NELNET INC, 10-K filed on 2/25/2021
Annual Report
v3.20.4
Cover - USD ($)
12 Months Ended
Dec. 31, 2020
Jan. 31, 2021
Jun. 30, 2020
Document Information [Line Items]      
Document Type 10-K    
Amendment Flag false    
Document Annual Report true    
Document Period End Date Dec. 31, 2020    
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 2020    
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    
ICFR Auditor Attestation Flag true    
Entity Shell Company false    
Entity Public Float     $ 918,743,888
Documents Incorporated by Reference Portions of the registrant’s definitive Proxy Statement to be filed for its 2021 Annual Meeting of Shareholders, scheduled to be held May 20, 2021, are incorporated by reference into Part III of this Form 10-K.    
Class A      
Document Information [Line Items]      
Entity Common Stock, Shares Outstanding   27,195,862  
Class B      
Document Information [Line Items]      
Entity Common Stock, Shares Outstanding   11,155,571  
v3.20.4
Consolidated Balance Sheets - USD ($)
$ in Thousands
Dec. 31, 2020
Dec. 31, 2019
Assets:    
Loans and accrued interest receivable (net of allowance for loan losses of $175,698 and $61,914, respectively) $ 20,185,656 $ 21,402,868
Cash and cash equivalents:    
Cash and cash equivalents - not held at a related party 33,292 13,922
Cash and cash equivalents - held at a related party 87,957 119,984
Total cash and cash equivalents 121,249 133,906
Investments 992,940 247,099
Restricted cash 553,175 650,939
Restricted cash - due to customers 283,971 437,756
Accounts receivable (net of allowance for doubtful accounts of $1,824 and $4,455, respectively) 76,460 115,391
Goodwill 142,092 156,912
Intangible assets, net 75,070 81,532
Property and equipment, net 123,527 348,259
Other assets 92,020 134,308
Total assets 22,646,160 23,708,970
Liabilities:    
Bonds and notes payable 19,320,726 20,529,054
Accrued interest payable 28,701 47,285
Bank deposits 54,633 0
Other liabilities 312,280 303,781
Due to customers 301,471 437,756
Total liabilities 20,017,811 21,317,876
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 3,794 5,715
Retained earnings 2,621,762 2,377,627
Accumulated other comprehensive earnings 6,102 2,972
Total Nelnet, Inc. shareholders' equity 2,632,042 2,386,712
Noncontrolling interests (3,693) 4,382
Total equity 2,628,349 2,391,094
Total liabilities and equity 22,646,160 23,708,970
Class A    
Common stock:    
Common stock 272 285
Class B    
Common stock:    
Common stock 112 113
Variable Interest Entity, Primary Beneficiary    
Assets:    
Loans and accrued interest receivable (net of allowance for loan losses of $175,698 and $61,914, respectively) 20,132,996 21,399,382
Cash and cash equivalents:    
Restricted cash 499,223 639,847
Liabilities:    
Bonds and notes payable 19,355,375 20,742,798
Other liabilities 83,127 162,494
Common stock:    
Net assets of consolidated education and other lending variable interest entities $ 1,193,717 $ 1,133,937
v3.20.4
Consolidated Balance Sheets (Parentheticals) - USD ($)
$ in Thousands
Dec. 31, 2020
Dec. 31, 2019
Allowance for loan losses $ 175,698 $ 61,914
Allowance for doubtful accounts $ 1,824 $ 4,455
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) 27,193,154 28,458,495
Shares outstanding (in shares) 27,193,154 28,458,495
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) 11,155,571 11,271,609
Shares outstanding (in shares) 11,155,571 11,271,609
v3.20.4
Consolidated Statements of Income - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Interest income:      
Loan interest $ 595,113 $ 914,256 $ 897,666
Investment interest 24,543 34,421 26,600
Total interest income 619,656 948,677 924,266
Interest expense:      
Interest on bonds and notes payable and bank deposits 330,071 699,327 669,906
Net interest income 289,585 249,350 254,360
Less provision for loan losses 63,360 39,000 23,000
Net interest income after provision for loan losses 226,225 210,350 231,360
Other income/expense:      
Other 57,561 47,918 54,805
Gain on sale of loans 33,023 17,261 0
Gain from deconsolidation of ALLO 258,588 0 0
Impairment expense and provision for beneficial interests (24,723) 0 (11,721)
Derivative market value adjustments and derivative settlements, net (24,465) (30,789) 71,085
Total other income/expense 1,110,384 831,245 820,811
Cost of services:      
Cost of services 105,018 102,026 76,492
Operating expenses:      
Salaries and benefits 501,832 463,503 436,179
Depreciation and amortization 118,699 105,049 86,896
Other expenses 160,574 194,272 166,310
Total operating expenses 781,105 762,824 689,385
Income before income taxes 450,486 176,745 286,294
Income tax expense 100,860 35,451 58,770
Net income 349,626 141,294 227,524
Net loss attributable to noncontrolling interests 2,817 509 389
Net income attributable to Nelnet, Inc. $ 352,443 $ 141,803 $ 227,913
Earnings per common share:      
Net income attributable to Nelnet, Inc. shareholders - basic and diluted (in dollars per share) $ 9.02 $ 3.54 $ 5.57
Weighted average common shares outstanding - basic and diluted (in shares) 39,059,588 40,047,402 40,909,022
Loan servicing and systems revenue      
Other income/expense:      
Revenue $ 451,561 $ 455,255 $ 440,027
Education technology services and payment processing services      
Other income/expense:      
Revenue 282,196 277,331 221,962
Cost of services:      
Cost of services 82,206 81,603 59,566
