UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
May 7, 2015

NELNET, INC.
(Exact name of registrant as specified in its charter)

					
Nebraska	 	001-31924	 	84-0748903	
(State or other jurisdiction of incorporation)	 	(Commission File Number)	 	(I.R.S. Employer Identification No.)	

	
			
121 South 13th Street, Suite 100
Lincoln, Nebraska	 	68508	
(Address of principal executive offices)	 	(Zip Code)	

Registrant's telephone number, including area code (402) 458-2370
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c))

 
Item 2.02 Results of Operations and Financial Condition.
On May 7, 2015 , Nelnet, Inc. (the “Company”) issued a press release with respect to its financial results for the quarter ended March 31, 2015 . A copy of the press release is furnished as Exhibit 99.1 to this report. In addition, a copy of the supplemental financial information for the quarter ended March 31, 2015 , which was made available on the Company's website at www.nelnetinvestors.com on May 7, 2015 in connection with the press release, is furnished as Exhibit 99.2 to this report.

The above information and Exhibits 99.1 and 99.2 shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), nor shall such information and Exhibits be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. In addition, information on the Company's website is not incorporated by reference into this report and should not be considered part of this report.

Certain statements contained in the exhibits furnished with this report may be considered forward looking in nature and are subject to various risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, the Company's actual results may vary materially from those anticipated, estimated, or expected. Among the key risks and uncertainties that may have a direct bearing on the Company's future operating results, performance, or financial condition expressed or implied by the forward-looking statements are the matters discussed in the Risk Factors section of the Company's Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on February 26, 2015. Although the Company may from time to time voluntarily update its prior forward-looking statements, it disclaims any commitment to do so except as required by securities laws.

Item 9.01 Financial Statements and Exhibits.

(d)      Exhibits. The following exhibits are furnished as part of this report:

			
Exhibit
No.	 	Description	
 	 	 	
99.1	 	Press Release dated May 7, 2015 - “Nelnet Reports First Quarter 2015 Results”	
99.2	 	Supplemental Financial Information for the Quarter Ended March 31, 2015	

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: May 7, 2015
NELNET, INC.
By:       /s/ JAMES D. KRUGER      
		
Name:	James D. Kruger	
		
Title:	Chief Financial Officer	

Nelnet Reports First Quarter 2015 Results

•	GAAP net income $1.40 per share, $1.37 per share excluding adjustments	
		
•	Servicing $140.8 billion student loans for 5.9 million borrowers under government contract	
		
•	37 percent increase in payment processing revenue driven by RenWeb acquisition	

LINCOLN, Neb., May 7, 2015-Nelnet (NYSE: NNI) today reported GAAP net income of $64.8 million, or $1.40 per share, for the first quarter of 2015, compared with GAAP net income of $73.8 million, or $1.59 per share, for the same period a year ago.

Excluding derivative market value and foreign currency adjustments, net income was $63.4 million, or $1.37 per share, for the first quarter of 2015, compared with $72.6 million, or $1.56 per share, for the same period in 2014. The company reported income from derivative market value and foreign currency adjustments of $1.3 million after tax, or $0.03 per share, for the first quarter of 2015, compared with income of $1.2 million after tax, or $0.03 per share, for the first quarter of 2014.

"As a result of our ongoing success, we are in a strong position financially and continue to generate significant cash flow," said Jeff Noordhoek, chief executive officer of Nelnet. "With our focus on delivering long-term value, we continue to accumulate capital for future investments in our core and other opportunities."

Nelnet operates three primary business segments, earning interest income on student loans in its Asset Generation and Management segment, and fee-based revenue in its Student Loan and Guaranty Servicing and Tuition Payment Processing and Campus Commerce segments.

The decrease in earnings for the first quarter of 2015, compared with the same period in 2014, was due to expected decreases in earnings from the company’s Student Loan and Guaranty Servicing segment, a decrease in investment advisory service fees, and reduced gains from investments. This decrease was partially offset by an increase in net interest income earned from the company’s student loan portfolio as a result of recent loan purchases.

Asset Generation and Management

Historically low interest rates continue to provide the opportunity for the company to generate substantial near-term value and cash flow from its student loan portfolio. For the first quarter of 2015, Nelnet reported net interest income of $102.6 million, compared with $98.9 million for the same period a year ago.  Net interest income included $46.2 million and $37.8 million of fixed rate floor income in the first quarters of 2015 and 2014, respectively. As a result of recent acquisitions of lower margin but longer term consolidation loans, core student loan spread decreased to 1.41 percent for the three months ended March 31, 2015, compared with 1.44 percent for the same period in 2014.

The company intends to use its strong liquidity position to capitalize on market opportunities to acquire private education loans and additional legacy Federal Family Education Loan Program (FFELP) loans. The company acquired $836.1 million of student loans during the first quarter of 2015. As of March 31, 2015, Nelnet’s student loan portfolio was $27.9 billion.

Student Loan and Guaranty Servicing

The company was servicing $140.8 billion of loans for 5.9 million borrowers on behalf of the U.S. Department of Education as of March 31, 2015, compared with $120.6 billion of loans for 5.4 million borrowers as of March 31, 2014. Revenue from this contract increased 9 percent to $32.4 million for the first quarter of 2015, up from $29.9 million for the same period a year ago.

The growth in government servicing revenue partially offset the impact of federal legislative changes that reduced the collections revenue earned by guaranty agencies. As a result of these changes, total revenue from the company's Student Loan and Guaranty Servicing segment decreased 11 percent, or $7.0 million, to $57.8 million for the first quarter of 2015, compared with the same period in 2014.

Tuition Payment Processing and Campus Commerce

For the first quarter of 2015, revenue from the company's Tuition Payment Processing and Campus Commerce segment was $34.7 million, an increase of $9.4 million, or 37 percent, from the same period in 2014. The increase in revenue was the result of the acquisition of RenWeb in June 2014, in addition to growth in managed tuition payment plans, campus commerce transaction volume, and new school customers.

Other Income

Other income decreased $11.2 million to $6.9 million for the first quarter of 2015, compared with $18.1 million for the same period in 2014. During the three months ended March 31, 2015, gains on investments and investment advisory fees were $1.2 million, compared with $12.4 million for the same period in 2014.

Board of Directors Approves Dividend and New Stock Repurchase Program

The Nelnet Board of Directors declared a second quarter cash dividend on the company's outstanding shares of Class A common stock and Class B common stock of $0.10 per share. The dividend will be paid on Monday, June 15, 2015, to shareholders of record at the close of business on Monday, June 1, 2015.

