NELNET INC, 10-K filed on 2/28/2012
Annual Report
Document And Entity Information (USD $)
12 Months Ended
Dec. 31, 2011
Jun. 30, 2011
Jan. 31, 2012
Common Class B [Member]
Jan. 31, 2012
Common Class A [Member]
Entity Registrant Name
NELNET INC 
 
 
 
Document Type
10-K 
 
 
 
Current Fiscal Year End Date
--12-31 
 
 
 
Entity Common Stock, Shares Outstanding
 
 
11,495,377 
35,638,834 
Entity Public Float
 
$ 600,914,599 
 
 
Amendment Flag
false 
 
 
 
Entity Central Index Key
0001258602 
 
 
 
Entity Current Reporting Status
Yes 
 
 
 
Entity Voluntary Filers
No 
 
 
 
Entity Filer Category
Accelerated Filer 
 
 
 
Entity Well-known Seasoned Issuer
No 
 
 
 
Document Period End Date
Dec. 31, 2011 
 
 
 
Document Fiscal Year Focus
2011 
 
 
 
Document Fiscal Period Focus
FY 
 
 
 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Assets:
 
 
Student loans receivable (net of allowance for loan losses of $48,482 and $43,626, respectively)
$ 24,297,876 
$ 23,948,014 
Student loans receivable - held for sale
84,987 
Cash and cash equivalents:
 
 
Cash and cash equivalents - not held at a related party
7,299 
6,952 
Cash and cash equivalents - held at a related party
35,271 
276,849 
Total cash and cash equivalents
42,570 
283,801 
Investments
50,780 
43,236 
Restricted cash and investments
614,322 
668,757 
Restricted cash - due to customers
109,809 
88,528 
Accrued interest receivable
308,401 
318,152 
Accounts receivable (net of allowance for doubtful accounts of $1,284 and $1,221, respectively)
63,654 
52,614 
Goodwill
117,118 
117,118 
Intangible assets, net
28,374 
38,712 
Property and equipment, net
34,819 
30,573 
Other assets
92,275 
101,054 
Fair value of derivative instruments
92,219 
118,346 
Total assets
25,852,217 
25,893,892 
Liabilities:
 
 
Bonds and notes payable
24,434,540 
24,672,472 
Accrued interest payable
19,634 
19,153 
Other liabilities
178,189 
191,017 
Due to customers
109,809 
88,528 
Fair value of derivative instruments
43,840 
16,089 
Total liabilities
24,786,012 
24,987,259 
Shareholders' equity:
 
 
Preferred stock, $0.01 par value. Authorized 50,000,000 shares; no shares issued or outstanding
Common stock: [Abstract]
 
 
Additional paid-in capital
49,245 
76,263 
Retained earnings
1,017,629 
831,057 
Employee notes receivable
(1,140)
(1,170)
Total shareholders' equity
1,066,205 
906,633 
Commitments and contingencies
   
   
Total liabilities and shareholders' equity
25,852,217 
25,893,892 
Common Class A [Member]
 
 
Common stock: [Abstract]
 
 
Common Stock
356 
368 
Common Class B [Member]
 
 
Common stock: [Abstract]
 
 
Common Stock
$ 115 
$ 115 
Consolidated Balance Sheets (Parentheticals) (USD $)
In Thousands, except Share data, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Allowance for loan losses (in Dollars)
$ 48,482 
$ 43,626 
Allowance for doubtful accounts (in Dollars)
$ 1,284 
$ 1,221 
Preferred stock, par value (in Dollars per share)
$ 0.01 
$ 0.01 
Preferred stock, authorized shares
50,000,000 
50,000,000 
Preferred stock, issued shares
Preferred stock, outstanding shares
Common Class A [Member]
 
 
Par Value (in Dollars per share)
$ 0.01 
$ 0.01 
Shares Authorized
600,000,000 
600,000,000 
Shares Issued
35,643,102 
36,846,353 
Shares Outstanding
35,643,102 
36,846,353 
Common Class B [Member]
 
 
Par Value (in Dollars per share)
$ 0.01 
$ 0.01 
Shares Authorized
60,000,000 
60,000,000 
Shares Issued
11,495,377 
11,495,377 
Shares Outstanding
11,495,377 
11,495,377 
Consolidated Statements of Income (USD $)
In Thousands, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Interest income:
 
 
 
Loan interest
$ 589,686 
$ 598,675 
$ 609,920 
Investment interest
3,168 
5,256 
10,287 
Total interest income
592,854 
603,931 
620,207 
Interest expense:
 
 
 
Interest on bonds and notes payable
228,289 
232,860 
384,862 
Net interest income
364,565 
371,071 
235,345 
Less provision for loan losses
21,250 
22,700 
29,000 
Net interest income after provision for loan losses
343,315 
348,371 
206,345 
Other income (expense):
 
 
 
Loan and guaranty servicing revenue
175,657 
158,584 
129,911 
Tuition payment processing and campus commerce revenue
67,797 
59,824 
53,894 
Enrollment services revenue
130,470 
139,897 
119,397 
Other income
29,513 
31,310 
26,469 
Gain on sale of loans and debt repurchases, net
8,340 
78,631 
76,831 
Derivative market value and foreign currency adjustments and derivative settlements, net
(25,647)
(10,677)
8,484 
Total other income
386,130 
457,569 
414,986 
Operating expenses:
 
 
 
Salaries and benefits
177,951 
166,011 
151,285 
Cost to provide enrollment services
86,548 
91,647 
74,926 
Depreciation and amortization
29,744 
38,444 
38,496 
Impairment expense
26,599 
32,728 
Restructure expense
6,020 
7,982 
Litigation settlement
55,000 
Other
113,415 
119,765 
100,216 
Total operating expenses
407,658 
503,486 
405,633 
Income before income taxes
321,787 
302,454 
215,698 
Income tax expense
117,452 
113,420 
76,573 
Net income
$ 204,335 
$ 189,034 
$ 139,125 
Earnings per common share:
 
 
 
Net earnings - basic (in Dollars per share)
$ 4.24 
$ 3.82 
$ 2.79 
Net earnings - diluted (in Dollars per share)
$ 4.23 
$ 3.81 
$ 2.78 
Weighted average common shares outstanding:
 
 
 
Basic (in Shares)
47,860,824 
49,127,934 
49,484,816 
Diluted (in Shares)
48,047,669 
49,326,686 
49,685,143 
Consolidated Statements of Shareholders' Equity and Comprehensive Income (USD $)
In Thousands, except Share data, unless otherwise specified
Total
Preferred Stock [Member]
Common Class A [Member]
Common Class B [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Employee Notes Receivable [Member]
Balance at Dec. 31, 2008
$ 643,226 
$ 0 
$ 378 
$ 115 
$ 103,762 
$ 540,521 
$ (1,550)
Balance (in Shares) at Dec. 31, 2008
 
37,794,067 
11,495,377 
 
 
 
Comprehensive income:
 
 
 
 
 
 
 
Net income
139,125 
 
 
 
 
139,125 
 
Cash dividend on Class A and Class B common stock
(3,492)
 
 
 
 
(3,492)
 
Issuance of common stock, net of forfeitures
4,372 
 
4,365 
 
 
Issuance of common stock, net of forfeitures (in Shares)
 
 
641,153 
 
 
 
Compensation expense for stock based awards
1,661 
 
 
 
1,661 
 
 
Repurchase of common stock
(430)
 
(1)
(429)
 
 
Repurchase of common stock (in Shares)
 
 
(38,429)
 
 
 
Reduction of employee stock notes receivable
101 
 
 
 
 
 
101 
Balance at Dec. 31, 2009
784,563 
384 
115 
109,359 
676,154 
(1,449)
Balance (in Shares) at Dec. 31, 2009
 
38,396,791 
11,495,377 
 
 
 
Comprehensive income:
 
 
 
 
 
 
 
Net income
189,034 
 
 
 
 
189,034 
 
Cash dividend on Class A and Class B common stock
(34,131)
 
 
 
 
(34,131)
 
Issuance of common stock, net of forfeitures
5,225 
 
5,222 
 
 
Issuance of common stock, net of forfeitures (in Shares)
 
 
315,894 
 
 
 
Compensation expense for stock based awards
1,468 
 
 
 
1,468 
 
 
Repurchase of common stock
(39,805)
 
(19)
(39,786)
 
 
Repurchase of common stock (in Shares)
 
 
(1,866,332)
 
 
 
Reduction of employee stock notes receivable
279 
 
 
 
 
 
279 
Balance at Dec. 31, 2010
906,633 
368 
115 
76,263 
831,057 
(1,170)
Balance (in Shares) at Dec. 31, 2010
 
36,846,353 
11,495,377 
 
 
 
Comprehensive income:
 
 
 
 
 
 
 
Net income
204,335 
 
 
 
 
204,335 
 
Cash dividend on Class A and Class B common stock
(17,763)
 
 
 
 
(17,763)
 
Contingency payment related to business combination
(5,893)
 
 
 
(5,893)
 
 
Issuance of common stock, net of forfeitures
4,696 
 
4,694 
 
 
Issuance of common stock, net of forfeitures (in Shares)
 
 
233,172 
 
 
 
Compensation expense for stock based awards
1,301 
 
 
 
1,301 
 
 
Repurchase of common stock
(27,134)
 
(14)
(27,120)
 
 
Repurchase of common stock (in Shares)
 
 
(1,436,423)
 
 
 
Reduction of employee stock notes receivable
30 
 
 
 
 
 
30 
Balance at Dec. 31, 2011
$ 1,066,205 
$ 0 
$ 356 
$ 115 
$ 49,245 
$ 1,017,629 
$ (1,140)
Balance (in Shares) at Dec. 31, 2011
 
35,643,102 
11,495,377 
 
 
 
Consolidated Statements of Shareholders' Equity and Comprehensive Income (Parentheticals)
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Common Class A [Member]
 
 
 
Dividends paid per common share (in dollars per share)
$ 0.37 
$ 0.70 
$ 0.07 
Common Class B [Member]
 
 
 
Dividends paid per common share (in dollars per share)
$ 0.37 
$ 0.70 
$ 0.07 
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Net income
$ 204,335 
$ 189,034 
$ 139,125 
Adjustments to reconcile net income to net cash provided by operating activities, net of business and asset acquisitions:
 
 
 
Depreciation and amortization, including loan and debt premiums/discounts and deferred origination costs
72,557 
91,244 
116,038 
Provision for loan losses
21,250 
22,700 
29,000 
Impairment expense
26,599 
32,728 
Derivative market value adjustment
50,513 
77,134 
(6,852)
Foreign currency transaction adjustment
(32,706)
(80,721)
37,654 
Proceeds to terminate and/or amend derivative instruments
13,607 
15,369 
3,870 
Payments to terminate and/or amend derivative instruments
(10,242)
(3,349)
(15,069)
Gain on sale of loans
(1,378)
(33,748)
(35,148)
Gain from debt repurchases
(6,962)
(44,883)
(41,683)
Originations and purchases of student loans-held for sale
(42,074)
(13,345)
Change in investments - trading securities, net
(7,544)
(43,236)
3,876 
Deferred income tax (benefit) expense
(7,726)
4,273 
(19,057)
Non-cash compensation expense
2,029 
2,280 
2,644 
Other non-cash items
553 
409 
1,976 
Decrease (increase) in accrued interest receivable
29,220 
11,161 
142,565 
Decrease (increase) in accounts receivable
(11,040)
(10,571)
45 
Decrease (increase) in other assets
1,421 
2,456 
5,407 
(Decrease) increase in accrued interest payable
(538)
(678)
(61,745)
(Decrease) increase in other liabilities
(6,487)
11,469 
2,677 
Net cash provided by operating activities
310,862 
194,868 
324,706 
Cash flows from investing activities, net of business and asset acquisitions:
 
 
 
Originations and purchases of student loans, including loan premiums and deferred origination costs, net of discounts
(976,837)
(3,137,210)
(2,776,557)
Purchases of student loans from a related party
(112)
(989,168)
(47,621)
Net proceeds from student loan repayments, claims, capitalized interest, participations, and other
2,235,719 
1,821,589 
1,873,666 
Proceeds from sale of student loans
121,344 
2,202,427 
2,317,093 
Proceeds from sale of student loans to a related party
76,448 
Purchases of property and equipment, net
(14,167)
(12,770)
(1,204)
Decrease (increase) in restricted cash and investments, net
87,905 
(43,265)
371,780 
Business and asset acquisitions, net of cash acquired, including contingency payments
(14,029)
(3,000)
Distribution from equity method investment
100 
Net cash provided by (used in) investing activities
1,439,823 
(161,297)
1,813,605 
Cash flows from financing activities:
 
 
 
Payments on bonds and notes payable
(2,938,613)
(5,564,844)
(6,644,250)
Proceeds from issuance of bonds and notes payable
1,100,384 
5,452,290 
4,688,404 
Payments on bonds payable due to a related party
(107,050)
(111,675)
(21,520)
Proceeds from issuance of bonds payable due to a related party
218,725 
Payments of debt issuance costs
(2,282)
(9,318)
(9,239)
Dividends paid
(17,763)
(34,131)
(3,492)
Repurchases of common stock
(27,134)
(39,805)
(430)
Proceeds from issuance of common stock
512 
528 
449 
Payments received on employee stock notes receivable
30 
279 
101 
Net cash used in financing activities
(1,991,916)
(87,951)
(1,989,977)
Net (decrease) increase in cash and cash equivalents
(241,231)
(54,380)
148,334 
Cash and cash equivalents, beginning of year
283,801 
338,181 
189,847 
Cash and cash equivalents, end of year
42,570 
283,801 
338,181 
Supplemental disclosures of cash flow information:
 
 
 
Interest paid
206,117 
224,837 
434,834 
Income taxes paid, net of refunds
$ 133,180 
$ 105,955 
$ 101,491 
Description of Business
Nature of Operations [Text Block]
Description of Business

Nelnet, Inc. and its subsidiaries (“Nelnet” or the “Company”) is an education services company focused primarily on providing fee-based processing services and quality education-related products and services in four core areas: loan financing, loan servicing, payment processing, and enrollment services (education planning). 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 net interest income on a portfolio of federally insured student loans. 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 1977 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”). To reduce its reliance on interest income on student loans, the Company has significantly diversified and increased its fee-based education-related services.

