restricted Cash

Restricted cash primarily includes amounts for student loan securitizations and other secured borrowings. This cash must be used to make payments related to trust obligations. Amounts on deposit in these accounts are primarily the result of timing differences between when principal and interest is collected on the student loans held as trust assets and when principal and interest is paid on the trust's asset-backed debt securities. Restricted cash also includes collateral deposits with derivative counterparties and third-party clearinghouses.

Restricted Cash - Due to Customers

As a servicer of student loans, the Company collects student loan remittances and subsequently disburses these remittances to the appropriate lending entities. In addition, as part of the Company's Education Technology, Services, and Payment Processing operating segment, the Company collects tuition payments and subsequently remits these payments to the appropriate schools. Cash collected for customers and the related liability are included in the accompanying consolidated balance sheets.

Accounts Receivable

Accounts receivable are presented at their net realizable values, which include allowances for doubtful accounts. Allowance estimates are based upon individual customer experience, as well as the age of receivables and likelihood of collection.

Business Combinations

The Company uses the acquisition method in accounting for acquired businesses. Under the acquisition method, the financial statements reflect the operations of an acquired business starting from the completion of the acquisition. The assets acquired and liabilities assumed are recorded at their respective estimated fair values at the date of acquisition. Any excess of the purchase price over the estimated fair values of the identifiable net assets acquired is recorded as goodwill. All contingent consideration is measured at fair value on the acquisition date and included in the consideration transferred in the acquisition. Contingent consideration classified as a liability is remeasured to fair value at each reporting date until the contingency is resolved, and changes in fair value are recognized in earnings.

Goodwill

The Company reviews goodwill for impairment annually (in the fourth quarter) and whenever triggering events or changes in circumstances indicate its carrying value may not be recoverable. Goodwill is tested for impairment using a fair value approach at the reporting unit level. A reporting unit is the operating segment, or a business one level below that operating segment if discrete financial information is prepared and regularly reviewed by segment management. However, components are aggregated as a single reporting unit if they have similar economic characteristics.

The Company tests goodwill for impairment in accordance with applicable accounting guidance. The guidance provides an entity the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not (more than 50%) that the estimated fair value of a reporting unit is less than its carrying amount. If an entity elects to perform a qualitative assessment and determines that an impairment is more likely than not, the entity is then required to perform a quantitative impairment test (described below), otherwise no further analysis is required. An entity also may elect not to perform the qualitative assessment and, instead, proceed directly to the quantitative impairment test.

If the Company elects to not perform a qualitative assessment or if the Company determines it is more likely than not that the fair value of a reporting unit is less than the carrying amount, then the Company performs a quantitative impairment test on goodwill. In the quantitative test, the Company compares the fair value of each reporting unit to its carrying value. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is considered not impaired

and the Company is not required to perform further testing. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then the Company would record an impairment loss equal to the difference.

Determining the fair value of a reporting unit involves the use of significant estimates and assumptions. These estimates and assumptions include revenue growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, future economic and market conditions, and determination of appropriate market comparables. Actual future results may differ from those estimates.

See note 9, "Goodwill," for information regarding the Company's annual goodwill impairment review.

Intangible Assets

The Company uses estimates to determine the fair value of acquired assets to allocate the purchase price to acquired intangible assets. Such estimates are generally based on estimated future cash flows or cost savings associated with particular assets and are discounted to present value using an appropriate discount rate. The estimates of future cash flows associated with intangible assets are generally prepared using a cost savings method, a lost income method, or an excess return method, as appropriate. In utilizing such methods, management must make certain assumptions about the amount and timing of estimated future cash flows and other economic benefits from the assets, the remaining economic useful life of the assets, and general economic factors concerning the selection of an appropriate discount rate. The Company may also use replacement cost or market comparison approaches to estimate fair value if such methods are determined to be more appropriate.

Intangible assets with finite lives are amortized over their estimated lives. Such assets are amortized using a method of amortization that reflects the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up. If that pattern cannot be reliably determined, the Company uses a straight-line amortization method.

The Company evaluates the estimated remaining useful lives of purchased intangible assets and whether events or changes in circumstances warrant a revision to the remaining periods of amortization.

Property and Equipment

Property and equipment are carried at cost, net of accumulated depreciation. Maintenance and repairs are charged to expense as incurred, and major improvements, including leasehold improvements, are capitalized. Gains and losses from the sale of property and equipment are included in determining net income. The Company uses the straight-line method for recording depreciation and amortization. Leasehold improvements are amortized straight-line over the shorter of the lease term or estimated useful life of the asset.

Leases

At the inception of an arrangement, the Company determines if the arrangement is, or contains, a lease and records the lease in the consolidated financial statements upon lease commencement, which is the date when the underlying asset is made available by the lessor. The Company primarily leases dark fiber to support its telecommunications operations and office and data center space. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The lease expense for these leases is recognized on a straight-line basis over the lease term. All other lease assets (ROU assets) and lease liabilities are recognized based on the present value of lease payments over the lease term at the commencement date. The Company classifies each lease as operating or financing, with the income statement reflecting lease expense for operating leases and amortization/interest expense for financing leases. When the discount rate implicit in the lease cannot be readily determined, the Company uses its incremental borrowing rate.

The Company has elected to utilize the practical expedient to account for lease and non-lease components together as a single, combined lease component for its office and data center space. In addition, the Company has identified itself as the lessor in its Communications operating segment for services provided to customers that include customer-premise equipment. The Company has also elected to utilize the practical expedient to account for those services and associated leases as a single, combined component. The non-lease services are 'predominant' in those contracts. Therefore, the combined component is considered a single performance obligation under ASC Topic 606, Revenue from Contracts with Customers.

Most leases include one or more options to renew, with renewal terms that can be extended. The exercise of lease renewal options for the majority of leases is at the Company's discretion. Renewal options that the Company is reasonably certain to exercise are included in the lease term.

Certain leases include escalating rental payments or rental payments adjusted periodically for inflation. None of the lease agreements include any residual value guarantees, a transfer of title, or a purchase option that is reasonably certain to be exercised.

Impairment of Long-Lived Assets

The Company reviews its long-lived assets, such as ROU assets, property and equipment, and purchased intangibles subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

Assumptions and estimates about future cash flows generated by, remaining useful lives of, and fair values of the Company's intangible and other long-lived assets are complex and subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in the Company's business strategy and internal forecasts. Although the Company believes the historical assumptions and estimates used are reasonable and appropriate, different assumptions and estimates could materially impact the reported financial results.

Fair Value Measurements

The Company uses estimates of fair value in applying various accounting standards for its financial statements.

Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction between willing and able market participants. In general, the Company's policy in estimating fair values is to first look at observable market prices for identical assets and liabilities in active markets, where available. When these are not available, other inputs are used to model fair value, such as prices of similar instruments, yield curves, volatilities, prepayment speeds, default rates, and credit spreads, relying first on observable data from active markets. Depending on current market conditions, additional adjustments to fair value may be based on factors such as liquidity, credit, and bid/offer spreads. In some cases fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Transaction costs are not included in the determination of fair value. When possible, the Company seeks to validate the model's output to market transactions. Depending on the availability of observable inputs and prices, different valuation models could produce materially different fair value estimates. The values presented may not represent future fair values and may not be realizable. Additionally, there may be inherent weaknesses in any calculation technique, and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the estimates of current or future values.

The Company categorizes its fair value estimates based on a hierarchical framework associated with three levels of price transparency utilized in measuring assets and liabilities at fair value. Classification is based on the lowest level of input that is significant to the fair value of the instrument. The three levels include:

•Level 1: Quoted prices for identical instruments in active markets. The types of financial instruments included in Level 1 are highly liquid instruments with quoted prices.

•Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose primary value drivers are observable.

•Level 3: Instruments whose primary value drivers are unobservable. Inputs are developed based on the best information available; however, significant judgment is required by management in developing the inputs.

Revenue Recognition

The Company applies the provisions of ASC Topic 606, Revenue from Contracts with Customers ("ASC Topic 606"), to its fee-based operating segments. The majority of the Company’s revenue earned in its Asset Generation and Management operating segment, including loan interest and derivative activity, is explicitly excluded from the scope of ASC Topic 606. The Company recognizes revenue under the core principle of ASC Topic 606 to depict the transfer of control of products and services to the Company’s customers in an amount reflecting the consideration to which the Company expects to be entitled. In order to achieve that core principle, the Company applies the following five-step approach: (1) identify the contract with a customer, (2)

identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied. The Company’s contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.

Timing of revenue recognition may differ from the timing of invoicing to customers. The Company records deferred revenue when revenue is received or receivable in advance of the delivery of service. For multi-year contracts, the Company generally invoices customers annually at the beginning of each annual coverage period. Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 60 days. In instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined its contracts do not include a significant financing component.

The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if it expects the benefit of those costs to be longer than one year. The Company has determined that certain sales incentive programs and pre-production contract fulfillment costs meet the requirements to be capitalized. Total capitalized costs to obtain a contract were immaterial during the periods presented and are included in “other assets” on the consolidated balance sheets.

Additional information related to revenue earned in its Asset Generation and Management operating segment is provided below. See note 15, "Disaggregated Revenue and Deferred Revenue" for additional information related to the Company's fee-based operating segments.

Loan interest income - Loan interest on federally insured student loans is paid by the Department or the borrower, depending on the status of the loan at the time of the accrual. The Department makes quarterly interest subsidy payments on certain qualified FFELP loans until the student is required under the provisions of the Higher Education Act to begin repayment. Borrower repayment of FFELP loans normally begins within six months after completion of the borrower's course of study, leaving school, or ceasing to carry at least one-half the normal full-time academic load, as determined by the educational institution. Borrower repayment of PLUS and Consolidation loans normally begins within 60 days from the date of loan disbursement. Borrower repayment of private education loans typically begins six months following the borrower's graduation from a qualified institution, and the interest is either paid by the borrower or capitalized annually or at repayment. Repayment of consumer loans typically starts upon origination of the loan.

The Department provides a special allowance to lenders participating in the FFEL Program. The special allowance is accrued based upon the fiscal quarter average rate of 13-week Treasury Bill auctions (for loans originated prior to January 1, 2000), the fiscal quarter average rate of the daily three-month financial commercial paper rates (for loans originated on and after January 1, 2000), or the fiscal quarter average rate of daily one-month LIBOR rates (for loans originated on and after January 1, 2000, and for lenders which elected to change the special allowance index to one-month LIBOR effective April 1, 2012) relative to the yield of the student loan.

The Company recognizes loan interest income as earned, net of amortization of loan premiums and deferred origination costs and the accretion of loan discounts. Loan interest income is recognized based upon the expected yield of the loan after giving effect to interest rate reductions resulting from borrower utilization of incentives such as timely payments ("borrower benefits") and other yield adjustments. Loan premiums or discounts, deferred origination costs, and borrower benefits are amortized/accreted over the estimated life of the loans, which includes an estimate of forecasted payments in excess of contractually required payments (the constant prepayment rate). The constant prepayment rate used by the Company to amortize/accrete loan premiums/discounts is 5 percent for Stafford loans and 3 percent for Consolidation loans. The Company periodically evaluates the assumptions used to estimate the life of the loans and prepayment rates. In instances where there are changes to the assumptions, amortization/accretion is adjusted on a cumulative basis to reflect the change since the acquisition of the loan.

The Company also pays the Department an annual 105 basis point rebate fee on Consolidation loans. These rebate fees are netted against loan interest income.

Interest Expense

Interest expense is based upon contractual interest rates, adjusted for the amortization of debt issuance costs and the accretion of discounts. The amortization of debt issuance costs and accretion of discounts are recognized using the effective interest method.

Transfer of Financial Assets and Extinguishments of Liabilities

The Company accounts for loan sales and debt repurchases in accordance with applicable accounting guidance. If a transfer of loans qualifies as a sale, the Company derecognizes the loan and recognizes a gain or loss as the difference between the carrying basis of the loan sold and the consideration received. The Company from time to time repurchases its outstanding debt and records a gain or loss on the early extinguishment of debt based upon the difference between the carrying amount of the debt and the amount paid to the third party. The Company recognizes the results of a transfer of loans and the extinguishment of debt based upon the settlement date of the transaction.

Derivative Accounting

All over-the-counter derivative contracts executed by the Company are cleared post-execution at the Chicago Mercantile Exchange (“CME”), a regulated clearinghouse. Clearing is a process by which a third-party, the clearinghouse, steps in between the original counterparties and guarantees the performance of both, by requiring that each post liquid collateral on an initial (initial margin) and mark-to-market (variation margin) basis to cover the clearinghouse’s potential future exposure in the event of default.

The CME legally characterizes variation margin payments for over-the-counter derivatives they clear as settlements of the derivatives’ exposure rather than collateral against the exposure. For accounting and presentation purposes, the Company considers variation margin and the corresponding derivative instrument as a single unit of account. As such, variation margin payments are considered in determining the fair value of the centrally cleared derivative portfolio. The Company records derivative contracts on its balance sheet with a fair value of zero due to the payment or receipt of variation margin between the Company and the CME settling the outstanding mark-to-market exposure on such derivatives to a balance of zero on a daily basis, and records the underlying daily changes in the market value of such derivative contracts that result in such receipts or payments on its consolidated statements of income as realized derivative market value adjustments in "derivative market value and foreign currency transaction adjustments and derivative settlements, net."

The Company records derivative instruments that are not required to be cleared at a clearinghouse (non-centrally cleared derivatives) in the consolidated balance sheets on a gross basis as either an asset or liability measured at its fair value. Certain non-centrally cleared derivatives are subject to right of offset provisions with counterparties. For these derivatives, the Company does not offset fair value amounts executed with the same counterparty under a master netting arrangement. In addition, the Company does not offset fair value amounts recognized for derivative instruments with respect to the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable).

The Company determines the fair value for its derivative instruments using either (i) pricing models that consider current market conditions and the contractual terms of the derivative instrument or (ii) counterparty valuations. The factors that impact the fair value of the Company's derivatives include interest rates, time value, forward interest rate curve, and volatility factors. Pricing models and their underlying assumptions impact the amount and timing of realized and unrealized gains and losses recognized, and the use of different pricing models or assumptions could produce different financial results. Management has structured all of the Company's derivative transactions with the intent that each is economically effective; however, the Company's derivative instruments do not qualify for hedge accounting. As a result, the change in fair value of derivative instruments is reported in current period earnings. Changes or shifts in the forward yield curve can significantly impact the valuation of the Company’s derivatives, and therefore impact the financial position and results of operations of the Company. Any proceeds received or payments made by the Company to terminate a derivative in advance of its expiration date, or to amend the terms of an existing derivative, are included in the Company's consolidated statements of income and are accounted for as a change in fair value of such derivative. The changes in fair value of derivative instruments, as well as the settlement payments made on such derivatives, are included in “derivative market value and foreign currency adjustments and derivative settlements, net” on the consolidated statements of income.

Foreign Currency

During 2006, the Company issued Euro-denominated bonds, which were included in “bonds and notes payable” on the consolidated balance sheets. Transaction gains and losses resulting from exchange rate changes when re-measuring these bonds to U.S. dollars at the balance sheet date were included in “derivative market value and foreign currency adjustments and derivative settlements, net” on the consolidated statements of income. The Company entered into a cross-currency interest rate swap in connection with the issuance of the Euro-denominated bonds. On October 25, 2017, the Company completed a remarketing of its Euro notes which reset the principal amount outstanding on the notes to U.S. dollars and the Company terminated the cross-currency interest rate swap.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company uses the deferred method of accounting for its credits related to state tax incentives and investments that generate investment tax credits. The investment tax credits are recognized as a reduction to the related asset.

Income tax expense includes deferred tax expense, which represents a portion of the net change in the deferred tax asset or liability balance during the year, plus any change made in the valuation allowance, and current tax expense, which represents the amount of tax currently payable to or receivable from a tax authority plus amounts for expected tax deficiencies.

Compensation Expense for Stock Based Awards

The Company has a restricted stock plan that is intended to provide incentives to attract, retain, and motivate employees in order to achieve long term growth and profitability objectives. The restricted stock plan provides for the grant to eligible employees of awards of restricted shares of Class A common stock. The fair value of restricted stock awards is determined on the grant date based on the Company's stock price and is amortized to compensation cost over the related vesting periods, which range up to ten years. For those awards with only service conditions that have graded vesting schedules, the Company recognizes compensation expense on a straight-line basis over the requisite service period for each separately vesting portion of the award, as if the award was, in substance, multiple awards. Holders of restricted stock are entitled to receive dividends from the date of grant whether or not vested. The Company accounts for forfeitures as they occur.

The Company also has a directors stock compensation plan pursuant to which non-employee directors can elect to receive their annual retainer fees in the form of fully vested shares of Class A common stock, and also elect to defer receipt of such shares until the termination of their service on the board of directors. The fair value of grants under this plan is determined on the grant date based on the Company's stock price, and is expensed over the board member's annual service period.

Loans Receivable and Allowance for Loan Losses

12 Months Ended

Dec. 31, 2019

Receivables [Abstract]

Loans Receivable and Allowance for Loan Losses

Loans receivable consisted of the following:


	As of December 31,
	2019		2018
Federally insured student loans:
Stafford and other	$	4,684,314	4,969,667
Consolidation	15,644,229		17,186,229
Total	20,328,543		22,155,896
Private education loans	244,258		225,975
Consumer loans	225,918		138,627
	20,798,719		22,520,498
Loan discount, net of unamortized loan premiums and deferred origination costs	(35,036)		(53,572)
Non-accretable discount (a)	(32,398)		(29,396)
Allowance for loan losses:
Federally insured loans	(36,763)		(42,310)
Private education loans	(9,597)		(10,838)
Consumer loans	(15,554)		(7,240)
	$	20,669,371	22,377,142

(a) At December 31, 2019 and 2018, the non-accretable discount related to purchased loan portfolios of $5.4 billion and $5.7 billion, respectively.

On May 1, 2019 and October 17, 2019, the Company sold $47.7 million (par value) and $179.3 million (par value) of consumer loans, respectively, to an unrelated third party who securitized such loans. The Company recognized a $1.7 million (pre-tax) and $15.6 million (pre-tax) gain, respectively, as part of these transactions. As partial consideration received for the consumer loans sold, the Company received an 11.0 percent and 28.7 percent residual interest, respectively, in the consumer loan securitizations that are included in "investments and notes receivable" on the Company's consolidated balance sheet.

Activity in the Allowance for Loan Losses

The provision for loan losses represents the periodic expense of maintaining an allowance sufficient to absorb losses, net of recoveries, inherent in the portfolio of loans. Activity in the allowance for loan losses is shown below.