In addition, the Board of Directors has authorized a new stock repurchase program to repurchase up to five million shares of the company's Class A common stock during the three-year period ending May 24, 2018. The current stock repurchase program is set to expire on May 24, 2015. Consistent with the current program, shares may be repurchased under the new program from time to time in the open market or private transactions, and the timing and amount of repurchases will depend on market conditions, share prices, trading volumes, and other factors, including compliance with credit agreements and securities laws.

Non-GAAP Performance Measures

The company provides additional non-GAAP financial information related to specific items management believes to be important in the evaluation of its operating results, including specifically, the impact of unrealized gains and losses resulting from changes in fair values of derivative instruments which do not qualify for “hedge treatment” under GAAP and foreign currency transaction gains or losses resulting from the re-measurement of the company's Euro-denominated bonds to U.S. dollars. The company believes these point in time estimates of asset and liability values related to financial instruments that are subject to interest and currency rate fluctuations, and items whose timing and/or amount cannot be reasonably estimated in advance, affect the period to period comparability of the results of the company's fundamental business operations on a recurring basis. Accordingly, the company provides operating results excluding these items for comparability purposes.

Forward-looking and Cautionary Statements

This press release contains forward-looking statements within the meaning of federal securities laws.  These statements are based on management's current expectations as of the date of this release and are subject to known and unknown risks and uncertainties that may cause actual results or performance to differ materially from those expressed or implied by the forward-looking statements. Such risks include, among others, risks related to the company's student loan portfolio such as interest rate basis and repricing risk, the use of derivatives to manage exposure to interest rate fluctuations, and the uncertain nature of expected benefits from recent FFELP loan purchases and initiatives to purchase additional FFELP and private education loans; the company's funding requirements to satisfy asset financing needs; risks related to the company's ability to maintain and increase volumes under the company’s loan servicing contract with the Department to service federally owned student loans; changes in the educational credit and services marketplace resulting from changes in applicable laws, regulations, and government programs and budgets; risks related to the recent reduction in government payments to guaranty agencies to rehabilitate defaulted FFELP loans and services in support of those activities; and changes in general economic and credit market conditions. For more information, see the "Risk Factors" sections and other cautionary discussions of risks and uncertainties included in documents filed or furnished by the company with the Securities and Exchange Commission, including the cautionary information about forward-looking statements contained in the company's supplemental financial information for the first quarter ended March 31, 2015.  All forward-looking statements in this release are as of the date of this release. Although the company may from time to time voluntarily update or revise its forward-looking statements to reflect actual results or changes in the company's expectations, the company disclaims any commitment to do so except as required by securities laws.

Consolidated Statements of Income
(Dollars in thousands, except share data)
(unaudited)

										
 	Three months ended	
 	March 31,
2015	 	December 31,
2014	 	March 31,
2014	
Interest income:	 	 	 	 	 	
Loan interest	$	171,944		 	182,783		 	156,896		
Investment interest	2,205		 	1,770		 	1,979		
Total interest income	174,149		 	184,553		 	158,875		
Interest expense:	 	 	 	 	 	
Interest on bonds and notes payable	71,554		 	72,061		 	60,004		
Net interest income	102,595		 	112,492		 	98,871		
Less provision for loan losses	2,000		 	3,500		 	2,500		
Net interest income after provision for loan losses	100,595		 	108,992		 	96,371		
Other income (expense):	 	 	 	 	 	
Loan and guaranty servicing revenue	57,811		 	56,538		 	64,757		
Tuition payment processing, school information, and campus commerce revenue	34,680		 	24,688		 	25,235		
Enrollment services revenue	17,863		 	17,791		 	22,011		
Other income	6,918		 	12,906		 	18,131		
Gain on sale of loans and debt repurchases, net	2,875		 	3,594		 	39		
Derivative settlements, net	(5,215	)	 	(4,566	)	 	(6,229	)	
Derivative market value and foreign currency adjustments, net	2,137		 	(1,082	)	 	1,964		
Total other income	117,069		 	109,869		 	125,908		
Operating expenses:	 	 	 	 	 	
Salaries and benefits	61,050		 	60,609		 	52,484		
Cost to provide enrollment services	11,702		 	11,343		 	14,475		
Loan servicing fees	7,685		 	7,606		 	5,421		
Depreciation and amortization	5,662		 	5,644		 	4,783		
Other	29,129		 	29,704		 	30,206		
Total operating expenses	115,228		 	114,906		 	107,369		
Income before income taxes	102,436		 	103,955		 	114,910		
Income tax expense	37,630		 	30,036		 	40,611		
Net income	64,806		 	73,919		 	74,299		
Net income attributable to noncontrolling interest	41		 	308		 	513		
Net income attributable to Nelnet, Inc.	$	64,765		 	73,611		 	73,786		
Earnings per common share:	 	 	 	 	 	
Net income attributable to Nelnet, Inc. shareholders - basic and diluted	$	1.40		 	1.59		 	1.59		
Weighted average common shares outstanding - basic and diluted	46,290,590		 	46,390,402		 	46,527,917		

Condensed Consolidated Balance Sheets
(Dollars in thousands)
(unaudited)

	
										
 	As of	 	As of	 	As of	
 	March 31, 2015	 	December 31, 2014	 	March 31, 2014	
Assets:	 	 	 	 	 	
Student loans receivable, net	$	27,897,949		 	28,005,195		 	25,607,143		
Cash, cash equivalents, investments, and notes receivable	376,950		 	366,190		 	327,383		
Restricted cash and investments	938,477		 	968,928		 	886,358		
Goodwill and intangible assets, net	166,383		 	168,782		 	126,207		
Other assets	576,035		 	589,048		 	539,916		
Total assets	$	29,955,794		 	30,098,143		 	27,487,007		
Liabilities:	 	 	 	 	 	
Bonds and notes payable	$	27,815,324		 	28,027,350		 	25,589,287		
Other liabilities	358,977		 	345,115		 	384,046		
Total liabilities	28,174,301		 	28,372,465		 	25,973,333		
Equity:	 	 	 	 	 	
Total Nelnet, Inc. shareholders' equity	1,781,222		 	1,725,448		 	1,512,919		
Noncontrolling interest	271		 	230		 	755		
Total equity	1,781,493		 	1,725,678		 	1,513,674		
Total liabilities and equity	$	29,955,794		 	30,098,143		 	27,487,007		

Contacts:
Media, Ben Kiser, +1-402-458-3024, or Investors, Phil Morgan, +1-402-458-3038, both of Nelnet, Inc .