The Company operates as four distinct operating segments. The Company's operating segments include:

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

A description of each operating segment is included below. In addition, see note 14, “Segment Reporting,” for additional information on the Company's segment reporting.

Fee-Based Operating Segments

Student Loan and Guaranty Servicing

The following are the primary service offerings the Company offers as part of its Student Loan and Guaranty Servicing operating segment:
 
Servicing FFELP loans
Originating and servicing non-federally insured student loans
Servicing federally-owned student loans for the Department of Education
Servicing and outsourcing services for guaranty agencies
Providing student loan servicing software and other information technology products and services

The Student Loan and Guaranty Servicing operating segment provides for the servicing of the Company's student loan portfolio and the portfolios of third parties. The loan servicing activities include loan origination activities, loan conversion activities, application processing, borrower updates, 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 June 2009, the Department of Education named the Company as one of four private sector companies awarded a servicing contract to service federally-owned student loans. In September 2009, the Company began servicing loans under this contract. The contract spans five years, with one five-year renewal at the option of the Department.

This operating segment also provides servicing activities for guarantee agencies. These activities include providing software and data center services, borrower and loan updates, default aversion tracking services, claim processing services, and post-default collection services.

This operating segment also provides student loan servicing software, which is used internally by the Company and licensed to third-party student loan holders and servicers. This software system has been adapted so that it can be offered as a hosted servicing software solution that can be used by third parties to service various types of student loans including federally-owned student loans and FFEL Program loans. In addition, this operating segment provides information technology products and services, with core areas of business in educational loan software solutions, technical consulting services, and enterprise content management solutions.

Tuition Payment Processing and Campus Commerce

The Company's Tuition Payment Processing and Campus Commerce operating segment provides products and services to help students and families manage the payment of education costs at all levels (K-12 and higher education). It also provides innovative education-focused technologies, services, and support solutions to help schools with the everyday challenges of collecting and processing commerce data.

In the K-12 market, the Company offers actively managed tuition payment plans as well as assistance with financial needs assessment and donor management. The Company offers two principal products to the higher education market: actively managed tuition payment plans and campus commerce technologies and payment processing.

Enrollment Services

The Enrollment Services operating segment offers products and services that are focused on helping colleges recruit and retain students (interactive and list marketing services) and helping students plan and prepare for life after high school and/or military service (publishing services and resource centers). Interactive marketing products and services include agency of record services, qualified inquiry generation, pay per click services, inquiry management software, and other marketing management, along with call center solutions. The inquiry management software allows schools to manage their inquiry flow and perform analytics on the inquiries received by the school. The majority of interactive marketing revenue is derived from fees that are earned through the delivery of qualified inquiries or clicks to colleges and universities. List marketing services include providing lists to help higher education institutions and businesses reach the middle school, high school, college bound high school, college, and young adult market places. Publishing services include test preparation study guides, school directories and databases, and career exploration guides. Resource centers include online courses, scholarship search and selection data, career planning, and on-line information about colleges and universities.

Asset Generation and Management Operating Segment

The Company's Asset Generation and Management operating segment includes the acquisition, management, and ownership of the Company's student loan assets, which was historically the Company's largest product and service offering. Student loan assets included in this segment are loans originated under the FFEL Program, including the Stafford Loan Program, the PLUS Loan program, the Supplemental Loans for Students (“SLS”) program, and loans that consolidate certain borrower obligations (“Consolidation”). The Company generates a substantial portion of its earnings from the spread, referred to as the Company's student loan spread, between the yield it receives on its student loan portfolio and the costs to finance the portfolio. The student loan assets are held in a series of education lending subsidiaries designed specifically for this purpose. In addition to the student 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.

On March 30, 2010, President Obama signed into law the Health Care and Education Reconciliation Act of 2010 (the "Reconciliation Act of 2010”). Effective July 1, 2010, this law prohibits new loan originations under the FFEL Program and requires that all new federal loan originations be made through the Federal Direct Loan Program. The new law does not alter or affect the terms and conditions of existing FFELP loans. As a result of this legislation, the Company no longer originates new FFELP loans.
Summary of Significant Accounting Policies and Practices
Significant Accounting Policies [Text Block]
Summary of Significant Accounting Policies and Practices

Consolidation

The consolidated financial statements include the accounts of Nelnet, Inc. and its consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

The Company's education lending subsidiaries are engaged in the securitization of education finance assets. These education lending subsidiaries hold beneficial interests in eligible loans, subject to creditors with specific interests. The liabilities of the Company's education lending subsidiaries are not the direct obligations of Nelnet, Inc. or any of its other subsidiaries. Each education lending subsidiary is structured to be bankruptcy remote, meaning that they should not be consolidated in the event of bankruptcy of the parent company or any other subsidiary. For accounting purposes, the transfers of student loans to the eligible lender trusts do not qualify as sales, as the trusts continue to be under the effective control of the Company. Accordingly, all the financial activities and related assets and liabilities, including debt, of the securitizations are reflected in the Company's consolidated financial statements.

Reclassifications

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

Reclassifying “software services revenue” to “loan and guaranty servicing revenue."

Reclassifying “professional and other services,” “occupancy and communications,” “postage and distribution,” “advertising and marketing,” and “trustee and other debt related fees” to “other” operating expenses.

Reclassifying student list amortization, which was previously included in “advertising and marketing” to “depreciation and amortization.”

The reclassifications had no effect on consolidated net income or consolidated assets and liabilities.

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.

Student Loans Receivable

Student loans consist of federally insured student loans and non-federally insured student 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.

Federally insured loans may be made under the FFEL Program by certain 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 of Education. The terms of the loans, which vary on an individual basis, generally provide for repayment in monthly installments of principal and interest over a period of up to 30 years. Interest rates on loans may be fixed or variable, dependent upon type, terms of loan agreements, and date of origination. For FFELP loans, the education lending subsidiaries have entered into trust agreements in which unrelated financial institutions serve as the eligible lender trustees. As eligible lender trustees, the financial institutions act as the eligible lender in acquiring certain eligible student loans as an accommodation to the subsidiaries, which hold beneficial interests in the student loan assets as the beneficiaries of such trusts.

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

Student loans receivable also includes non-federally insured loans. The terms of the non-federally insured loans, which vary on an individual basis, generally provide for repayment in monthly installments of principal and interest over a period of up to 30 years. The non-federally insured loans are not covered by guarantees or collateral should the borrower default.

Allowance for Loan Losses

The allowance for loan losses represents management's estimate of probable losses on student loans. The provision for loan losses reflects the activity for the applicable period and provides an allowance at a level that the Company's management believes is adequate to cover probable losses inherent in the loan portfolio. The Company evaluates the adequacy of the allowance for loan losses on its federally insured loan portfolio separately from its non-federally insured loan portfolio. These evaluation processes are subject to numerous judgments and uncertainties.

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

In determining the adequacy of the allowance for loan losses on the non-federally insured loans, the Company considers several factors including: loans in repayment versus those in a nonpaying status, delinquency status, type of program, trends in defaults in the portfolio based on Company and industry data, past experience, current economic conditions, and other relevant factors. The Company places a non-federally insured loan on nonaccrual status when the collection of principal and interest is 30 days past due and charges off the loan when the collection of principal and interest is 120 days past due.

Cash and Cash Equivalents

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

Investments

Investments are held to provide liquidity and to serve as a source of income. The Company's investments are classified as trading and are accounted for at fair value with unrealized gains and losses included in “other income” on the consolidated statements of income. Securities that the Company has the intent and ability to hold to maturity are classified as held-to-maturity. The Company's held-to-maturity securities are accounted for at amortized cost.

Restricted Cash and Investments 

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 trust assets and when principal and interest is paid on trust liabilities. Restricted cash also includes collateral deposits with derivative counterparties.

Cash balances that the Company's indentured trusts deposit in guaranteed investment contracts that are held for the related note holders are classified as restricted investments. The Company has classified these investments as held-to-maturity and accounts for them at amortized cost.

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. The Company also 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 includes allowances for doubtful accounts. Allowance estimates are based upon individual customer experience, as well as the age of receivables and likelihood of collection.

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.

In April 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2011-08, Intangibles - Goodwill and Other: Testing for Goodwill Impairment ("ASU 2011-08"). This ASU amends FASB ASC Topic 350, Intangibles - Goodwill and Other, to simplify how an entity tests for goodwill impairment by allowing entities to first assess certain qualitative factors to determine whether the existence of certain events or circumstances would lead to a determination that it would be more likely than not that the fair value of a reporting unit is less than its carrying amount, instead of first performing a fair value analysis for each reporting unit. Entities that conclude, after assessing the totality of events and circumstances, that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount are not required to perform the two-step impairment test (the two-step impairment test is described below). This guidance became effective on September 15, 2011 for annual and interim impairment tests for fiscal years beginning after December 15, 2011, and early adoption is permitted. The Company adopted the new guidance for its 2011 goodwill impairment test. As of November 30, 2011, 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 the two-step impairment test.

If the Company elects to not perform a qualitative assessment or if the Company determines it is more likely than not that the fair value of a reporting unit is less than the carrying amount, then the Company performs a two-step impairment test on goodwill. In the first step, the Company compares the fair value of each reporting unit to its carrying value. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is considered not impaired and the Company is not required to perform further testing. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then the Company must perform the second step of the impairment test in order to determine the implied fair value of the reporting unit's goodwill. If the carrying value of a reporting unit's goodwill exceeds its implied fair value, then the Company would record an impairment loss equal to the difference.

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

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 is 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 accelerated and straight-line methods for recording depreciation and amortization. Accelerated methods are used for certain equipment and software when this method is believed to provide a better matching of income and expenses. Leasehold improvements are amortized over the lesser of their useful life or the related lease period.

Impairment of Long‑Lived Assets

The Company reviews its long-lived assets, such as 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. The Company uses estimates to determine the fair value of long-lived 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 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 estimating fair value if such methods are determined to be more appropriate.

Assumptions and estimates about future values and remaining useful lives 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.

Other Assets

Other assets are recorded at cost or amortized cost and consist primarily of debt issuance costs, student list costs, certain investments, and other miscellaneous assets. Debt issuance costs are amortized using the effective interest method.

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, the Company uses unobservable inputs that reflect the Company's market assumptions such as prices of similar instruments. 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 results 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 financial instruments 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.

The Company's accounting policy is to recognize transfers between levels of the fair value hierarchy at the end of the reporting period.

Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company's various financial instruments. In cases where quoted market prices are not available for identical or similar instruments, 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. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

Revenue Recognition

Loan interest income - Loan interest is paid by the Department or the borrower, depending on the status of the loan at the time of the accrual. In addition, 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 loan holder'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 non-federally insured loans typically begins six months following a borrower's graduation from a qualified institution and the interest is either paid by the borrower or capitalized annually or at repayment.

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) or the fiscal quarter average rate of daily H15 financial commercial paper rates (for loans originated on and after January 1, 2000) relative to the yield of the student loan.

The Company recognizes student loan income as earned, net of amortization of loan premiums and deferred origination costs and the accretion of loan discounts. Loan income is recognized based upon the expected yield of the loan after giving effect to 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 loan, which includes an estimate of prepayment speeds. The Company periodically evaluates the assumptions used to estimate the life of the loans and prepayment speeds.
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.
Student loan and guaranty servicing revenue – Student loan and guaranty servicing revenue consists of the the following items:

Loan and guaranty servicing fees – Loan servicing fees are determined according to individual agreements with customers and are calculated based on the dollar value of loans, number of loans, or number of borrowers serviced for each customer. Guaranty servicing fees, generally, are calculated based on the number of loans serviced, volume of loans serviced, or amounts collected. Revenue is recognized when earned pursuant to applicable agreements, and when ultimate collection is assured.

Software services revenue – Software services revenue is determined from individual agreements with customers and includes license and maintenance fees associated with student loan software products.  Computer and software consulting and remote hosting revenues are recognized over the period in which services are provided to customers.

Tuition payment processing and campus commerce revenue - Tuition payment processing and campus commerce revenue includes actively managed tuition payment solutions and online payment processing. Fees for these services are recognized over the period in which services are provided to customers.

Enrollment services revenue - Enrollment services revenue primarily consists of the following items:

Interactive marketing - Interactive marketing revenue is derived primarily from fees which are earned through the delivery of qualified inquiries or clicks. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is reasonably assured. Delivery is deemed to have occurred at the time a qualified inquiry or click is delivered to the customer provided that no significant obligations remain. From time to time, the Company may agree to credit certain inquiries or clicks if they fail to meet the contractual or other guidelines of a particular client. The Company has established a sales reserve based on historical experience. To date, such credits have been immaterial and within management's expectations.