	Balance at beginning of period		Provision for loan losses	Charge-offs	Recoveries	Loan sale and other	Balance at end of period
	Year ended December 31, 2019
Federally insured loans	$	42,310	8,000	(13,547)	—	—	36,763
Private education loans	10,838		—	(1,965)	724	—	9,597
Consumer loans	7,240		31,000	(12,498)	812	(11,000)	15,554
	$	60,388	39,000	(28,010)	1,536	(11,000)	61,914

	Year ended December 31, 2018
Federally insured loans	$	38,706	14,000	(11,396)	—	1,000	42,310
Private education loans	12,629		—	(2,415)	624	—	10,838
Consumer loans	3,255		9,000	(5,056)	41	—	7,240
	$	54,590	23,000	(18,867)	665	1,000	60,388

	Year ended December 31, 2017
Federally insured loans	$	37,268	13,000	(11,562)	—	—	38,706
Private education loans	14,574		(2,000)	(1,313)	768	600	12,629
Consumer loans	—		3,450	(195)	—	—	3,255
	$	51,842	14,450	(13,070)	768	600	54,590

Student Loan Status and Delinquencies

Delinquencies have the potential to adversely impact the Company’s earnings through increased servicing and collection costs and account charge-offs. The table below shows the Company’s loan delinquency amounts.


	As of December 31,
	2019						2018						2017
Federally insured loans:
Loans in-school/grace/deferment (a)	$	1,074,678			$	1,298,493			$	1,260,394
Loans in forbearance (b)	1,339,821				1,430,291				1,774,405
Loans in repayment status:
Loans current	15,410,993		86.0	%	16,882,252		86.9	%	16,477,004		88.2	%
Loans delinquent 31-60 days (c)	650,796		3.6		683,084		3.5		682,586		3.7
Loans delinquent 61-90 days (c)	428,879		2.4		427,764		2.2		374,534		2.0
Loans delinquent 91-120 days (c)	310,851		1.7		283,831		1.5		287,922		1.5
Loans delinquent 121-270 days (c)	812,107		4.5		806,692		4.2		629,480		3.4
Loans delinquent 271 days or greater (c)(d)	300,418		1.8		343,489		1.7		235,281		1.2
Total loans in repayment	17,914,044		100.0	%	19,427,112		100.0	%	18,686,807		100.0	%
Total federally insured loans	$	20,328,543			$	22,155,896			$	21,721,606
Private education loans:
Loans in-school/grace/deferment (a)	$	4,493			$	4,320			$	6,053
Loans in forbearance (b)	3,108				1,494				2,237
Loans in repayment status:
Loans current	227,013		95.9	%	208,977		95.0	%	196,720		96.5	%
Loans delinquent 31-60 days (c)	2,814		1.2		3,626		1.6		1,867		0.9
Loans delinquent 61-90 days (c)	1,694		0.7		1,560		0.7		1,052		0.5
Loans delinquent 91 days or greater (c)	5,136		2.2		5,998		2.7		4,231		2.1
Total loans in repayment	236,657		100.0	%	220,161		100.0	%	203,870		100.0	%
Total private education loans	$	244,258			$	225,975			$	212,160
Consumer loans:
Loans in repayment status:
Loans current	$	220,404	97.5	%	$	136,130	98.2	%	$	61,344	98.7	%
Loans delinquent 31-60 days (c)	2,046		0.9		1,012		0.7		289		0.5
Loans delinquent 61-90 days (c)	1,545		0.7		832		0.6		198		0.3
Loans delinquent 91 days or greater (c)	1,923		0.9		653		0.5		280		0.5
Total loans in repayment	225,918		100.0	%	138,627		100.0	%	62,111		100.0	%
Total consumer loans	$	225,918			$	138,627			$	62,111

(a) Loans for borrowers who still may be attending school or engaging in other permitted educational activities and are not yet required to make

payments on the loans, e.g., residency periods for medical students or a grace period for bar exam preparation for law students.

(b) Loans for borrowers who have temporarily ceased making full payments due to hardship or other factors, according to a schedule approved by

the servicer consistent with the established loan program servicing procedures and policies.

(c) The period of delinquency is based on the number of days scheduled payments are contractually past due and relate to repayment loans, that is,

receivables not charged off, and not in school, grace, deferment, or forbearance.

(d) A portion of loans included in loans delinquent 271 days or greater includes loans in claim status, which are loans that have gone into default

and have been submitted to the guaranty agency.

Bonds and Notes Payable

12 Months Ended

Dec. 31, 2019

Debt Disclosure [Abstract]

Bonds and Notes Payable

The following tables summarize the Company’s outstanding debt obligations by type of instrument:


	As of December 31, 2019
	Carrying amount		Interest rate range	Final maturity
Variable-rate bonds and notes issued in FFELP loan asset-backed securitizations:
Bonds and notes based on indices	$	18,428,998	1.98% - 3.61%	5/27/25 - 1/25/68
Bonds and notes based on auction	768,626		2.75% - 3.60%	3/22/32 - 11/26/46
Total FFELP variable-rate bonds and notes	19,197,624
Fixed-rate bonds and notes issued in FFELP loan asset-backed securitizations	512,836		2.00% - 3.45%	10/25/67 / 11/25/67
FFELP warehouse facilities	778,094		1.98% / 2.07%	5/20/21 / 5/31/22
Consumer loan warehouse facility	116,570		1.99%	4/23/22
Variable-rate bonds and notes issued in private education loan asset-backed securitizations	73,308		3.15% / 3.54%	12/26/40 / 6/25/49
Fixed-rate bonds and notes issued in private education loan asset-backed securitization	49,367		3.60% / 5.35%	12/26/40 / 12/28/43
Unsecured line of credit	50,000		3.29%	12/16/24
Unsecured debt - Junior Subordinated Hybrid Securities	20,381		5.28%	9/15/61
Other borrowings	5,000		3.44%	5/30/22
	20,803,180
Discount on bonds and notes payable and debt issuance costs	(274,126)
Total	$	20,529,054


	As of December 31, 2018
	Carrying amount		Interest rate range	Final maturity
Variable-rate bonds and notes issued in FFELP loan asset-backed securitizations:
Bonds and notes based on indices	$	20,192,123	2.59% - 4.52%	11/25/24 - 2/25/67
Bonds and notes based on auction	793,476		2.84% - 3.55%	3/22/32 - 11/26/46
Total FFELP variable-rate bonds and notes	20,985,599
FFELP warehouse facilities	986,886		2.65% / 2.71%	5/20/20 / 5/31/21
Variable-rate bonds and notes issued in private education loan asset-backed securitization	50,720		4.26%	12/26/40
Fixed-rate bonds and notes issued in private education loan asset-backed securitization	63,171		3.60% / 5.35%	12/26/40 / 12/28/43
Unsecured line of credit	310,000		3.92% - 4.01%	6/22/23
Unsecured debt - Junior Subordinated Hybrid Securities	20,381		6.17%	9/15/61
Other borrowings	120,342		3.05% - 5.22%	1/3/19 - 12/15/45
	22,537,099
Discount on bonds and notes payable and debt issuance costs	(318,359)
Total	$	22,218,740

Secured Financing Transactions

The Company has historically relied upon secured financing vehicles as its most significant source of funding for loans. The net cash flow the Company receives from the securitized loans generally represents the excess amounts, if any, generated by the underlying loans over the amounts required to be paid to the bondholders, after deducting servicing fees and any other expenses relating to the securitizations. The Company’s rights to cash flow from securitized loans are subordinate to bondholder interests, and the securitized loans may fail to generate any cash flow beyond what is due to bondholders. The Company’s secured financing vehicles during the periods presented include loan warehouse facilities and asset-backed securitizations.

The majority of the bonds and notes payable are primarily secured by the loans receivable, related accrued interest, and by the amounts on deposit in the accounts established under the respective bond resolutions or financing agreements.

FFELP warehouse facilities

The Company funds the majority of its FFELP loan acquisitions using its FFELP warehouse facilities. Student loan warehousing allows the Company to buy and manage student loans prior to transferring them into more permanent financing arrangements.

As of December 31, 2019, the Company had two FFELP warehouse facilities as summarized below.


	NFSLW-I		NHELP-II	Total
Maximum financing amount	$	550,000	500,000	1,050,000
Amount outstanding	489,303		288,791	778,094
Amount available	$	60,697	211,209	271,906
Expiration of liquidity provisions	May 20, 2020		May 31, 2020
Final maturity date	May 20, 2021		May 31, 2022
Advanced as equity support	$	21,670	20,882	42,552

The FFELP warehouse facilities are supported by liquidity provisions, which are subject to the respective expiration date shown in the above table. In the event the Company is unable to renew the liquidity provisions by such date, the facility would become a term facility at a stepped-up cost, with no additional student loans being eligible for financing, and the Company would be required to refinance the existing loans in the facility by the facility's final maturity date. The NFSLW-I warehouse facility has a static advance rate until the expiration date of the liquidity provisions. In the event the liquidity provisions are not extended, the valuation agent has the right to perform a one-time mark to market on the underlying loans funded in this facility, subject to a floor. The loans would then be funded at this new advance rate until the final maturity date of the facility. The NHELP-II warehouse facility has a static advance rate that requires initial equity for loan funding and does not require increased equity based on market movements.

The FFELP warehouse facilities contain financial covenants relating to levels of the Company’s consolidated net worth, ratio of recourse indebtedness to adjusted EBITDA, and unencumbered cash. Any noncompliance with these covenants could result in a requirement for the immediate repayment of any outstanding borrowings under the facilities.

Asset-backed securitizations

The following tables summarize the asset-backed securitization transactions completed in 2019 and 2018.


	Securitizations completed during the year ended December 31, 2019
	2019-1							2019-2	Private education loan 2019-A	2019-3	2019-4	2019-5	2019-6	2019-7		Total
	Class A-1 Notes		Class A-2 Notes	2019-1 total								Class A-1 Notes	Class A-2 Notes	2019-7 total
Date securities issued	2/27/19		2/27/19	2/27/19		4/30/19	6/25/19	7/24/19	8/22/19	9/25/19	10/30/19	12/19/19	12/19/19	12/19/19
Total original principal amount	$	35,700	448,000	496,800		416,100	47,159	498,300	418,600	374,500	145,200	210,300	200,000	420,800	2,817,459

Class A senior notes:
Total principal amount	$	35,700	448,000	483,700		405,000	47,159	485,800	408,000	364,500	140,200	210,300	200,000	410,300	2,744,659
Bond discount	—		—	—		—	—	—	—	(114)	(26)	—	—	—	(140)
Issue price	$	35,700	448,000	483,700		405,000	47,159	485,800	408,000	364,386	140,174	210,300	200,000	410,300	2,744,519
Cost of funds	1-month LIBOR plus 0.30%		1-month LIBOR plus 0.75%			1-month LIBOR plus 0.90%	Prime rate less 1.60%	1-month LIBOR plus 0.80%	1-month LIBOR plus 0.87%	2.53%	2.46%	1-month LIBOR plus 0.50%	1-month LIBOR plus 1.00%
Final maturity date	4/25/67		4/25/67			6/27/67	6/25/49	8/25/67	9/26/67	10/25/67	11/25/67	1/25/68	1/25/68
Class B subordinated notes:
Total principal amount				$	13,100	11,100		12,500	10,600	10,000	5,000			10,500	72,800
Bond discount				—		—		—	—	(4)	(913)			—	(917)
Issue price				$	13,100	11,100		12,500	10,600	9,996	4,087			10,500	71,883
Cost of funds				1-month LIBOR plus 1.40%		1-month LIBOR plus 1.50%		1-month LIBOR plus 1.55%	1-month LIBOR plus 1.65%	3.45%	2.00%			1-month LIBOR plus 1.75%
Final maturity date				4/25/67		6/27/67		8/25/67	9/26/67	10/25/67	11/25/67			1/25/68

During 2019, the Company extinguished $1.05 billion of notes payable included in certain FFELP asset-backed securitizations prior to the notes’ contractual maturities. To extinguish the notes, the Company paid premiums of $14.0 million and wrote off $2.7 million of debt issuance costs. In total, the Company recognized $16.7 million (pre-tax) in expenses to extinguish these notes, which is included in “other expenses” on the consolidated statements of income.


	Securitizations completed during the year ended December 31, 2018
	2018-1						2018-2	2018-3								2018-4	2018-5	Total
	Class A-1 Notes		Class A-2 Notes	2018-1 total		Class A-1 Notes	Class A-2 Notes	Class A-3 Notes	2018-3 total		Class A-1 Notes	Class A-2 Notes	2018-4 total
Date securities issued	3/29/18		3/29/18	3/29/18	6/7/18	7/26/18	7/26/18	7/26/18	7/26/18		8/30/18	8/30/18	8/30/18	12/13/18
Total original principal amount	$	98,000	375,750	473,750	509,800	220,000	546,900	220,000	1,001,900		30,500	451,900	495,700	511,500	2,992,650

Class A senior notes:
Total principal amount	$	98,000	375,750	473,750	509,800	220,000	546,900	220,000	986,900		30,500	451,900	482,400	498,000	2,950,850


Cost of funds (1-month LIBOR plus:)	0.32%		0.76%		0.65%	0.30%	0.44%	0.75%			0.26%	0.70%		0.68%
Final maturity date	5/25/66		5/25/66		7/26/66	9/27/66	9/27/66	9/27/66			10/25/66	10/25/66		2/25/67

Class B subordinated notes:
Total original principal amount									$	15,000			13,300	13,500	41,800
Bond discount									(229)				—	—	(229)
Issue price									$	14,771			13,300	13,500	41,571
Cost of funds (1-month LIBOR plus:)									1.20%				1.40%	1.45%
Final maturity date									9/27/66				10/25/66	2/25/67

Auction Rate Securities

The interest rates on certain of the Company's FFELP asset-backed securities were set and provide for interest rates to be periodically reset via a "dutch auction" ("Auction Rate Securities"). As of December 31, 2019, the Company is currently the sponsor on $768.6 million of Auction Rate Securities. Since the auction feature has essentially been inoperable for substantially all auction rate securities since 2008, the Auction Rate Securities generally pay interest to the holder at a maximum rate as defined by the indenture. While these rates will vary, they will generally be based on a spread to LIBOR or Treasury Securities, or the Net Loan Rate as defined in the financing documents.

Consumer Loan Warehouse Facility

During 2019, the Company obtained a consumer loan warehouse facility that has an aggregate maximum financing amount available of $200.0 million, an advance rate of 70 or 75 percent depending on the type of collateral and subject to certain concentration limits, liquidity provisions to April 23, 2021, and a final maturity date of April 23, 2022. As of December 31, 2019, $116.6 million was outstanding under this warehouse facility and $83.4 million was available for future funding. Additionally, as of December 31, 2019, the Company had $41.3 million advanced as equity support under this facility.

Unsecured Line of Credit

The Company has a $455.0 million unsecured line of credit that has a maturity date of December 16, 2024. The line of credit provides that the Company may increase the aggregate financing commitments, through the existing lenders and/or through new lenders, up to a total of $550.0 million, subject to certain conditions. As of December 31, 2019, $50.0 million was outstanding on the line of credit and $405.0 million was available for future use. Interest on amounts borrowed under the line of credit is payable, at the Company's election, at an alternate base rate or a Eurodollar rate, plus a variable rate (LIBOR), in each case as defined in the credit agreement. The initial margin applicable to Eurodollar borrowings is 150 basis points and may vary from 100 to 200 basis points depending on the Company's credit rating.

The line of credit agreement contains certain financial covenants that, if not met, lead to an event of default under the agreement. The covenants include, among others, maintaining:

•A minimum consolidated net worth

•A minimum recourse indebtedness to adjusted EBITDA (over the last four rolling quarters)

•A limitation on recourse indebtedness

•A limitation on the amount of unsecuritized private education and consumer loans in the Company’s portfolio

•A limitation on permitted investments, including business acquisitions that are not in one of the Company's existing lines of business

As of December 31, 2019, the Company was in compliance with all of these requirements. Many of these covenants are duplicated in the Company's other lending facilities, including its warehouse facilities.

The Company's operating line of credit does not have any covenants related to unsecured debt ratings. However, changes in the Company's ratings have modest implications on the pricing level at which the Company obtains funds.

A default on the Company's other debt facilities would result in an event of default on the Company's unsecured line of credit that would result in the outstanding balance on the line of credit becoming immediately due and payable.

Junior Subordinated Hybrid Securities

On September 27, 2006, the Company issued $200.0 million aggregate principal amount of Junior Subordinated Hybrid Securities ("Hybrid Securities"). The Hybrid Securities are unsecured obligations of the Company. The interest rate on the Hybrid Securities through September 29, 2036 ("the scheduled maturity date") is equal to three-month LIBOR plus 3.375%, payable quarterly, which was 5.28% at December 31, 2019. The principal amount of the Hybrid Securities will become due on the scheduled maturity date only to the extent that prior to such date the Company has received proceeds from the sale of certain qualifying capital securities (as defined in the Hybrid Securities' indenture). If any amount is not paid on the scheduled maturity date, it will remain outstanding and bear interest at a floating rate as defined in the indenture, payable monthly. On September 15, 2061, the Company must pay any remaining principal and interest on the Hybrid Securities in full whether or not the Company has sold qualifying capital securities. At the Company's option, the Hybrid Securities are redeemable in whole or in part at their principal amount plus accrued and unpaid interest.

Other Borrowings

During 2017, the Company entered into a repurchase agreement, the proceeds of which are collateralized by FFELP asset-backed security investments. Included in "other borrowings" as of December 31, 2018 was $41.4 million, subject to this repurchase agreement.

During 2018, the Company entered into a repurchase agreement, the proceeds of which were collateralized by private education loans. On June 25, 2019, the Company terminated this repurchase agreement. Included in "other borrowings" as of December 31, 2018 was $45.0 million subject to this repurchase agreement.

On May 30, 2019, the Company entered into a $22.0 million secured line of credit agreement with a maturity date of May 30, 2022 and an interest rate of one-month LIBOR plus 1.75%. As of December 31, 2019, $5.0 million was outstanding under this line of credit and $17.0 million was available for future use. The line of credit is secured by several Company-owned properties.

The Company had other notes payable included in its consolidated financial statements which were issued by partnerships for certain real estate development projects in Lincoln, Nebraska. Although the Company’s ownership interests in these partnerships are 50 percent or less, because the Company was the developer of and is a current tenant in the associated buildings, the operating results of these partnerships were included in the Company’s consolidated financial statements. On January 1, 2019, the Company adopted a new accounting standard for leases (see note 2). As a result of the adoption of this new standard, these real estate entities were deconsolidated, including $33.9 million of related debt. Prior to January 1, 2019, this debt was included in "other borrowings."