Communications revenue      
Other income/expense:      
Revenue 76,643 64,269 44,653
Cost of services:      
Cost of services $ 22,812 $ 20,423 $ 16,926
v3.20.4
Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Dec. 31, 2020
Sep. 30, 2020
Jun. 30, 2020
Mar. 31, 2020
Dec. 31, 2019
Sep. 30, 2019
Jun. 30, 2019
Mar. 31, 2019
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Statement of Comprehensive Income [Abstract]                      
Net income $ 231,606 $ 71,176 $ 86,610 $ (39,765) $ 41,834 $ 33,135 $ 24,678 $ 41,647 $ 349,626 $ 141,294 $ 227,524
Available-for-sale securities:                      
Unrealized holding gains (losses) arising during period, net                 6,637 (1,199) 1,056
Reclassification adjustment for gains recognized in net income, net of losses                 (2,521) 0 (978)
Income tax effect                 (986) 288 (69)
Total other comprehensive income (loss)                 3,130 (911) 9
Comprehensive income                 352,756 140,383 227,533
Comprehensive loss attributable to noncontrolling interests                 2,817 509 389
Comprehensive income attributable to Nelnet, Inc.                 $ 355,573 $ 140,892 $ 227,922
v3.20.4
Consolidated Statements of Shareholders' Equity - USD ($)
$ in Thousands
Total
Cumulative Effect, Period of Adoption, Adjustment
Preferred stock shares
Common stock shares
Class A
Common stock shares
Class B
Additional paid-in capital
Retained earnings
Retained earnings
Cumulative Effect, Period of Adoption, Adjustment
Accumulated other comprehensive earnings
Accumulated other comprehensive earnings
Cumulative Effect, Period of Adoption, Adjustment
Noncontrolling interests
Noncontrolling interests
Cumulative Effect, Period of Adoption, Adjustment
Beginning balance (in shares) at Dec. 31, 2017     0 29,341,517 11,468,587              
Beginning balance at Dec. 31, 2017 $ 2,165,387 $ 1,264 $ 0 $ 293 $ 115 $ 521 $ 2,143,983 $ 2,007 $ 4,617 $ (743) $ 15,858  
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)          
Conversion of common stock (in shares)       8,946 (8,946)              
Acquisition of noncontrolling interest (19,101)           (13,449)       (5,652)  
Ending balance at Dec. 31, 2018 $ 2,314,779 (6,077) $ 0 $ 288 $ 115 622 2,299,556   3,883   10,315 $ (6,077)
Ending balance (in shares) at Dec. 31, 2018     0 28,798,464 11,459,641              
Increase (Decrease) in Stockholders' Equity [Roll Forward]                        
Accounting Standards Update [Extensible List] us-gaap:AccountingStandardsUpdate201602Member                      
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 $ (18,868) $ 0 $ 285 $ 113 5,715 2,377,627 $ (18,868) 2,972   4,382  
Ending balance (in shares) at Dec. 31, 2019     0 28,458,495 11,271,609              
Increase (Decrease) in Stockholders' Equity [Roll Forward]                        
Accounting Standards Update [Extensible List] us-gaap:AccountingStandardsUpdate201613Member                      
Issuance of noncontrolling interests $ 219,265                   219,265  
Net income (loss) 349,626           352,443       (2,817)  
Other comprehensive income (loss) 3,130               3,130      
Distribution to noncontrolling interests (16,123)                   (16,123)  
Cash dividends on Class A and Class B common stock (31,778)           (31,778)          
Issuance of common stock, net of forfeitures (in shares)       213,015                
Issuance of common stock, net of forfeitures 5,628     $ 2   5,626            
Compensation expense for stock based awards 7,290         7,290            
Repurchase of common stock (in shares)       (1,594,394)                
Repurchase of common stock (73,358)     $ (16)   (14,837) (58,505)          
Conversion of common stock (in shares)       116,038 (116,038)              
Conversion of common stock       $ 1 $ (1)              
Acquisition of noncontrolling interest (600)           (375)       (225)  
Deconsolidation of noncontrolling interest - ALLO 208,175                   208,175  
Stockholders' Equity, Other 1,218           1,218          
Ending balance at Dec. 31, 2020 $ 2,628,349   $ 0 $ 272 $ 112 $ 3,794 $ 2,621,762   $ 6,102   $ (3,693)  
Ending balance (in shares) at Dec. 31, 2020     0 27,193,154 11,155,571              
Increase (Decrease) in Stockholders' Equity [Roll Forward]                        
Accounting Standards Update [Extensible List] us-gaap:AccountingStandardsUpdate201613Member                      
v3.20.4
Consolidated Statements of Shareholders' Equity (Parentheticals) - $ / shares
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Class A      
Cash dividend on Class A and Class B common stock (in dollars per share) $ 0.82 $ 0.74 $ 0.66
Class B      
Cash dividend on Class A and Class B common stock (in dollars per share) $ 0.82 $ 0.74 $ 0.66
v3.20.4
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Statement of Cash Flows [Abstract]      
Net income attributable to Nelnet, Inc. $ 352,443 $ 141,803 $ 227,913
Net loss attributable to noncontrolling interests (2,817) (509) (389)
Net income 349,626 141,294 227,524
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization, including debt discounts and loan premiums and deferred origination costs 198,473 192,662 184,682
Loan discount accretion (35,285) (35,824) (40,800)
Provision for loan losses 63,360 39,000 23,000
Derivative market value adjustments 28,144 76,195 (1,014)