For a portion of its interactive marketing revenue, the Company has agreements with providers of online media or traffic (“Publishers”) used in the generation of inquiries or clicks. The Company receives a fee from its customers and pays a fee to Publishers either on a cost per inquiry, cost per click, or cost per number of impressions basis. The Company is the primary obligor in the transaction. As a result, the fees paid by the Company's customers are recognized as revenue and the fees paid to its Publishers are included in “cost to provide enrollment services” in the Company's consolidated statements of income.

List marketing - Revenue from the sale of lists is generally earned and recognized, net of estimated returns, upon delivery.

Publishing services - Revenue from the sale of print products is generally earned and recognized, net of estimated returns, upon shipment or delivery.

Resource centers - Resource centers services include online courses, scholarship search and selection data, career planning, and online information about colleges and universities. The majority of these services are sold based on subscriptions and/or are performance based. Revenues from sales of subscription and performance based services are recognized ratably over the term of the contract as earned. Subscription and performance based revenues received or receivable in advance of the delivery of services is included in deferred revenue.

Other income - Other income primarily includes borrower late fee income, which is earned by the education lending subsidiaries and is recognized when payments are collected from the borrower.

Derivative Accounting

The Company records derivative instruments at fair value on the consolidated balance sheet as either an asset or liability. The Company determines the fair value for its derivative contracts using either (i) pricing models that consider current market conditions and the contractual terms of the derivative contract or (ii) counterparty valuations. The factors that impact the fair value of the Company's derivatives include interest rates, time value, forward interest rate curve, and volatility factors, as well as foreign exchange rates. Pricing models and their underlying assumptions impact the amount and timing of unrealized gains and losses recognized, and the use of different pricing models or assumptions could produce different financial results. Management has structured all of the Company's derivative transactions with the intent that each is economically effective. However, the Company's derivative instruments do not qualify for hedge accounting. Accordingly, changes in the fair value of derivative instruments are reported in current period earnings. The changes in fair value on derivative instruments, as well as the settlement payments made on such derivatives, are included in “derivative market value and foreign currency adjustments and derivative settlements, net” on the consolidated statements of income.

Foreign Currency

During 2006, the Company issued Euro-denominated bonds, which are included in “bonds and notes payable” on the consolidated balance sheets. Transaction gains and losses resulting from exchange rate changes when re-measuring these bonds to U.S. dollars at the balance sheet date are included in “derivative market value and foreign currency 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.
 
Income tax expense includes deferred tax expense, which represents 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 (including both tax and interest).

Restructuring Activities

From time to time, the Company implements plans to restructure its business. In conjunction with these restructuring plans, one-time, involuntary benefit arrangements and contract termination costs are accounted for in accordance with the Exit or Disposal Cost Obligations Topic of the FASB Accounting Standards Codification and are classified as restructuring expenses in the accompanying consolidated statements of income.

In conjunction with its restructuring plans, the Company has entered into one-time benefit arrangements with employees, who have been involuntarily terminated. The Company recognizes a liability when all of the following conditions have been met and the benefit arrangement has been communicated to the employees:

Management, having the authority to approve the action, commits to a plan of termination;

The plan of termination identifies the number of employees to be terminated, their job classifications or functions, and their locations and the expected completion date;

The plan of termination establishes the terms of the benefit arrangement, including the benefits that employees will receive upon termination, in sufficient detail to enable employees to determine the type and amount of benefits they will receive if they are involuntarily terminated; and

Actions required to complete the plan of termination indicate that it is unlikely that significant changes to the plan of termination will be made or that the plan of termination will be withdrawn.

Severance costs under such one-time termination benefit arrangements may include all or some combination of severance pay, medical and dental benefits, outplacement services, and certain other costs. Contract termination costs are expensed at the earlier of (1) the contract termination date or (2) the cease use date under the contract. See note 13, “Restructuring Charges,” for additional information.
Student Loans Receivable and Allowance for Loan Losses
Loans, Notes, Trade and Other Receivables Disclosure [Text Block]
 Student Loans Receivable and Allowance for Loan Losses

ASU 2010-20, Disclosure about the Credit Quality of Financing Receivables and the Allowance for Credit Losses (“ASU 2010-20”), requires entities to provide disclosures on a disaggregated basis. The ASU defines two levels of disaggregation – portfolio segment and class of financing receivable.  A portfolio segment is defined as the level at which an entity develops and documents a systematic method for determining its allowance for credit losses.  Classes of financing receivables generally are a disaggregation of a portfolio segment. The Company evaluates the adequacy of the allowance for loan losses on its federally insured loan portfolio separately from its non-federally insured loan portfolio.  Management has determined that each of the federally insured loan portfolio and the non-federally insured loan portfolio meets the definition of a portfolio segment.  Accordingly, the portfolio segment basis disclosures required by ASU 2010-20 are presented in this note for each of these portfolios.  The Company does not disaggregate its portfolio segment student loan portfolios into classes of financing receivables as defined in ASU 2010-20. In addition, as of December 31, 2011 and 2010, the Company does not have any impaired loans as defined in the Receivables Topic of the FASB ASC.

Student loans receivable consisted of the following:
 
As of December 31,
 
2011
 
2010
 
Held for investment
 
Held for investment
 
Held for sale (a)
Federally insured loans
$
24,332,709

 
23,757,699

 

Non-federally insured loans
26,916

 
26,370

 
84,987

 
24,359,625

 
23,784,069

 
84,987

Unamortized loan premiums/discounts and deferred origination costs, net
(13,267
)
 
207,571

 

Allowance for loan losses – federally insured loans
(37,205
)
 
(32,908
)
 

Allowance for loan losses – non-federally insured loans
(11,277
)
 
(10,718
)
 

 
$
24,297,876

 
23,948,014

 
84,987

Allowance for federally insured loans as a percentage of such loans
0.15
%
 
0.14
%
 
 

Allowance for non-federally insured loans as a percentage of such loans
41.90
%
 
40.64
%
 
 

 
(a)
On January 13, 2011, the Company sold a portfolio of non-federally insured loans for proceeds of $91.3 million (100% of par value). The Company retained credit risk related to this portfolio and will pay cash to purchase back any loans which become 60 days delinquent. As of December 31, 2010, the Company classified this portfolio as held for sale and the loans were carried at fair value.

Loan Acquisition

On July 8, 2011, the Company purchased the residual interest in $1.9 billion of securitized federally insured consolidation loans. The Company acquired the ownership interest in GCO SLIMS Trust I (the "SLIMS Trust") giving the Company rights to the residual interest in GCO Education Loan Funding Trust-I (the "GCO Trust"). The GCO Trust includes federally insured consolidation loans funded to term with $1.9 billion of notes payable that carry interest rates on a spread to LIBOR or are set and periodically reset via a "dutch auction" ("Auction Rate Securities").

On July 8, 2011, the SLIMS Trust included $46.2 million of notes payable that carry a fixed interest rate of 5.72%. All excess interest earned from the GCO Trust must be used to pay the interest and principal on the notes payable in the SLIMS Trust until the SLIMS notes are paid in full.

The Company has consolidated these trusts on its consolidated balance sheet because management has determined the Company is the primary beneficiary of the trusts. Upon acquisition, the Company recorded all assets and liabilities of the trusts at fair value, resulting in the recognition of a student loan fair value discount of $153.9 million and a bonds and notes payable fair value discount of $174.9 million. These discounts will be accreted using the effective interest method over the lives of the underlying assets and liabilities. All other assets acquired and liabilities assumed (restricted cash, accrued interest receivable/payable, and other assets/liabilities) were recorded at cost which approximates fair value.

Activity in the Allowance for Loan Losses

The provision for loan losses represents the periodic expense of maintaining an allowance sufficient to absorb losses, net of recoveries, inherent in the portfolio of student loans. Activity in the allowance for loan losses is shown below.
 
 
Year ended December 31,
 
2011
 
2010
 
2009
Balance at beginning of period
$
43,626

 
50,887

 
50,922

Provision for loan losses:
 
 
 
 
 
Federally insured loans
20,000

 
18,700

 
20,000

Non-federally insured loans
1,250

 
4,000

 
9,000

Total provision for loan losses
21,250

 
22,700

 
29,000

Charge-offs:
 

 
 

 
 
Federally insured loans
(17,166
)
 
(18,603
)
 
(14,954
)
Non-federally insured loans
(4,147
)
 
(7,282
)
 
(5,304
)
Total charge-offs
(21,313
)
 
(25,885
)
 
(20,258
)
 
 

 
 

 
 
Recoveries - non-federally insured loans
1,310

 
1,263

 
1,543

Purchase (sale) of loans, net:
 
 
 
 
 
Federally insured loans
1,463

 
2,710

 
(520
)
Non-federally insured loans

 
220

 

Reserve related to loans reclassified to held for sale

 
(6,269
)
 

Transfer to/from repurchase obligation related to loans sold/purchased, net
2,146

 
(2,000
)
 
(9,800
)
Balance at end of period
$
48,482

 
43,626

 
50,887

 
 
 
 
 
 
Allocation of the allowance for loan losses:
 

 
 

 
 
Federally insured loans
$
37,205

 
32,908

 
30,102

Non-federally insured loans
11,277

 
10,718

 
20,785

Total allowance for loan losses
$
48,482

 
43,626

 
50,887


Repurchase Obligations

As of December 31, 2011, the Company had participated a cumulative amount of $117.1 million of non-federally insured loans to third parties. Loans participated under these agreements have been accounted for by the Company as loan sales. Accordingly, the participation interests sold are not included on the Company’s consolidated balance sheets. Per the terms of the servicing agreements, the Company’s servicing operations are obligated to repurchase loans subject to the participation interests in the event such loans become 60 or 90 days delinquent.

In addition, on January 13, 2011, the Company sold a portfolio of non-federally insured loans for proceeds of $91.3 million (100% of par value).  The Company retained credit risk related to this portfolio and will pay cash to purchase back any loans which become 60 days delinquent.

The Company’s estimate related to its obligation to repurchase these loans is included in “other liabilities” in the Company’s consolidated balance sheets. The activity related to this accrual is detailed below.
 
Year ended December 31,
 
2011
 
2010
 
2009
Beginning balance
$
12,600

 
10,600

 

Repurchase obligation transferred to/from the allowance for loan losses related to loans purchased/sold, net
(2,146
)
 
2,000

 
9,800

Repurchase obligation associated with loans sold (a)
6,269

 

 

Current period expense
2,500

 

 
800

Ending balance
$
19,223

 
12,600

 
10,600


(a)
As discussed previously, on January 13, 2011, the Company sold a portfolio of loans and retained all credit risk related to this portfolio. These loans were classified as held for sale as of December 31, 2010 and the loans were carried at fair value. Upon sale, the Company established a repurchase obligation associated with those loans that are estimated to become 60 days delinquent.

Student Loan Status and Delinquencies

Delinquencies have the potential to adversely impact the Company’s earnings through increased servicing and collection costs and account charge-offs.  The table below shows the Company’s student loan delinquency amounts on loans held for investment.
 
As of December 31,
 
2011
 
2010
 
Dollars
 
Percent
 
Dollars
 
Percent
Federally Insured Loans:
 
 
 
 
 
 
 
Loans in-school/grace/deferment (a)
$
3,664,899

 
 
 
$
4,358,616

 
 
Loans in forbearance (b)
3,330,452

 
 
 
2,984,869

 
 
Loans in repayment status:
 
 
 
 
 
 
 
Loans current
14,600,372

 
84.2
%
 
14,309,480

 
87.2
%
Loans delinquent 31-60 days (c)
844,204

 
4.9

 
794,140

 
4.8

Loans delinquent 61-90 days (c)
407,094

 
2.3

 
306,853

 
1.9

Loans delinquent 91-270 days (c)
1,163,437

 
6.7

 
789,795

 
4.8

Loans delinquent 271 days or greater (c)(d)
322,251

 
1.9

 
213,946

 
1.3

Total loans in repayment
17,337,358

 
100.0
%
 
16,414,214

 
100.0
%
Total federally insured loans
$
24,332,709

 
 

 
$
23,757,699

 
 

 
 
 
 
 
 
 
 
Non-Federally Insured Loans:
 

 
 

 
 

 
 

Loans in-school/grace/deferment (a)
$
2,058

 
 

 
$
3,500

 
 

Loans in forbearance (b)
371

 
 

 
292

 
 

Loans in repayment status:
 
 
 

 
 
 
 

Loans current
16,776

 
68.5
%
 
16,679

 
73.9
%
Loans delinquent 31-60 days (c)
706

 
2.9

 
1,546

 
6.8

Loans delinquent 61-90 days (c)
1,987

 
8.1

 
1,163

 
5.2

Loans delinquent 91 days or greater (c)
5,018

 
20.5

 
3,190

 
14.1

Total loans in repayment
24,487

 
100.0
%
 
22,578

 
100.0
%
Total non-federally insured loans
$
26,916

 
 

 
$
26,370

 
 

 

(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 include federally insured loans in claim status, which are loans that have gone into default and have been submitted to the guaranty agency.

Loan Sales

See note 5, “Gain on Sale of Loans and Debt Repurchases, net,” for a summary of loans sold by the Company during 2011, 2010, and 2009.

Related Party Loan Activity

The Company sold and/or purchased loans to/from Union Bank & Trust Company (“Union Bank”) an entity under common control with the Company. See note 19, “Related Parties,” for additional information.