For Release: May 7, 2015
Media Contact: Ben Kiser, 402.458.3024
Investor Contact: Phil Morgan, 402.458.3038

Nelnet, Inc. supplemental financial information for the first quarter 2015
(All dollars are in thousands, except per share amounts, unless otherwise noted)

The following information should be read in connection with Nelnet, Inc.'s (the “Company's”) press release for first quarter 2015 earnings, dated May 7, 2015 , and the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 .

This report contains forward-looking statements and information that are based on management's current expectations as of the date of this document.  Statements that are not historical facts, including statements about the Company's plans and expectations for future financial condition, results of operations or economic performance, or that address management's plans and objectives for future operations, and statements that assume or are dependent upon future events, are forward-looking statements. The words “may,” “should,” “could,” “would,” “predict,” “potential,” “continue,” “expect,” “anticipate,” “future,” “intend,” “plan,” “believe,” “estimate,” “assume,” “forecast,” “will,” and similar expressions, as well as statements in future tense, are intended to identify forward-looking statements.

The forward-looking statements are based on assumptions and analyses made by management in light of management's experience and its perception of historical trends, current conditions, expected future developments, and other factors that management believes are appropriate under the circumstances. These statements are subject to known and unknown risks, uncertainties, assumptions, and other factors that may cause the actual results and performance to be materially different from any future results or performance expressed or implied by such forward-looking statements.  These factors include, among others, the risks and uncertainties set forth in the "Risk Factors" section of the Company's Annual Report on Form 10-K for the year ended December 31, 2014 (the "2014 Annual Report"), in particular such risks and uncertainties as:

•	student loan portfolio risks such as interest rate basis and repricing risk resulting from the fact that the interest rate characteristics of the student loan assets do not match the interest rate characteristics of the funding for those assets, the risk of loss of floor income on certain student loans originated under the Federal Family Education Loan Program (the "FFEL Program" or "FFELP"), risks related to the use of derivatives to manage exposure to interest rate fluctuations, uncertainties regarding the expected benefits from recently purchased securitized and unsecuritized FFELP student loans and initiatives to purchase additional FFELP and private education loans, and risks from changes in levels of student loan prepayment or default rates;	

•	financing and liquidity risks, including risks of changes in the general interest rate environment and in the securitization and other financing markets for student loans, which may increase the costs or limit the availability of financings necessary to purchase, refinance, or continue to hold student loans;	

•	risks from changes in the educational credit and services markets resulting from changes in applicable laws, regulations, and government programs and budgets, such as the expected decline over time in FFELP loan interest income and fee-based revenues due to the discontinuation of new FFELP loan originations in 2010 and potential government initiatives or legislative proposals to consolidate existing FFELP loans to the Federal Direct Loan Program or otherwise allow FFELP loans to be refinanced with Federal Direct Loan Program loans, risks related to reduced government payments to guaranty agencies to rehabilitate defaulted FFELP loans and services in support of those activities, risks related to the Company's ability to maintain or increase volumes under the Company's loan servicing contract with the U.S. Department of Education (the "Department"), which accounted for approximately 10 percent of the Company's revenue in 2014 and for which the loan allocation metrics were modified effective September 1, 2014, and risks related to the Company's ability to comply with agreements with third-party customers for the servicing of FFELP, Federal Direct Loan Program, and private education loans;	

•	risks related to a breach of or failure in the Company's operational or information systems or infrastructure, or those of third-party vendors;	

•	uncertainties inherent in forecasting future cash flows from student loan assets and related asset-backed securitizations; and	

•	risks and uncertainties associated with litigation matters and with maintaining compliance with the extensive regulatory requirements applicable to the Company's businesses, and uncertainties inherent in the estimates and assumptions about future events that management is required to make in the preparation of the Company's consolidated financial statements.	

All forward-looking statements contained in this report are qualified by these cautionary statements and are made only as of the date of this document. Although the Company may from time to time voluntarily update or revise its prior forward-looking statements to reflect actual results or changes in the Company's expectations, the Company disclaims any commitment to do so except as required by securities laws.

1

Consolidated Statements of Income
(Dollars in thousands, except share data)
(unaudited)

										
 	Three months ended	
 	March 31,
2015	 	December 31,
2014	 	March 31,
2014	
Interest income:	 	 	 	 	 	
Loan interest	$	171,944		 	182,783		 	156,896		
Investment interest	2,205		 	1,770		 	1,979		
Total interest income	174,149		 	184,553		 	158,875		
Interest expense:	 	 	 	 	 	
Interest on bonds and notes payable	71,554		 	72,061		 	60,004		
Net interest income	102,595		 	112,492		 	98,871		
Less provision for loan losses	2,000		 	3,500		 	2,500		
Net interest income after provision for loan losses	100,595		 	108,992		 	96,371		
Other income (expense):	 	 	 	 	 	
Loan and guaranty servicing revenue	57,811		 	56,538		 	64,757		
Tuition payment processing, school information, and campus commerce revenue	34,680		 	24,688		 	25,235		
Enrollment services revenue	17,863		 	17,791		 	22,011		
Other income	6,918		 	12,906		 	18,131		
Gain on sale of loans and debt repurchases, net	2,875		 	3,594		 	39		
Derivative settlements, net	(5,215	)	 	(4,566	)	 	(6,229	)	
Derivative market value and foreign currency adjustments, net	2,137		 	(1,082	)	 	1,964		
Total other income	117,069		 	109,869		 	125,908		
Operating expenses:	 	 	 	 	 	
Salaries and benefits	61,050		 	60,609		 	52,484		
Cost to provide enrollment services	11,702		 	11,343		 	14,475		
Loan servicing fees	7,685		 	7,606		 	5,421		
Depreciation and amortization	5,662		 	5,644		 	4,783		
Other	29,129		 	29,704		 	30,206		
Total operating expenses	115,228		 	114,906		 	107,369		
Income before income taxes	102,436		 	103,955		 	114,910		
Income tax expense	37,630		 	30,036		 	40,611		
Net income	64,806		 	73,919		 	74,299		
Net income attributable to noncontrolling interest	41		 	308		 	513		
Net income attributable to Nelnet, Inc.	$	64,765		 	73,611		 	73,786		
Earnings per common share:	 	 	 	 	 	
Net income attributable to Nelnet, Inc. shareholders - basic and diluted	$	1.40		 	1.59		 	1.59		
 	 	 	 	 	 	
Weighted average common shares outstanding - basic and diluted	46,290,590		 	46,390,402		 	46,527,917		