(Payments to) proceeds from termination of derivative instruments, net 0 (12,530) 10,283
(Gain from) loss on repurchases and extinguishment of debt, net (1,924) 16,553 (359)
(Payments to) proceeds from clearinghouse - initial and variation margin, net (26,747) (70,685) 40,382
Gain from deconsolidation of ALLO (287,579) 0 0
Gain from sale of loans (33,023) (17,261) 0
Gain from investments, net (14,055) (3,095) (8,139)
Deferred income tax expense (benefit) 7,974 (7,265) 10,981
Non-cash compensation expense 16,739 6,781 6,539
Impairment expense and provision for beneficial interests 24,723 0 11,721
Other 186 584 (2,551)
Increase in loan and investment accrued interest receivable (61,090) (54,586) (248,869)
Decrease (increase) in accounts receivable 40,880 (55,949) 3,059
Decrease (increase) in other assets, net 59,182 (19,858) (4,069)
Decrease in the carrying amount of ROU asset 11,594 8,793 0
(Decrease) increase in accrued interest payable (18,584) (14,394) 11,640
Increase (decrease) in other liabilities 35,907 49,100 (12,506)
Decrease in the carrying amount of lease liability (9,401) (8,678) 0
(Decrease) increase in due to customers (136,285) 68,078 59,388
Net cash provided by operating activities 212,815 298,915 270,892
Cash flows from investing activities, net of acquisitions:      
Purchases of loans (1,459,696) (1,906,669) (3,847,553)
Purchases of loans from a related party (147,539) (101,538) (74,698)
Net proceeds from loan repayments, claims, and capitalized interest 2,644,347 3,462,391 3,322,783
Proceeds from sale of loans 136,126 196,564 23,712
Purchases of available-for-sale securities (471,510) (1,010) (46,424)
Proceeds from sales of available-for-sale securities 173,784 105 71,415
Proceeds from beneficial interest in loan securitizations 44,213 6,593 0
Purchases of other investments (168,216) (103,250) (67,040)
Proceeds from other investments 13,011 63,879 23,039
Purchases of property and equipment (113,312) (92,499) (125,023)
Business acquisitions, net of cash and restricted cash acquired (29,989) 0 (12,562)
Net cash provided by (used in) investing activities 621,219 1,524,566 (732,351)
Cash flows from financing activities:      
Payments on bonds and notes payable (3,129,485) (4,698,878) (3,113,503)
Proceeds from issuance of bonds and notes payable 1,884,689 2,997,972 3,922,962
Payments of debt issuance costs (8,674) (14,406) (13,808)
Payments to extinguish debt 0 (14,030) 0
Increase in bank deposits, net 54,633 0 0
Dividends paid (31,778) (29,485) (26,839)
Repurchases of common stock (73,358) (40,411) (45,331)
Proceeds from issuance of common stock 1,653 1,552 1,359
Acquisition of noncontrolling interest (600) 0 (13,449)
Issuance of noncontrolling interests 205,768 4,650 918
Distribution to noncontrolling interests (1,088) (235) (525)
Net cash (used in) provided by financing activities (1,098,240) (1,793,271) 711,784
Net increase (decrease) in cash, cash equivalents and restricted cash (264,206) 30,210 250,325
Cash, cash equivalents, and restricted cash, beginning of year 1,222,601 1,192,391 942,066
Cash, cash equivalents, and restricted cash, end of year 958,395 1,222,601 1,192,391
Supplemental disclosures of cash flow information:      
Cash disbursements made for interest 301,570 657,436 591,394
Cash disbursements made for income taxes, net of refunds and credits [1] 29,685 17,672 473
Cash disbursements made for operating leases 11,488 9,966 0
Noncash operating, investing, and financing activity:      
ROU assets obtained in exchange for lease obligations 4,282 8,731 0
Receipt of beneficial interest in consumer loan securitizations 52,501 39,780 0
Distribution to noncontrolling interest 15,035 3,868 0
Cash and cash equivalents:      
Cash, cash equivalents, and restricted cash $ 1,222,601 $ 1,192,391 $ 942,066
[1] For 2020, 2019, and 2018 the Company utilized $53.9 million, $31.8 million, and $14.7 million of federal and state tax credits, respectively, related primarily to renewable energy.
v3.20.4
Consolidated Statements of Cash Flows (Parenthetical) - USD ($)
$ in Millions
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Statement of Cash Flows [Abstract]      
Tax credit utilized in period $ 53.9 $ 31.8 $ 14.7
v3.20.4
Description of Business
12 Months Ended
Dec. 31, 2020
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 and education technology, services, and payment processing, and the Company also has a significant investment in 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's reportable operating segments include:
Loan Servicing and Systems (“LSS”)
Education Technology, Services, and Payment Processing (“ETS&PP”)
Communications
Asset Generation and Management (“AGM”)
Nelnet Bank
A description of each reportable operating segment is included below. See note 15 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
Backup servicing for FFELP, private education and consumer loans
Providing student loan servicing software and other information technology products and services
Customer acquisition, management services, and backup servicing for community solar developers
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. In addition, LSS provides backup servicing to third-parties, which allows a transfer of the customer’s servicing volume to the Company’s platform and becoming a full servicing customer if their existing servicer cannot perform their duties.