Debt Covenants

Certain bond resolutions and related credit agreements contain, among other requirements, covenants relating to restrictions on additional indebtedness, limits as to direct and indirect administrative expenses, and maintaining certain financial ratios. Management believes the Company is in compliance with all covenants of the bond indentures and related credit agreements as of December 31, 2019.

Maturity Schedule

Bonds and notes outstanding as of December 31, 2019 are due in varying amounts as shown below.


2020	$	—
2021	489,303
2022	410,361
2023	—
2024	50,000
2025 and thereafter	19,853,516
	$	20,803,180

Generally, the Company's secured financing instruments can be redeemed on any interest payment date at par plus accrued interest. Subject to certain provisions, all bonds and notes are subject to redemption prior to maturity at the option of certain lending subsidiaries.

Debt Repurchases

The following table summarizes the Company's repurchases of its own debt in 2018 and 2017. There were no debt repurchases in 2019. Gains (losses) recorded by the Company from the repurchase of debt are included in "other income" on the Company’s consolidated statements of income.


	Par value		Purchase price	Gain (loss)	Par value	Purchase price	Gain (loss)
	Year ended December 31,
	2018						2017
Unsecured debt - Hybrid Securities	$	—	—	—	29,803	25,357	4,446
Asset-backed securities	12,905		12,546	359	154,407	155,951	(1,544)
	$	12,905	12,546	359	184,210	181,308	2,902

Derivative Financial Instruments

12 Months Ended

Dec. 31, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

The Company uses derivative financial instruments primarily to manage interest rate risk. In addition, the Company previously used derivative financial instruments to manage foreign currency exchange risk associated with student loan asset-backed notes that were denominated in Euros prior to a remarketing of such notes in October 2017. The Company is exposed to interest rate risk in the form of basis risk and repricing risk because the interest rate characteristics of the Company's assets do not match the interest rate characteristics of the funding for those assets. The Company periodically reviews the mismatch related to the interest rate characteristics of its assets and liabilities together with the Company's outlook as to current and future market conditions. Based on those factors, the Company uses derivative instruments as part of its overall risk management strategy. Derivative instruments used as part of the Company's interest rate risk management strategy are discussed below.

Basis Swaps

Interest earned on the majority of the Company's FFELP student loan assets is indexed to the one-month LIBOR rate. Meanwhile, the Company funds a portion of its FFELP loan assets with three-month LIBOR indexed floating rate securities. The differing interest rate characteristics of the Company's loan assets versus the liabilities funding these assets results in basis risk, which impacts the Company's excess spread earned on its loans.

The Company also faces repricing risk due to the timing of the interest rate resets on its liabilities, which may occur as infrequently as once a quarter, in contrast to the timing of the interest rate resets on its assets, which generally occur daily.

As of December 31, 2019, the Company had $18.9 billion, $0.8 billion, and $0.6 billion of FFELP loans indexed to the one-month LIBOR rate, three-month commercial paper rate, and the three-month treasury bill rate, respectively, the indices for which reset daily, and $7.5 billion of debt indexed to three-month LIBOR, the indices for which reset quarterly, and $11.0 billion of debt indexed to one-month LIBOR, the indices for which reset monthly.

The Company has used derivative instruments to hedge its basis risk and repricing risk. The Company has entered into basis swaps in which the Company receives three-month LIBOR set discretely in advance and pays one-month LIBOR plus or minus a spread as defined in the agreements (the 1:3 Basis Swaps).

The following table summarizes the Company’s 1:3 Basis Swaps outstanding:


	As of December 31,
	2019		2018
Maturity	Notional amount		Notional amount
2019	$	—	3,500,000
2020	1,000,000		1,000,000
2021	250,000		250,000
2022 (a)	2,000,000		2,000,000
2023	750,000		750,000
2024	1,750,000		250,000
2026	1,150,000		1,150,000
2027	250,000		375,000
2028	—		325,000
2029	—		100,000
2031	—		300,000

	$	7,150,000	10,000,000

(a) $750 million of the notional amount of these derivatives have forward effective start dates of May 2020.

The weighted average rate paid by the Company on the 1:3 Basis Swaps as of December 31, 2019 and 2018, was one-month LIBOR plus 9.7 basis points and 9.4 basis points, respectively.

Interest rate swaps – floor income hedges

FFELP loans originated prior to April 1, 2006 generally earn interest at the higher of the borrower rate, which is fixed over a period of time, or a floating rate based on the Special Allowance Payments ("SAP") formula set by the Department. The SAP rate is based on an applicable index plus a fixed spread that depends on loan type, origination date, and repayment status. The Company generally finances its student loan portfolio with variable rate debt. In low and/or certain declining interest rate environments, when the fixed borrower rate is higher than the SAP rate, these student loans earn at a fixed rate while the interest on the variable rate debt typically continues to reflect the low and/or declining interest rates. In these interest rate environments, the Company may earn additional spread income that it refers to as floor income.

Depending on the type of loan and when it was originated, the borrower rate is either fixed to term or is reset to an annual rate each July 1. As a result, for loans where the borrower rate is fixed to term, the Company may earn floor income for an extended period of time, which the Company refers to as fixed rate floor income, and for those loans where the borrower rate is reset annually on July 1, the Company may earn floor income to the next reset date, which the Company refers to as variable rate floor income. All FFELP loans first originated on or after April 1, 2006 effectively earn at the SAP rate, since lenders are required to rebate fixed rate floor income and variable rate floor income for these loans to the Department.

Absent the use of derivative instruments, a rise in interest rates may reduce the amount of floor income received and this may have an impact on earnings due to interest margin compression caused by increasing financing costs, until such time as the federally insured loans earn interest at a variable rate in accordance with their SAP formulas. In higher interest rate environments, where the interest rate rises above the borrower rate and fixed rate loans effectively become variable rate loans, the impact of the rate fluctuations is reduced.

As of December 31, 2019 and 2018, the Company had $3.3 billion and $2.6 billion, respectively, of FFELP student loan assets that were earning fixed rate floor income, of which the weighted average estimated variable conversion rate for these loans, which is the estimated short-term interest rate at which loans would convert to a variable rate, was 3.72% and 4.24%, respectively.

The following table summarizes the outstanding derivative instruments used by the Company to economically hedge loans earning fixed rate floor income.


	As of December 31, 2019						As of December 31, 2018
Maturity	Notional amount		Weighted average fixed rate paid by the Company (a)		Notional amount		Weighted average fixed rate paid by the Company (a)

2019	$	—	—	%	$	3,250,000	0.97	%
2020	1,500,000		1.01		1,500,000		1.01
2021	600,000		2.15		100,000		2.95
2022 (b)	250,000		1.65		—		—
2023	150,000		2.25		400,000		2.24
2024	—		—		300,000		2.28
2027	—		—		25,000		2.35


	$	2,500,000	1.42	%	$	5,575,000	1.18	%

(a) For all interest rate derivatives, the Company receives discrete three-month LIBOR.

(b) These derivatives have forward effective start dates in June 2021.

Interest Rate Swap Options – Floor Income Hedges

During 2014 and 2018, the Company paid $9.1 million and $4.6 million, respectively for interest rate swap options to economically hedge loans earning fixed rate floor income. The interest rate swap options gave the Company the right, but not the obligation, to enter into interest rate swaps during the third quarter of 2019 in which the Company would pay a weighted average fixed amount of 3.21 percent and receive discrete one-month or three-month LIBOR through 2024. The Company did not exercise its rights on these options, and such swap options expired.

Interest Rate Caps

In June 2015 and June 2019, the Company paid $2.9 million and $0.3 million, respectively, for interest rate cap contracts to mitigate a rise in interest rates and its impact on earnings related to its student loan portfolio earning a fixed rate. In the event that the one-month LIBOR or three-month LIBOR rate rises above the applicable strike rate, the Company will receive monthly payments related to the spread difference. The following table summarizes these derivative instruments as of December 31, 2019.

Notional Amount

Strike rate

Maturity date

$

125,000

2.50% (1-month LIBOR)

July 15, 2020

150,000

4.99 (1-month LIBOR)

July 15, 2020

500,000

2.25 (3-month LIBOR)

September 25, 2020

Interest Rate Swaps - Unsecured Debt Hedges

The Company has unsecured debt (Hybrid Securities) outstanding in which it pays interest at three-month LIBOR plus 3.375%. The Company had $25.0 million (notional amount) of derivative financial instruments that were used to effectively convert the variable interest rate on a designated notional amount of this debt to a fixed rate. These derivatives were terminated during the fourth quarter of 2018.

Derivative Terminations

During the year ended December 31, 2019, the Company terminated certain derivatives for net payments of $12.5 million, including payments of $14.4 million on the termination of floor income hedges, proceeds of $1.4 million on the termination of other hedges, and proceeds of $0.5 million on the termination of 1:3 basis swaps. During the year ended December 31, 2018, the Company terminated certain derivatives for net proceeds of $10.3 million, including proceeds of $14.2 million on the termination of floor income hedges, and payments of $3.9 million on the termination of hybrid debt hedges. During the year ended December 31, 2017, the Company terminated certain derivatives for net payments of $30.4 million, including proceeds of $2.1 million and $0.9 million on the termination of 1:3 basis swaps and interest rate caps, respectively, and payments of $33.4 million on the termination of its cross-currency interest rate swap.

Consolidated Financial Statement Impact Related to Derivatives

Balance Sheet

The following table summarizes the fair value of the Company’s derivatives as reflected on the consolidated balance sheets. There is no difference between the gross amounts of recognized assets presented in the consolidated balance sheets related to the Company's derivative portfolio and the net amount when excluding derivatives subject to enforceable master netting arrangements and cash collateral received.


	Fair value of asset derivatives				Fair value of liability derivatives
	As of		As of	As of	As of
	December 31, 2019		December 31, 2018	December 31, 2019	December 31, 2018


Interest rate swap options - floor income hedges	$	—	1,465	—	—
Interest rate caps	—		353	—	—



Total	$	—	1,818	—	—

Income Statement Impact

The following table summarizes the components of "derivative market value and foreign currency transaction adjustments and derivative settlements, net" included in the consolidated statements of income.


	Year ended December 31,
	2019		2018	2017
Settlements:
1:3 basis swaps	$	5,214	5,577	(3,069)
Interest rate swaps - floor income hedges	40,192		64,901	10,838
Interest rate swaps - hybrid debt hedges	—		(407)	(781)
Cross-currency interest rate swap	—		—	(6,321)
Total settlements - income	45,406		70,071	667
Change in fair value:
1:3 basis swaps	1,515		12,573	(8,224)
Interest rate swaps - floor income hedges	(77,027)		(10,962)	3,585
Interest rate swap options - floor income hedges	(1,465)		(3,848)	(2,433)
Interest rate caps	(628)		78	(893)
Interest rate swaps - hybrid debt hedges	—		3,173	279
Cross-currency interest rate swap	—		—	34,208
Other	1,410		—	(143)
Total change in fair value - (expense) income	(76,195)		1,014	26,379
Re-measurement of Euro Notes (foreign currency transaction adjustment)	—		—	(45,600)
Derivative market value and foreign currency transaction adjustments and derivative settlements, net - (expense) income	$	(30,789)	71,085	(18,554)

Derivative Instruments - Credit and Market Risk

For non-centrally cleared derivatives, the Company is exposed to credit risk. However, the majority of the Company's derivatives currently outstanding and anticipated to be executed in future periods are and will be executed and cleared at a regulated clearinghouse, thus, significantly reducing counterparty credit risk associated with the Company's derivative portfolio.

Interest rate movements have an impact on the amount of collateral the Company is required to deposit with its derivative instrument counterparties and variation margin payments to its third-party clearinghouse. The Company attempts to manage market risk associated with interest rates by establishing and monitoring limits as to the types and degree of risk that may be undertaken. The Company's derivative portfolio and hedging strategy is reviewed periodically by its internal risk committee and board of directors' Risk and Finance Committee. With the Company's current derivative portfolio, the Company does

not currently anticipate any movement in interest rates having a material impact on its liquidity or capital resources, nor expects future movements in interest rates to have a material impact on its ability to meet potential collateral deposits with its counterparties and/or make variation margin payments to its third-party clearinghouse. Due to the existing low interest rate environment, the Company's exposure to downward movements in interest rates on its interest rate swaps is limited. In addition, the historical high correlation between one-month and three-month LIBOR limits the Company's exposure to interest rate movements on the 1:3 Basis Swaps.

Investments and Notes Receivable

12 Months Ended

Dec. 31, 2019

Investments [Abstract]

Investments and Notes Receivable

A summary of the Company's investments and notes receivable follows:


	As of December 31, 2019									As of December 31, 2018
	Amortized cost		Gross unrealized gains	Gross unrealized losses	Fair value		Amortized cost	Gross unrealized gains	Gross unrealized losses	Fair value

Investments (at fair value):
Student loan asset-backed and other debt securities - available-for-sale (a)	$	48,790	3,911	—	52,701		47,931	5,109	—	53,040
Equity securities	9,622		4,561	(1,283)	12,900		12,909	5,145	(407)	17,647
Total investments (at fair value)	$	58,412	8,472	(1,283)	65,601		60,840	10,254	(407)	70,687

Other Investments and Notes Receivable (not measured at fair value):
Venture capital and funds:
Measurement alternative (b)					72,760					70,939
Equity method					15,379					16,191
Other					1,175					900
Total venture capital and funds					89,314					88,030
Real estate:
Equity method					44,159					29,483
Other					867					34,211
Total real estate					45,026					63,694
Solar:
Equity method					7,562					2,724

Beneficial interest in consumer loan securitizations (c)					33,187					—
Tax liens and affordable housing					6,283					7,862
Notes receivable					—					16,373
Total investments and notes receivable (not measured at fair value)					181,372					178,683
Total investments and notes receivable					$	246,973				249,370

(a) As of December 31, 2019, the stated maturities of substantially all of the Company's student loan asset-backed and other debt securities classified as available-for-sale were greater than 10 years.

(b) During 2018, the Company recorded upward adjustments of $7.2 million (pre-tax) on these investments, which are included in "other income" in the consolidated statements of income. The upward adjustments were made as a result of observable price changes. The Company also recorded $0.8 million (pre-tax) in impairments in 2018 on these investments.

(c) The Company's current expectation of cash flows from the beneficial interest in consumer loan securitizations is approximately three years.

Business Combination

12 Months Ended

Dec. 31, 2019

Business Combinations [Abstract]

Business Combination

Business Combinations

Great Lakes Educational Loan Services, Inc. ("Great Lakes")

On February 7, 2018, the Company acquired 100 percent of the outstanding stock of Great Lakes for total cash consideration of $150.0 million. Great Lakes provides servicing for federally-owned student loans for the Department of Education, FFELP loans, and private education loans. The acquisition of Great Lakes has expanded the Company's portfolio of loans it services. The operating results of Great Lakes are included in the Loan Servicing and Systems operating segment.

As part of the acquisition, the Company acquired the remaining 50 percent ownership in GreatNet Solutions, LLC ("GreatNet"), a joint venture formed prior to the acquisition between Nelnet Servicing, a subsidiary of the Company, and Great Lakes. Prior to the acquisition of the remaining 50 percent of GreatNet, the Company consolidated the operating results of GreatNet, as the Company was deemed to have control over the joint venture. The proportionate share of membership interest (equity) and net loss of GreatNet that was attributable to Great Lakes was reflected as a noncontrolling interest in the Company's consolidated financial statements. The Company recognized a $19.1 million reduction to consolidated shareholders' equity as a result of acquiring Great Lakes' 50 percent ownership in GreatNet. This transaction resulted in a $5.7 million decrease in noncontrolling interests and a $13.4 million decrease in retained earnings.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date. The fair value assigned to the acquisition of the noncontrolling interest in GreatNet reduced the total consideration allocated to the assets acquired and liabilities assumed of Great Lakes from $150.0 million to $136.6 million.


Cash and cash equivalents	$	27,399
Accounts receivable	23,708
Property and equipment	35,919
Other assets	14,018
Intangible assets	75,329
Excess cost over fair value of net assets acquired (goodwill)	15,043
Other liabilities	(54,865)
Net assets acquired	$	136,551

The $75.3 million of acquired intangible assets on the date of acquisition had a weighted-average useful life of approximately 4 years. The intangible assets that made up this amount include customer relationships of $70.2 million (4-year average useful life) and a trade name of $5.1 million (7-year useful life).

The $15.0 million of goodwill was assigned to the Loan Servicing and Systems operating segment and is not expected to be deductible for tax purposes. The amount allocated to goodwill was primarily attributed to the deferred tax liability related to the difference between the carrying amount and tax bases of acquired identifiable intangible assets and the synergies and economies of scale expected from combining the operations of the Company and Great Lakes.

The Great Lakes assets acquired and liabilities assumed were recorded by the Company at their respective fair values at the date of acquisition, and Great Lakes' operating results from the date of acquisition forward are included in the Company's consolidated operating results. During 2018, the Company converted Great Lakes' FFELP and private education loan servicing volume to Nelnet Servicing's servicing platform. In addition, the Company began to combine certain shared services and overhead functions between Great Lakes and the Company. As a result of these operational changes, the results of operations for the year ended December 31, 2018 attributed to Great Lakes since the acquisition are not provided since the results of the Great Lakes legal entity are no longer reflective of the entity acquired.

The following unaudited pro forma information for the Company has been prepared as if the acquisition of Great Lakes had occurred on January 1, 2017. The information is based on the historical results of the separate companies and may not necessarily be indicative of the results that could have been achieved or of results that may occur in the future. The pro forma adjustments include the impact of depreciation and amortization of property and equipment and intangible assets acquired.


	Year ended December 31,
	2018		2017
Loan servicing and systems revenue	$	460,074	452,760

Net income attributable to Nelnet, Inc.	$	229,409	185,369

Net income per share - basic and diluted	$	5.61	4.44

Tuition Management Systems, LLC ("TMS")

On November 20, 2018, the Company acquired 100 percent of the membership interests of TMS for total cash consideration of $27.0 million. TMS provides tuition payment plans, billing services, payment technology solutions, and refund management to educational institutions. The TMS acquisition added both K-12 and higher education schools to the Company's existing customer base, further enhancing the Company's market share leading position with private faith based K-12 schools and advancing to a market leading position in higher education. The operating results of TMS are included in the Education Technology, Services, and Payment Processing operating segment from the date of acquisition.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date.