2

Condensed Consolidated Balance Sheets
(Dollars in thousands)
(unaudited)

										
 	As of	 	As of	 	As of	
 	March 31, 2015	 	December 31, 2014	 	March 31, 2014	
Assets:	 	 	 	 	 	
Student loans receivable, net	$	27,897,949		 	28,005,195		 	25,607,143		
Cash, cash equivalents, investments, and notes receivable	376,950		 	366,190		 	327,383		
Restricted cash and investments	938,477		 	968,928		 	886,358		
Goodwill and intangible assets, net	166,383		 	168,782		 	126,207		
Other assets	576,035		 	589,048		 	539,916		
Total assets	$	29,955,794		 	30,098,143		 	27,487,007		
Liabilities:	 	 	 	 	 	
Bonds and notes payable	$	27,815,324		 	28,027,350		 	25,589,287		
Other liabilities	358,977		 	345,115		 	384,046		
Total liabilities	28,174,301		 	28,372,465		 	25,973,333		
Equity:	 	 	 	 	 	
Total Nelnet, Inc. shareholders' equity	1,781,222		 	1,725,448		 	1,512,919		
Noncontrolling interest	271		 	230		 	755		
Total equity	1,781,493		 	1,725,678		 	1,513,674		
Total liabilities and equity	$	29,955,794		 	30,098,143		 	27,487,007		

3

Overview

The Company provides educational products and services in loan servicing, payment processing, education planning, and asset management. These products and services help students and families plan, prepare, and pay for their education and make the administrative and financial processes more efficient for schools and financial organizations. In addition, the Company earns interest income on a portfolio of federally insured student loans.

A reconciliation of the Company's GAAP net income to net income, excluding derivative market value and foreign currency adjustments, is provided below.

										
 	Three months ended	
 	March 31, 2015	 	December 31, 2014	 	March 31, 2014	
GAAP net income attributable to Nelnet, Inc.	$	64,765		 	73,611		 	73,786		
Derivative market value and foreign currency adjustments, net of tax	(1,325	)	 	671		 	(1,218	)	
Net income, excluding derivative market value and foreign currency adjustments (a)	$	63,440		 	74,282		 	72,568		
 	 	 	 	 	 	
Earnings per share:	 	 	 	 	 	
GAAP net income attributable to Nelnet, Inc.	$	1.40		 	1.59		 	1.59		
Derivative market value and foreign currency adjustments, net of tax	(0.03	)	 	0.01		 	(0.03	)	
Net income, excluding derivative market value and foreign currency adjustments (a)	$	1.37		 	1.60		 	1.56		

(a)	The Company provides non-GAAP information that reflects specific items management believes to be important in the evaluation of its financial position and performance. "Derivative market value and foreign currency adjustments" include (i) the unrealized gains and losses that are caused by changes in fair values of derivatives which do not qualify for "hedge treatment" under GAAP; and (ii) the foreign currency transaction gains or losses caused by the re-measurement of the Company's Euro-denominated bonds to U.S. dollars. The Company believes these point-in-time estimates of asset and liability values related to these financial instruments that are subject to interest and currency rate fluctuations affect the period-to-period comparability of the results of operations. Accordingly, the Company provides operating results excluding these items for comparability purposes.	

The Company earns net interest income on its FFELP student loan portfolio in its Asset Generation and Management ("AGM") operating segment. This segment is expected to generate a stable net interest margin and significant amounts of cash as the FFELP portfolio amortizes. As of March 31, 2015 , the Company had a $27.9 billion student loan portfolio that will amortize over the next approximately 25 years. The Company actively seeks to acquire additional FFELP loan portfolios to leverage its servicing scale and expertise to generate incremental earnings and cash flow.

In addition, the Company earns fee-based revenue through the following reportable operating segments:

•	Student Loan and Guaranty Servicing ("LGS") - referred to as Nelnet Diversified Solutions ("NDS")	
		
•	Tuition Payment Processing and Campus Commerce ("TPP&CC") - referred to as Nelnet Business Solutions ("NBS")	

Other business activities and operating segments that are not reportable are combined and included in Corporate and Other Activities. Corporate and Other Activities also includes income earned on certain investments and interest expense incurred on unsecured debt transactions.

4

The information below provides the operating results for each reportable operating segment and Corporate and Other Activities ("Corporate") for the three months ended March 31, 2015 and 2014 (dollars in millions).

		
(a)	Revenue includes intersegment revenue earned by LGS as a result of servicing loans for AGM.	

(b)	Total revenue includes "net interest income after provision for loan losses" and "total other income" from the Company's segment statements of income, excluding the impact from changes in fair values of derivatives and foreign currency transaction adjustments. Net income excludes changes in fair values of derivatives and foreign currency transaction adjustments, net of tax.	

(c)	Computed as income before income taxes divided by total revenue.	

Student Loan and Guaranty Servicing

•	As of March 31, 2015 , the Company was servicing $168.8 billion in FFELP, private, and government owned student loans, as compared with $147.9 billion of loans as of March 31, 2014 .	

•	Revenue decreased in the first quarter of 2015 compared to the same period in 2014 due primarily to a decrease in rehabilitation collection revenue. Federal budget provisions that became effective July 1, 2014 have reduced payments by the Department to guaranty agencies for assisting student loan borrowers with the rehabilitation of defaulted loans under FFELP, and as a result, rehabilitation revenue has been negatively affected. Rehabilitation collection revenue recognized by the Company was $7.4 million and $13.4 million for the three months ended March 31, 2015 and 2014 , respectively.	

•	Revenue from the Department servicing contract increased to $32.4 million for the three months ended March 31, 2015 , compared to $29.9 million for the same period in 2014 . As of March 31, 2015 , the Company was servicing $140.8 billion of loans for 5.9 million borrowers under this contract.	

•	Before tax operating margin was 14.3% and 28.5% for the three months ended March 31, 2015 and 2014 , respectively. Operating margin decreased as a result of the implementation of federal budget reductions for guaranty agencies revenue. In addition, as the volume of loans serviced under the Department servicing contract continues to grow and loans serviced under the legacy commercial programs continue to run off, the Company expects operating margins to tighten accordingly.	

5

Tuition Payment Processing and Campus Commerce

•	Revenue increased in the three months ended March 31, 2015 compared to the same period in 2014 due to the acquisition of RenWeb in the second quarter of 2014 and due to increases in the number of managed tuition payment plans, campus commerce customer transaction volume, and new school customers.	

•	Excluding the amortization of intangibles, before tax operating margin was 40.5% and 40.1% for the three months ended March 31, 2015 and 2014 , respectively.	