On February 7, 2018, NDS acquired Great Lakes Educational Loan Services, Inc. (“Great Lakes”). See note 8 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 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, interacting with customers through multi-channels, and processing and technology services.
Education Technology, Services, and Payment Processing
The Education Technology, Services, and Payment Processing segment (known as Nelnet Business Solutions (“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 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) 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. 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, hosted PBX services, and other services.
On December 21, 2020 the Company deconsolidated ALLO from the Company’s consolidated financial statements due to ALLO’s recapitalization. The recapitalization of ALLO is not considered a strategic shift in the Company’s involvement with ALLO and ALLO’s results of operations, prior to deconsolidation, are presented by the Company as a reportable operating segment. See note 2, “Recent Developments - ALLO Recapitalization,” for a description of this transaction and the Company’s continued involvement.
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 (excluding loan assets held by Nelnet Bank). 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). AGM also acquires private education and consumer loans. AGM 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.
Nelnet Bank
On November 2, 2020, the Company obtained final approval from the Federal Deposit Insurance Corporation ("FDIC") for federal deposit insurance and for a bank charter from the Utah Department of Financial Institutions ("UDFI") in connection with the establishment of Nelnet Bank, and Nelnet Bank launched operations. Nelnet Bank operates as an internet Utah-chartered industrial bank franchise focused on the private education loan marketplace, with a home office in Salt Lake City, Utah.
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 renewable energy (solar) and real estate
Interest expense incurred on unsecured and certain other corporate related 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.
v3.20.4
Recent Developments - ALLO Recapitalization
12 Months Ended
Dec. 31, 2020
Restructuring and Related Activities [Abstract]  
Recent Developments - ALLO Recapitalization Recent Developments - ALLO Recapitalization
On October 1, 2020, the Company entered into various agreements with SDC Allo Holdings, LLC (“SDC”), a third party global digital infrastructure investor, and ALLO, then a majority owned communications subsidiary of the Company, for various transactions contemplated by the parties in connection with a recapitalization and additional funding for ALLO.
The agreements provided for a series of interrelated transactions, whereby on October 15, 2020, ALLO received proceeds of $197.0 million from SDC as the purchase price for the issuance of non-voting preferred membership units of ALLO, and redeemed $160.0 million of non-voting preferred membership units of ALLO held by the Company. On December 21, 2020, the non-voting preferred membership units of ALLO held by SDC automatically converted into voting membership units of ALLO pursuant to the terms of the agreements upon the receipt on December 21, 2020 of the required approvals from applicable regulatory authorities. As a result of such conversion, SDC, the Company, and members of ALLO’s management own approximately 48 percent, 45 percent, and 7 percent, respectively, of the outstanding voting membership interests of ALLO, and the Company deconsolidated ALLO from the Company’s consolidated financial statements.
Upon the deconsolidation of ALLO, the Company recorded its 45 percent voting membership interests in ALLO at fair value, and accounts for such investment under the Hypothetical Liquidation at Book Value (“HLBV”) method of accounting. In addition, the Company recorded its remaining non-voting preferred membership units in ALLO at fair value, and accounts for such investment as a separate equity investment. As a result of the deconsolidation of ALLO, the Company recognized a gain of $258.6 million in the fourth quarter of 2020 as summarized below.
As of
December 21, 2020
Voting interest/equity method investment - recorded at fair value$132,960 
Preferred membership interest investment - recorded at fair value228,530 
Less: ALLO assets deconsolidated:
Cash and cash equivalents – not held at a related party(299)
Cash and cash equivalents – held at a related party(28,692)
Accounts receivable(4,138)
Goodwill(21,112)
Intangible assets(6,083)
Property and equipment, net(245,295)
Other assets(29,643)
Other liabilities24,185 
Noncontrolling interests208,175 
Gain recognized upon deconsolidation of ALLO$258,588 

The agreements between the Company, SDC, and ALLO provide that they will use commercially reasonable efforts (which expressly excludes requiring ALLO to raise any additional equity financing or sell any assets) to cause ALLO to redeem, on or before April 2024, the remaining preferred membership units of ALLO held by the Company, plus the amount of accrued and unpaid preferred return on such units. As of December 31, 2020, the outstanding preferred membership units of ALLO held by the Company was $228.9 million. The preferred membership units earn a preferred annual return of 6.25 percent.
The impact to the Company’s 2020 operating results as a result of the ALLO recapitalization is summarized below:

Gain from deconsolidation$258,588 
Compensation expense (note 1)(9,298)
Obligation to SDC (note 2)(2,339)
$246,951 

Note 1: On October 1, 2020 (prior to the deconsolidation of ALLO), ALLO recognized compensation expense related to the modification of certain equity awards previously granted to members of ALLO’s management.
Note 2:    As part of the ALLO recapitalization transaction, the Company and SDC entered into an agreement, in which the Company has a contingent payment obligation to pay SDC a contingent payment amount of $25.0 million to $35.0 million in the event the Company disposes of its voting membership units of ALLO that it holds and realizes from such disposition certain targeted return levels. The Company recognized the estimated fair value of the contingent payment as of December 31, 2020 to be $2.3 million, which is included in “other liabilities” on the consolidated balance sheet.
v3.20.4
Summary of Significant Accounting Policies and Practices
12 Months Ended
Dec. 31, 2020
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies and Practices 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.