Bonds and Notes Payable
Debt Disclosure [Text Block]
Bonds and Notes Payable

The following tables summarize the Company’s outstanding debt obligations by type of instrument:
 
 
As of December 31, 2011
 
Carrying
amount
 
Interest rate
range
 
Final maturity
Variable-rate bonds and notes (a):
 
 
 
 
 
Bonds and notes based on indices
$
20,252,403

 
0.42% - 6.90%
 
11/25/15 - 7/27/48
Bonds and notes based on auction or remarketing
970,575

 
0.11% - 2.19%
 
5/1/28 - 5/25/42
Total variable-rate bonds and notes
21,222,978

 
 
 
 
Commercial paper - FFELP warehouse facilities
824,410

 
0.26% - 0.70%
 
7/1/14
Department of Education Conduit
2,339,575

 
0.24%
 
5/8/14
Unsecured line of credit
64,390

 
0.69%
 
5/8/12
Unsecured debt - Junior Subordinated Hybrid Securities
100,697

 
3.95%
 
9/15/61
Other borrowings
43,119

 
3.78% - 5.72%
 
11/14/12 - 3/1/22
 
24,595,169

 
 
 
 
Discount on bonds and notes payable
(160,629
)
 
 
 
 
Total
$
24,434,540

 
 
 
 
 
 
As of December 31, 2010
 
Carrying
amount
 
Interest rate
range
 
Final maturity
Variable-rate bonds and notes (a):
 
 
 
 
 
Bonds and notes based on indices
$
20,170,217

 
0.30% - 6.90%
 
5/26/14 - 7/27/48
Bonds and notes based on auction or remarketing
944,560

 
0.24% - 1.51%
 
5/1/11 - 7/1/43
Total variable-rate bonds and notes
21,114,777

 
 
 
 
Commercial paper - FFELP warehouse facility
108,381

 
0.29% - 0.35%
 
7/29/13
Department of Education Conduit
2,702,345

 
0.31%
 
5/8/14
Unsecured line of credit
450,000

 
0.79%
 
5/8/12
Unsecured debt - Junior Subordinated Hybrid Securities
163,255

 
7.40%
 
9/15/61
Related party debt
107,050

 
0.53%
 
5/20/11
Other borrowings
26,664

 
0.26% - 5.10%
 
1/1/11 - 11/1/15
 
$
24,672,472

 
 
 
 
(a)
Issued in asset-backed securitizations

Secured Financing Transactions

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

The majority of the bonds and notes payable are primarily secured by the student loans receivable, related accrued interest, and by the amounts on deposit in the accounts established under the respective bond resolutions or financing agreements. Certain variable rate bonds and notes are secured by a letter of credit and reimbursement agreement issued by a third-party liquidity provider.

The Company funds loan acquisitions using loan warehouse facilities and asset-backed securitizations. Student loan warehousing allows the Company to buy and manage student loans prior to transferring them into more permanent financing arrangements. In 2009, the Company funded certain loans under the Department's Conduit Program.
FFELP warehouse facilities

The Company funds a portion of its loan acquisitions using its FFELP warehouse facilities.

On August 3, 2009, the Company entered into a FFELP warehouse facility (the “2009 FFELP Warehouse Facility”). The 2009 FFELP Warehouse Facility had a maximum financing amount of $500.0 million, with a revolving financing structure supported by 364-day liquidity provisions, which were to expire on August 2, 2010.

On July 30, 2010, the Company renewed its FFELP warehouse facility (the “2009/2010 FFELP Warehouse Facility”). The 2009/2010 FFELP Warehouse Facility had a maximum financing amount of $500.0 million, with a revolving financing structure supported by 364-day liquidity provisions, which were to expire on July 29, 2011. As of December 31, 2010, $108.4 million was outstanding under the 2009/2010 FFELP Warehouse Facility, $391.6 million was available for future use, and $5.3 million was advanced as equity support.

On July 14, 2011, the Company renewed the liquidity agreement on its existing FFELP warehouse facility (the “NFSLW-I Warehouse”) and entered into an additional FFELP warehouse facility (the “NHELP-I Warehouse”).

When the Company renewed the liquidity agreement on its NFSLW-I Warehouse facility on July 14, 2011, it had a maximum financing amount of $300.0 million which was increased to $500.0 million on August 10, 2011. The NFSLW-I Warehouse has a revolving financing structure supported by 364-day liquidity provisions, which expires on July 1, 2012. The final maturity date of the facility is July 1, 2014. In the event the Company is unable to renew the liquidity provisions by July 1, 2012, the facility would become a term facility at a stepped-up cost, with no additional student loans being eligible for financing, and the Company would be required to refinance the existing loans in the facility by July 1, 2014.

The NFSLW-I Warehouse facility provides for formula based advance rates, depending on FFELP loan type, up to a maximum of 85 percent to 98 percent of the principal and interest of loans financed. The advance rates for collateral may increase or decrease based on market conditions, but they are subject to a minimum advance of 84.5 percent to 90 percent based on loan type. As of December 31, 2011, $496.7 million was outstanding under the NFSLW-I Warehouse facility, $3.3 million was available for future use, and $38.4 million was advanced as equity support.

The NHELP-I Warehouse has a maximum financing amount of $500.0 million, with a revolving financing structure supported by 364-day liquidity provisions, which expires on October 1, 2012. The final maturity date of the facility is July 1, 2014. In the event the Company is unable to renew the liquidity provisions by October 1, 2012, the facility would become a term facility at a stepped-up cost, with no additional student loans being eligible for financing, and the Company would be required to refinance the existing loans in the facility by July 1, 2014.

The NHELP-I Warehouse facility provides for formula based advance rates, depending on FFELP loan type, up to a maximum of 93 percent to 95 percent of the principal and interest of loans financed. The advance rates for collateral may increase or decrease based on market conditions, but they are subject to a minimum advance of 85 percent to 90 percent based on loan type. As of December 31, 2011, $327.7 million was outstanding under the NHELP-I Warehouse facility, $172.3 million was available for future use, and $20.1 million was advanced as equity support.

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

Asset-backed securitizations

During 2011 and 2010, the Company completed asset-backed securities transactions totaling $0.4 billion and $1.9 billion, respectively. Notes issued in the 2011 and 2010 asset-backed securities transactions carry interest rates based on a spread to LIBOR.

As part of the Company's issuance of asset-backed securities in 2008, due to credit market conditions when these notes were issued, the Company purchased the Class B subordinated notes of $76.5 million (par value). These notes are not included on the Company's consolidated balance sheet. If the credit market conditions improve, the Company anticipates selling these notes to third parties. Upon a sale to third parties, the Company would obtain cash proceeds equal to the market value of the notes on the date of such sale. Upon sale, these notes would be shown as “bonds and notes payable” on the Company's consolidated balance sheet. The Company believes the market value of such notes is currently less than par value. The difference between the par value and market value would be recognized by the Company as interest expense over the life of the bonds.

Notes issued during 2006 included €773.2 million (950 million in U.S. dollars) with variable interest rates initially based on a spread to EURIBOR (the “Euro Notes”). As of December 31, 2011 and December 31, 2010, the Euro Notes were recorded on the Company's balance sheet at $1.0 billion. Transaction gains or losses resulting from exchange rate changes when remeasuring these bonds to U.S. dollars at the balance sheet date are included in “derivative market value and foreign currency adjustments and derivative settlements, net” on the consolidated statements of income. Concurrently with the issuance of the Euro Notes, the Company entered into cross-currency interest rate swaps which are further discussed in note 6, “Derivative Financial Instruments.”

The interest rates on certain of the Company's asset-backed securities are set and periodically reset via a "dutch auction" ("Auction Rate Securities") or through a remarketing utilizing remarketing agents ("Variable Rate Demand Notes"). As of December 31, 2011, the Company is currently sponsor on $751.4 million of Auction Rate Securities and $219.2 million of Variable Rate Demand Notes.

For Auction Rate Securities, investors and potential investors submit orders through a broker-dealer as to the principal amount of notes they wish to buy, hold, or sell at various interest rates. The broker-dealers submit their clients' orders to the auction agent, who then determines the clearing interest rate for the upcoming period. Interest rates on these Auction Rate Securities are reset periodically, generally every 7 to 35 days, by the auction agent or agents. During the first quarter of 2008, as part of the credit market crisis, auction rate securities from various issuers failed to receive sufficient order interest from potential investors to clear successfully, resulting in failed auction status. Since February 8, 2008, all of the Company's Auction Rate Securities have failed in this manner. Under normal conditions, banks have historically purchased these securities when investor demand is weak. However, since February 2008, banks have been allowing auctions to fail.

As a result of a failed auction, the Auction Rate Securities will generally pay interest to the holder at a maximum rate as defined by the indenture. While these rates will vary, they will generally be based on a spread to LIBOR or Treasury Securities. Based on the relative levels of these indices as of December 31, 2011, the rates expected to be paid by the Company range from 91-day T-Bill plus 125 basis points, on the low end, to LIBOR plus 250 basis points, on the high end. These maximum rates are subject to increase if the credit ratings on the bonds are downgraded.

For Variable Rate Demand Notes, the remarketing agents set the price, which is then offered to investors. If there are insufficient potential bid orders to purchase all of the notes offered for sale, the Company could be subject to interest costs substantially above the anticipated and historical rates paid on these types of securities. The maximum rate for Variable Rate Demand Notes is based on a spread to certain indices as defined in the underlying documents, with the highest to the Company being Prime plus 200 basis points.

Department of Education’s Conduit Program

In May 2009, the U.S. Department of Education implemented a program under which it finances eligible FFELP Stafford and PLUS loans in a conduit vehicle established to provide funding for student lenders (the "Conduit Program").  Loans eligible for the Conduit Program had to be first disbursed on or after October 1, 2003, but not later than June 30, 2009, and fully disbursed before September 30, 2009, and meet certain other requirements. Funding for the Conduit Program is provided by the capital markets at a cost based on market rates, with the Company being advanced 97 percent of the student loan face amount. Excess amounts needed to fund the remaining 3 percent of the student loan balances were contributed by the Company. The Conduit Program expires on May 8, 2014. The Student Loan Short-Term Notes (“Student Loan Notes”) issued by the Conduit Program are supported by a combination of  (i) notes backed by FFELP loans, (ii) a liquidity agreement with the Federal Financing Bank, and (iii) a put agreement provided by the Department.  If the conduit does not have sufficient funds to pay all Student Loan Notes, then those Student Loan Notes will be repaid with funds from the Federal Financing Bank.  The Federal Financing Bank will hold the notes for a short period of time and, if at the end of that time, the Student Loan Notes still cannot be paid off, the underlying FFELP loans that serve as collateral to the Conduit Program will be sold to the Department through a put agreement at a price of 97 percent of the face amount of the loans.  As of December 31, 2011 and 2010, the Company had $2.3 billion and $2.7 billion, respectively, borrowed under the facility and $84.7 million and $94.1 million advanced as equity support in the facility. Effective July 1, 2010, no additional loans could be funded using the Conduit Program.

Unsecured Line of Credit

As of December 31, 2011, we had a $750.0 million unsecured line of credit with a maturity date of May 8, 2012. As of December 31, 2011 and 2010, there was $64.4 million and $450.0 million, respectively, outstanding on this line. On February 17, 2012, the Company entered into a new $250.0 million unsecured line of credit. In conjunction with entering into this new agreement, the outstanding balance on the $750.0 million unsecured line of credit of $64.4 million was paid off in full and the agreement was terminated. As of February 17, 2012, the $250.0 million unsecured line of credit had an outstanding balance of $40.0 million. The $250.0 million line of credit terminates on February 17, 2016. Upon termination in 2016, there can be no assurance that the Company will be able to maintain this line of credit, find alternative funding, or increase the amount outstanding under the line, if necessary.

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

A minimum consolidated net worth

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

A limitation on recourse indebtedness

A limitation on the percentage of non-federally insured loans in the Company’s portfolio

Many of these covenants are duplicated in the Company’s other lending facilities, including its FFELP warehouse facilities.

The Company’s new operating line of credit does not have any covenants related to unsecured debt ratings.  However, changes in the Company’s ratings (as well as the amounts the Company borrows) have modest implications on the pricing level at which the Company obtains funding.

A default on the Company’s FFELP warehouse facilities would result in an event of default on the Company’s new unsecured line of credit that would result in the outstanding balance on the line of credit becoming immediately due and payable.

Unsecured Fixed Rate Debt

Senior Notes

On May 25, 2005, the Company issued $275.0 million in aggregate principal amount of Senior Notes due June 1, 2010 (the “Senior Notes”). The Senior Notes were unsecured obligations of the Company. The interest rate on the Notes was 5.125%, payable semiannually. Upon maturity, the Company paid the remaining outstanding balance on the Senior Notes in full.

Junior Subordinated Hybrid Securities

On September 27, 2006 the Company issued $200.0 million aggregate principal amount of Junior Subordinated Hybrid Securities ("Hybrid Securities"). The Hybrid Securities are unsecured obligations of the Company. The interest rate on the Hybrid Securities from the date they were issued through September 28, 2011 was 7.40%, payable semi-annually. Beginning September 29, 2011 through September 29, 2036, the "scheduled maturity date," the interest rate on the Hybrid Securities is equal to three-month LIBOR plus 3.375%, payable quarterly. The principal amount of the Hybrid Securities will become due on the scheduled maturity date only to the extent that the Company has received proceeds from the sale of certain qualifying capital securities prior to such date (as defined in the Hybrid Securities' prospectus). If any amount is not paid on the scheduled maturity date, it will remain outstanding and bear interest at a floating rate as defined in the prospectus, payable monthly. On September 15, 2061, the Company must pay any remaining principal and interest on the Hybrid Securities in full whether or not the Company has sold qualifying capital securities. At the Company's option, the Hybrid Securities are redeemable in whole or in part, any time on or after September 29, 2011, at their principal amount plus accrued and unpaid interest, provided in the case of a redemption in part that the principal amount outstanding after such redemption is at least $50.0 million.