•	This segment is subject to seasonal fluctuations. Based on the timing of when revenue is recognized and when expenses are incurred, revenue and operating margin are higher in the first quarter as compared to the remainder of the year.	

Asset Generation and Management

•	The Company acquired $836.1 million of student loans during the first three months of 2015 . The average loan portfolio balance for the three months ended March 31, 2015 and 2014 was $28.3 billion and $25.9 billion, respectively.	

•	Core student loan spread decreased to 1.41% for the three months ended March 31, 2015 , compared to 1.49% and 1.44% for the three months ended December 31, 2014 and March 31, 2014 , respectively. This decrease was the result of recent acquisitions of consolidation loans, which have lower margins but longer terms.	

•	Due to historically low interest rates, the Company continues to earn significant fixed rate floor income. During the three months ended March 31, 2015 and 2014 , the Company earned $46.2 million and $37.8 million, respectively, of fixed rate floor income (net of $5.0 million and $7.0 million of derivative settlements, respectively, used to hedge such loans).	

Corporate and Other Activities

•	The Company recognized $0.5 million in net gains from investment activity during the three months ended March 31, 2015, compared to $7.2 million for the same period in 2014. The majority of gains recognized in 2014 were from sales of student loan asset-backed security investments.	

•	Whitetail Rock Capital Management, LLC ("WRCM"), the Company's SEC-registered investment advisory subsidiary, recognized investment advisory revenue of $0.7 million for the three months ended March 31, 2015, compared to $5.2 million for the three months ended March 31, 2014. The decrease was the result of the reduction in performance fees earned in 2015.	

•	During the three months ended March 31, 2015, the Company repurchased $11.9 million (par value) of its Junior Subordinated Hybrid Securities for a gain of $2.5 million. Gains from debt repurchases in the first quarter of 2014 were approximately $39,000.	

Liquidity and Capital Resources

•	As of March 31, 2015 , the Company had cash and cash equivalents of $100.0 million . In addition, the Company had a portfolio of available-for-sale and trading investments, consisting primarily of student loan asset-backed securities, with a fair value of $146.8 million as of March 31, 2015.	

•	For the three months ended March 31, 2015 , the Company generated $129.3 million in net cash provided by operating activities.	

•	Forecasted future cash flows from the Company's FFELP student loan portfolio financed in asset-backed securitization transactions are estimated to be approximately $2.27 billion as of March 31, 2015 .	

•	As of March 31, 2015 , no amounts were outstanding on the Company's unsecured line of credit and $350.0 million was available for future use. The unsecured line of credit has a maturity date of June 30, 2019.	

•	During the three months ended March 31, 2015 , the Company repurchased a total of 175,798 shares of Class A common stock for $7.9 million ( $45.16 per share).	

•	During the three months ended March 31, 2015, the Company paid cash dividends of $4.6 million ($0.10 per share).	

6

		
•	The Company intends to use its liquidity position to capitalize on market opportunities, including FFELP and private education loan acquisitions; strategic acquisitions and investments; and capital management initiatives, including stock repurchases, debt repurchases, and dividend distributions. Dependent upon the timing and size of the opportunities, the Company may continue to accumulate additional cash and investments.	

Operating Segments

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

•  Student Loan and Guaranty Servicing
•  Tuition Payment Processing and Campus Commerce
•  Asset Generation and Management

The Company earns fee-based revenue through its Student Loan and Guaranty Servicing and Tuition Payment Processing operating segments. In addition, the Company earns interest income on its student loan portfolio in its Asset Generation and Management operating segment. The Company’s operating segments are defined by the products and services they offer and the types of customers they serve, and they reflect the manner in which financial information is currently evaluated by management. See note 1 of the notes to consolidated financial statements included in the 2014 Annual Report for a description of each operating segment, including the primary products and services offered.

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

Intersegment revenues are charged by a segment that provides a product or service to another segment.  Intersegment revenues and expenses are included within each segment consistent with the income statement presentation provided to management.  Income taxes are allocated based on 38% of income before taxes for each individual operating segment. The difference between the consolidated income tax expense and the sum of taxes calculated for each operating segment is included in income taxes in Corporate and Other Activities.

Corporate and Other Activities

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

•	Income earned on certain investment activities	
		
•	Interest expense incurred on unsecured debt transactions	
		
•	Other product and service offerings that are not considered reportable operating segments including, but not limited to, WRCM, the SEC-registered investment advisory subsidiary, and the Enrollment Services business	

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

Effective January 1, 2015, internal reporting to executive management (the "chief operating decision maker") changed to reflect operational changes made within the organization. The operational and internal reporting changes included moving the majority of information technology infrastructure personnel and related functions to Corporate and Other Activities. The associated costs are allocated to the other operating segments based on those segments' actual use of information technology related products and services. Information technology infrastructure personnel and related functions were historically included within the Student Loan and Guaranty Servicing operating segment, and associated costs were allocated to the other operating segments based on those segments' actual use of the related products and services. Prior period segment operating results have been reclassified to reflect these changes; however, the reclassifications had no effect on any operating segment's net income.