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" on the consolidated balance sheets and accounted for under the HLBV method of accounting. 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,
20202019
Investment carrying amount$(30,373)7,562 
Tax credits subject to recapture117,740 67,069 
Unfunded capital and other commitments17,462 14,006 
Maximum exposure to loss (a)$104,829 88,637 
(a)    Amounts include $15.6 million and $3.0 million as of December 31, 2020 and 2019, respectively, syndicated to other investors in certain solar projects.
As of December 31, 2020, the Company owned 45 percent of the economic rights of ALLO Communications LLC and has a disproportional 43 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. See note 2, “Recent Developments - ALLO Recapitalization,” for disclosure of ALLO’s recapitalization and the Company’s recognition of its voting interest/equity method and non-voting preferred membership investments, which is the Company’s maximum exposure to loss.
Accounting Standard Adopted in 2020
In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, Financial Instruments – Credit Losses (“ASC 326”), which replaces the incurred loss methodology with an expected loss methodology that is referred to as the
current expected credit loss ("CECL") methodology. Since its original issuance in 2016, the FASB has issued several updates to the original ASU.
The CECL methodology utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for financial assets measured at amortized cost at the time the financial asset is originated or acquired, including, for the Company, loans receivable, accounts receivable, and held-to-maturity beneficial interests in loan securitizations. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. In addition, ASC 326 made changes to the accounting for available-for-sale debt securities. For available-for-sale debt securities where fair value is less than amortized cost, credit-related impairment, if any, is recognized through an allowance for credit losses and adjusted each period for changes in credit risk.
On January 1, 2020, the Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost. Results for reporting periods beginning after January 1, 2020 are presented under ASC 326 (recognizing estimated credit losses expected to occur over the asset's remaining life) while prior period amounts continue to be reported in accordance with previously applicable GAAP (recognizing estimated credit losses using an incurred loss model); therefore, the comparative information for 2019 is not comparable to the information presented for 2020. Adoption of the new guidance primarily impacted the allowance for loan losses related to the Company's loan portfolio. Upon adoption, the Company recorded an increase to the allowance for loan losses of $91.0 million, which included a reclassification of the non-accretable discount balance and premiums related to loans purchased with evidence of credit deterioration, and decreased retained earnings, net of tax, by $18.9 million. The following table illustrates the impact of the adoption of ASC 326.
Balances at
December 31, 2019
Impact of ASC 326 adoptionBalances at
January 1, 2020
Assets
Loans and accrued interest receivable, net of allowance
Loans receivable$20,798,719 — 20,798,719 
Accrued interest receivable733,497 — 733,497 
Loan discount, net(35,036)33,790 (1,246)
Non-accretable discount(32,398)32,398 — 
Allowance for loan losses(61,914)(91,014)(152,928)
Loans and accrued interest receivable, net of allowance21,402,868 (24,826)21,378,042 
Liabilities
Other liabilities (deferred taxes)303,781 (5,958)297,823 
Equity
Retained earnings2,377,627 (18,868)2,358,759 

The Company adopted ASC 326 using the prospective transition approach for loans receivable purchased with credit deterioration ("PCD") that were previously classified as purchased credit impaired ("PCI"). In accordance with the standard, the Company did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. On January 1, 2020, the unamortized cost basis of the PCD assets were adjusted to reflect the addition of $32.4 million in the allowance for loan losses (as reflected in the table above). The remaining noncredit premium on these loans as of January 1, 2020 (based on the adjusted amortized cost basis) will be amortized into interest income over the life of the loans. Changes to the allowance for loan losses on these loans after adoption are recorded through provision expense.
Summary of Significant Accounting Policies Affected by Implementation of ASC 326
Allowance for Loan Losses
The allowance for loan losses is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans as of the balance sheet date. Such allowance is based on the credit losses expected to arise over the life of the asset which includes consideration of prepayments. Loans are charged off when management determines the loan is uncollectible. Charge-offs are recognized as a reduction to the allowance for loan losses. Expected
recoveries of amounts previously charged off, not to exceed the aggregate of the amount previously charged off, are included in the estimate of the allowance for loan losses at the balance sheet date.
The Company aggregates loans with similar risk characteristics into pools to estimate its expected credit losses. The Company evaluates such pooling decisions each quarter and makes adjustments as risk characteristics change.
The Company determines its estimated credit losses for the following financial assets as follows:
Loans receivable
Management has determined that the federally insured, private education, and consumer loan portfolios each 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 loan losses. Accordingly, the portfolio segment disclosures are presented on this basis in note 4 for each of these portfolios. The Company does not disaggregate its portfolio segment loan portfolios into classes of financing receivables.