Cash and cash equivalents	$	438
Restricted cash - due to customers	123,169
Accounts receivable	1,019
Other assets	381
Intangible assets	26,390
Excess cost over fair value of net assets acquired (goodwill)	3,110
Other liabilities	(4,321)
Due to customers	(123,169)
Net assets acquired	$	27,017

The $26.4 million of acquired intangible assets on the date of acquisition had a weighted-average useful life of approximately 10 years. The intangible assets that made up this amount include customer relationships of $25.4 million (10-year useful life) and computer software of $1.0 million (2-year useful life).

The $3.1 million of goodwill was assigned to the Education Technology, Services, and Payment Processing operating segment and is expected to be deductible for tax purposes. The amount allocated to goodwill was primarily attributed to the synergies and economies of scale expected from combining the operations of the Company and TMS.

The pro forma impacts of the TMS acquisition on the Company's historical results prior to the acquisition were not material.

Intangible Assets

12 Months Ended

Dec. 31, 2019

Intangible Assets, Net (Excluding Goodwill) [Abstract]

Intangible Assets

Intangible assets consist of the following:


	Weighted average remaining useful life as of December 31, 2019 (months)	As of December 31,
				2019		2018
Amortizable intangible assets, net:
Customer relationships (net of accumulated amortization of $60,553 and $33,968, respectively)	80	$	71,900		98,484
Trade names (net of accumulated amortization of $2,792 and $5,825, respectively)	96	7,478			10,868
Computer software (net of accumulated amortization of $3,233 and $15,420, respectively)	14	2,154			4,938
Total - amortizable intangible assets, net	80	$	81,532		114,290

The Company recorded amortization expense on its intangible assets of $32.8 million, $30.2 million, and $9.4 million during the years ended December 31, 2019, 2018, and 2017, respectively. The Company will continue to amortize intangible assets over their remaining useful lives. As of December 31, 2019, the Company estimates it will record amortization expense as follows:


2020	$	29,515
2021	18,761
2022	7,172
2023	6,925
2024	6,511
2025 and thereafter	12,648
	$	81,532

Goodwill

12 Months Ended

Dec. 31, 2019

Goodwill [Abstract]

Goodwill

The change in the carrying amount of goodwill by reportable operating segment was as follows:


	Loan Servicing and Systems		Education Technology, Services, and Payment Processing	Communications	Asset Generation and Management (a)	Corporate and Other Activities	Total
Balance as of December 31, 2017	$	8,596	67,168	21,112	41,883	—	138,759
Goodwill acquired	15,043		3,110	—	—	—	18,153


Balance as of December 31, 2018 and 2019	$	23,639	70,278	21,112	41,883	—	156,912

(a) As a result of the Reconciliation Act of 2010, the Company no longer originates new FFELP loans, and net interest income from the Company's existing FFELP loan portfolio will decline over time as the Company's portfolio pays down. As a result, as this revenue stream winds down, goodwill impairment will be triggered for the Asset Generation and Management reporting unit due to the passage of time and depletion of projected cash flows stemming from its FFELP student loan portfolio. Management believes the elimination of new FFELP loan originations will not have an adverse impact on the fair value of the Company's other reporting units.

The Company reviews goodwill for impairment annually. This annual review is completed by the Company as of November 30 of each year and whenever triggering events or changes in circumstances indicate its carrying value may not be recoverable.

For the 2019 and 2018 annual reviews of goodwill, the Company assessed qualitative factors and concluded it was not more likely than not that the fair value of its reporting units were less than their carrying amount. As such, the Company was not required to perform further impairment testing and concluded there was no impairment of goodwill.

In 2017, due to the sale of a reporting unit at the Corporate segment, the Company recognized an impairment expense of $3.6 million (pre-tax) which is included in "other expenses" in the consolidated statements of income.

Property and Equipment

12 Months Ended

Dec. 31, 2019

Property, Plant and Equipment [Abstract]

Property and Equipment

Property and equipment consisted of the following:


		As of December 31,
	Useful life	2019		2018
Non-communications:
Computer equipment and software	1-5 years	$	160,319	137,705
Building and building improvements	5-48 years	37,904		50,138
Office furniture and equipment	1-10 years	21,245		22,796
Leasehold improvements	1-15 years	9,517		9,327
Transportation equipment	5-10 years	5,049		5,123
Land	—	1,400		3,328
Construction in progress	—	13,738		3,578
		249,172		231,995
Accumulated depreciation - non-communications		(142,270)		(123,003)
Non-communications, net property and equipment		106,902		108,992

Communications:
Network plant and fiber	4-15 years	254,560		215,787
Customer located property	2-4 years	27,011		21,234
Central office	5-15 years	17,672		15,688
Transportation equipment	4-10 years	6,611		6,580
Computer equipment and software	1-5 years	5,574		4,943
Other	1-39 years	3,702		3,219
Land	—	70		70
Construction in progress	—	54		6,344
		315,254		273,865
Accumulated depreciation - communications		(73,897)		(38,073)
Communications, net property and equipment		241,357		235,792
Total property and equipment, net		$	348,259	344,784

The Company recorded depreciation expense on its property and equipment of $72.3 million, $56.7 million, and $30.2 million during the years ended December 31, 2019, 2018, and 2017, respectively.

Impairment charges

As part of integrating technology and becoming more efficient and effective in meeting borrower needs, the Company continues to evaluate the best use of its servicing systems on a post-Great Lakes acquisition basis. As a result of this evaluation, in 2018, the Company recorded an impairment charge of $3.9 million (pre-tax) within its Loan Servicing and Systems operating segment related to certain external software development costs that were previously capitalized.

On October 16, 2018, the Company terminated its investment in a proprietary payment processing platform. This decision was made as a result of decreases in price and advancements of technology by established processors in the industry. As a result of this decision, in 2018, the Company recorded an impairment charge of $7.8 million (pre-tax) within its Education Technology, Services, and Payment Processing operating segment. The charge primarily represents computer equipment and external software development costs related to the payment processing platform.

The above impairment charges are included in "other expenses" in the consolidated statements of income.

Shareholders' Equity

12 Months Ended

Dec. 31, 2019

Equity [Abstract]

Stockholders' Equity

Shareholders’ Equity

Classes of Common Stock

The Company's common stock is divided into two classes. The Class B common stock has ten votes per share and the Class A common stock has one vote per share on all matters to be voted on by the Company's shareholders. Each Class B share is convertible at any time at the holder's option into one Class A share. With the exception of the voting rights and the conversion feature, the Class A and Class B shares are identical in terms of other rights, including dividend and liquidation rights.

Stock Repurchases

The Company has a stock repurchase program that expires on May 7, 2022 in which it can repurchase up to five million shares of its Class A common stock on the open market, through private transactions, or otherwise. As of December 31, 2019, 4.8 million shares may still be purchased under the Company's stock repurchase program. Shares repurchased by the Company during 2019, 2018, and 2017 are shown in the table below. In accordance with the corporate laws of the state in which the Company is incorporated, all shares repurchased by the Company are legally retired upon acquisition by the Company.


	Total shares repurchased	Purchase price (in thousands)		Average price of shares repurchased (per share)
Year ended December 31, 2019	726,273	$	40,411	$	55.64
Year ended December 31, 2018	868,147	45,331		52.22
Year ended December 31, 2017	1,473,054	68,896		46.77

Earnings per Common Share

12 Months Ended

Dec. 31, 2019

Earnings Per Share [Abstract]

Earnings Per Common Share

Earnings per Common Share

Presented below is a summary of the components used to calculate basic and diluted earnings per share. The Company applies the two-class method in computing both basic and diluted earnings per share, which requires the calculation of separate earnings per share amounts for common stock and unvested share-based awards. Unvested share-based awards that contain nonforfeitable rights to dividends are considered securities which participate in undistributed earnings with common stock.


	Year ended December 31,
	2019						2018				2017
	Common shareholders		Unvested restricted stock shareholders	Total	Common shareholders	Unvested restricted stock shareholders	Total	Common shareholders	Unvested restricted stock shareholders	Total
Numerator:
Net income attributable to Nelnet, Inc.	$	139,946	1,857	141,803	225,170	2,743	227,913	171,442	1,724	173,166

Denominator:
Weighted-average common shares outstanding - basic and diluted	39,523,082		524,320	40,047,402	40,416,719	492,303	40,909,022	41,375,964	415,977	41,791,941
Earnings per share - basic and diluted	$	3.54	3.54	3.54	5.57	5.57	5.57	4.14	4.14	4.14

Unvested restricted stock awards are the Company's only potential common shares and, accordingly, there were no awards that were antidilutive and not included in average shares outstanding for the diluted earnings per share calculation.

As of December 31, 2019, a cumulative amount of 193,411 shares have been deferred by non-employee directors under the Directors Stock Compensation Plan and will become issuable upon the termination of service by the respective non-employee director on the board of directors. These shares are included in the Company's weighted average shares outstanding calculation.

Income Taxes

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Income Taxes

The Company is subject to income taxes in the United States, Canada, and Australia. Significant judgment is required in evaluating the Company's tax positions and determining the provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain.

As required by the Income Taxes Topic of the FASB Accounting Standards Codification ("ASC Topic 740"), the Company recognizes in the consolidated financial statements only those tax positions determined to be more likely than not of being sustained upon examination, based on the technical merits of the positions. It further requires that a change in judgment related to the expected ultimate resolution of uncertain tax positions be recognized in earnings in the period of such change.

As of December 31, 2019, the total amount of gross unrecognized tax benefits (excluding the federal benefit received from state positions) was $20.1 million, which is included in “other liabilities” on the consolidated balance sheet. Of this total, $15.9 million (net of the federal benefit on state issues) represents the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate in future periods. The Company currently anticipates uncertain tax positions will decrease by $6.4 million prior to December 31, 2020 as a result of a lapse of applicable statutes of limitations, settlements, correspondence with examining authorities, and recognition or measurement considerations with federal and state jurisdictions; however, actual developments in this area could differ from those currently expected. Of the anticipated $6.4 million decrease, $5.1 million, if recognized, would favorably affect the Company's effective tax rate. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits follows:


	Year ended December 31,
	2019		2018
Gross balance - beginning of year	$	23,445	28,421
Additions based on tax positions of prior years	651		1,405
Additions based on tax positions related to the current year	1,339		2,044
Settlements with taxing authorities	(1,810)		(915)
Reductions for tax positions of prior years	(380)		(5,109)

Reductions due to lapse of applicable statutes of limitations	(3,097)		(2,401)
Gross balance - end of year	$	20,148	23,445

All the reductions shown in the table above that are due to prior year tax positions, settlements, and the lapse of statutes of limitations impacted the effective tax rate.

The Company's policy is to recognize interest and penalties accrued on uncertain tax positions as part of interest expense and other expense, respectively. As of December 31, 2019 and 2018, $5.0 million and $4.9 million in accrued interest and penalties, respectively, were included in “other liabilities” on the consolidated balance sheets. The Company recognized interest expense of $0.1 million, $0.4 million, and $0.8 million related to uncertain tax positions for the years ended December 31, 2019, 2018, and 2017, respectively. The impact to the consolidated statements of income related to penalties for uncertain tax positions was not significant for the years 2019, 2018, and 2017. The impact of timing differences and tax attributes are considered when calculating interest and penalty accruals associated with the unrecognized tax benefits.

The Company and its subsidiaries file a consolidated federal income tax return in the U.S. and the Company or one of its subsidiaries files income tax returns in various state, local, and foreign jurisdictions. The Company is no longer subject to U.S. federal income tax examinations for years prior to 2016. The Company is no longer subject to U.S. state and local income tax examinations by tax authorities prior to 2010. As of December 31, 2019, the Company has tax uncertainties that remain unsettled in the jurisdiction of California (2010 through 2015).

The provision for income taxes consists of the following components:


	Year ended December 31,
	2019		2018	2017
Current:
Federal	$	38,931	45,822	65,196
State	3,546		1,969	1,246
Foreign	239		(2)	(35)
Total current provision	42,716		47,789	66,407

Deferred:
Federal	(4,280)		11,783	(8,270)
State	(2,922)		(883)	6,618
Foreign	(63)		81	108
Total deferred provision	(7,265)		10,981	(1,544)
Provision for income tax expense	$	35,451	58,770	64,863

The differences between the income tax provision computed at the statutory federal corporate tax rate and the financial statement provision for income taxes are shown below:


	Year ended December 31,
	2019		2018		2017
Tax expense at federal rate	21.0	%	21.0	%	35.0	%
Increase (decrease) resulting from:
State tax, net of federal income tax benefit	2.5		2.4		1.6
Tax credits	(3.0)		(1.9)		(1.3)
Provision for uncertain federal and state tax matters	(0.7)		(1.0)		—
Reduction of statutory federal rate (a)	—		—		(8.0)
Other	0.2		—		—
Effective tax rate	20.0	%	20.5	%	27.3	%

(a) The Tax Cuts and Jobs Act (the “Tax Act”), signed into law on December 22, 2017, changed existing United States tax law and included numerous provisions that affect businesses, including the Company. The Tax Act, for instance, introduced changes that impact U.S. corporate tax rates, business-related exclusions, and deductions and credits.

The Company accounted for the change in tax laws in accordance with ASC Topic 740 that provides guidance that a change in tax law or rates be recognized in the financial reporting period that includes the enactment date, which is the date the changes were signed into law. The income tax accounting effect of a change in tax laws or tax rates includes, for example, adjusting (or re-measuring) deferred tax liabilities and deferred tax assets, as well as evaluating whether a valuation allowance is needed for deferred tax assets. The Company re-measured its deferred tax liabilities and deferred tax assets as of December 22, 2017 which resulted in a decrease to income tax expense of $19.3 million. The Company determined no valuation allowance was needed for any deferred tax assets as a result of the Tax Act.

The tax effect of temporary differences that give rise to deferred tax assets and liabilities include the following:


	As of December 31,
	2019		2018
Deferred tax assets:
Deferred revenue	$	18,037	16,633
Student loans	15,479		15,054
Tax credit carryforwards	9,394		—
Lease liability	5,891		—
Accrued expenses	4,112		3,254
Stock compensation	2,167		2,041
Securitizations	1,261		2,014
State net operating losses	551		528

Total gross deferred tax assets	56,892		39,524
Less valuation allowance	(548)		(527)
Net deferred tax assets	56,344		38,997
Deferred tax liabilities:
Partnership basis	56,741		47,488
Depreciation	11,489		9,469
Lease right of use asset	5,684		—
Intangible assets	5,399		9,903
Loan origination services	4,647		6,243
Debt and equity investments	3,775		1,363
Basis in certain derivative contracts	2,730		22,042
Other	1,003		1,172
Total gross deferred tax liabilities	91,468		97,680
Net deferred tax asset (liability)	$	(35,124)	(58,683)

The Company has performed an evaluation of the recoverability of deferred tax assets. In assessing the realizability of the Company's deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible or eligible for utilization of a tax credit carryforward. Management considers the scheduled reversals of deferred tax liabilities, projected taxable income, carry back opportunities, and tax planning strategies in making the assessment of the amount of the valuation allowance. With the exception of a portion of the Company's state net operating losses, it is management's opinion that it is more likely than not that the deferred tax assets will be realized and should not be reduced by a valuation allowance. The amount of deferred tax assets considered realizable could be reduced in the near term if estimates of future taxable income during the carry forward period are reduced.

As of December 31, 2019 and 2018, the Company had a current income tax receivable of $27.3 million and $6.4 million, respectively, that is included in "other assets" on the consolidated balance sheets.

Segment Reporting

12 Months Ended

Dec. 31, 2019

Segment Reporting [Abstract]

Segment Reporting

The Company has four reportable operating segments. The Company's reportable operating segments include:

• Loan Servicing and Systems

• Education Technology, Services, and Payment Processing

• Communications

• Asset Generation and Management

The Company earns fee-based revenue through its Loan Servicing and Systems; Education Technology, Services, and Payment Processing; and Communications operating segments. In addition, the Company earns interest income on its loan portfolio in its Asset Generation and Management operating segment.

The Company’s operating segments are defined by the products and services they offer and the types of customers they serve, and they reflect the manner in which financial information is currently evaluated by management. See note 1, "Description of Business," for a description of each operating segment, including the primary products and services offered.

The management reporting process measures the performance of the Company’s operating segments based on the management structure of the Company, as well as the methodology used by management to evaluate performance and allocate resources. Executive management (the "chief operating decision maker") evaluates the performance of the Company’s operating segments based on their financial results prepared in conformity with U.S. GAAP.

The accounting policies of the Company’s operating segments are the same as those described in the summary of significant accounting policies. Intersegment revenues are charged by a segment that provides a product or service to another segment. Intersegment revenues and expenses are included within each segment consistent with the income statement presentation provided to management. As a result of the Tax Cuts and Jobs Act, beginning January 1, 2018, income taxes are allocated based on 24% of income before taxes for each individual operating segment. Prior to January 1, 2018, income taxes were allocated based on 38% of income before taxes for each individual operating segment. The difference between the consolidated income tax expense and the sum of taxes calculated for each operating segment is included in income taxes in Corporate and Other Activities.

Corporate and Other Activities

Other business activities and operating segments that are not reportable are combined and included in Corporate and Other Activities. Corporate and Other Activities includes the following items:

•Income earned on certain investment activities, including real estate and renewable energy (solar)

•Interest expense incurred on unsecured debt transactions

•Other product and service offerings that are not considered reportable operating segments including, but not limited to, WRCM, the SEC-registered investment advisor subsidiary

Corporate and Other Activities also includes certain corporate activities and overhead functions related to executive management, internal audit, human resources, accounting, legal, enterprise risk management, information technology, occupancy, and marketing. These costs are allocated to each operating segment based on estimated use of such activities and services.

Segment Results

The following tables include the results of each of the Company's reportable operating segments reconciled to the consolidated financial statements.