7

Segment Results of Operations

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

																			
 	Three months ended March 31, 2015	
 	Student Loan and Guaranty Servicing	 	Tuition Payment Processing and Campus Commerce	 	Asset
Generation and
Management	 	Corporate and Other Activities	 	Eliminations	 	Total	
Total interest income	$	7		 	2		 	172,423		 	2,153		 	(436	)	 	174,149		
Interest expense	—		 	—		 	70,540		 	1,450		 	(436	)	 	71,554		
Net interest income	7		 	2		 	101,883		 	703		 	—		 	102,595		
Less provision for loan losses	—		 	—		 	2,000		 	—		 	—		 	2,000		
Net interest income after provision for loan losses	7		 	2		 	99,883		 	703		 	—		 	100,595		
Other income:	 		 	 		 	 		 	 		 	 		 	 		
Loan and guaranty servicing revenue	57,811		 	—		 	—		 	—		 	—		 	57,811		
Intersegment servicing revenue	12,871		 	—		 	—		 	—		 	(12,871	)	 	—		
Tuition payment processing, school information, and campus commerce revenue	—		 	34,680		 	—		 	—		 	—		 	34,680		
Enrollment services revenue	—		 	—		 	—		 	17,863		 	—		 	17,863		
Other income	—		 	—		 	4,576		 	2,342		 	—		 	6,918		
Gain on sale of loans and debt repurchases	—		 	—		 	351		 	2,524		 	—		 	2,875		
Derivative market value and foreign currency adjustments, net	—		 	—		 	3,590		 	(1,453	)	 	—		 	2,137		
Derivative settlements, net	—		 	—		 	(4,963	)	 	(252	)	 	—		 	(5,215	)	
Total other income	70,682		 	34,680		 	3,554		 	21,024		 	(12,871	)	 	117,069		
Operating expenses:	 		 	 		 	 		 	 		 	 		 	 		
Salaries and benefits	33,703		 	13,321		 	541		 	13,485		 	—		 	61,050		
Cost to provide enrollment services	—		 	—		 	—		 	11,702		 	—		 	11,702		
Loan servicing fees	—		 	—		 	7,685		 	—		 	—		 	7,685		
Depreciation and amortization	446		 	2,195		 	—		 	3,021		 	—		 	5,662		
Other	14,600		 	3,802		 	1,068		 	9,659		 	—		 	29,129		
Intersegment expenses, net	9,700		 	2,614		 	13,040		 	(12,483	)	 	(12,871	)	 	—		
Total operating expenses	58,449		 	21,932		 	22,334		 	25,384		 	(12,871	)	 	115,228		
Income (loss) before income taxes and corporate overhead allocation	12,240		 	12,750		 	81,103		 	(3,657	)	 	—		 	102,436		
Corporate overhead allocation	(2,153	)	 	(862	)	 	(1,078	)	 	4,093		 	—		 	—		
Income before income taxes	10,087		 	11,888		 	80,025		 	436		 	—		 	102,436		
Income tax (expense) benefit	(3,834	)	 	(4,518	)	 	(30,409	)	 	1,131		 	—		 	(37,630	)	
Net income	6,253		 	7,370		 	49,616		 	1,567		 	—		 	64,806		
  Net income attributable to noncontrolling interest	—		 	—		 	—		 	41		 	—		 	41		
Net income attributable to Nelnet, Inc.	$	6,253		 	7,370		 	49,616		 	1,526		 	—		 	64,765		

8

	
																			
 	Three months ended December 31, 2014	
 	Student Loan and Guaranty Servicing	 	Tuition Payment Processing and Campus Commerce	 	Asset
Generation and
Management	 	Corporate and Other Activities	 	Eliminations	 	Total	
Total interest income	$	5		 	1		 	182,868		 	2,110		 	(431	)	 	184,553		
Interest expense	—		 	—		 	71,293		 	1,199		 	(431	)	 	72,061		
Net interest income	5		 	1		 	111,575		 	911		 	—		 	112,492		
Less provision for loan losses	—		 	—		 	3,500		 	—		 	—		 	3,500		
Net interest income after provision for loan losses	5		 	1		 	108,075		 	911		 	—		 	108,992		
Other income (expense):	 		 	 		 	 		 	 		 	 		 	 		
Loan and guaranty servicing revenue	56,538		 	—		 	—		 	—		 	—		 	56,538		
Intersegment servicing revenue	13,686		 	—		 	—		 	—		 	(13,686	)	 	—		
Tuition payment processing, school information, and campus commerce revenue	—		 	24,688		 	—		 	—		 	—		 	24,688		
Enrollment services revenue	—		 	—		 	—		 	17,791		 	—		 	17,791		
Other income	—		 	1,268		 	8,578		 	3,060		 	—		 	12,906		
Gain on sale of loans and debt repurchases	—		 	—		 	(1,414	)	 	5,008		 	—		 	3,594		
Derivative market value and foreign currency adjustments, net	—		 	—		 	1,180		 	(2,262	)	 	—		 	(1,082	)	
Derivative settlements, net	—		 	—		 	(4,308	)	 	(258	)	 	—		 	(4,566	)	
Total other income (expense)	70,224		 	25,956		 	4,036		 	23,339		 	(13,686	)	 	109,869		
Operating expenses:	 		 	 		 	 		 	 		 	 		 	 		
Salaries and benefits	32,737		 	14,026		 	572		 	13,274		 	—		 	60,609		
Cost to provide enrollment services	—		 	—		 	—		 	11,343		 	—		 	11,343		
Loan servicing fees	—		 	—		 	7,606		 	—		 	—		 	7,606		
Depreciation and amortization	436		 	2,500		 	—		 	2,708		 	—		 	5,644		
Other	14,252		 	4,091		 	1,378		 	9,983		 	—		 	29,704		
Intersegment expenses, net	9,284		 	1,559		 	13,858		 	(11,015	)	 	(13,686	)	 	—		
Total operating expenses	56,709		 	22,176		 	23,414		 	26,293		 	(13,686	)	 	114,906		
Income (loss) before income taxes and corporate overhead allocation	13,520		 	3,781		 	88,697		 	(2,043	)	 	—		 	103,955		
Corporate overhead allocation	(2,542	)	 	(847	)	 	(1,413	)	 	4,802		 	—		 	—		
Income before income taxes	10,978		 	2,934		 	87,284		 	2,759		 	—		 	103,955		
Income tax (expense) benefit	(4,172	)	 	(1,115	)	 	(33,168	)	 	8,419		 	—		 	(30,036	)	
Net income	6,806		 	1,819		 	54,116		 	11,178		 	—		 	73,919		
Net income attributable to noncontrolling interest	—		 	—		 	—		 	308		 	—		 	308		
Net income attributable to Nelnet, Inc.	$	6,806		 	1,819		 	54,116		 	10,870		 	—		 	73,611		

9

	
																			