The Company utilizes an undiscounted cash flow methodology in determining its lifetime expected credit losses on its federally insured and private education loan portfolios and a remaining life methodology for its consumer loan portfolio. For the undiscounted cash flow models, the expected credit losses are the product of multiplying the Company’s estimates of probability of default and loss given default and the exposure of default over the expected life of the loans. For the remaining life method, the expected credit losses are the product of multiplying the Company’s estimated net loss rate by the exposure at default over the expected life of the loans. Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current economic conditions, and reasonable and supportable forecasts. The Company has determined that, for modeling current expected credit losses, the Company can reasonably estimate expected losses that incorporate current economic conditions and forecasted probability weighted economic scenarios up to a one-year period. Macroeconomic factors used in the models include such variables as unemployment rates, gross domestic product, and consumer price index. After the "reasonable and supportable" period, the Company reverts to its actual long-term historical loss experience in the historical observation period. The Company uses a straight line reversion method over two years. Historical credit loss experience provides the basis for the estimation of expected credit losses. A portion of the allowance is comprised of qualitative adjustments to historical loss experience.
Qualitative adjustments consider the following factors, as applicable, for each of the Company’s loan portfolios: student loans in repayment versus those in nonpaying status; delinquency status; type of private education or consumer loan program; trends in defaults in the portfolio based on Company and industry data; past experience; trends in federally insured student loan claims rejected for payment by guarantors; changes in federal student loan programs; and other relevant qualitative factors.
Changes in the allowance for the year ended December 31, 2020 were primarily a result of the adoption of ASC 326 and changes in macroeconomic factors that were impacted by COVID-19.
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. Federally insured student loans disbursed prior to October 1, 1993 are fully insured. Private education and consumer loans are unsecured, with neither a government nor a private insurance guarantee. Accordingly, the Company bears the full risk of loss on these loans if the borrower and co-borrower, if applicable, default. The Company places private education 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 past due. The Company places 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.
Purchased Loans Receivable with Credit Deterioration (“PCD”)
The Company has purchased federally insured rehabilitation loans that have experienced more than insignificant credit deterioration since origination. Rehabilitation loans are loans that have previously defaulted, but for which the borrower has made a specified number of on-time payments. Although rehabilitation loans benefit from the same guarantees as other federally insured loans, rehabilitation loans have generally experienced redefault rates that are higher than default rates for federally insured loans that have not previously defaulted. These PCD loans are recorded at the amount paid. An allowance for loan losses is determined using the same methodology as for other loans held for investment. The sum of the loans’ purchase
price and allowance for loan losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized or accreted into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through provision expense.
Loan Accrued Interest Receivable
The Company has elected to present its loan accrued interest receivable balance combined in its consolidated balance sheets with the loans receivable amortized cost balance.
For the Company’s federally insured loan portfolio, the Company has elected to measure an allowance for credit losses for accrued interest receivables. For federally insured loans, accrued interest receivable is typically charged-off when the contractual payment of principal or interest has become greater than 270 days past due. Charge-offs of accrued interest receivable are recognized as a reduction to the allowance for loan losses.
For the Company’s private education and consumer loan portfolios, the Company has elected not to measure an allowance for credit losses for accrued interest receivables. For private education and consumer loans, the accrual of interest is discontinued when the contractual payment of principal or interest has become 90 days past due. Charge-offs of accrued interest receivable are recognized by reversing interest income.
Reclassifications
Certain amounts previously reported have been reclassified to conform to the current period presentation. These reclassifications include:
Reclassifying the line item "accrued interest receivable" on the Company's consolidated balance sheet to "loans and accrued interest receivable" and "investments";
Reclassifying "gain on sale of loans" that was previously included in "other income" to a new line item on the Company's consolidated statements of income; and
Reclassifying “impairment expense” that was previously included in “other expenses” to a new line on the Company’s consolidated statements of income.
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.
In addition, the Company has established multiple 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, 2020 and 2019.
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. Under the Higher Education Act a 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 thirty 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 six years.
Allowance for Loan Losses – Prior to Adoption of ASC 326
Prior to the adoption of ASC 326 effective January 1, 2020, the allowance for loan losses represented management's estimate of probable losses on loans. The provision for loan losses for periods ended prior to January 1, 2020 reflected the activity for the applicable period and provided an allowance at a level that the Company's management believed was appropriate to cover probable losses inherent in the loan portfolio. The Company evaluated 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 were subject to numerous judgments and uncertainties including the selection of loss rates over time and determination of the loss emergence period.
In determining the appropriate allowance for loan losses, the Company considered several factors, as applicable, for each of the Company’s loan portfolios, including: 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, type of program, current economic conditions, and other relevant qualitative factors.
For loans purchased where there was evidence of credit deterioration since the origination of the loan, the Company recorded a credit discount, separate from the allowance for loan losses, which was non-accretable to interest income. Remaining discounts and premiums for purchased loans were recognized in interest income over the remaining estimated lives of the loans. The Company continued to evaluate credit losses associated with purchased loans based on current information and changes in expectations to determine if additional allowance for loan losses on such portfolios were needed.
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 $92.3 million, $112.9 million, and $181.0 million in 2020, 2019, and 2018, respectively.
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 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. When an investment is sold, the cost basis is determined through specific identification of the security sold.
The Company classifies its residual interest in federally insured and 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. If the present value of remaining cash flows is less than the present value of cash flows expected to be collected, the Company records an allowance for credit losses for the difference. Subsequent favorable changes, if any, decreases the allowance for credit losses. The Company reflects the changes in the allowance for credit losses in provision for beneficial interests on the consolidated statements of income.
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.