	Year ended December 31, 2019
	Loan Servicing and Systems		Education Technology, Services, and Payment Processing	Communications	Asset Generation and Management	Corporate and Other Activities	Eliminations	Total
Total interest income	$	2,031	9,244	3	931,963	9,232	(3,796)	948,677
Interest expense	115		46	—	693,375	9,587	(3,796)	699,327
Net interest income (expense)	1,916		9,198	3	238,588	(355)	—	249,350
Less provision for loan losses	—		—	—	39,000	—	—	39,000
Net interest income (loss) after provision for loan losses	1,916		9,198	3	199,588	(355)	—	210,350
Other income:
Loan servicing and systems revenue	455,255		—	—	—	—	—	455,255
Intersegment servicing revenue	46,751		—	—	—	—	(46,751)	—
Education technology, services, and payment processing revenue	—		277,331	—	—	—	—	277,331
Communications revenue	—		—	64,269	—	—	—	64,269
Other income	9,736		259	1,509	30,349	23,327	—	65,179

Derivative settlements, net	—		—	—	45,406	—	—	45,406
Derivative market value and foreign currency transactions adjustments, net	—		—	—	(76,195)	—	—	(76,195)
Total other income	511,742		277,590	65,778	(440)	23,327	(46,751)	831,245
Cost of services:
Cost to provide education technology, services, and payment processing services	—		81,603	—	—	—	—	81,603
Cost to provide communications services	—		—	20,423	—	—	—	20,423
Total cost of services	—		81,603	20,423	—	—	—	102,026
Operating expenses:
Salaries and benefits	276,136		94,666	21,004	1,545	70,152	—	463,503
Depreciation and amortization	34,755		12,820	37,173	—	20,300	—	105,049

Other expenses	71,064		22,027	15,165	34,445	51,571	—	194,272
Intersegment expenses, net	54,325		13,405	2,962	47,362	(71,303)	(46,751)	—
Total operating expenses	436,280		142,918	76,304	83,352	70,720	(46,751)	762,824
Income (loss) before income taxes	77,378		62,267	(30,946)	115,796	(47,748)	—	176,745
Income tax (expense) benefit	(18,571)		(14,944)	7,427	(27,792)	18,428	—	(35,451)
Net income (loss)	58,807		47,323	(23,519)	88,004	(29,320)	—	141,294
Net loss (income) attributable to noncontrolling interests	—		—	—	—	509	—	509
Net income (loss) attributable to Nelnet, Inc.	$	58,807	47,323	(23,519)	88,004	(28,811)	—	141,803

Total assets as of December 31, 2019	$	290,311	506,382	303,347	22,128,917	627,897	(147,884)	23,708,970


	Year ended December 31, 2018
	Loan Servicing and Systems		Education Technology, Services, and Payment Processing	Communications	Asset Generation and Management	Corporate and Other Activities	Eliminations	Total
Total interest income	$	1,351	4,453	4	911,502	19,944	(12,989)	924,266
Interest expense	—		9	9,987	662,360	10,540	(12,989)	669,906
Net interest income (expense)	1,351		4,444	(9,983)	249,142	9,404	—	254,360
Less provision for loan losses	—		—	—	23,000	—	—	23,000
Net interest income (loss) after provision for loan losses	1,351		4,444	(9,983)	226,142	9,404	—	231,360
Other income:
Loan servicing and systems revenue	440,027		—	—	—	—	—	440,027
Intersegment servicing revenue	47,082		—	—	—	—	(47,082)	—
Education technology, services, and payment processing revenue	—		221,962	—	—	—	—	221,962
Communications revenue	—		—	44,653	—	—	—	44,653
Other income	7,284		—	1,075	12,723	33,724	—	54,805

Derivative settlements, net	—		—	—	70,478	(407)	—	70,071
Derivative market value and foreign currency transaction adjustments, net	—		—	—	(2,159)	3,173	—	1,014
Total other income	494,393		221,962	45,728	81,042	36,490	(47,082)	832,532
Cost of services:
Cost to provide education technology, services, and payment processing services	—		59,566	—	—	—	—	59,566
Cost to provide communications revenue	—		—	16,926	—	—	—	16,926
Total cost of services	—		59,566	16,926	—	—	—	76,492
Operating expenses:
Salaries and benefits	267,458		81,080	18,779	1,526	67,336	—	436,179
Depreciation and amortization	32,074		13,484	23,377	—	17,960	—	86,896

Other expenses	67,336		28,137	11,900	15,961	54,697	—	178,031
Intersegment expenses, net	59,042		10,681	2,578	47,870	(73,088)	(47,082)	—
Total operating expenses	425,910		133,382	56,634	65,357	66,905	(47,082)	701,106
Income (loss) before income taxes	69,834		33,458	(37,815)	241,827	(21,011)	—	286,294
Income tax (expense) benefit	(16,954)		(8,030)	9,075	(58,038)	15,177	—	(58,770)
Net income (loss)	52,880		25,428	(28,740)	183,789	(5,834)	—	227,524
Net loss (income) attributable to noncontrolling interests	808		—	—	—	(419)	—	389
Net income (loss) attributable to Nelnet, Inc.	$	53,688	25,428	(28,740)	183,789	(6,253)	—	227,913

Total assets as of December 31, 2018	$	226,445	471,719	286,816	23,806,321	563,841	(134,174)	25,220,968


	Year ended December 31, 2017
	Loan Servicing and Systems		Education Technology, Services, and Payment Processing	Communications	Asset Generation and Management	Corporate and Other Activities	Eliminations	Total
Total interest income	$	513	17	3	764,225	13,643	(7,976)	770,426
Interest expense	3		—	5,427	464,256	3,477	(7,976)	465,188
Net interest income (expense)	510		17	(5,424)	299,969	10,166	—	305,238
Less provision for loan losses	—		—	—	14,450	—	—	14,450
Net interest income (loss) after provision for loan losses	510		17	(5,424)	285,519	10,166	—	290,788
Other income:
Loan servicing and systems revenue	223,000		—	—	—	—	—	223,000
Intersegment servicing revenue	41,674		—	—	—	—	(41,674)	—
Education technology, services, and payment processing revenue	—		193,188	—	—	—	—	193,188
Communications revenue	—		—	25,700	—	—	—	25,700
Other income	—		—	—	11,857	43,871	—	55,728

Derivative settlements, net	—		—	—	1,448	(781)	—	667
Derivative market value and foreign currency transaction adjustments, net	—		—	—	(19,357)	136	—	(19,221)
Total other income	264,674		193,188	25,700	(6,052)	43,226	(41,674)	479,062
Cost of services:
Cost to provide education technology, services, and payment processing services	—		48,678	—	—	—	—	48,678
Cost to provide communications services	—		—	9,950	—	—	—	9,950
Total cost of services	—		48,678	9,950	—	—	—	58,628
Operating expenses:
Salaries and benefits	156,256		69,500	14,947	1,548	59,633	—	301,885
Depreciation and amortization	2,864		9,424	11,835	—	15,418	—	39,541

Other expenses	39,126		17,897	8,074	26,634	51,381	—	143,112
Intersegment expenses, net	31,871		9,079	2,101	42,830	(44,208)	(41,674)	—
Total operating expenses	230,117		105,900	36,957	71,012	82,224	(41,674)	484,538
Income (loss) before income taxes	35,067		38,627	(26,631)	208,455	(28,832)	—	226,684
Income tax (expense) benefit	(18,128)		(14,678)	10,120	(79,213)	37,036	—	(64,863)
Net income (loss)	16,939		23,949	(16,511)	129,242	8,204	—	161,821
Net loss (income) attributable to noncontrolling interests	12,640		—	—	—	(1,295)	—	11,345
Net income (loss) attributable to Nelnet, Inc.	$	29,579	23,949	(16,511)	129,242	6,909	—	173,166

Total assets as of December 31, 2017	$	122,330	250,351	214,336	22,910,974	877,859	(411,415)	23,964,435

Disaggregated Revenue and Deferred Revenue

12 Months Ended

Dec. 31, 2019

Revenue from Contract with Customer [Abstract]

Disaggregated Revenue and Deferred Revenue

The following provides additional revenue recognition information for the Company’s fee-based reportable operating segments.

Loan Servicing and Systems Revenue

Loan servicing and systems revenue consists of the following items:

•Loan servicing revenue - Loan servicing revenue consideration is determined from individual contracts with customers and is calculated monthly based on the dollar value of loans, number of loans, number of borrowers serviced for each customer, or number of transactions. Loan servicing requires a significant level of integration and the individual components are not considered distinct. The Company will perform various services, including, but not limited to, (i) application processing, (ii) monthly servicing, (iii) conversion processing, and (iv) fulfillment services, during each distinct service period. Even though the mix and quantity of activities that the Company performs each period may differ, the nature of the activities are substantially the same. Revenue is allocated to the distinct service period, typically a month, and recognized as control transfers as customers simultaneously receive and consume benefits.

•Software services revenue - Software services revenue consideration is determined from individual contracts with customers and includes license and maintenance fees associated with loan software products, generally in a remote hosted environment, and computer and software consulting. Usage-based revenue from remote hosted licenses is allocated to the distinct service period, typically a month, and recognized as control transfers as customers simultaneously receive and consume benefits. Revenue from any non-refundable up-front fee is recognized ratably over the contract period, as the fee relates to set-up activities that provide no incremental benefit to the customers. Computer and software consulting is also capable of being distinct and accounted for as a separate performance obligation. Revenue allocated to computer and software consulting is recognized as services are provided.

•Outsourced services revenue - Outsourced services revenue consideration is determined from individual contracts with customers and is calculated monthly based on the volume of services. Revenue is allocated to the distinct service period, typically a month, and recognized as control transfers as customers simultaneously receive and consume benefits.

The following table provides disaggregated revenue by service offering:


	Year ended December 31,
	2019		2018	2017
Government servicing - Nelnet	$	157,991	157,091	155,829
Government servicing - Great Lakes	185,656		168,298	—
Private education and consumer loan servicing	36,788		41,474	28,060
FFELP servicing	25,043		31,542	15,542
Software services	41,077		32,929	17,782
Outsourced services and other	8,700		8,693	5,787
Loan servicing and systems revenue	$	455,255	440,027	223,000

Education Technology, Services, and Payment Processing Revenue

Education technology, services, and payment processing revenue consists of the following items:

•Tuition payment plan services - Tuition payment plan services consideration is determined from individual plan agreements, which are governed by plan service agreements, and includes access to a remote hosted environment and management of payment processing. The management of payment processing is considered a distinct performance obligation when sold with the remote hosted environment. Revenue for each performance obligation is allocated to the distinct service period, the academic school term, and recognized ratably over the service period as customers simultaneously receive and consume benefits.

•Payment processing - Payment processing consideration is determined from individual contracts with customers and includes electronic transfer and credit card processing, reporting, virtual terminal solutions, and specialized

integrations to business software for education and non-education markets. Volume-based revenue from payment processing is allocated and recognized to the distinct service period, based on when each transaction is completed, and recognized as control transfers as customers simultaneously receive and consume benefits. The electronic transfer and credit card processing consideration is recognized as revenue on a gross basis as the Company is the principal in the delivery of the payment processing. The Company has concluded it is the principal as it controls the services before delivery to the educational institution or business, it is primarily responsible for the delivery of the services, and it has discretion in setting prices charged to its customers. In addition, the Company has the unilateral ability to accept or reject a transaction based on criteria established by the Company. The Company is liable for the costs of processing the transactions and records such costs within "cost to provide education technology, services, and payment processing services."

•Education technology and services - Education technology and services consideration is determined from individual contracts with customers and is based on the services selected by the customer. Services in K-12 private and faith based schools primarily includes (i) assistance with financial needs assessment, (ii) school information system software that automates administrative processes such as admissions, enrollment, scheduling, cafeteria management, attendance, and grade book management, and (iii) professional development and educational instruction services. Revenue for these services is recognized for the consideration the Company has a right to invoice, the amount of which corresponds directly with the value provided to the customer based on the performance completed. Services provided to the higher education market include payment technology and processing that allow for electronic billing and payment of campus charges. These services are considered distinct performance obligations. Revenue for each performance obligation is allocated to the distinct service period, typically a month or based on when each transaction is completed, and recognized as control transfers as customers simultaneously receive and consume benefits.

The following table provides disaggregated revenue by service offering:


	Year ended December 31,
	2019		2018	2017
Tuition payment plan services	$	106,682	85,381	76,753
Payment processing	110,848		84,289	71,652
Education technology and services	58,578		51,155	44,539
Other	1,223		1,137	244
Education technology, services, and payment processing revenue	$	277,331	221,962	193,188

Cost to provide education technology, services, and payment processing services is primarily associated with providing payment processing services. Interchange and payment network fees are charged by the card associations or payment networks. Depending upon the transaction type, the fees are a percentage of the transaction’s dollar value, a fixed amount, or a combination of the two methods. Other items included in cost to provide education technology, services, and payment processing services include salaries and benefits and third-party professional service costs directly related to providing professional development and educational instruction services to teachers, school leaders, and students.

Communications Revenue

Communications revenue is derived principally from internet, television, and telephone services and is billed as a flat fee in advance of providing the service. Revenues for usage-based services, such as access charges billed to other telephone carriers for originating and terminating long-distance calls on the Company's network, are billed in arrears. These are each considered distinct performance obligations. Revenue is recognized monthly for the consideration the Company has a right to invoice, the amount of which corresponds directly with the value provided to the customer based on the performance completed. The Company recognizes revenue from these services in the period the services are rendered rather than billed. Revenue received or receivable in advance of the delivery of services is included in deferred revenue. Earned but unbilled usage-based services are recorded in accounts receivable.

The following table provides disaggregated revenue by service offering and customer type:


	Year ended December 31,
	2019		2018	2017
Internet	$	38,239	24,069	11,976
Television	16,196		12,949	8,018
Telephone	9,705		7,546	5,603
Other	129		89	103
Communications revenue	$	64,269	44,653	25,700

Residential revenue	$	48,344	33,434	17,696
Business revenue	15,689		10,976	7,744
Other	236		243	260
Communications revenue	$	64,269	44,653	25,700

Cost to provide communications services is primarily associated with television programming costs. The Company has various contracts to obtain television programming from programming vendors whose compensation is typically based on a flat fee per customer. The cost of the right to exhibit network programming under such arrangements is recorded in the month the programming is available for exhibition. Programming costs are paid each month based on calculations performed by the Company and are subject to periodic audits performed by the programmers. Other items in cost to provide communications services include connectivity, franchise, and other regulatory costs directly related to providing internet and telephone services.

Other Income

The following table provides the components of "other income" on the consolidated statements of income:


	Year ended December 31,
	2019		2018	2017
Gain on sale of loans	$	17,261	—	—
Borrower late fee income	12,884		12,302	11,604
Management fee revenue	8,838		6,497	—
Gain on investments and notes receivable, net of losses	6,136		9,579	939
Investment advisory services	2,941		6,009	12,723
Peterson's revenue	—		—	12,572

Other	17,119		20,418	17,890
Other income	$	65,179	54,805	55,728

•Borrower late fee income - Late fee income is earned by the education lending subsidiaries. Revenue is allocated to the distinct service period, based on when each transaction is completed.

•Management fee revenue - Management fee revenue is earned for providing administrative support and marketing services provided primarily to Great Lakes' former parent company. Revenue is allocated to the distinct service period, based on when each transaction is completed.

•Investment advisory fees - Investment advisory services are provided by WRCM, the Company's SEC-registered investment advisor subsidiary, under various arrangements. The Company earns monthly fees based on the monthly outstanding balance of investments and certain performance measures, which are recognized monthly as the uncertainty of the transaction price is resolved.

•Peterson's revenue - The Company earned revenue related to educational digital marketing and content solution products and services under the brand name Peterson's. On December 31, 2017, the Company sold Peterson's.

Deferred Revenue

Activity in the deferred revenue balance, which is included in "other liabilities" on the consolidated balance sheets, is shown below:


	Loan Servicing and Systems		Education, Technology, Services, and Payment Processing	Communications	Corporate and Other Activities	Total
Balance as of December 31, 2016	$	6,105	24,708	963	1,365	33,141
Deferral of revenue	3,406		73,445	15,217	2,721	94,789
Recognition of revenue	(4,543)		(73,989)	(14,515)	(2,607)	(95,654)
Balance as of December 31, 2017	4,968		24,164	1,665	1,479	32,276
Deferral of revenue	5,117		77,297	25,325	5,553	113,292
Recognition of revenue	(5,672)		(70,905)	(24,439)	(5,430)	(106,446)
Balance as of December 31, 2018	4,413		30,556	2,551	1,602	39,122
Deferral of revenue	3,585		93,373	36,024	3,505	136,487
Recognition of revenue	(5,286)		(91,855)	(35,343)	(3,479)	(135,963)
Balance as of December 31, 2019	$	2,712	32,074	3,232	1,628	39,646

Major Customer	12 Months Ended
Major Customer	Dec. 31, 2019
Risks and Uncertainties [Abstract]
Major Customer	Major Customer Nelnet Servicing earns loan servicing revenue from a servicing contract with the Department. Revenue earned by Nelnet Servicing related to this contract was $158.0 million, $157.1 million, and $155.8 million for the years ended December 31, 2019, 2018, and 2017, respectively. In addition, Great Lakes, which was acquired by the Company on February 7, 2018, also earns loan servicing revenue from a similar servicing contract with the Department. Revenue earned by Great Lakes related to this contract was $185.7 million for the year ended December 31, 2019. Revenue of $168.3 million was earned for the period from February 7, 2018 to December 31, 2018. Nelnet Servicing and Great Lakes' servicing contracts with the Department previously provided for expiration on June 16, 2019. On May 15, 2019, Nelnet Servicing and Great Lakes each received a contract extension from the Department's Office of Federal Student Aid (“FSA”) pursuant to which FSA extended the expiration date of the current contracts to December 15, 2019. On November 26, 2019, Nelnet Servicing and Great Lakes each received an additional extension from FSA on their contracts through December 14, 2020. The contract extensions also provided the potential for two additional six-month extensions at the Department’s discretion through December 14, 2021. FSA is conducting a contract procurement process entitled Next Generation Financial Services Environment (“NextGen”) for a new framework for the servicing of all student loans owned by the Department. On January 15, 2019, FSA issued solicitations for three NextGen components: •NextGen Enhanced Processing Solution (“EPS”) •NextGen Business Process Operations (“BPO”) •NextGen Optimal Processing Solution (“OPS”) On April 1, 2019 and October 4, 2019, the Company responded to the EPS component. On January 16, 2020, FSA released an amendment to the EPS component and the company responded on February 3, 2020. In addition, on August 1, 2019, the Company responded to the BPO component. On January 10, 2020, FSA released an amendment to the BPO component and the Company responded on January 30, 2020. The Company is also part of a team that has responded and intends to respond to various aspects of the OPS component; however, on November 12, 2019, FSA put an indefinite hold on the OPS solicitation. The Company cannot predict the timing, nature, or outcome of these solicitations.

Leases

12 Months Ended

Dec. 31, 2019

Leases [Abstract]

Leases

The following table provides supplemental balance sheet information related to leases:


	As of
	December 31, 2019
Operating lease ROU assets, which is included in "other assets" on the consolidated balance sheet	$	32,770
Operating lease liabilities, which is included in "other liabilities" on the consolidated balance sheet	$	33,689

The following table provides components of lease expense:


	Year ended December 31, 2019
Rental expense, which is included in "other expenses" on the consolidated statements of income (a)	$	11,171
Rental expense, which is included in "cost to provide communications services" on the consolidated statements of income (a)	1,609
Total operating rental expense	$	12,780

(a) Includes short-term and variable lease costs, which are immaterial.