 	Three months ended March 31, 2014	
 	Student Loan and Guaranty Servicing	 	Tuition Payment Processing and Campus Commerce	 	Asset
Generation and
Management	 	Corporate and Other Activities	 	Eliminations	 	Total	
Total interest income	$	11		 	—		 	157,003		 	2,658		 	(797	)	 	158,875		
Interest expense	—		 	—		 	59,476		 	1,325		 	(797	)	 	60,004		
Net interest income	11		 	—		 	97,527		 	1,333		 	—		 	98,871		
Less provision for loan losses	—		 	—		 	2,500		 	—		 	—		 	2,500		
Net interest income after provision for loan losses	11		 	—		 	95,027		 	1,333		 	—		 	96,371		
Other income:	 		 	 		 	 		 	 		 	 		 	 		
Loan and guaranty servicing revenue	64,757		 	—		 	—		 	—		 	—		 	64,757		
Intersegment servicing revenue	14,221		 	—		 	—		 	—		 	(14,221	)	 	—		
Tuition payment processing, school information, and campus commerce revenue	—		 	25,235		 	—		 	—		 	—		 	25,235		
Enrollment services revenue	—		 	—		 	—		 	22,011		 	—		 	22,011		
Other income	—		 	—		 	4,164		 	13,967		 	—		 	18,131		
Gain on sale of loans and debt repurchases	—		 	—		 	39		 	—		 	—		 	39		
Derivative market value and foreign currency adjustments, net	—		 	—		 	3,477		 	(1,513	)	 	—		 	1,964		
Derivative settlements, net	—		 	—		 	(5,977	)	 	(252	)	 	—		 	(6,229	)	
Total other income	78,978		 	25,235		 	1,703		 	34,213		 	(14,221	)	 	125,908		
Operating expenses:	 		 	 		 	 		 	 		 	 		 	 		
Salaries and benefits	29,398		 	10,027		 	609		 	12,450		 	—		 	52,484		
Cost to provide enrollment services	—		 	—		 	—		 	14,475		 	—		 	14,475		
Loan servicing fees	—		 	—		 	5,421		 	—		 	—		 	5,421		
Depreciation and amortization	419		 	1,428		 	—		 	2,936		 	—		 	4,783		
Other	15,651		 	2,647		 	1,725		 	10,183		 	—		 	30,206		
Intersegment expenses, net	9,163		 	1,420		 	14,371		 	(10,733	)	 	(14,221	)	 	—		
Total operating expenses	54,631		 	15,522		 	22,126		 	29,311		 	(14,221	)	 	107,369		
Income before income taxes and corporate overhead allocation	24,358		 	9,713		 	74,604		 	6,235		 	—		 	114,910		
Corporate overhead allocation	(1,860	)	 	(620	)	 	(1,329	)	 	3,809		 	—		 	—		
Income before income taxes	22,498		 	9,093		 	73,275		 	10,044		 	—		 	114,910		
Income tax (expense) benefit	(8,549	)	 	(3,455	)	 	(27,844	)	 	(763	)	 	—		 	(40,611	)	
Net income	13,949		 	5,638		 	45,431		 	9,281		 	—		 	74,299		
  Net income attributable to noncontrolling interest	—		 	—		 	—		 	513		 	—		 	513		
Net income attributable to Nelnet, Inc.	$	13,949		 	5,638		 	45,431		 	8,768		 	—		 	73,786		

10

Net Interest Income, Net of Settlements on Derivatives

The Company maintains an overall risk management strategy that incorporates the use of derivative instruments to reduce the economic effect of interest rate volatility. Derivative settlements for each applicable period should be evaluated with the Company's net interest income.

The following table summarizes the components of “net interest income” and “derivative settlements, net” included in the attached consolidated statements of income.

										
 	Three months ended	
 	March 31, 2015	 	December 31,
2014	 	March 31, 2014	
Variable student loan interest margin, net of settlements on derivatives	$	50,633		 	58,401		 	54,396		
Fixed rate floor income, net of settlements on derivatives	46,244		 	49,213		 	37,844		
Investment interest	2,205		 	1,770		 	1,979		
Non-portfolio related derivative settlements	(252	)	 	(259	)	 	(252	)	
Corporate debt interest expense	(1,450	)	 	(1,199	)	 	(1,325	)	
Net interest income (net of settlements on derivatives)	$	97,380		 	107,926		 	92,642		

Student Loan Servicing Volumes (dollars in millions)

	
																									
Company owned	 	$22,650	 	$21,237	 	$21,397	 	$21,192	 	$21,110	 	$20,511	 	$19,742	 	$19,369	
% of total	 	29.8%	 	21.8%	 	15.5%	 	14.3%	 	14.1%	 	12.9%	 	12.2%	 	11.5%	
Number of servicing borrowers:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Government servicing:	 	3,036,534		 	3,892,929		 	5,305,498		 	5,438,933		 	5,465,395		 	5,824,743		 	5,915,449		 	5,882,446		
FFELP servicing:	 	1,799,484		 	1,626,146		 	1,462,122		 	1,426,435		 	1,390,541		 	1,404,619		 	1,397,295		 	1,358,551		
Private servicing:	 	164,554		 	173,948		 	195,580		 	191,606		 	186,863		 	200,095		 	202,529		 	205,926		
Total:	 	5,000,572		 	5,693,023		 	6,963,200		 	7,056,974		 	7,042,799		 	7,429,457		 	7,515,273		 	7,446,923		
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Number of remote hosted borrowers:	 	9,566,296		 	6,912,204		 	1,915,203		 	1,796,287		 	1,735,594		 	1,677,547		 	1,611,654		 	1,592,813		

11

Other Income

The following table summarizes the components of "other income" included in the attached consolidated statements of income.

										
 	Three months ended	
 	March 31,
2015	 	December 31,
2014	 	March 31,
2014	
Borrower late fee income	$	4,131		 	3,840		 	3,688		
Investment advisory fees	657		 	3,487		 	5,228		
Realized and unrealized gains/(losses) on investments, net	516		 	(1,972	)	 	7,210		
Reduction of repurchase obligation	—		 	4,235		 	—		
Other	1,614		 	3,316		 	2,005		
Other income	$	6,918		 	12,906		 	18,131		

Derivative Settlements

The following table summarizes the components of "derivative settlements, net" included in the attached consolidated statements of income.

										
 	Three months ended	
 	March 31,
2015	 	December 31,
2014	 	March 31,
2014	
1:3 basis swaps	$	266		 	842		 	881		
Interest rate swaps - floor income hedges	(5,015	)	 	(5,035	)	 	(6,950	)	
Interest rate swaps - hybrid debt hedges	(252	)	 	(258	)	 	(252	)	
Cross-currency interest rate swaps	(214	)	 	(115	)	 	92		
Total settlements - expense	$	(5,215	)	 	(4,566	)	 	(6,229	)	

Derivative Market Value and Foreign Currency Adjustments

"Derivative market value and foreign currency adjustments" include (i) the unrealized gains and losses that are caused by changes in fair values of derivatives which do not qualify for "hedge treatment" under GAAP; and (ii) the foreign currency transaction gains or losses caused by the re-measurement of the Company's Euro-denominated bonds to U.S. dollars.

The following table summarizes the components of “derivative market value and foreign currency adjustments” included in the attached consolidated statements of income.