The Company accounts for its solar investments and equity investments in ALLO under the HLBV method of accounting. The HLBV method of accounting is used by the Company for equity method investments when the liquidation rights and priorities as defined by an equity investment agreement differ from what is reflected by the underlying percentage ownership or voting interests. The Company applies the HLBV method using a balance sheet approach. A calculation is prepared at each balance sheet date to determine the amount that the Company would receive if an equity investment entity were to liquidate its net assets and distribute that cash to the investors based on the contractually defined liquidation priorities. The difference between the calculated liquidation distribution amounts at the beginning and the end of the reporting period, after adjusting for capital contributions and distributions, is the amount the Company recognizes for its share of the earnings or losses from the equity investment for the period.
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 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 (as of November 30) 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, 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.
For the 2020, 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.
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 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 accounts for lease and non-lease components together as a single, combined lease component for its office and data center space. In addition, the Company identified itself as the lessor in its Communications operating segment for services provided to customers that include customer-premise equipment. The Company accounts 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 16, "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 federally insured 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. Substantially all of the Company’s outstanding derivatives are over-the-counter contracts. 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. 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 market 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 results of operations of the Company. The changes in fair value of derivative instruments, as well as the settlement payments made on such derivatives, are included in “derivative market value adjustments and derivative settlements, net” on the consolidated statements of income.
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.
v3.20.4
Loans Receivable and Allowance for Loan Losses
12 Months Ended
Dec. 31, 2020
Receivables [Abstract]  
Loans Receivable and Allowance for Loan Losses Loans and Accrued Interest Receivable and Allowance for Loan Losses
Loans and accrued interest receivable consisted of the following:
As of December 31,
 20202019
Federally insured student loans:
Stafford and other$4,383,000 4,684,314 
Consolidation14,746,173 15,644,229 
Total19,129,173 20,328,543 
Private education loans338,132 244,258 
Consumer loans109,346 225,918 
 19,576,651 20,798,719 
Accrued interest receivable794,611 733,497 
Loan discount, net of unamortized loan premiums and deferred origination costs (9,908)(35,036)
Non-accretable discount— (32,398)
Allowance for loan losses:
Federally insured loans(128,590)(36,763)
Private education loans(19,852)(9,597)
Consumer loans(27,256)(15,554)
 $20,185,656 21,402,868 
    
On January 30, 2020 and July 29, 2020, the Company sold $124.2 million (par value) and $60.8 million (par value), respectively, of consumer loans to an unrelated third party who securitized such loans. The Company recognized a gain of $18.2 million (pre-tax) and $14.8 million (pre-tax), respectively, as part of these transactions. As partial considerations received for the consumer loans sold, the Company received a 31.4 percent and 25.4 percent residual interest, respectively, in the consumer loan securitizations that are included in "investments" on the Company's consolidated balance sheet.
Activity in the Allowance for Loan Losses
The following table presents the activity in the allowance for loan losses by portfolio segment.
 Balance at beginning of periodImpact of ASC 326 adoptionProvision for loan lossesCharge-offsRecoveriesInitial allowance on loans purchased with credit deterioration (a)Loan sale and otherBalance at end of period
Year ended December 31, 2020
Federally insured loans$36,763 72,291 18,691 (14,955)— 15,800 — 128,590 
Private education loans9,597 4,797 6,486 (1,659)631 — — 19,852 
Consumer loans15,554 13,926 38,183 (12,115)1,132 — (29,424)27,256 
$61,914 91,014 63,360 (28,729)1,763 15,800 (29,424)175,698 
Year ended December 31, 2019
Federally insured loans$42,310 — 8,000 (13,547)— — — 36,763 
Private education loans10,838 — — (1,965)724 — — 9,597 
Consumer loans7,240 — 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 loans12,629 — — (2,415)624 — — 10,838 
Consumer loans3,255 — 9,000 (5,056)41 — — 7,240 
$54,590 — 23,000 (18,867)665 — 1,000 60,388 

(a)    During the year ended December 31, 2020, the Company acquired $835.0 million (par value) of federally insured rehabilitation loans that met the definition of PCD loans when they were purchased by the Company.
Loan Status and Delinquencies
The key credit quality indicators for the Company’s federally insured, private education, and consumer loan portfolios are loan status, including delinquencies. The impact of changes in loan status is incorporated into the allowance for loan losses calculation. 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 status and delinquency amounts.