Related Party Transactions

Union Bank Participation Agreement

The Company maintains an agreement with Union Bank as trustee for various grantor trusts, under which Union Bank has agreed to purchase from the Company participation interests in student loans (the "FFELP Participation Agreement"). The Company uses this facility as an additional source to fund FFELP student loans.  As of December 31, 2011 and 2010, $509.2 million and $350.4 million, respectively, of loans were subject to outstanding participation interests held by Union Bank, as trustee, under this agreement. The agreement automatically renews annually and is terminable by either party upon five business days notice. This agreement provides beneficiaries of Union Bank’s grantor trusts with access to investments in interests in student loans, while providing liquidity to the Company.  The Company can participate loans to Union Bank to the extent of availability under the grantor trusts, up to $750.0 million or an amount in excess of $750.0 million if mutually agreed to by both parties.  Loans participated under this agreement have been accounted for by the Company as loan sales.  Accordingly, the participation interests sold are not included on the Company’s consolidated balance sheets.

Related Party Debt

The Company has from time to time repurchased certain of its own asset-backed securities (bonds and notes payable). For accounting purposes, these notes have been effectively retired and are not included on the Company’s consolidated balance sheets. However, these securities are legally outstanding at the trust level and the Company could sell these notes to third parties or redeem the notes at par as cash is generated by the trust estate. As of December 31, 2010, the Company had $107.1 million of these securities participated to Union Bank, as trustee for various grantor trusts, and such notes were included in “bonds and notes payable” on the Company’s consolidated balance sheet. During the first quarter of 2011, the Company redeemed all outstanding notes under this participation.

Other Borrowings

As discussed in note 3, "Student Loans Receivable and Allowance for Loan Losses," on July 8, 2011, the Company acquired the ownership interest in the SLIMS Trust which included $46.2 million of notes payable that carry a fixed interest rate of 5.72%. As of December 31, 2011, $29.5 million of debt remained outstanding under this facility.

On October 13, 2006, the Company purchased a building in which its corporate headquarters is located. In connection with the acquisition of the building, the Company assumed the outstanding note on the property. As of December 31, 2011 and 2010, the outstanding balance on the note was $4.7 million and $4.8 million, respectively.

As of December 31, 2011 and 2010, bonds and notes payable includes $8.9 million and $10.0 million, respectively, of notes due to a third-party. The Company used the proceeds from these notes to invest in non-federally insured student loan assets via a participation agreement.

As of December 31, 2010, bonds and notes payable included a line of credit with a balance of $11.9 million. The Company used the proceeds from the line of credit to purchase federally insured student loans. This line of credit was paid off during 2011.

One of the Company's education lending subsidiaries has irrevocably escrowed funds to make the remaining principal and interest payments on previously issued bonds and notes. Accordingly, neither these obligations nor the escrowed funds are included on the accompanying consolidated balance sheets. As of December 31, 2011 and 2010, $39.7 million and $36.9 million, respectively, of defeased debt remained outstanding.

Debt Covenants

Certain bond resolutions contain, among other requirements, covenants relating to restrictions on additional indebtedness, limits as to direct and indirect administrative expenses, and maintaining certain financial ratios. Management believes the Company is in compliance with all covenants of the bond indentures and related credit agreements as of December 31, 2011.

Maturity Schedule

Bonds and notes outstanding as of December 31, 2011 are due in varying amounts as shown below.
2012
 
$
8,900

2013
 

2014
 
3,163,985

2015
 
209,172

2016
 
105,163

2017 and thereafter
 
21,107,949

 
 
$
24,595,169


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

Debt Repurchases

The Company repurchased outstanding debt as summarized in note 5, "Gain on Sale of Loans and Debt Repurchases, net."


Gain on Sale of Loans and Debt Repurchases, Net
Additional Financial Information Disclosure [Text Block]
Gain on Sale of Loans and Debt Repurchases, net

“Gain on sale of loans and debt repurchases, net” in the accompanying consolidated statements of income is composed of the following items:
 
Year ended December 31,
 
2011
 
2010
 
2009
Gain on sale of loans, net (a)
$
1,378

 
33,748

 
35,148

Gain from debt repurchases (b)
6,962

 
44,883

 
41,683

 
$
8,340

 
78,631

 
76,831


(a)
The majority of gains from the sale of loans included in the table above were the result of selling loans to the Department under a program established to provide liquidity to student loan lenders. During each of 2010 and 2009, the Company sold $2.1 billion (par value) of student loans to the Department and recognized a gain of $33.8 million and $36.6 million, respectively.

(b)
The activity included in "Gain from debt repurchases" is detailed below:
 
Year ended December 31, 2011
 
Year ended December 31, 2010
 
Year ended December 31, 2009
 
Notional
amount
 
Purchase
price
 
Gain
 
Notional
amount
 
Purchase
price
 
Gain
 
Notional
amount
 
Purchase
price
 
Gain
Gains on debt repurchases:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unsecured debt - Senior Notes due 2010
$

 

 

 

 

 

 
208,284

 
196,529

 
11,755

Junior Subordinated Hybrid Securities
62,558

 
55,651

 
6,907

 
34,995

 
30,073

 
4,922

 
1,750

 
350

 
1,400

Asset-backed securities (1)
12,254

 
12,199

 
55

 
690,750

 
650,789

 
39,961

 
348,155

 
319,627

 
28,528

 
$
74,812

 
67,850

 
6,962

 
725,745

 
680,862

 
44,883

 
558,189

 
516,506

 
41,683


(1)
For accounting purposes, the asset-backed securities repurchased by the Company are effectively retired and are not included on the Company’s consolidated balance sheets.  However, as of December 31, 2011, the Company has purchased a cumulative amount of $72.5 million of these securities that remain legally outstanding at the trust level and the Company could sell these notes to third parties or redeem the notes at par as cash is generated by the trust estate.  Upon a sale to third parties, the Company would obtain cash proceeds equal to the market value of the notes on the date of such sale. The par value of these notes ($72.5 million as of December 31, 2011) may not represent market value of such securities.
Derivative Financial Instruments
Derivative Instruments and Hedging Activities Disclosure [Text Block]
Derivative Financial Instruments

The Company is exposed to certain risks relating to its ongoing business operations. The primary risks managed by using derivative instruments are interest rate risk and foreign currency exchange risk.

Interest Rate Risk

The Company’s primary market risk exposure arises from fluctuations in its borrowing and lending rates, the spread between which could impact the Company due to shifts in market interest rates. Because the Company generates a significant portion of its earnings from its student loan spread, the interest rate sensitivity of the balance sheet is a key profitability driver.  The Company has adopted a policy of periodically reviewing the mismatch related to the interest rate characteristics of its assets and liabilities together with the Company’s assessment of current and future market conditions. Based on those factors, the Company uses derivative instruments as part of its overall risk management strategy.

Basis Swaps

The Company funds the majority of its student loan assets with one-month or three-month LIBOR indexed floating rate securities. Meanwhile, the interest earned on the Company’s student loan assets is indexed to commercial paper and treasury bill rates. The different interest rate characteristics of the Company’s loan assets and liabilities funding these assets results in basis risk. The Company also faces repricing risk due to the timing of the interest rate resets on its liabilities, which may occur as infrequently as once a quarter, in contrast to the timing of the interest rate resets on its assets, which generally occurs daily. In a declining interest rate environment, this may cause the Company’s student loan spread to compress, while in a rising rate environment, it may cause the spread to increase. As of December 31, 2011, the Company had $23.4 billion and $0.9 billion of FFELP loans indexed to the three-month financial commercial paper rate and the three-month treasury bill rate, respectively, both of which reset daily, and $19.6 billion of debt indexed to three-month LIBOR, which resets quarterly, and $0.7 billion of debt indexed to one-month LIBOR, which resets monthly.

Because of the different indice types and different indice reset frequencies, the Company is exposed to interest rate risk in the form of basis risk and repricing risk, which, as noted above, is the risk that the different indices may reset at different frequencies, or will not move in the same direction or with the same magnitude. While these indices are all short term in nature with rate movements that are highly correlated over a longer period of time, there have been points in recent history when volatility has been high and correlation has been reduced.

The Company has used derivative instruments to hedge both the basis and repricing risk on certain student loans in which the Company earns interest based on a treasury bill rate that resets daily and are funded with debt indexed to primarily three-month LIBOR.  To hedge these loans, the Company has entered into basis swaps in which the Company receives three-month LIBOR set discretely in advance and pays a weekly treasury bill rate plus a spread as defined in the agreement ("T-Bill/LIBOR Basis Swaps").

However, the Company does not generally hedge the basis risk on those assets indexed to the commercial paper rate that are funded with liabilities in which the Company pays primarily on the LIBOR indice, since the derivatives needed to hedge this risk are generally illiquid or non-existent and the relationship between these indices has been highly correlated over a long period of time.

The Company has also used derivative instruments to hedge the repricing risk due to the timing of the interest rate resets on its assets and liabilities.  The Company has entered into basis swaps in which the Company:

receives three-month LIBOR set discretely in advance and pays a daily weighted average three-month LIBOR less a spread as defined in the agreements (the “Average/Discrete Basis Swaps”)

receives three-month LIBOR set discretely in advance and pays one-month LIBOR plus or minus a spread as defined in the agreements (the “1/3 Basis Swaps”)

The following table summarizes the Company’s basis swaps outstanding:
 
 
 
 
As of December 31, 2011
 
 
 
Notional amounts
Maturity
 
1:3 Basis Swaps
 
T-Bill/LIBOR
Basis Swaps
2021
 
 
$
250,000

 

2023
 
 
1,250,000

 

2024
 
 
250,000

 

2026
 
 
800,000

 

2028
 
 
100,000

 

2036
 
 
700,000

 

2039
(a)
 
150,000

 

2040
(b)
 
200,000

 

 
 
 
$
3,700,000

 


 
 
 
As of December 31, 2010
 
 
 
Notional amounts
 
 
 
1:3 Basis Swaps
 
T-Bill/LIBOR
Basis Swaps
Maturity
 
2011
 
 
$

 
225,000

2021
 
 
250,000

 

2023
 
 
1,250,000

 

2024
 
 
250,000

 

2028
 
 
100,000

 

2039
(a)
 
150,000

 

2040
(b)
 
200,000

 

 
 
 
$
2,200,000

 
225,000


(a)This derivative has a forward effective start date in 2015.

(b)This derivative has a forward effective start date in 2020.

Interest rate swaps – floor income hedges

FFELP loans originated prior to April 1, 2006 generally earn interest at the higher of a floating rate based on the Special Allowance Payment (or SAP) formula set by the Department and the borrower rate, which is fixed over a period of time. The SAP formula is based on an applicable indice plus a fixed spread that is dependent upon when the loan was originated, the loan’s repayment status, and funding sources for the loan. The Company generally finances its student loan portfolio with variable rate debt. In low and/or declining interest rate environments, when the fixed borrower rate is higher than the rate produced by the SAP formula, the Company’s student loans earn at a fixed rate while the interest on the variable rate debt typically continues to decline. In these interest rate environments, the Company may earn additional spread income that it refers to as floor income.

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

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

As of December 31, 2011 and 2010, the Company had $10.9 billion and $8.5 billion, respectively, of student loan assets that were earning fixed rate floor income. The following tables summarize the outstanding derivative investments used by the Company to economically hedge these loans.
 
 
As of December 31, 2011
 
 
Notional
 
Weighted average fixed rate paid by the Company (a)
Maturity
 
amount
 
2013
 
$
2,150,000

 
0.85
%
2014
 
750,000

 
0.85

2015
 
100,000

 
2.26

2020
 
50,000

 
3.23

 
 
$
3,050,000

 
0.87
%
 
 
 
As of December 31, 2010
 
 
Notional
 
Weighted average fixed rate paid by the Company (a)
Maturity
 
amount
 
2011
 
$
4,300,000

 
0.53
%
2012
 
3,950,000

 
0.67

2013
 
650,000

 
1.07

2015
 
100,000

 
2.26

2020
 
50,000

 
3.23

 
 
$
9,050,000

 
0.66
%

(a) For all interest rate derivatives, the Company receives discrete three-months LIBOR.
 
Interest rate swaps – unsecured debt hedges

On September 27, 2006, the Company issued $200.0 million aggregate principal amount of Junior Subordinated Hybrid Securities. As of December 31, 2011, $100.7 million of these notes were outstanding. The interest rate on the Hybrid Securities from the date they were issued through September 28, 2011 was 7.40%. Beginning September 29, 2011 through September 29, 2036, the interest rate on the Hybrid Securities is equal to three-month LIBOR plus 3.375%, payable quarterly. As of December 31, 2011 and 2010, the Company had the following derivatives outstanding that are used to effectively convert the variable interest rate on the Hybrid Securities to a fixed rate.
 
As of December 31, 2011
Notional amount (a)
 
Weighted average fixed rate paid by the Company (b)
$
75,000

 
4.28
%
 
 
 
As of December 31, 2010
Notional amount (a)
 
Weighted average fixed rate paid by the Company (b)
$
100,000

 
4.27
%

(a)
The effective start date on $75 million (notional amount) of the derivatives outstanding is March 2012 with a maturity date of September 29, 2036.