										
 	Three months ended	
 	March 31,
2015	 	December 31,
2014	 	March 31,
2014	
Change in fair value of derivatives - income (expense)	$	(46,072	)	 	(19,879	)	 	2,916		
Foreign currency transaction adjustment - income (expense)	48,209		 	18,797		 	(952	)	
Derivative market value and foreign currency adjustments - income (expense)	$	2,137		 	(1,082	)	 	1,964		

12

Student Loans Receivable

The table below outlines the components of the Company’s student loan portfolio:

										
 	As of	 	As of	 	As of	
 	March 31,
2015	 	December 31,
2014	 	March 31,
2014	
Federally insured loans	 	 	 	 	 	
Stafford and other	$	6,287,829		 	6,030,825		 	6,606,814		
Consolidation	21,687,746		 	22,165,605		 	19,138,841		
Total	27,975,575		 	28,196,430		 	25,745,655		
Private education loans	131,513		 	27,478		 	68,540		
 	28,107,088		 	28,223,908		 	25,814,195		
Loan discount, net of unamortized loan premiums and deferred origination costs	(157,978	)	 	(169,813	)	 	(152,424	)	
Allowance for loan losses – federally insured loans	(38,021	)	 	(39,170	)	 	(42,909	)	
Allowance for loan losses – private education loans	(13,140	)	 	(9,730	)	 	(11,719	)	
 	$	27,897,949		 	28,005,195		 	25,607,143		

Loan Activity

The following table sets forth the activity of loans:

							
 	Three months ended March 31,	
 	2015	 	2014	
Beginning balance	$	28,223,908		 	26,121,306		
Loan acquisitions	836,112		 	387,258		
Repayments, claims, capitalized interest, participations, and other	(628,360	)	 	(548,705	)	
Consolidation loans lost to external parties	(320,576	)	 	(145,664	)	
Loans sold	(3,996	)	 	—		
Ending balance	$	28,107,088		 	25,814,195		

Student Loan Spread

The following table analyzes the student loan spread on the Company’s portfolio of student loans, which represents the spread between the yield earned on student loan assets and the costs of the liabilities and derivative instruments used to fund those assets.

										
 	Three months ended	
 	March 31,
2015	 	December 31,
2014	 	March 31,
2014	
Variable student loan yield, gross	2.53	 %	 	2.56	 %	 	2.50	 %	
Consolidation rebate fees	(0.84	)	 	(0.84	)	 	(0.80	)	
Discount accretion, net of premium and deferred origination costs amortization	0.04		 	0.05		 	0.05		
Variable student loan yield, net	1.73		 	1.77		 	1.75		
Student loan cost of funds - interest expense	(0.98	)	 	(0.97	)	 	(0.92	)	
Student loan cost of funds - derivative settlements	—		 	0.01		 	0.02		
Variable student loan spread	0.75		 	0.81		 	0.85		
Fixed rate floor income, net of settlements on derivatives	0.66		 	0.68		 	0.59		
Core student loan spread	1.41	 %		1.49	 %		1.44	 %	
 	 	 	 	 	 	
Average balance of student loans	$	28,289,420		 	28,738,887		 	25,915,053		
Average balance of debt outstanding	28,460,627		 	28,877,939		 	25,826,656		

13

A trend analysis of the Company's core and variable student loan spreads is summarized below.

(a)	The interest earned on a large portion of the Company's FFELP student loan assets is indexed to the one-month LIBOR rate.  The Company funds the majority of its assets with three-month LIBOR indexed floating rate securities.  The relationship between the indices in which the Company earns interest on its loans and funds such loans has a significant impact on student loan spread.  This table (the right axis) shows the difference between the Company's liability base rate and the one-month LIBOR rate by quarter.	

Variable student loan spread decreased during the three months ended March 31, 2015 as compared to the same period in 2014 as a result of recent acquisitions of consolidation loans, which have lower margins but longer terms.

The primary difference between variable student loan spread and core student loan spread is fixed rate floor income.  A summary of fixed rate floor income and its contribution to core student loan spread follows:

										
 	Three months ended	
 	March 31, 2015	 	December 31,
2014	 	March 31, 2014	
Fixed rate floor income, gross	$	51,259		 	54,248		 	44,794		
Derivative settlements (a)	(5,015	)	 	(5,035	)	 	(6,950	)	
Fixed rate floor income, net	$	46,244		 	49,213		 	37,844		
 	 	 	 	 	 	
Fixed rate floor income contribution to spread, net	0.66	%	 	0.68	%	 	0.59	%	

		
(a)	Includes settlement payments on derivatives used to hedge student loans earning fixed rate floor income.	

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Fixed Rate Floor Income

The following table shows the Company’s student loan assets that are earning fixed rate floor income as of March 31, 2015 :

									
 	 	Borrower/	 	Estimated	 	 	
Fixed	 	lender	 	variable	 	 	
interest	 	weighted	 	conversion	 	Loan	
rate range	 	average yield	 	rate (a)	 	balance	
< 3.0%	 	2.88%	 	0.24%	 	$	1,805,151		
3.0 - 3.49%	 	3.19%	 	0.55%	 	2,266,800		
3.5 - 3.99%	 	3.65%	 	1.01%	 	2,219,177		
4.0 - 4.49%	 	4.20%	 	1.56%	 	1,696,214		
4.5 - 4.99%	 	4.72%	 	2.08%	 	1,050,092		
5.0 - 5.49%	 	5.22%	 	2.58%	 	661,683		
5.5 - 5.99%	 	5.67%	 	3.03%	 	383,874		
6.0 - 6.49%	 	6.18%	 	3.54%	 	447,053		
6.5 - 6.99%	 	6.70%	 	4.06%	 	426,004		
7.0 - 7.49%	 	7.17%	 	4.53%	 	178,772		
7.5 - 7.99%	 	7.71%	 	5.07%	 	305,639		
8.0 - 8.99%	 	8.18%	 	5.54%	 	689,526		
> 9.0%	 	9.04%	 	6.40%	 	268,771		
 	 	 	 	 	 	$	12,398,756		

(a)	The estimated variable conversion rate is the estimated short-term interest rate at which loans would convert to a variable rate. As of March 31, 2015 , the weighted average estimated variable conversion rate was 1.84% and the short-term interest rate was 17 basis points.	

The following table summarizes the outstanding derivative instruments as of March 31, 2015 used by the Company to economically hedge loans earning fixed rate floor income.

								
Maturity	 	Notional amount	 	Weighted average fixed rate paid by the Company (a)	
	 		 		
2015	 	$	1,100,000		 	0.89	%	
2016	 	750,000		 	0.85		
2017	 	1,350,000		 	0.85		
2018	 	100,000		 	1.02		
2025	 	100,000		 	2.32		
2045	 	25,000		 	2.46		
 	 	$	3,425,000		 	0.92	%	

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

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