As of December 31,
 202020192018
Federally insured loans:    
Loans in-school/grace/deferment (a)$1,036,028 5.4 % $1,074,678 5.3 % $1,298,493 5.9 %
Loans in forbearance (b)1,973,175 10.3  1,339,821 6.6  1,430,291 6.4 
Loans in repayment status:  
Loans current13,683,054 84.9 %15,410,993 86.0 %16,882,252 86.9 %
Loans delinquent 31-60 days (c)633,411 3.9 650,796 3.6 683,084 3.5 
Loans delinquent 61-90 days (c)307,936 1.9 428,879 2.4 427,764 2.2 
Loans delinquent 91-120 days (c)800,257 5.0 310,851 1.7 283,831 1.5 
Loans delinquent 121-270 days (c)674,975 4.2 812,107 4.5 806,692 4.2 
Loans delinquent 271 days or greater (c)(d)20,337 0.1 300,418 1.8 343,489 1.7 
Total loans in repayment16,119,970 84.3 100.0 %17,914,044 88.1 100.0 %19,427,112 87.7 100.0 %
Total federally insured loans19,129,173 100.0 % 20,328,543 100.0 % 22,155,896 100.0 %
Accrued interest receivable791,453 730,059 675,898 
Loan discount, net of unamortized premiums and deferred origination costs(14,505)(35,822)(54,546)
Non-accretable discount (e)— (28,036)(23,833)
Allowance for loan losses(128,590)(36,763)(42,310)
Total federally insured loans and accrued interest receivable, net of allowance for loan losses$19,777,531 $20,957,981 $22,711,105 
Private education loans:
Loans in-school/grace/deferment (a)$5,049 1.5 %$4,493 1.8 %$4,320 1.9 %
Loans in forbearance (b)2,388 0.7 3,108 1.3 1,494 0.7 
Loans in repayment status:
Loans current327,550 99.1 %227,013 95.9 %208,977 95.0 %
Loans delinquent 31-60 days (c)1,099 0.3 2,814 1.2 3,626 1.6 
Loans delinquent 61-90 days (c)675 0.2 1,694 0.7 1,560 0.7 
Loans delinquent 91 days or greater (c)1,371 0.4 5,136 2.2 5,998 2.7 
Total loans in repayment330,695 97.8 100.0 %236,657 96.9 100.0 %220,161 97.4 100.0 %
Total private education loans338,132 100.0 % 244,258 100.0 % 225,975 100.0 %
Accrued interest receivable2,157 1,558 1,126 
Loan premium, net of unaccreted discount2,957 46 (1,245)
Non-accretable discount (e)— (4,362)(5,563)
Allowance for loan losses(19,852)(9,597)(10,838)
Total private education loans and accrued interest receivable, net of allowance for loan losses$323,394 $231,903 $209,455 
Consumer loans:
Loans in deferment$829 0.8 %$— $— 
Loans in repayment status:
Loans current105,650 97.4 %220,404 97.5 %136,130 98.2 %
Loans delinquent 31-60 days (c)954 0.9 2,046 0.9 1,012 0.7 
Loans delinquent 61-90 days (c)804 0.7 1,545 0.7 832 0.6 
Loans delinquent 91 days or greater (c)1,109 1.0 1,923 0.9 653 0.5 
Total loans in repayment108,517 99.2 100.0 %225,918 100.0 %138,627 100.0 %
Total consumer loans109,346 100.0 %225,918 138,627 
Accrued interest receivable1,001 1,880 665 
Loan premium1,640 740 2,219 
Allowance for loan losses(27,256)(15,554)(7,240)
Total consumer loans and accrued interest receivable, net of allowance for loan losses$84,731 $212,984 $134,271 
(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.
(e)    Upon adoption of ASC 326 on January 1, 2020, the Company reclassified the non-accretable discount balance related to loans purchased with evidence of credit deterioration to allowance for loan losses.
In March 2020, the rapid outbreak of the respiratory disease caused by a novel strain of coronavirus, coronavirus 2019 or COVID-19 (“COVID-19”), was declared a global pandemic by the World Health Organization and a national emergency by the President, and caused significant disruptions in the U.S. and world economies. As a result of COVID-19, effective March 13, 2020 through June 30, 2020, the Company proactively applied a 90 day natural disaster forbearance to any loan that was 31-269 days past due (for federally insured loans) and 80 days past due (for private education loans), and to any current loan upon request. Beginning July 1, 2020, the Company discontinued proactively applying 90 day natural disaster forbearances on past due loans. However, the Company will continue to apply a natural disaster forbearance in 90 day increments to any federally insured and private education loan upon request through September 30, 2021.
For the majority of the Company's consumer loans, borrowers are generally being offered, upon request and/or documented evidence of financial distress, up to a two-month deferral of payments, with an option of additional deferrals if the COVID-19 pandemic continues.
The Company will continue to review whether additional and/or extended borrower relief policies and activities are needed. All relief provided to borrowers by the Company through December 31, 2020 have been delays in payment that the Company considers to be insignificant and the modifications have not been accounted for as troubled debt restructuring.
Nonaccrual Status
The Company does not place federally insured loans on nonaccrual status due to the government guaranty. The amortized cost of private and consumer loans on nonaccrual status, as well as the allowance for loan losses related to such loans, as of December 31, 2020, 2019, and 2018 was not material.
Amortized Cost Basis by Origination Year
The following table presents the amortized cost of the Company's private education and consumer loans by loan status and delinquency amount as of December 31, 2020 based on year of origination. Effective July 1, 2010, no new loan originations can be made under the FFEL Program and all new federal loan originations must be made under the Federal Direct Loan Program. As such, all the Company’s federally insured loans were originated prior to July 1, 2010.
20202019201820172016Prior yearsTotal
Private education loans:
Loans in school/grace/deferment$638 1,518 — — 206 2,687 5,049 
Loans in forbearance392 313 — — 305 1,378 2,388 
Loans in repayment status:
Loans current112,783 79,161 958 — 5,444 129,204 327,550 
Loans delinquent 31-60 days— 24 — — 28 1,047 1,099 
Loans delinquent 61-90 days94 — — — — 581 675 
Loans delinquent 91 days or greater— — — — — 1,371 1,371 
Total loans in repayment112,877 79,185 958 — 5,472 132,203 330,695 
Total private education loans$113,907 81,016 958 — 5,983 136,268 338,132 
Accrued interest receivable2,157 
Loan premium, net of unaccreted discount2,957 
Allowance for loan losses(19,852)
Total private education loans and accrued interest receivable, net of allowance for loan losses$323,394 
Consumer loans:
Loans in deferment$62 447 317