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

Foreign Currency Exchange Risk

During 2006, the Company completed separate debt offerings of student loan asset-backed securities that included €420.5 million and €352.7 million Euro Notes with interest rates based on a spread to the EURIBOR index. As a result of these transactions, the Company is exposed to market risk related to fluctuations in foreign currency exchange rates between the U.S. dollar and Euro. The principal and accrued interest on these notes is re-measured at each reporting period and recorded on the Company’s balance sheet in U.S. dollars based on the foreign currency exchange rate on that date. Changes in the principal and accrued interest amounts as a result of foreign currency exchange rate fluctuations are included in the “derivative market value and foreign currency adjustments and derivative settlements, net” in the Company’s consolidated statements of income.

The Company entered into cross-currency interest rate swaps in connection with the issuance of the Euro Notes. Under the terms of these derivative instrument agreements, the Company receives from a counterparty a spread to the EURIBOR indice based on notional amounts of €420.5 million and €352.7 million and pays a spread to the LIBOR indice based on notional amounts of $500.0 million and $450.0 million, respectively. In addition, under the terms of these agreements, all principal payments on the Euro Notes will effectively be paid at the exchange rate in effect between the U.S. dollar and Euro as of the issuance of the notes.

The following table shows the income statement impact as a result of the re-measurement of the Euro Notes and the change in the fair value of the related derivative instruments. These items are included in “derivative market value and foreign currency adjustments and derivative settlements, net” on the accompanying consolidated statements of income.
 
 
Year ended December 31,
 
2011
 
2010
 
2009
Re-measurement of Euro Notes
$
32,706

 
80,721

 
(37,654
)
Change in fair value of cross currency interest rate swaps
(14,287
)
 
(74,899
)
 
2,497

Total impact to statements of income - income (expense)
$
18,419

 
5,822

 
(35,157
)

The re-measurement of the Euro-denominated bonds generally correlates with the change in fair value of the cross-currency interest rate swaps. However, the Company will experience unrealized gains or losses related to the cross-currency interest rate swaps if the two underlying indices (and related forward curve) do not move in parallel. Management intends to hold the cross-currency interest rate swaps through the maturity of the Euro-denominated bonds.

Accounting for Derivative Financial Instruments

The Company records derivative instruments on the consolidated balance sheets as either an asset or liability measured at its fair value. Management has structured the majority of the Company’s derivative transactions with the intent that each is economically effective; however, the Company’s derivative instruments do not qualify for hedge accounting.  As a result, the change in fair value of the Company’s derivatives at each reporting date are included in “derivative market value and foreign currency adjustments and derivative settlements, net” in the Company’s consolidated statements of income. Changes or shifts in the forward yield curve and fluctuations in currency rates can significantly impact the valuation of the Company’s derivatives. Accordingly, changes or shifts to the forward yield curve and fluctuations in currency rates will impact the financial position and results of operations of the Company.

Any proceeds received or payments made by the Company to terminate a derivative in advance of its expiration date, or to amend the terms of an existing derivative, are included in “derivative market value and foreign currency adjustments and derivative settlements, net” on the consolidated statements of income and are accounted for as a change in fair value of such derivative. During the years ended December 31, 2011, 2010, and 2009, the Company terminated and/or amended certain derivatives for net proceeds of $3.4 million in 2011, net proceeds of $12.0 million in 2010, and net payments of $11.2 million in 2009, respectively.
 
The following table summarizes the fair value of the Company’s derivatives not designated as hedging:

 
Fair value of asset derivatives
 
Fair value of liability derivatives
 
As of
 
As of
 
As of
 
As of
 
December 31, 2011
 
December 31, 2010
 
December 31, 2011
 
December 31, 2010
Average/discrete basis swaps
$

 

 

 

1:3 basis swaps
10,988

 
10,489

 
641

 
44

T-Bill/LIBOR basis swaps

 

 

 
201

Interest rate swaps - floor income hedges
592

 
10,569

 
18,384

 
15,372

Interest rate swaps - hybrid debt hedges

 
1,132

 
24,814

 
470

Cross-currency interest rate swaps
80,631

 
94,918

 

 

Other
8

 
1,238

 
1

 
2

Total
$
92,219

 
118,346

 
43,840

 
16,089


The following table summarizes the effect of derivative instruments in the consolidated statements of income. All gains and losses recognized in income related to the Company’s derivative activity are included in “derivative market value and foreign currency and derivative settlements, net” on the consolidated statements of income.
 
 
Year ended December 31,
Derivatives not designated as hedging
 
2011
 
2010
 
2009
Settlements:
 
 

 
 

 
 
Average/discrete basis swaps
 
$

 
140

 
11,483

1:3 basis swaps
 
1,446

 
1,194

 
21,231

T-Bill/LIBOR basis swaps
 
(253
)
 
(47
)
 

Interest rate swaps - floor income hedges
 
(20,246
)
 
(19,618
)
 
(2,020
)
Interest rate swaps - hybrid debt hedges
 
(744
)
 
(495
)
 

Cross-currency interest rate swaps
 
11,877

 
5,109

 
8,631

Other
 
80

 
(547
)
 
(39
)
Total settlements - (expense) income
 
(7,840
)
 
(14,264
)
 
39,286

Change in fair value:
 
 

 
 

 
 

Average/discrete basis swaps
 
(148
)
 
406

 
(13,647
)
1:3 basis swaps
 
1,114

 
6,133

 
12,587

T-Bill/LIBOR basis swaps
 
201

 
(101
)
 
(101
)
Interest rate swaps - floor income hedges
 
(12,169
)
 
(8,992
)
 
2,267

Interest rate swaps - hybrid debt hedges
 
(25,475
)
 
(301
)
 
1,817

Cross-currency interest rate swaps
 
(14,287
)
 
(74,899
)
 
2,497

Other
 
251

 
620

 
1,432

Total change in fair value - (expense) income
 
(50,513
)
 
(77,134
)
 
6,852

Re-measurement of Euro Notes (foreign currency transaction adjustment) - (expense) income
 
32,706

 
80,721

 
(37,654
)
Derivative market value and foreign currency adjustments and derivative settlements, net - (expense) income
 
$
(25,647
)
 
(10,677
)
 
8,484


Derivative Instruments - Credit and Market Risk

By using derivative instruments, the Company is exposed to credit and market risk.

The Company attempts to manage credit and market risks associated with interest rates by establishing and monitoring limits as to the types and degree of risk that may be undertaken and by entering into transactions with high-quality counterparties that are reviewed periodically by the Company's risk committee. As of December 31, 2011, all of the Company's derivative counterparties had investment grade credit ratings. The Company also has a policy of requiring that all derivative contracts be governed by an International Swaps and Derivatives Association, Inc. Master Agreement.

Credit Risk

When the fair value of a derivative contract is positive (an asset on the Company's balance sheet), this generally indicates that the counterparty would owe the Company if the derivative was settled. If the counterparty fails to perform, credit risk with such counterparty is equal to the extent of the fair value gain in the derivative less any collateral held by the Company. If the Company was unable to collect from a counterparty, it would have a loss equal to the amount the derivative is recorded on the consolidated balance sheet. As of December 31, 2011, the trustee for certain of the Company's asset-backed securities transactions held $73.4 million of collateral from the counterparty on the cross-currency interest rate swaps.

The Company considers counterparties' credit risk when determining the fair value of derivative positions on its exposure net of collateral. However, the Company does not use the collateral to offset fair value amounts recognized in the financial statements for derivative instruments.

Market Risk

When the fair value of a derivative instrument is negative (a liability on the Company's balance sheet), the Company would owe the counterparty if the derivative was settled and, therefore, has no immediate credit risk.  If the negative fair value of derivatives with a counterparty exceeds a specified threshold, the Company may have to make a collateral deposit with the counterparty. The threshold at which the Company may be required to post collateral is dependent upon the Company's unsecured credit rating.  At the Company's current unsecured credit rating (Standard and Poor: BBB- (stable outlook) and Moody's: Ba1 (stable outlook)), the Company has substantially collateralized its corporate derivative liability position with its counterparties. As such, further downgrades would not result in additional collateral requirements of a material nature. In addition, no counterparty has the right to terminate its contracts in the event of further downgrades. However, some long dated derivative contracts have mutual optional termination provisions that can be exercised in 2016 and 2021. The fair value of the derivatives with termination provisions as of December 31, 2011 was not significant. As of December 31, 2011, the Company had $34.0 million posted as collateral to derivative counterparties, which is included in “restricted cash and investments” in the Company's consolidated balance sheet.

Interest rate movements have an impact on the amount of collateral the Company is required to deposit with its derivative instrument counterparties. With the Company's current derivative portfolio, the Company does not currently anticipate any movement in interest rates having a material impact on its capital or liquidity profile, nor expects that any movement in interest rates would have a material impact on its ability to meet potential collateral deposits with its counterparties. Due to the existing low interest rate environment, the Company's exposure to downward movements in interest rates on its interest rate swaps is limited.  In addition, the historical high correlation between 1-month and 3-month LIBOR and the limited notional amount of 1:3 Basis Swaps derivatives outstanding limits the Company's exposure to interest rate movements on these derivatives. 

The Company's cross-currency interest rate swaps are derivatives entered into as a result of certain asset-backed security financings. These derivatives are entered into at the trust level with the counterparty. Trust related derivatives do not contain credit contingent features related to the Company or the trust's credit ratings.
Investments
Investment Holdings [Text Block]
Investments

A summary of investments and restricted investments follows:
 
As of December 31,
 
2011
 
2010
Investments:
 
 
 
Investments - trading securities (a)
 
 
 
Student loan auction rate asset-backed securities
$
42,412

 
11,861

Equity securities
6,847

 
6,250

Debt securities (b)
1,521

 
25,125

Total investments - trading securities
$
50,780

 
43,236

 
 
 
 
Restricted Investments (c):
 
 
 
Guaranteed investment contracts - held-to-maturity
$
236,899

 
215,009


(a)
The unrealized gain/loss on the Company's trading securities as of December 31, 2011 and 2010 was not significant.

(b)
Debt securities include corporate, mortgage-backed security, and U.S. government bonds and U.S. Treasury securities.

(c)
Restricted investments are included in "Restricted cash and investments" on the Company's consolidated balance sheets.

As of December 31, 2011 and 2010, the Company has $22.2 million and $22.4 million, respectively, of other investments included in "other assets" on the Company's consolidated balance sheets.

As of December 31, 2011, the stated maturities for the Company's held-to-maturity investments (restricted investments) are shown in the following table:
 
 
Restricted investments
Year of Maturity:
 
 
2017-2021
 
$
27,355

After 2021
 
209,544

Total
 
$
236,899

Intangible Assets and Goodwill
Goodwill and Intangible Assets Disclosure [Text Block]
Intangible Assets and Goodwill

Intangible assets consist of the following:
 
Weighted
average
remaining
useful life as of
December 31,
2011 (months)
 
As of December 31,
 
 
2011
 
2010
Amortizable intangible assets:
 
 
 
Customer relationships (net of accumulated amortization of $59,893 and $47,770, respectively)
63

 
$
23,240

 
28,576

Computer software (net of accumulated amortization of $5,103 and $2,419, respectively)
12

 
2,815

 
5,499

Trade names (net of accumulated amortization of $9,274 and $6,956, respectively)
12

 
2,319

 
4,637

Total - amortizable intangible assets
54

 
$
28,374

 
38,712


The Company recorded amortization expense on its intangible assets of $17.1 million, $22.7 million, and $22.2 million for the years ended December 31, 2011, 2010, and 2009, respectively. The Company will continue to amortize intangible assets over their remaining useful lives.  As of December 31, 2011, the Company estimates it will record amortization expense as follows:
 
2012
$
18,632

2013
3,399

2014
2,102

2015
829

2016
639

2017 and thereafter
2,773

 
$
28,374


On January 8, 2010, the Company purchased certain assets of a software company that constituted a business combination.  The initial consideration paid by the Company was $3.0 million in cash.  In addition to the initial purchase price, additional payments are to be made by the Company based on certain operating results as defined in the purchase agreement.  On February 1, 2011, the Company made an additional payment of $1.3 million. Additional contingent payments are payable in two annual installments due in March 2012 and March 2013 and, in total, are estimated by the Company to be $3.5 million as of December 31, 2011.  The estimated contingency payments are included in "other liabilities" on the Company's consolidated balance sheets. The contingent payments will be remeasured to fair value each reporting date until the contingency is resolved, with all changes in fair value being recognized in earnings. Substantially all of the purchase price was allocated to a computer software intangible asset that is being amortized over three years. There was no excess purchase price over net assets acquired (goodwill) recognized as a result of this acquisition.

On June 30, 2011, the Company purchased contracts with more than 370 K–12 schools to provide tuition payment plan services.  The initial consideration paid by the Company was $6.9 million in cash.  The initial purchase price is subject to adjustment based on customer retention.  In September 2011, the Company received approximately $51,000 as an adjustment to the purchase price. The final adjustment to purchase price, if any, will occur on May 31, 2012.  Substantially all of the purchase price was allocated to a customer relationship intangible asset that is being amortized over three years.