The following table provides supplemental cash flow information related to leases:


	Year ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows related to operating leases	$	9,966
Supplemental noncash activity:
Operating ROU assets obtained in exchange for lease obligations, excluding impact of adoption	$	8,731

Weighted average remaining lease term and discount rate are shown below:


	As of
	December 31, 2019
Weighted average remaining lease term (years)	7.29
Weighted average discount rate	3.93	%

Maturity of lease liabilities are shown below:


2020	$	10,178
2021	6,905
2022	4,652
2023	3,640
2024	2,567
2025 and thereafter	10,941
Total lease payments	38,883
Imputed interest	(5,194)
Total	$	33,689

The Company adopted the new lease standard using the effective date as its date of initial application (January 1, 2019) as noted above, and as required, the following disclosure is provided for periods prior to adoption. Future minimum lease payments as of December 31, 2018 are shown below:


2019	$	9,181
2020	8,261
2021	5,776
2022	3,745
2023	2,904
2024 and thereafter	5,479
Total minimum lease payments	$	35,346

Total rental expense incurred by the Company prior to the adoption of the new lease standard was $8.4 million and $5.7 million during 2018 and 2017, respectively.

Defined Contribution Benefit Plan	12 Months Ended
Defined Contribution Benefit Plan	Dec. 31, 2019
Retirement Benefits [Abstract]
Defined Contribution Benefit Plan	Defined Contribution Benefit PlanThe Company has a 401(k) savings plan that covers substantially all of its employees. Employees may contribute up to 100 percent of their pre-tax salary, subject to IRS limitations. The Company matches up to 100 percent on the first 3 percent of contributions and 50 percent on the next 2 percent. The Company made contributions to the plan of $10.8 million, $9.8 million, and $6.2 million during the years ended December 31, 2019, 2018, and 2017, respectively.

Stock Based Compensation Plans

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

Stock Based Compensation Plan

Stock Based Compensation Plans

Restricted Stock Plan

The following table summarizes restricted stock activity:


	Year ended December 31,
	2019	2018	2017
Non-vested shares at beginning of year	532,336	398,210	447,380
Granted	186,281	279,441	107,237
Vested	(109,651)	(100,035)	(131,988)
Canceled	(59,121)	(45,280)	(24,419)
Non-vested shares at end of year	549,845	532,336	398,210

As of December 31, 2019, there was $17.0 million of unrecognized compensation cost included in equity on the consolidated balance sheet related to restricted stock, which is expected to be recognized as compensation expense in future periods as shown in the table below.


2020	$	5,927
2021	3,839
2022	2,587
2023	1,731
2024	1,157
2025 and thereafter	1,793
	$	17,034

For the years ended December 31, 2019, 2018, and 2017, the Company recognized compensation expense of $6.4 million, $6.2 million, and $4.2 million, respectively, related to shares issued under the restricted stock plan, which is included in "salaries and benefits" on the consolidated statements of income.

Employee Share Purchase Plan

The Company has an employee share purchase plan pursuant to which employees are entitled to purchase Class A common stock from payroll deductions at a 15 percent discount from market value. During the years ended December 31, 2019, 2018, and 2017, the Company recognized compensation expense of $0.3 million, $0.3 million, and $0.2 million respectively, in connection with issuing 33,250 shares, 28,744 shares, and 16,989 shares, respectively, under this plan, which is included in "salaries and benefits" on the consolidated statements of income.

Non-employee Directors Compensation Plan

The Company has a compensation plan for non-employee directors pursuant to which non-employee directors can elect to receive their annual retainer fees in the form of cash or Class A common stock. If a non-employee director elects to receive Class A common stock, the number of shares of Class A common stock that are awarded is equal to the amount of the annual retainer fee otherwise payable in cash divided by 85 percent of the fair market value of a share of Class A common stock on the date the fee is payable. Non-employee directors who choose to receive Class A common stock may also elect to defer receipt of the Class A common stock until termination of their service on the board of directors.

For the years ended December 31, 2019, 2018, and 2017, the Company recognized $1.2 million, $1.0 million, and $0.9 million, respectively, of expense related to this plan, which is included in "other expenses" on the consolidated statements of income. The following table provides the number of shares awarded under this plan for the years ended December 31, 2019, 2018, and 2017.


	Shares issued - not deferred	Shares issued- deferred	Total
Year ended December 31, 2019	9,588	11,212	20,800
Year ended December 31, 2018	8,029	10,680	18,709
Year ended December 31, 2017	6,855	10,974	17,829

As of December 31, 2019, a cumulative amount of 193,411 shares have been deferred by directors and will be issued upon the termination of their service on the board of directors. These shares are included in the Company's weighted average shares outstanding calculation.

Related Parties	12 Months Ended
Related Parties	Dec. 31, 2019
Related Party Transactions [Abstract]
Related Parties	Related Parties (dollar amounts in this note are not in thousands) Transactions with Union Bank and Trust Company Union Bank and Trust Company ("Union Bank") is controlled by Farmers & Merchants Investment Inc. (“F&M”), which owns a majority of Union Bank's common stock and a minority share of Union Bank's non-voting non-convertible preferred stock. Michael S. Dunlap, Executive Chairman and a member of the board of directors and a significant shareholder of the Company, along with his spouse and children, owns or controls a significant portion of the stock of F&M, and Mr. Dunlap's sister, Angela L. Muhleisen, along with her spouse and children, also owns or controls a significant portion of F&M stock. Mr. Dunlap serves as a Director and Chairman of F&M, and as a Director of Union Bank. Ms. Muhleisen serves as a Director and Chief Executive Officer of F&M and as a Director, Chairperson, President, and Chief Executive Officer of Union Bank. Union Bank is deemed to have beneficial ownership of a significant number of shares of the Company because it serves in a capacity of trustee or account manager for various trusts and accounts holding shares of the Company, and may share voting and/or investment power with respect to such shares. Mr. Dunlap and Ms. Muhleisen beneficially own a significant percent of the voting rights of the Company's outstanding common stock. The Company has entered into certain contractual arrangements with Union Bank. These transactions are summarized below. Loan Purchases The Company purchased $67.7 million (par value) and $2.9 million (par value) of private education loans from Union Bank in 2019 and 2017, respectively. There were no private education loan purchases in 2018. In addition, the Company purchased $32.6 million (par value), $74.7 million (par value), and $10.3 million (par value) of consumer loans from Union Bank in 2019, 2018, and 2017, respectively. The net premium paid by the Company on these loan acquisitions was $1.2 million in 2019. The premiums paid by the Company in 2018 and 2017 were not significant. The Company has an agreement with Union Bank in which the Company provides marketing, origination, and loan servicing services to Union Bank related to private education loans. Union Bank paid $1.8 million in marketing fees to the Company in 2019 under this agreement. Loan Servicing The Company serviced $395.5 million, $405.5 million, and $462.3 million of FFELP and private education loans for Union Bank as of December 31, 2019, 2018, and 2017, respectively. Servicing and origination fee revenue earned by the Company from servicing loans for Union Bank was $0.6 million, $0.5 million, and $0.5 million for the years ended December 31, 2019, 2018, and 2017, respectively. Funding - Participation Agreement The Company maintains an agreement with Union Bank, as trustee for various grantor trusts, under which Union Bank has agreed to purchase from the Company participation interests in student loans (the “FFELP Participation Agreement”). The Company uses this facility as a source to fund FFELP student loans. As of December 31, 2019 and 2018, $749.6 million and $664.3 million, respectively, of loans were subject to outstanding participation interests held by Union Bank, as trustee, under this agreement. The agreement automatically renews annually and is terminable by either party upon five business days' notice. This agreement provides beneficiaries of Union Bank's grantor trusts with access to investments in interests in student loans, while providing liquidity to the Company on a short-term basis. The Company can participate loans to Union Bank to the extent of availability under the grantor trusts, up to $900 million or an amount in excess of $900 million if mutually agreed to by both parties. Loans participated under this agreement have been accounted for by the Company as loan sales. Accordingly, the participation interests sold are not included on the Company's consolidated balance sheets. Funding - Real Estate 12100.5 West Center, LLC ("West Center") is an entity that was established in 2016 for the sole purpose of acquiring, developing, and owning a commercial real estate property in Omaha, Nebraska. The Company owns 33.33% of West Center. On October 31, 2019, Union Bank, as lender, received a $2.9 million promissory note from West Center. The promissory note carries an interest rate of 3.85% and has a maturity date of October 30, 2024. Operating Cash Accounts The majority of the Company's cash operating accounts are maintained at Union Bank. The Company also invests amounts in the Short term Federal Investment Trust (“STFIT”) of the Student Loan Trust Division of Union Bank, which are included in “cash and cash equivalents - held at a related party” and “restricted cash - due to customers” on the accompanying consolidated balance sheets. As of December 31, 2019 and 2018, the Company had $390.5 million and $147.2 million, respectively, invested in the STFIT or deposited at Union Bank in operating accounts, of which $270.5 million and $35.3 million as of December 31, 2019 and 2018, respectively, represented cash collected for customers. Interest income earned by the Company on the amounts invested in the STFIT and in cash operating accounts for the years ended December 31, 2019, 2018, and 2017, was $1.6 million, $1.0 million, and $0.9 million, respectively. 529 Plan Administration Services The Company provides certain 529 Plan administration services to certain college savings plans (the “College Savings Plans”) through a contract with Union Bank, as the program manager. Union Bank is entitled to a fee as program manager pursuant to its program management agreement with the College Savings Plans. For the years ended December 31, 2019, 2018, and 2017, the Company has received fees of $3.7 million, $3.2 million, and $2.0 million, respectively, from Union Bank related to the administration services provided to the College Savings Plans. Lease Arrangements Union Bank leases approximately 4,000 square feet in the Company's corporate headquarters building. Union Bank paid the Company approximately $79,000, $76,000, and $74,000 for commercial rent and storage income during 2019, 2018, and 2017, respectively. The lease agreement expires on June 30, 2023. Other Fees Paid to Union Bank During the years ended December 31, 2019, 2018, and 2017, the Company paid Union Bank approximately $213,000, $128,000, and $127,000, respectively, in cash management and trustee fees. Other Fees Received from Union Bank During the years ended December 31, 2019, 2018, and 2017, Union Bank paid the Company approximately $317,000, $231,000, and $231,000, respectively, under certain employee sharing arrangements. During the years ended December 31, 2019, 2018, and 2017, Union Bank paid the Company approximately $92,000, $34,000, and $5,000, respectively, for communications services. In addition, during the years ended December 31, 2019, 2018, and 2017, Union Bank paid the Company approximately $1,000, $4,000, and $11,000 in payment processing fees (net of merchant fees of approximately $4,000, $13,000, and $1,000), respectively. 401(k) Plan Administration Union Bank administers the Company's 401(k) defined contribution plan. Fees paid to Union Bank to administer the plan are paid by the plan participants and were approximately $366,000, $313,000, and $241,000 during the years ended December 31, 2019, 2018, and 2017, respectively. Investment Services Union Bank has established various trusts whereby Union Bank serves as trustee for the purpose of purchasing, holding, managing, and selling investments in student loan asset-backed securities. WRCM, an SEC-registered investment advisor and a subsidiary of the Company, has a management agreement with Union Bank under which WRCM performs various advisory and management services on behalf of Union Bank with respect to investments in securities by the trusts, including identifying securities for purchase or sale by the trusts. The agreement provides that Union Bank will pay to WRCM annual fees of 25 basis points on the outstanding balance of the investments in the trusts. As of December 31, 2019, the outstanding balance of investments in the trusts was $756.3 million. In addition, Union Bank will pay additional fees to WRCM of up to 50 percent of the gains from the sale of securities from the trusts or securities being called prior to the full contractual maturity. For the years ended December 31, 2019, 2018, and 2017, the Company earned $1.8 million, $4.5 million, and $9.2 million, respectively, of fees under this agreement. WRCM also has management agreements with Union Bank under which it is designated to serve as investment advisor with respect to the assets (principally Nelnet stock) within several trusts established by Mr. Dunlap and his spouse and Stephen F. Butterfield, former Vice Chairman and former member of the board of directors of the Company who passed away in April 2018, and his spouse Shelby J. Butterfield. Union Bank serves as trustee for the trusts. Per the terms of the agreements, Union Bank pays WRCM five basis points of the aggregate value of the assets of the trusts as of the last day of each calendar quarter. As of December 31, 2019, WRCM was the investment advisor with respect to a total of 6.3 million shares of the Company's Class B common stock held directly by these trusts, and the 50% interest held by the Butterfield Family Trust, an estate planning trust for the family of Mr. Butterfield, in Union Financial Services, Inc. (“UFS”), which holds a total of 1.6 million shares of the Company’s Class B common stock and the other 50% interest in which is owned by Mr. Dunlap. For the years ended December 31, 2019, 2018, and 2017, the Company earned approximately $219,000, $172,000, and $161,000, respectively, of fees under these agreements. WRCM has established private investment funds for the primary purpose of purchasing, selling, investing, and trading, directly or indirectly, in student loan asset-backed securities, and to engage in financial transactions related thereto. Mr. Dunlap, Jeffrey R. Noordhoek (an executive officer of the Company), Ms. Muhleisen and her spouse, and WRCM have invested in certain of these funds. Based upon the current level of holdings by non-affiliated limited partners, the management agreements provide non-affiliated limited partners the ability to remove WRCM as manager without cause. WRCM earns 50 basis points (annually) on the outstanding balance of the investments in these funds, of which WRCM pays approximately 50 percent of such amount to Union Bank as custodian. As of December 31, 2019, the outstanding balance of investments in these funds was $152.1 million. The Company paid Union Bank $0.3 million in each of 2019, 2018, and 2017 as custodian of the funds. Transactions with F&M During the third quarter of 2019, the Company, F&M, and the holding company of BankFirst of Norfolk, Nebraska ("BankFirst"), of which Mr. Dunlap is a member of the Board of Directors, co-invested $0.7 million, $2.1 million, and $2.1 million, respectively, in a Company-managed limited liability company that invests in renewable energy (solar). As part of these transactions, the Company receives management and performance fees under a management agreement. During the third quarter of 2019, the Company earned a total of approximately $138,000 of management fees under this agreement, allocable in equal amounts of approximately $69,000 to the investments of each of F&M and BankFirst. Transactions with UFS UFS is owned 50 percent by Mr. Dunlap and 50 percent by the Butterfield Family Trust, an estate planning trust for the family of Mr. Butterfield. Historically, the Company owned a 65 percent interest in an aircraft due to the frequent business travel needs of the Company's executives and the limited availability of commercial flights in Lincoln, Nebraska, where the Company's headquarters are located. UFS owned the remaining interest in the same aircraft. On December 31, 2018, the Company purchased an additional 17.5 percent interest in the aircraft from UFS for $717,500, which reflected what available information indicated was the aircraft's fair market value at the time of sale. As a result of this transaction, the Company's ownership in the aircraft increased to 82.5 percent. On December 31, 2018, UFS also contributed a 17.5 percent interest in the aircraft to an entity owned by Mr. Dunlap. Transactions with Agile Sports Technologies, Inc. (doing business as "Hudl") David Graff, who has served on the Company's Board of Directors since 2014, is CEO, co-founder, and a director of Hudl. The Company and Mr. Dunlap, along with his children, currently hold combined direct and indirect equity ownership interests in Hudl of 19.2% and 3.7%, respectively. The Company's and Mr. Dunlap's direct and indirect equity ownership interests in Hudl consist of preferred stock with certain liquidation preferences that are considered substantive. Accordingly, for accounting purposes, the Company's and Mr. Dunlap's equity ownership interests are not considered in-substance common stock and the Company is accounting for its equity investment in Hudl using the measurement alternative method. As of December 31, 2019, the carrying amount of the Company's investment in Hudl is $51.8 million, and is included in "investments and notes receivable" in the Company's consolidated balance sheet. On July 26, 2019, the Company, as lender, received a $16.0 million promissory note from Hudl. The promissory note carried a 14 percent interest rate and was due 180 days from the date of issuance. In connection with this promissory note, the Company entered into a Subordination Agreement with Union Bank, effective as of July 26, 2019, which required the Company to subordinate its promissory note from Hudl to existing notes Union Bank holds from Hudl. The $16.0 million promissory note from Hudl was paid in full to the Company in August 2019. The Company makes investments to further diversify the Company both within and outside of its historical core education-related businesses, including investments in real estate. Recent real estate investments have been focused on the development of commercial properties in the Midwest, and particularly in Lincoln, Nebraska, where the Company's headquarters are located. One investment includes the development of a building in Lincoln's Haymarket District that is the new headquarters of Hudl, in which Hudl is the primary tenant in this building. Transaction with Assurity Life Insurance Company ("Assurity") Thomas Henning, who has served on the Company's Board of Directors since 2003, is the President and Chief Executive Officer of Assurity. During the years ended December 31, 2019, 2018, and 2017, Nelnet Business Solutions, a subsidiary of the Company, paid $1.7 million, $1.7 million, and $1.5 million, respectively, to Assurity for insurance premiums for insurance on certain tuition payment plans. As part of providing the tuition payment plan insurance to Nelnet Business Solutions, Assurity entered into a reinsurance agreement with the Company's insurance subsidiary, under which Assurity paid the Company's insurance subsidiary reinsurance premiums of $1.3 million, $1.3 million, and $1.4 million in 2019, 2018, and 2017, respectively, and the Company's insurance subsidiary paid claims on such reinsurance to Assurity of $0.9 million, $0.9 million, and $0.7 million in 2019, 2018, and 2017, respectively. In addition, Assurity pays Nelnet Business Solutions a partial refund annually based on claim experience, which was approximately $56,000, $84,000, and $10,000 for the years ended December 31, 2019, 2018, and 2017, respectively.

Fair Value

12 Months Ended

Dec. 31, 2019

Fair Value Disclosures [Abstract]

Fair Value

The following tables present the Company’s financial assets and liabilities that are measured at fair value on a recurring basis. There were no transfers into or out of level 1, level 2, or level 3 for the year ended December 31, 2019.