The change in the carrying amount of goodwill by operating segment was as follows:
 
Student Loan and Guaranty Servicing
 
Tuition Payment Processing and Campus Commerce
 
Enrollment Services
 
Asset Generation and Management (a)
 
Total
Balance as of December 31, 2008
$
8,596

 
58,086

 
66,613

 
41,883

 
175,178

Impairment charge

 

 
(31,461
)
 

 
(31,461
)
Balance as of December 31, 2009
8,596

 
58,086

 
35,152

 
41,883

 
143,717

Impairment charge

 

 
(26,599
)
 

 
(26,599
)
Balance as of December 31, 2010 and 2011
$
8,596

 
58,086

 
8,553

 
41,883

 
117,118


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

The Company reviews goodwill for impairment annually. This annual review is completed by the Company as of November 30 of each year and whenever triggering events or changes in circumstances indicate its carrying value may not be recoverable.
2009 Annual Goodwill Impairment Test
As a result of the 2009 annual test, the Company recorded an impairment charge of $31.5 million related to its list marketing business. The Company's list marketing business had been negatively affected by the economic recession and deterioration of the direct-to-consumer student loan market. In addition, during the fourth quarter of 2009, the Company recognized an impairment charge of $1.2 million on certain intangible assets related to its list marketing business. These charges are included in “impairment expense” in the Company's consolidated statements of income. Information related to the impairment charge follows:
Asset
 
Operating segment
 
Impairment charge
Amortizable intangible assets:
 
 
 
 
Customer relationships
 
Enrollment Services
 
$
584

Trade names
 
Enrollment Services
 
506

Covenants not to compete
 
Enrollment Services
 
21

Other
 
Enrollment Services
 
156

Goodwill
 
Enrollment Services
 
31,461

Total impairment charge
 
 
 
$
32,728


2010 Annual Goodwill Impairment Test
As a result of the 2010 annual goodwill impairment test, the Company recorded impairment charges at two reporting units included in the Enrollment Services operating segment. These charges consisted of $23.9 million related to its interactive marketing business and $2.7 million related to its list marketing business. After recording these charges, no goodwill remained at these two reporting units. These charges are included in “impairment expense” in the Company's consolidated statements of income.

The Company determined legislation and related public scrutiny at for-profit schools may negatively affect enrollments at these schools which could impact future revenue, operating margins, and cash flows related to the Company's interactive marketing business. In addition, the Company's list marketing business continued to be negatively affected by the economic recession and deterioration of the direct-to-consumer market.

With the exception of these two reporting units, as of November 30, 2010, the fair value of each of the Company's reporting units significantly exceeded the carrying value of the net assets assigned to that unit and the Company was not required to perform further testing for impairment.

2011 Annual Goodwill Impairment Test
As further discussed in note 2, "Summary of Significant Accounting Policies and Practices," as of November 30, 2011, 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 the two-step impairment test and determined there was no impairment of goodwill.
Property and Equipment
Property, Plant and Equipment Disclosure [Text Block]
Property and Equipment

Property and equipment consisted of the following:
 
 
 
As of December 31,
 
Useful life
 
2011
 
2010
Computer equipment and software
1-5 years
 
$
79,895

 
78,929

Office furniture and equipment
3-7 years
 
10,607

 
10,481

Leasehold improvements
1-15 years
 
7,321

 
8,037

Transportation equipment
3-10 years
 
3,766

 
3,766

Buildings
5-39 years
 
9,144

 
8,490

Land
 
700

 
700

 
 
 
111,433

 
110,403

Accumulated depreciation
 
 
76,614

 
79,830

 
 
 
$
34,819

 
30,573


Depreciation expense for the years ended December 31, 2011, 2010, and 2009 related to property and equipment was $9.9 million, $8.9 million, and $13.4 million, respectively.
Shareholders’ Equity
Stockholders' Equity Note Disclosure [Text Block]
Shareholders’ Equity

Classes of Common Stock

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

Stock Repurchases

The Company has a stock repurchase program that expires on May 24, 2012 in which it can repurchase shares of the Company's Class A common stock on the open market, through private transactions, or otherwise. Shares repurchased by the Company during 2011, 2010, and 2009 are shown in the table below.

 
 
Total shares repurchased
 
Purchase price (in thousands)
 
Average price of shares repurchased (per share)
Year ended December 31, 2011
 
1,436,423

 
$
27,134

 
$
18.89

Year ended December 31, 2010
 
1,866,332

 
39,805

 
21.33

Year ended December 31, 2009
 
38,429

 
430

 
11.16


As of December 31, 2011, 1.6 million shares may still be purchased under the Company's stock repurchase program
 
Contingent Consideration - infiNET Integrated Solutions, Inc. (“infiNET”)

In 2004, the Company purchased 50% of the stock of infiNET and, in 2006, purchased the remaining 50% of infiNET’s stock. infiNET provides software for customer-focused electronic transactions, information sharing, and electronic account and bill presentment for colleges and universities. Consideration for the purchase of the remaining 50% of the stock of infiNET included 95,380 restricted shares of the Company’s Class A common stock. The purchase agreement provided that the 95,380 shares of Class A common stock issued in the acquisition were subject to stock price guaranty provisions whereby if on or about February 28, 2011 the average market trading price of the Class A common stock was less than $104.8375 per share and had not exceeded that price for any 25 consecutive trading days during the 5-year period from the closing of the acquisition to February 28, 2011, then the Company was required to pay additional cash to the sellers of infiNET for each share of Class A common stock issued in an amount representing the difference between $104.8375 less the greater of $41.9335 or the gross sales price such seller obtained from a sale of the shares occurring subsequent to February 28, 2011. On February 28, 2011, the Company paid $5.9 million in cash to satisfy this obligation. This payment was recorded by the Company as a reduction to additional paid-in capital.
Earnings per Common Share
Earnings Per Share [Text Block]
Earnings per Common Share

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

A reconciliation of weighted average shares outstanding follows:
 
Year ended December 31,
 
2011
 
2010
 
2009
Net income attributable to Nelnet, Inc.
$
204,335

 
189,034

 
139,125

Less earnings allocated to holders of unvested restricted stock
1,263

 
1,218

 
889

Net income available to common stockholders
$
203,072

 
187,816

 
138,236

Weighted average common shares outstanding - basic
47,860,824

 
49,127,934

 
49,484,816

Dilutive effect of the assumed vesting of restricted stock awards
186,845

 
198,752

 
200,327

Weighted average common shares outstanding - diluted
48,047,669

 
49,326,686

 
49,685,143

Basic earnings per common share
$
4.24

 
3.82

 
2.79

Diluted earnings per common share
$
4.23

 
3.81

 
2.78


Included in the Company's weighted average shares outstanding during the years ended December 31, 2011, 2010, and 2009 are 117,361 shares, 101,253 shares, and 96,622 shares, respectively, of restricted stock units issued to certain associates of the Company and restricted stock units that will be issued to nonemployee directors upon their termination from the board of directors under the Company's nonemployee directors' compensation plan (see note 18, “Stock Based Compensation Plans - Non-employee Directors Compensation Plan.”)

There were no shares that were antidilutive and not included in average shares outstanding for the diluted earnings per share calculation.
Income Taxes
Income Tax Disclosure [Text Block]
Income Taxes

The Company is subject to income taxes in the United States and Canada. Significant judgment is required in evaluating the Company's tax positions and determining the provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain.
 
As required by the Income Taxes Topic of the FASB Accounting Standards Codification, the Company recognizes in the consolidated financial statements only those tax positions determined to be more likely than not of being sustained upon examination, based on the technical merits of the positions. It further requires that a change in judgment related to the expected ultimate resolution of uncertain tax positions be recognized in earnings in the period of such change.

As of December 31, 2011, the total amount of gross unrecognized tax benefits (excluding the federal benefit received from state positions) was $21.8 million which is included in “other liabilities” on the consolidated balance sheet. Of this total, $15.0 million (net of the federal benefit on state issues) represents the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate in future periods. The Company currently anticipates uncertain tax positions will decrease by $2.3 million prior to December 31, 2012 as a result of a lapse of applicable statute of limitations, settlements, correspondence with examining authorities, and recognition or measurement considerations with federal and state jurisdictions; however, actual developments in this area could differ from those currently expected. Of the $2.3 million anticipated decrease, $1.8 million, if recognized, would affect the Company's effective tax rate. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits follows:
 
Year ended December 31,
 
2011
 
2010
Gross balance - beginning of year
$
10,546

 
8,629

Additions based on tax positions of prior years
7,898

 
401

Additions based on tax positions related to the current year
4,359

 
2,383

Settlements with taxing authorities

 

Reductions for tax positions of prior years
(417
)
 
(750
)
Reductions based on tax positions related to the current year

 

Reductions due to lapse of applicable statute of limitations
(592
)
 
(117
)
Gross balance - end of year
$
21,794

 
10,546


All of the reductions due to the lapse of statute of limitations and for prior year tax positions shown above impacted the effective tax rate.

The Company's policy is to recognize interest and penalties accrued on uncertain tax positions as part of interest expense and other expense, respectively. As of December 31, 2011 and 2010, $2.4 million and $1.7 million in accrued interest and penalties, respectively, were included in “other liabilities” on the consolidated balance sheets. The Company recognized interest expense related to uncertain tax positions of $0.7 million and $0.3 million for the years ended December 31, 2011 and 2010, respectively, and interest income of $0.6 million for the year ended December 31, 2009. Penalties were accrued in the amount of $0.2 million in both 2010 and 2009. The amount of penalties accrued in 2011 was not significant. The impact of timing differences and tax attributes are considered when calculating interest and penalty accruals associated with the unrecognized tax benefits.

The Company and its subsidiaries file a consolidated federal income tax return in the U.S. and the Company or one of its subsidiaries files income tax returns in various state, local, and foreign jurisdictions. The Company is no longer subject to U.S. federal income tax examinations for years prior to 2008. The Company is no longer subject to U.S. state/local income tax examinations by tax authorities prior to 2004. As of December 31, 2011, the tax years subject to examination by a significant jurisdiction are as follows:

U.S. Federal        2008 and 2009
California          2004 through 2009

The provision for income taxes consists of the following components:
 
Year ended December 31,
 
2011
 
2010
 
2009
Current:
 
 
 
 
 
Federal
$
123,737

 
102,162

 
88,413

State
1,354

 
6,827

 
7,194

Foreign
87

 
158

 
23

Total current provision
125,178

 
109,147

 
95,630

 
 
 
 
 
 
Deferred:
 
 
 
 
 
Federal
(6,606
)
 
272

 
(15,947
)
State
(1,116
)
 
4,009

 
(3,111
)
Foreign
(4
)
 
(8
)
 
1

Total deferred (benefit) provision
(7,726
)
 
4,273

 
(19,057
)
Provision for income tax expense
$
117,452

 
113,420

 
76,573


The differences between the income tax provision computed at the statutory federal corporate tax rate and the financial statement provision for income taxes are shown below:
 
Year ended December 31,
 
2011
 
2010
 
2009
Tax expense at federal rate
35.0
  %
 
35.0
  %
 
35.0
  %
Increase (decrease) resulting from:
 
 
 
 
 
State tax, net of federal income tax benefit
0.9

 
2.2

 
1.9

Provision of uncertain federal and state tax matters
1.1

 
0.4

 

Tax credits
(0.4)

 
(0.2)

 
(0.4)

Valuation allowance
(0.3)

 
0.1

 
(0.6)

Other
0.2

 

 
(0.4)

Effective tax rate
36.5
  %
 
37.5
  %
 
35.5
  %

The Company's net deferred income tax liability, which is included in “other liabilities” on the consolidated balance sheets, consists of the following components:
 
As of December 31,
 
2011
 
2010
Deferred tax assets:
 
 
 
Student loans
$
23,605

 
21,413

Intangible assets
23,476

 
20,578

Accrued expenses
3,282

 
4,981

Net operating loss carryforwards
680

 
2,081

Stock compensation
867

 
899

Deferred revenue
2,625

 
734

Foreign tax credit
397

 
721

Bond issuance costs
656

 
667

Other

 
55

Total gross deferred tax assets
55,588

 
52,129

Less valuation allowance
(250
)
 
(1,161
)
Deferred tax assets
55,338

 
50,968

Deferred tax liabilities:
 
 
 
Loan origination services
31,576

 
36,878

Debt repurchases
30,637

 
33,391

Basis in certain derivative contracts
4,420

 
10,644

Depreciation
5,819

 
2,215

Other
454

 
53

Deferred tax liabilities
72,906

 
83,181

Net deferred income tax liability
$
17,568

 
32,213


The Company has performed an evaluation of the recoverability of deferred tax assets. In assessing the realizability of the Company's deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible. Management considers the scheduled reversals of deferred tax liabilities, projected taxable income, carry back opportunities, and tax planning strategies in making the assessment of the amount of the valuation allowance. With the exception of a portion of the Company's state net operating loss, it is management's opinion that it is more likely than not that the deferred tax assets will be realized and should not be reduced by a valuation allowance. The amount of deferred tax assets considered realizable; however, could be reduced in the near term if estimates of future taxable income during the carry forward period are reduced. As of December 31, 2011, various subsidiaries have state net operating loss carry forwards of $11.6 million expiring at various times through 2030 and foreign tax credit carry forwards of $0.4 million expiring in 2018. A valuation allowance has been established at December 31, 2011 and 2010 of $0.3 million and $1.2 million, respectively, to reduce deferred income tax assets to amounts expected to be realized. The net change in the valuation allowance for the year ended December 31, 2011 was a decrease of $0.9 million, which affected the Company's effective tax rate. Certain events occurred during the year which, in the judgment of management, changed the level of the Company's state net operating loss and foreign tax credit carry forwards expected to be realized.