	As of December 31, 2019						As of December 31, 2018
	Level 1		Level 2	Total	Level 1	Level 2	Total
Assets:
Investments (a):
Student loan asset-backed securities - available-for-sale	$	—	52,597	52,597	—	52,936	52,936
Equity securities	6		—	6	2,722	—	2,722
Equity securities measured at net asset value (b)				12,894			14,925
Debt securities - available-for-sale	104		—	104	104	—	104
Total investments	110		52,597	65,601	2,826	52,936	70,687
Derivative instruments (c)	—		—	—	—	1,818	1,818
Total assets	$	110	52,597	65,601	2,826	54,754	72,505

(a) Investments represent investments recorded at fair value on a recurring basis. Level 1 investments are measured based upon quoted prices and include investments traded on an active exchange, such as the New York Stock Exchange, and corporate bonds, mortgage-backed securities, U.S. government bonds, and U.S. Treasury securities that trade in active markets. Level 2 investments include student loan asset-backed securities. The fair value for the student loan asset-backed securities is determined using indicative quotes from broker-dealers or an income approach valuation technique (present value using the discount rate adjustment technique) that considers, among other things, rates currently observed in publicly traded debt markets for debt of similar terms issued by companies with comparable credit risk.

(b) In accordance with the Fair Value Measurements Topic of the FASB Accounting Standards Codification, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.

(c) All derivatives are accounted for at fair value on a recurring basis. The fair value of derivative financial instruments is determined using a market approach in which derivative pricing models use the stated terms of the contracts, observable yield curves, and volatilities from active markets. When determining the fair value of derivatives, the Company takes into account counterparty credit risk for positions where it is exposed to the counterparty on a net basis by assessing exposure net of collateral held. The net exposures for each counterparty are adjusted based on market information available for the specific counterparty.

The following table summarizes the fair values of all of the Company’s financial instruments on the consolidated balance sheets:


	As of December 31, 2019
	Fair value		Carrying value	Level 1	Level 2	Level 3
Financial assets:
Loans receivable	$	21,477,630	20,669,371	—	—	21,477,630
Cash and cash equivalents	133,906		133,906	133,906	—	—
Investments (at fair value)	65,601		65,601	110	52,597	—

Beneficial interest in consumer loan securitizations	33,258		33,187	—	—	33,258
Restricted cash	650,939		650,939	650,939	—	—
Restricted cash – due to customers	437,756		437,756	437,756	—	—
Accrued interest receivable	733,623		733,623	—	733,623	—

Financial liabilities:
Bonds and notes payable	20,479,095		20,529,054	—	20,479,095	—
Accrued interest payable	47,285		47,285	—	47,285	—
Due to customers	437,756		437,756	437,756	—	—


	As of December 31, 2018
	Fair value		Carrying value	Level 1	Level 2	Level 3
Financial assets:
Loans receivable	$	23,521,171	22,377,142	—	—	23,521,171
Cash and cash equivalents	121,347		121,347	121,347	—	—
Investments (at fair value)	70,687		70,687	2,826	52,936	—
Notes receivable	16,373		16,373	—	16,373	—
Restricted cash	701,366		701,366	701,366	—	—
Restricted cash – due to customers	369,678		369,678	369,678	—	—
Accrued interest receivable	679,197		679,197	—	679,197	—
Derivative instruments	1,818		1,818	—	1,818	—
Financial liabilities:
Bonds and notes payable	22,270,462		22,218,740	—	22,270,462	—
Accrued interest payable	61,679		61,679	—	61,679	—
Due to customers	369,678		369,678	369,678	—	—

The methodologies for estimating the fair value of financial assets and liabilities that are measured at fair value on a recurring basis are previously discussed. The remaining financial assets and liabilities were estimated using the following methods and assumptions:

Loans Receivable

Fair values for loans receivable were determined by modeling loan cash flows using stated terms of the assets and internally-developed assumptions. The significant assumptions used to project cash flows are prepayment speeds, default rates, cost of funds, required return on equity, and future interest rate and index relationships. A number of significant inputs into the models are internally derived and not observable to market participants.

Beneficial Interest in Consumer Loan Securitizations

Fair values for beneficial interest in consumer loan securitizations were determined by modeling securitization cash flows and internally-developed assumptions. The significant assumptions used to project cash flows are prepayment speeds, default rates, cost of funds, required return on equity, and future interest rate and index relationships. A number of significant inputs into the models are internally derived and not observable to market participants.

Notes Receivable

Fair values for notes receivable were determined by using model-derived valuations with observable inputs, including current market rates.

Cash and Cash Equivalents, Restricted Cash, Restricted Cash – Due to Customers, Accrued Interest Receivable, Accrued Interest Payable, and Due to Customers

The carrying amount approximates fair value due to the variable rate of interest and/or the short maturities of these instruments.

Bonds and Notes Payable

The fair value of bonds and notes payable was determined from quotes from broker-dealers or through standard bond pricing models using the stated terms of the borrowings, observable yield curves, market credit spreads, and weighted average life of underlying collateral. Fair value adjustments for unsecured corporate debt are made based on indicative quotes from observable trades.

Limitations

The fair value estimates are made at a specific point in time based on relevant market information and information about the financial instruments. Because no market exists for a significant portion of the Company's financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Therefore, the calculated fair value estimates in many instances cannot be substantiated by comparison to independent markets and, in many cases, may not be realizable in a current sale of the instrument. Changes in assumptions could significantly affect the estimates.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Legal Proceedings	12 Months Ended
Legal Proceedings	Dec. 31, 2019
Commitments and Contingencies Disclosure [Abstract]
Legal Proceedings	Legal ProceedingsThe Company is subject to various claims, lawsuits, and proceedings that arise in the normal course of business. These matters frequently involve claims by student loan borrowers disputing the manner in which their student loans have been serviced or the accuracy of reports to credit bureaus, claims by student loan borrowers or other consumers alleging that state or Federal consumer protection laws have been violated in the process of collecting loans or conducting other business activities, and disputes with other business entities. In addition, from time to time, the Company receives information and document requests from state or federal regulators concerning its business practices. The Company cooperates with these inquiries and responds to the requests. While the Company cannot predict the ultimate outcome of any regulatory examination, inquiry, or investigation, the Company believes its activities have materially complied with applicable law, including the Higher Education Act, the rules and regulations adopted by the Department thereunder, and the Department's guidance regarding those rules and regulations. On the basis of present information, anticipated insurance coverage, and advice received from counsel, it is the opinion of the Company's management that the disposition or ultimate determination of these claims, lawsuits, and proceedings will not have a material adverse effect on the Company's business, financial position, or results of operations.

Quarterly Financial Information (Unaudited)

12 Months Ended

Dec. 31, 2019

Quarterly Financial Information Disclosure [Abstract]

Quarterly Financial Information (Unaudited)


	2019
	First quarter		Second quarter	Third quarter	Fourth quarter
Net interest income	$	58,816	59,825	66,457	64,252
Less provision for loan losses	7,000		9,000	10,000	13,000
Net interest income after provision for loan losses	51,816		50,825	56,457	51,252
Loan servicing and systems revenue	114,898		113,985	113,286	113,086
Education technology, services, and payment processing revenue	79,159		60,342	74,251	63,578
Communications revenue	14,543		15,758	16,470	17,499
Other income	9,067		16,152	13,439	26,522

Derivative market value and foreign currency transaction adjustments and derivative settlements, net	(11,539)		(24,088)	1,668	3,170
Cost to provide education technology, services, and payment processing services	(21,059)		(15,871)	(25,671)	(19,002)
Cost to provide communications services	(4,759)		(5,101)	(5,236)	(5,327)
Salaries and benefits	(111,059)		(111,214)	(116,670)	(124,561)
Depreciation and amortization	(24,213)		(24,484)	(27,701)	(28,651)

Other operating expenses	(43,816)		(45,417)	(58,329)	(46,710)
Income tax (expense) benefit	(11,391)		(6,209)	(8,829)	(9,022)
Net income	41,647		24,678	33,135	41,834
Net loss (income) attributable to noncontrolling interests	(56)		(59)	77	546
Net income attributable to Nelnet, Inc.	$	41,591	24,619	33,212	42,380
Earnings per common share:
Net income attributable to Nelnet, Inc. shareholders - basic and diluted	$	1.03	0.61	0.83	1.06


	2018
	First quarter		Second quarter	Third quarter	Fourth quarter
Net interest income	$	67,307	57,739	59,773	69,539
Less provision for loan losses	4,000		3,500	10,500	5,000
Net interest income after provision for loan losses	63,307		54,239	49,273	64,539
Loan servicing and systems revenue	100,141		114,545	112,579	112,761
Education technology, services, and payment processing revenue	60,221		48,742	58,409	54,589
Communications revenue	9,189		10,320	11,818	13,326
Other income	18,557		9,580	16,673	9,998

Derivative market value and foreign currency transaction adjustments and derivative settlements, net	66,799		17,031	17,098	(29,843)
Cost to provide education technology, services, and payment processing services	(13,683)		(11,317)	(19,087)	(15,479)
Cost to provide communications services	(3,717)		(3,865)	(4,310)	(5,033)
Salaries and benefits	(96,643)		(111,118)	(114,172)	(114,247)
Depreciation and amortization	(18,457)		(21,494)	(22,992)	(23,953)

Other operating expenses	(36,553)		(43,613)	(48,281)	(49,583)
Income tax (expense) benefit	(35,976)		(13,511)	(13,882)	4,599
Net income	113,185		49,539	43,126	21,674
Net loss (income) attributable to noncontrolling interests	740		(104)	(199)	(48)
Net income attributable to Nelnet, Inc.	$	113,925	49,435	42,927	21,626
Earnings per common share:
Net income attributable to Nelnet, Inc. shareholders - basic and diluted	$	2.78	1.21	1.05	0.53

Condensed Parent Company Financial Statements

12 Months Ended

Dec. 31, 2019

Condensed Financial Information Disclosure [Abstract]

Condensed Parent Company Financial Statements

The following represents the condensed balance sheets as of December 31, 2019 and 2018 and condensed statements of income, comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2019 for Nelnet, Inc.

The Company is limited in the amount of funds that can be transferred to it by its subsidiaries through intercompany loans, advances, or cash dividends. These limitations relate to the restrictions by trust indentures under the lending subsidiaries debt financing arrangements. The amounts of cash and investments restricted in the respective reserve accounts of the education lending subsidiaries are shown on the consolidated balance sheets as restricted cash.


Balance Sheets
(Parent Company Only)
As of December 31, 2019 and 2018
	2019		2018
Assets:
Cash and cash equivalents	$	73,144	36,890
Investments and notes receivable	137,229		140,582
Investment in subsidiary debt	13,818		13,818
Restricted cash	9,567		16,217
Investment in subsidiaries	2,181,122		2,448,540
Notes receivable from subsidiaries	42,552		56,973
Other assets	100,059		57,555
Fair value of derivative instruments	—		1,818
Total assets	$	2,557,491	2,772,393
Liabilities:
Notes payable	$	67,655	369,725
Other liabilities	97,952		94,016

Total liabilities	165,607		463,741
Equity:
Nelnet, Inc. shareholders' equity:
Common stock	398		403
Additional paid-in capital	5,715		622
Retained earnings	2,377,627		2,299,556
Accumulated other comprehensive earnings	2,972		3,883
Total Nelnet, Inc. shareholders' equity	2,386,712		2,304,464
Noncontrolling interest	5,172		4,188
Total equity	2,391,884		2,308,652
Total liabilities and shareholders' equity	$	2,557,491	2,772,393


Statements of Income
(Parent Company Only)
Years ended December 31, 2019, 2018, and 2017
	2019		2018	2017
Investment interest income	$	4,925	17,707	13,060
Interest expense on bonds and notes payable	9,588		9,270	3,315
Net interest (expense) income	(4,663)		8,437	9,745
Other income:
Other income	8,384		13,944	3,483
Gain from debt repurchases	136		359	2,964
Equity in subsidiaries income	182,346		158,364	170,897
Derivative market value adjustments and derivative settlements, net	(30,789)		71,085	(603)
Total other income	160,077		243,752	176,741
Operating expenses	19,561		4,795	6,117
Income before income taxes	135,853		247,394	180,369
Income tax benefit (expense)	5,950		(19,481)	(7,491)
Net income	141,803		227,913	172,878
Net loss attributable to noncontrolling interest	—		—	288
Net income attributable to Nelnet, Inc.	$	141,803	227,913	173,166


Statements of Comprehensive Income
(Parent Company Only)
Years ended December 31, 2019, 2018, and 2017
	2019		2018	2017
Net income	$	141,803	227,913	172,878
Other comprehensive (loss) income:
Available-for-sale securities:
Unrealized holding (losses) gains arising during period, net	(1,199)		1,056	2,349
Reclassification adjustment for gains recognized in net income, net of losses	—		(978)	(2,528)
Income tax effect	288		(69)	66
Total other comprehensive (loss) income	(911)		9	(113)
Comprehensive income	140,892		227,922	172,765
Comprehensive loss attributable to noncontrolling interest	—		—	288
Comprehensive income attributable to Nelnet, Inc.	$	140,892	227,922	173,053


Statements of Cash Flows
(Parent Company Only)
Years ended December 31, 2019, 2018, and 2017
	2019		2018	2017
Net income attributable to Nelnet, Inc.	$	141,803	227,913	173,166
Net loss attributable to noncontrolling interest	—		—	(288)
Net income	141,803		227,913	172,878
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization	467		442	420
Derivative market value adjustments	76,195		(1,014)	7,591
(Payments to) proceeds from termination of derivative instruments, net	(12,530)		10,283	2,100

(Payments to) proceeds from clearinghouse - initial and variation margin, net	(70,685)		40,382	76,325
Equity in earnings of subsidiaries	(182,346)		(158,364)	(170,897)




Deferred income tax (benefit) expense	(19,183)		21,814	(8,056)
Non-cash compensation expense	6,781		6,539	4,416
Other	(4,586)		(16,306)	(3,454)
(Increase) decrease in other assets	(10,672)		25,252	4,171
Increase (decrease) in other liabilities	29,384		(9,621)	10,104
Net cash (used in) provided by operating activities	(45,372)		147,320	95,598
Cash flows from investing activities:

Purchases of available-for-sale securities	—		(46,382)	(127,567)
Proceeds from sales of available-for-sale securities	—		75,605	156,727
Capital distributions/contributions from/to subsidiaries, net	449,602		(334,280)	29,426
Decrease (increase) in notes receivable from subsidiaries	14,421		(31,325)	(50,793)
Increase in guaranteed payment from subsidiary	—		(70,270)	—
Proceeds from investments and notes receivable	27,926		7,783	4,823
Proceeds from (purchases of) subsidiary debt, net	—		61,841	(3,844)
Purchases of investments and issuances of notes receivable	(47,106)		(28,610)	(18,023)

Net cash provided by (used in) investing activities	444,843		(365,638)	(9,251)
Cash flows from financing activities:
Payments on notes payable	(361,272)		(8,651)	(27,480)
Proceeds from issuance of notes payable	60,000		300,000	61,059
Payments of debt issuance costs	(1,129)		(827)	—
Dividends paid	(29,485)		(26,839)	(24,097)
Repurchases of common stock	(40,411)		(45,331)	(68,896)
Proceeds from issuance of common stock	1,552		1,359	678
Acquisition of noncontrolling interest	—		(13,449)	—
Issuance of noncontrolling interest	878		13	—

Net cash (used in) provided by financing activities	(369,867)		206,275	(58,736)
Net increase (decrease) in cash, cash equivalents, and restricted cash	29,604		(12,043)	27,611
Cash, cash equivalents, and restricted cash, beginning of period	53,107		65,150	37,539
Cash, cash equivalents, and restricted cash, end of period	$	82,711	53,107	65,150

Cash disbursements made for:
Interest	$	9,501	8,628	2,882
Income taxes, net of refunds and credits	$	17,672	473	96,721

Noncash investing and financing activities:

Recapitalization of accrued interest payable to accrued guaranteed payment	$	—	6,674	—
Recapitalization of note payable to guaranteed payment	$	—	186,429	—
Recapitalization of guaranteed payment to investment in subsidiary	$	—	273,360	—
Contributions to subsidiaries	$	—	—	2,092

Summary of Significant Accounting Policies and Practices Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

Consolidation

The consolidated financial statements include the accounts of Nelnet, Inc. and its consolidated subsidiaries. In addition, the accounts of all variable interest entities (“VIEs”) of which the Company has determined that it is the primary beneficiary are included in the consolidated financial statements. All significant intercompany balances and transactions have been eliminated in consolidation.

Variable Interest Entities

The Company assesses its partnerships and joint ventures to determine if the entity meets the qualifications of a VIE. The Company performs a qualitative assessment of each VIE to determine if it is the primary beneficiary. The primary beneficiary is the entity which has both: (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (2) the obligation to absorb losses or receive benefits of the entity that could potentially be significant to the VIE. The Company examines specific criteria and uses judgment when determining whether an entity is a VIE and whether it is the primary beneficiary. The Company performs this review initially at the time it enters into a partnership or joint venture agreement and reassess upon reconsideration events.

VIEs - Consolidated

The Company is required to consolidate VIEs in which it has determined it is the primary beneficiary.

The Company's education and other lending subsidiaries are engaged in the securitization of finance assets. These lending subsidiaries hold beneficial interests in eligible loans, subject to creditors with specific interests. The liabilities of the Company's lending subsidiaries are not the direct obligations of Nelnet, Inc. or any of its other subsidiaries. Each lending subsidiary is structured to be bankruptcy remote, meaning that it should not be consolidated in the event of bankruptcy of the parent company or any other subsidiary. The Company is generally the administrator and master servicer of the securitized assets held in its lending subsidiaries and owns the residual interest of the securitization trusts. For accounting purposes, the transfers of loans to the securitization trusts do not qualify as sales. Accordingly, all the financial activities and related assets and liabilities, including debt, of the securitizations are reflected in the Company's consolidated financial statements and are summarized as supplemental information on the balance sheet.

As of December 31, 2019, the Company owned 98.9 percent of the economic rights of ALLO Communications LLC and has a disproportional 80 percent of the voting rights related to all operating decisions for ALLO's business. See note 1, “Description of Business,” for a description of ALLO, including the primary services offered. In addition to the Company’s original equity investment, Nelnet, Inc. (the parent) contributed additional equity with a yield-based preferred return of future earnings due on the newly contributed equity. The Company will continue to increase its ownership interests as it makes cash contributions to fund ALLO's operating losses and capital expenditures. In addition, ALLO's management, as current minority members, has the opportunity to earn ownership interests based on the financial performance of ALLO. Nelnet, Inc.’s maximum exposure to loss as a result of its involvement with ALLO is equal to its ownership interests investment. All of ALLO’s financial activities and related assets and liabilities are reflected in the Company’s consolidated financial statements. See note 14, “Segment Reporting,” for disclosure of ALLO’s total assets and results of operations (included in the "Communications" operating segment), note 15, "Disaggregated Revenue and Deferred Revenue," for disclosure of ALLO's disaggregated revenue and deferred revenue, note 9, "Goodwill," for disclosure of ALLO's goodwill, and note 10, “Property and Equipment,” for disclosure of ALLO’s fixed assets. ALLO's goodwill and property and equipment comprise the majority of its assets. The assets recognized as a result of consolidating ALLO are the property of ALLO and are not available for any other purpose.

VIEs - Not consolidated

The Company is not required to consolidate VIEs in which it has determined it is not the primary beneficiary.

The Company makes investments in entities that promote renewable energy sources (solar). The Company’s investments in these entities generate a return primarily through the realization of federal income tax credits, operating cash flows, and other tax benefits, such as tax deductions from operating losses of the investments, over specified time periods. These investments are included in "investments and notes receivable" on the consolidated balance sheets. The carrying value of these investments are reduced by tax credits earned when the solar project is placed in service. The Company’s unfunded capital and other commitments related to these unconsolidated VIEs are included in “other liabilities” on the consolidated balance sheet. The Company’s maximum exposure to loss from these unconsolidated VIEs include the investment, unfunded capital commitments, and previously recorded tax credits which remain subject to recapture by taxing authorities based on compliance features required to be met at the project level. The tax credit recapture period ratably decreases over five years from when the project is placed in service. While the Company believes potential losses from these investments are remote, the maximum exposure was determined by assuming a scenario where the energy-producing projects completely fail and do not meet certain government compliance requirements resulting in recapture of the related tax credits.

Accounting Standards Adopted in 2019

Accounting Standard Adopted in 2019

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Codification Topic 842, Leases ("ASC Topic 842"). The standard requires the identification of arrangements that should be accounted for as leases by lessees and the disclosure of key information about leasing arrangements. The standard establishes a right-of-use ("ROU") model that requires a lessee to recognize a ROU asset and lease liability for all leases with a term longer than twelve months and classify the lease as either operating or financing, with the income statement reflecting lease expense for operating leases and amortization/interest expense for financing leases.

The Company adopted the standard effective January 1, 2019, using the effective date as its date of initial application. Consequently, financial information is not updated and the disclosures required under the new standard are not provided for dates and periods before January 1, 2019. The Company elected to utilize the ‘package of practical expedients’, which permitted it to not reassess under the new standard its prior conclusions about lease identification, lease classification, and initial direct costs.

The most significant impact of the standard relates to (1) the recognition of new ROU assets and lease liabilities on the Company's consolidated balance sheet; (2) the deconsolidation of assets and liabilities for certain sale-leaseback transactions arising from build-to-suit lease arrangements for which construction was completed and the Company is leasing the constructed assets that did not qualify for sale accounting prior to the adoption of the new standard; and (3) significant new disclosures about the Company’s leasing activities. The build-to-suit lease arrangements have been reassessed as operating leases as of the effective date under ASC Topic 842.

Adoption of the new standard resulted in recognizing lease liabilities of $33.7 million based on the present value of the remaining minimum rental payments. In addition, the Company recognized ROU assets of $32.8 million, which corresponds to the lease liabilities reduced by deferred rent expense as of the effective date. The Company also deconsolidated total assets of $43.8 million and total liabilities of $34.8 million for entities that had been consolidated due to sale-leaseback transactions that failed to qualify for recognition as sales under the prior guidance. Deconsolidation of these entities reduced noncontrolling

interests by $6.1 million. The cumulative effect of the changes made to the Company's consolidated balance sheet as of January 1, 2019 for the adoption of the new lease standard was as follows:


			Adjustments from adoption of new lease standard
	Balances at December 31, 2018		ROU assets and lease liabilities	Deconsolidation of sale-leaseback transactions	Balances at January 1, 2019
Assets
Cash and cash equivalents	$	121,347	—	(646)	120,701
Investments and notes receivable	249,370		—	(23,134)	226,236
Accounts receivable	59,531		—	(89)	59,442
Property and equipment, net	344,784		—	(16,974)	327,810
Other assets	45,533		32,831	(27)	78,337
Liabilities
Bonds and notes payable	22,218,740		—	(33,182)	22,185,558
Other liabilities	256,092		32,831	(1,611)	287,312
Equity
Noncontrolling interests	10,315		—	(6,077)	4,238

Reclassifications

Certain amounts previously reported within the Company’s consolidated statements of income have been reclassified to conform to the current period presentation. These reclassifications include:

•Reclassifying “gain from debt repurchases” to “other income”; and

•Reclassifying “loan servicing fees to third parties” to “other expenses.”

Noncontrolling Interests

Amounts for noncontrolling interests reflect the proportionate share of membership interest (equity) and net income attributable to the holders of minority membership interests in the following entities:

•Whitetail Rock Capital Management, LLC - WRCM is the Company’s SEC-registered investment advisor subsidiary. WRCM issued 10 percent minority membership interests on January 1, 2012.

•ALLO Communications LLC - On December 31, 2015, the Company purchased 92.5 percent of the ownership interests in ALLO. On January 1, 2016, the Company sold a 1.0 percent ownership interest in ALLO to a non-related third party. Subsequently, the Company contributed additional equity to increase its ownership interest in ALLO to 98.9 percent. Per ALLO's operating agreement, currently all operating results of ALLO are allocated to the Company.

In addition, the Company has established entities for the purpose of investing in renewable energy (solar) and federal opportunity zone programs in which it has noncontrolling members.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities, reported amounts of revenues and expenses, and other disclosures. Actual results may differ from those estimates.

Loans Receivable

Loans consist of federally insured student loans, private education loans, and consumer loans. If the Company has the ability and intent to hold loans for the foreseeable future, such loans are held for investment and carried at amortized cost. Amortized cost includes the unamortized premium or discount and capitalized origination costs and fees, all of which are amortized to interest income. Loans which are held-for-investment also have an allowance for loan loss as needed. Any loans the Company has the ability and intent to sell are classified as held for sale and are carried at the lower of cost or fair value. Loans which are held for sale do not have the associated premium or discount and origination costs and fees amortized into interest income and

there is also no related allowance for loan losses. There were no loans classified as held for sale as of December 31, 2019 and 2018.

Federally insured loans were originated under the FFEL Program by certain eligible lenders as defined by the Higher Education Act of 1965, as amended (the “Higher Education Act”). These loans, including related accrued interest, are guaranteed at their maximum level permitted under the Higher Education Act by an authorized guaranty agency, which has a contract of reinsurance with the Department. The terms of the loans, which vary on an individual basis, generally provide for repayment in monthly installments of principal and interest. Generally, Stafford and PLUS loans have repayment periods between five and ten years. Consolidation loans have repayment periods of twelve to thirty years. FFELP loans do not require repayment while the borrower is in-school, and during the grace period immediately upon leaving school. The borrower may also be granted a deferment or forbearance for a period of time based on need, during which time the borrower is not considered to be in repayment. Interest continues to accrue on loans in the in-school, deferment, and forbearance program periods. In addition, eligible borrowers may qualify for income-driven repayment plans offered by the Department. These plans determine the borrower's payment amount based on their discretionary income and may extend their repayment period. Interest rates on federally insured student loans may be fixed or variable, dependent upon the type of loan, terms of the loan agreements, and date of origination.

Substantially all FFELP loan principal and related accrued interest is guaranteed as provided by the Higher Education Act. These guarantees are subject to the performance of certain loan servicing due diligence procedures stipulated by applicable Department regulations. If these due diligence requirements are not met, affected student loans may not be covered by the guarantees in the event of borrower default. Such student loans are subject to “cure” procedures and reinstatement of the guarantee under certain circumstances.

Loans also include private education and consumer loans. Private education loans are loans to students or their families that are non-federal loans and loans not insured or guaranteed under the FFEL Program. These loans are used primarily to bridge the gap between the cost of higher education and the amount funded through financial aid, federal loans, or borrowers' personal resources. The terms of the private education loans, which vary on an individual basis, generally provide for repayment in monthly installments of principal and interest over a period of up to 30 years. The private education loans are not covered by a guarantee or collateral in the event of borrower default. Consumer loans are unsecured loans to an individual for personal, family, or household purposes. The terms of the consumer loans, which vary on an individual basis, generally provide for repayment in weekly or monthly installments of principal and interest over a period of up to 6 years.

Allowance for Loan Losses

The allowance for loan losses represents management's estimate of probable losses on loans. The provision for loan losses reflects the activity for the applicable period and provides an allowance at a level that the Company's management believes is appropriate to cover probable losses inherent in the loan portfolio. The Company evaluates the adequacy of the allowance for loan losses using a historical loss rate methodology adjusted for qualitative factors separately on each of its federally insured, private education, and consumer loan portfolios. These evaluation processes are subject to numerous judgments and uncertainties including the selection of loss rates over time and determination of the loss emergence period.

The allowance for the federally insured loan portfolio is based on periodic evaluations of the Company's loan portfolios considering loans in repayment versus those in a nonpaying status, delinquency status, trends in defaults in the portfolio based on Company and industry data, past experience, trends in student loan claims rejected for payment by guarantors, changes to federal student loan programs, current economic conditions, and other relevant qualitative factors. The federal government guarantees 97 percent of the principal of and the interest on federally insured student loans disbursed on and after July 1, 2006 (and 98 percent for those loans disbursed on and after October 1, 1993 and prior to July 1, 2006), which limits the Company's loss exposure on the outstanding balance of the Company's federally insured portfolio. Student loans disbursed prior to October 1, 1993 are fully insured.

In determining the appropriate allowance for loan losses on the private education and consumer loans, the Company considers several factors, including: loans in repayment versus those in a nonpaying status, delinquency status, type of program, trends in defaults in the portfolio based on Company and industry data, past experience, current economic conditions, and other relevant qualitative factors. The Company places private education and consumer loans on nonaccrual status when the collection of principal and interest is 90 days past due, and charges off the loan when the collection of principal and interest is 120 days or 180 days past due, depending on type of loan program. Collections, if any, are reflected as a recovery through the allowance for loan losses.

Management has determined that each of the federally insured, private education, and consumer loan portfolios meet the definition of a portfolio segment, which is defined as the level at which an entity develops and documents a systematic method for determining its allowance for credit losses. Accordingly, the portfolio segment disclosures are presented on this basis in note 3 for each of these portfolios. The Company does not disaggregate its portfolio segment loan portfolios into classes of financing receivables. The Company collectively evaluates loans for impairment and as of December 31, 2019 and 2018, the Company did not have any impaired loans as defined in the Receivables Topic of the FASB Accounting Standards Codification.

For loans purchased where there is evidence of credit deterioration since the origination of the loan, the Company records a credit discount, separate from the allowance for loan losses, which is non-accretable to interest income. Remaining discounts and premiums for purchased loans are recognized in interest income over the remaining estimated lives of the loans. The Company continues to evaluate credit losses associated with purchased loans based on current information and changes in expectations to determine the need for any additional allowance for loan losses.

Cash and Cash Equivalents and Statement of Cash Flow

Cash and Cash Equivalents and Statements of Cash Flows

For purposes of the consolidated statements of cash flows, the Company considers all investments with original maturities of three months or less to be cash equivalents.

Accrued interest on loans purchased and sold is included in cash flows from operating activities in the respective period.

Investments

The Company classifies its debt securities, primarily student loan and other asset-backed securities, as available-for-sale. These securities are carried at fair value, with the temporary changes in fair value, net of taxes, carried as a separate component of shareholders’ equity. The amortized cost of debt securities in this category is adjusted for amortization of premiums and accretion of discounts, which are amortized using the effective interest rate method. Other-than-temporary impairment is evaluated by considering several factors, including the length of time and extent to which the fair value has been less than the amortized cost basis, the financial condition and near-term prospects of the issuer of the security (considering factors such as adverse conditions specific to the security and ratings agency actions), and the intent and ability of the Company to retain the investment to allow for any anticipated recovery in fair value. The entire fair value loss on a security that has experienced an other-than-temporary impairment is recorded in earnings if the Company intends to sell the security or if it is more likely than not that the Company will be required to sell the security before the expected recovery of the loss. However, if the impairment is other-than-temporary, and either of those two conditions does not exist, the portion of the impairment related to credit losses is recorded in earnings and the impairment related to other factors is recorded in other comprehensive income. When an investment is sold, the cost basis is determined through specific identification of the security sold.

The Company classifies its residual interest in consumer loan securitizations as held-to-maturity beneficial interest investments. The Company measures accretable yield initially as the excess of all cash flows expected to be collected attributable to the beneficial interest estimated at the acquisition/transaction date over the initial investment and recognizes interest income over the life of the beneficial interest using the effective interest method. The Company continues to update, over the life of the beneficial interest, the expectation of cash flows to be collected. Beneficial interest investments are evaluated for impairment by comparing the present value of the remaining cash flows as estimated at the initial transaction date (or the last date previously revised) to the present value of the cash flows expected to be collected at the current financial reporting date, both discounted using the same effective rate equal to the current yield used to accrete the beneficial interest.

Equity investments with readily determinable fair values are measured at fair value, with changes in the fair value recognized through net income (other than those equity investments accounted for under the equity method of accounting or those that result in consolidation of the investee).

For equity investments without readily determinable fair value, the Company uses the measurement alternative of cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The Company uses qualitative factors to identify impairment on these investments.

The Company accounts for equity investments over which it has significant influence but not a controlling financial interest using the equity method of accounting. Equity method investments are recorded at cost and subsequently increased or decreased by the amount of the Company’s proportionate share of the net earnings or losses and other comprehensive income of the

investee. Equity method investments are evaluated for other-than-temporary impairment using certain impairment indicators such as a series of operating losses of an investee or other factors. These factors may indicate that a decrease in value of the investment has occurred that is other-than-temporary and shall be recognized.

For periods prior to January 1, 2018, equity securities with readily determinable fair values were primarily classified as available-for-sale and stated at fair value with unrealized gains and losses reported as a separate component of accumulated other comprehensive income, net of tax. Equity securities without readily determinable fair values were recorded at cost less impairment, if any.

Restricted Cash

Restricted cash primarily includes amounts for student loan securitizations and other secured borrowings. This cash must be used to make payments related to trust obligations. Amounts on deposit in these accounts are primarily the result of timing differences between when principal and interest is collected on the student loans held as trust assets and when principal and interest is paid on the trust's asset-backed debt securities. Restricted cash also includes collateral deposits with derivative counterparties and third-party clearinghouses.

Restricted Cash - Due to Customers

As a servicer of student loans, the Company collects student loan remittances and subsequently disburses these remittances to the appropriate lending entities. In addition, as part of the Company's Education Technology, Services, and Payment Processing operating segment, the Company collects tuition payments and subsequently remits these payments to the appropriate schools. Cash collected for customers and the related liability are included in the accompanying consolidated balance sheets.

Accounts Receivable

Accounts receivable are presented at their net realizable values, which include allowances for doubtful accounts. Allowance estimates are based upon individual customer experience, as well as the age of receivables and likelihood of collection.

Business Combinations

Business CombinationsThe Company uses the acquisition method in accounting for acquired businesses. Under the acquisition method, the financial statements reflect the operations of an acquired business starting from the completion of the acquisition. The assets acquired and liabilities assumed are recorded at their respective estimated fair values at the date of acquisition. Any excess of the purchase price over the estimated fair values of the identifiable net assets acquired is recorded as goodwill. All contingent consideration is measured at fair value on the acquisition date and included in the consideration transferred in the acquisition. Contingent consideration classified as a liability is remeasured to fair value at each reporting date until the contingency is resolved, and changes in fair value are recognized in earnings

Goodwill and Intangible Assets

Goodwill

The Company reviews goodwill for impairment annually (in the fourth quarter) and whenever triggering events or changes in circumstances indicate its carrying value may not be recoverable. Goodwill is tested for impairment using a fair value approach at the reporting unit level. A reporting unit is the operating segment, or a business one level below that operating segment if discrete financial information is prepared and regularly reviewed by segment management. However, components are aggregated as a single reporting unit if they have similar economic characteristics.

The Company tests goodwill for impairment in accordance with applicable accounting guidance. The guidance provides an entity the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not (more than 50%) that the estimated fair value of a reporting unit is less than its carrying amount. If an entity elects to perform a qualitative assessment and determines that an impairment is more likely than not, the entity is then required to perform a quantitative impairment test (described below), otherwise no further analysis is required. An entity also may elect not to perform the qualitative assessment and, instead, proceed directly to the quantitative impairment test.

If the Company elects to not perform a qualitative assessment or if the Company determines it is more likely than not that the fair value of a reporting unit is less than the carrying amount, then the Company performs a quantitative impairment test on goodwill. In the quantitative test, the Company compares the fair value of each reporting unit to its carrying value. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is considered not impaired

and the Company is not required to perform further testing. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then the Company would record an impairment loss equal to the difference.

Determining the fair value of a reporting unit involves the use of significant estimates and assumptions. These estimates and assumptions include revenue growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, future economic and market conditions, and determination of appropriate market comparables. Actual future results may differ from those estimates.

See note 9, "Goodwill," for information regarding the Company's annual goodwill impairment review.

Intangible Assets

The Company uses estimates to determine the fair value of acquired assets to allocate the purchase price to acquired intangible assets. Such estimates are generally based on estimated future cash flows or cost savings associated with particular assets and are discounted to present value using an appropriate discount rate. The estimates of future cash flows associated with intangible assets are generally prepared using a cost savings method, a lost income method, or an excess return method, as appropriate. In utilizing such methods, management must make certain assumptions about the amount and timing of estimated future cash flows and other economic benefits from the assets, the remaining economic useful life of the assets, and general economic factors concerning the selection of an appropriate discount rate. The Company may also use replacement cost or market comparison approaches to estimate fair value if such methods are determined to be more appropriate.

Intangible assets with finite lives are amortized over their estimated lives. Such assets are amortized using a method of amortization that reflects the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up. If that pattern cannot be reliably determined, the Company uses a straight-line amortization method.

The Company evaluates the estimated remaining useful lives of purchased intangible assets and whether events or changes in circumstances warrant a revision to the remaining periods of amortization.

Property and Equipment

Property and EquipmentProperty and equipment are carried at cost, net of accumulated depreciation. Maintenance and repairs are charged to expense as incurred, and major improvements, including leasehold improvements, are capitalized. Gains and losses from the sale of property and equipment are included in determining net income. The Company uses the straight-line method for recording depreciation and amortization. Leasehold improvements are amortized straight-line over the shorter of the lease term or estimated useful life of the asset