During 2010, the Company recorded a $55.0 million pre-tax charge related to a legal settlement. Prior to the Company filing its 2010 U.S. Federal income tax return, it executed a binding agreement with the Internal Revenue Service concluding that the settlement payment was deductible as an ordinary and necessary business expense. See note 15, "Legal Proceedings," for additional information on this settlement.

As of December 31, 2011 and 2010, current income taxes receivable of $5.6 million and current income taxes payable of $2.6 million are included in "other assets" and “other liabilities,” respectively, on the consolidated balance sheets.
Restructuring Charges
Restructuring and Related Activities Disclosure [Text Block]
Restructuring Charges

Restructuring Charge - Legislative Impact (2009 Restructuring Plan)

On May 8, 2009, as a result of the continued challenges in the economy and legislative changes in the student loan industry, the Company adopted a plan to further streamline its operations by continuing to reduce its geographic footprint and consolidate servicing operations and related support services.

Management developed a restructuring plan that resulted in lower costs and provided enhanced synergies through cross training, career development, and simplified communications. The Company simplified its operating structure to leverage its larger facilities and technology by closing certain offices and downsizing its presence in certain geographic locations. Approximately 300 associates were impacted by this restructuring plan. However, the majority of these functions were relocated to the Company's Lincoln headquarters and Denver offices. Implementation of the plan began immediately and was completed during the third quarter of 2010.

The total charge to earnings associated with this restructuring plan was $11.7 million, of which $7.3 million and $4.4 million was recognized in 2009 and 2010, respectively. The majority of this restructuring charge and related activity impacted the Company's Student Loan and Guaranty Servicing operating segment. See note 14, “Segment Reporting,” which identifies the income statement impact of this restructuring for each operating segment.

Selected information related to the restructuring charge follows:
 
2009 Restructuring Plan
 
2008 Restructuring Plan (a)
 
2007 Restructuring Plan (b)
 
 
 
Employee termination benefits
 
Lease terminations
 
Lease terminations
 
Lease terminations
 
Total
Restructuring accrual as of December 31, 2008
$

 

 
589

 
2,891

 
3,480

Restructuring costs recognized in 2009
4,247

 
3,031

 

 

 
7,278

Adjustment from initial estimate of charges

 

 
12

 
692

 
704

Cash payments
(898
)
 
(605
)
 
(250
)
 
(650
)
 
(2,403
)
Restructuring accrual as of December 31, 2009
3,349

 
2,426

 
351

 
2,933

 
9,059

Restructuring costs recognized in 2010
1,069

 
3,360

 

 

 
4,429

Adjustment from initial estimate of charges

 

 

 
1,639

 
1,639

Cash payments
(3,380
)
 
(2,332
)
 
(128
)
 
(1,207
)
 
(7,047
)
Restructuring accrual as of December 31, 2010
1,038

 
3,454

 
223

 
3,365

 
8,080

Cash payments
(683
)
 
(1,387
)
 
(223
)
 
(1,541
)
 
(3,834
)
Restructuring accrual as of December 31, 2011
$
355

 
2,067

 

 
1,824

 
4,246


(a)
During, 2008, the Company announced a plan to reduce operating expenses related to its student loan origination and related businesses as a result of ongoing disruptions in the credit markets. This restructuring plan was completed during the second quarter of 2008.

(b)
During 2007, the Company initiated a restructuring plan to modify its student loan business model in advance of the enactment of the College Cost Reduction Act, which impacted the FFEL Program. This restructuring plan was completed as of December 31, 2007.

The restructuring accrual as of December 31, 2011 and 2010 is included in “other liabilities” on the consolidated balance sheets.
Segment Reporting
Segment Reporting Disclosure [Text Block]
Segment Reporting

The Company earns fee-based revenue through its Student Loan and Guaranty Servicing, Tuition Payment Processing and Campus Commerce, and Enrollment Services 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, "Description of Business," for a description of each operating segment.

The accounting policies of the Company’s operating segments are the same as those described in the summary of significant accounting policies. Intersegment revenues are charged by a segment to another segment that provides the product or service.  Intersegment revenues and expenses are included within each segment consistent with the income statement presentation provided to management.  Changes in management structure or allocation methodologies and procedures may result in changes in reported segment financial information. In 2010, the Company began allocating certain corporate overhead expenses to the individual operating segments. These expenses include certain corporate activities related to executive management, human resources, accounting, legal, occupancy, and marketing. These costs are allocated to each operating segment based on estimated use of such activities and services. These allocations were not made in 2009, and thus are not reflected in the 2009 segment operating results.

Segment Operating Results – “Base Net Income”

The tables below include the operating results of each of the Company’s operating segments. Management, including the chief operating decision maker, evaluates the performance of the Company's operating segments based on their profitability. Management measures the profitability of the Company's operating segments based on “base net income.”  Accordingly, information regarding the Company's operating segments is provided based on “base net income.”  The Company's “base net income” is not a defined term within generally accepted accounting principles and may not be comparable to similarly titled measures reported by other companies.  Unlike financial accounting, there is no comprehensive, authoritative guidance for management reporting. While “base net income” is not a substitute for reported results under GAAP, the Company relies on “base net income” to manage each operating segment because it believes this measure provides additional information regarding the operational and performance indicators that are most closely assessed by management.

“Base net income” is the primary financial performance measure used by management to develop the Company’s financial plans, track results, and establish corporate performance targets and incentive compensation. Management believes this information provides additional insight into the financial performance of the core business activities of the Company’s operating segments. Accordingly, the tables presented below reflect “base net income,” which is the operating measure reviewed and utilized by management to manage the business, allocate resources, and evaluate performance. Reconciliations of the segment totals to the Company’s operating results in accordance with GAAP are also included in the tables below.

Corporate Activity and Overhead

Included in the tables below are certain corporate activities ("Corporate Activity and Overhead"). Corporate Activity and Overhead includes the following items:

Income earned on certain investment activities
Interest expense incurred on unsecured debt transactions
Other products and service offerings that are not considered operating segments

Corporate Activities also includes certain corporate activities and overhead functions related to executive management, human resources, accounting and finance, legal, and marketing. Beginning in 2010, these costs were allocated to each operating segment based on estimated use of such activities and services.

Income Taxes

For segment reporting, income taxes are applied based on 38% of income (loss) 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 Activity and Overhead.

Reclassifications

Certain operating segment amounts previously reported have been reclassified to conform to the current period presentation. These reclassifications include reclassifying "software services revenue" to "loan and guaranty servicing revenue" and reclassifying "depreciation and amortization," "impairment expense," "restructure expense," and "litigation settlement," which were previously included in “other expenses.” These reclassifications had no effect on any of the segments net income.

Segment Results and Reconciliations to GAAP
 
Year ended December 31, 2011
 
Fee-Based
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Student
Loan
and
Guaranty
Servicing
 
Tuition
Payment
Processing
and
Campus
Commerce
 
Enrollment
Services
 
Total Fee-
Based
 
Asset
Generation and
Management
 
Corporate
Activity
and
Overhead
 
Eliminations
 
Base Net
Income
 
Adjustments
to GAAP
Results
 
GAAP
Results of
Operations
Total interest income
$
58

 
21

 

 
79

 
590,736

 
5,074

 
(3,035
)
 
592,854

 

 
592,854

Interest expense

 

 

 

 
221,675

 
9,649

 
(3,035
)
 
228,289

 

 
228,289

Net interest income (loss)
58

 
21

 

 
79

 
369,061

 
(4,575
)
 

 
364,565

 

 
364,565

Less provision for loan losses

 

 

 

 
21,250

 

 

 
21,250

 

 
21,250

Net interest income (loss) after provision for loan losses
58

 
21

 

 
79

 
347,811

 
(4,575
)
 

 
343,315

 

 
343,315

Other income (expense):
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Loan and guaranty servicing revenue
175,657

 

 

 
175,657

 

 

 

 
175,657

 

 
175,657

Intersegment servicing revenue
69,037

 

 

 
69,037

 

 

 
(69,037
)
 

 

 

Tuition payment processing and campus commerce revenue

 
67,797

 

 
67,797

 

 

 

 
67,797

 

 
67,797

Enrollment services revenue

 

 
130,470

 
130,470

 

 

 

 
130,470

 

 
130,470

Other income

 

 

 

 
15,416

 
14,097

 

 
29,513

 

 
29,513

Gain on sale of loans and debt repurchases

 

 

 

 
1,433

 
6,907

 

 
8,340

 

 
8,340

Derivative market value and foreign currency adjustments

 

 

 

 

 

 

 

 
(17,807
)
 
(17,807
)
Derivative settlements, net

 

 

 

 
(7,228
)
 
(612
)
 

 
(7,840
)
 

 
(7,840
)
Total other income (expense)
244,694

 
67,797

 
130,470

 
442,961

 
9,621

 
20,392

 
(69,037
)
 
403,937

 
(17,807
)
 
386,130

Operating expenses:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Salaries and benefits
102,878

 
30,070

 
25,155

 
158,103

 
2,791

 
17,057

 

 
177,951

 

 
177,951

Cost to provide enrollment services

 

 
86,548

 
86,548

 

 

 

 
86,548

 

 
86,548

Depreciation and amortization
6,843

 
1,174

 
3,204

 
11,221

 

 
1,398

 

 
12,619

 
17,125

 
29,744

Other
60,442

 
10,192

 
9,425

 
80,059

 
13,381

 
19,975

 

 
113,415

 

 
113,415

Intersegment expenses, net
4,776

 
4,714

 
3,521

 
13,011

 
70,018

 
(13,992
)
 
(69,037
)
 

 

 

Total operating expenses
174,939

 
46,150

 
127,853

 
348,942

 
86,190

 
24,438

 
(69,037
)
 
390,533

 
17,125

 
407,658

Income (loss) before income taxes and corporate overhead allocation
69,813

 
21,668

 
2,617

 
94,098

 
271,242

 
(8,621
)
 

 
356,719

 
(34,932
)
 
321,787

Corporate overhead allocation
(4,138
)
 
(1,379
)
 
(1,379
)
 
(6,896
)
 
(6,896
)
 
13,792

 

 

 

 

Income (loss) before income taxes
65,675

 
20,289

 
1,238

 
87,202

 
264,346

 
5,171

 

 
356,719

 
(34,932
)
 
321,787

Income tax (expense) benefit
(24,955
)
 
(7,709
)
 
(471
)
 
(33,135
)
 
(100,451
)
 
2,860

 

 
(130,726
)
 
13,274

 
(117,452
)
Net income (loss)
$
40,720

 
12,580

 
767

 
54,067

 
163,895

 
8,031

 

 
225,993

 
(21,658
)
 
204,335

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
123,307

 
157,444

 
45,738

 
326,489

 
25,821,806

 
24,735

 
(320,813
)
 
25,852,217

 

 
25,852,217


 
Year ended December 31, 2010
 
Fee-Based
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Student
Loan
and
Guaranty
Servicing
 
Tuition
Payment
Processing
and
Campus
Commerce
 
Enrollment
Services
 
Total Fee-Based
 
Asset
Generation
and
Management
 
Corporate
Activity
and
Overhead
 
Eliminations
 
Base Net
Income
 
Adjustments
to GAAP
Results
 
GAAP
Results of
Operations
Total interest income
$
62

 
32

 

 
94

 
600,098

 
8,109

 
(4,370
)
 
603,931

 

 
603,931

Interest expense

 

 

 

 
215,339

 
21,891

 
(4,370
)
 
232,860

 

 
232,860

Net interest income (loss)
62

 
32

 

 
94

 
384,759

 
(13,782
)
 

 
371,071

 

 
371,071

Less provision for loan losses

 

 

 

 
22,700

 

 

 
22,700

 

 
22,700

Net interest income (loss) after provision for loan losses
62

 
32

 

 
94

 
362,059

 
(13,782
)
 

 
348,371

 

 
348,371

Other income (expense):
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Loan and guaranty servicing revenue
158,838

 

 

 
158,838

 

 
(254
)
 

 
158,584

 

 
158,584

Intersegment servicing revenue
85,342

 

 

 
85,342

 

 


 
(85,342
)
 

 

 

Tuition payment processing and campus commerce revenue

 
59,824

 

 
59,824

 

 

 

 
59,824

 

 
59,824

Enrollment services revenue

 

 
139,897

 
139,897

 

 

 

 
139,897

 

 
139,897

Other income
519

 

 

 
519

 
18,639

 
12,152

 

 
31,310

 

 
31,310

Gain on sale of loans and debt repurchases

 

 

 

 
73,709

 
4,922

 

 
78,631

 

 
78,631

Derivative market value and foreign currency adjustments

 

 

 

 

 

 

 

 
3,587

 
3,587

Derivative settlements, net

 

 

 

 
(13,336
)
 
(928
)
 

 
(14,264
)
 

 
(14,264
)
Total other income (expense)
244,699

 
59,824

 
139,897

 
444,420

 
79,012

 
15,892

 
(85,342
)
 
453,982

 
3,587

 
457,569

Operating expenses:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Salaries and benefits
95,293

 
27,180

 
24,827

 
147,300

 
4,524

 
15,849

 
(1,662
)
 
166,011

 

 
166,011

Cost to provide enrollment services

 

 
91,647

 
91,647

 

 

 

 
91,647

 

 
91,647

Depreciation and amortization
5,179

 
1,333

 
7,359

 
13,871

 
3

 
1,826

 

 
15,700

 
22,744

 
38,444

Impairment expense

 

 
26,599

 
26,599

 

 

 

 
26,599

 

 
26,599

Restructure expense
6,040

 

 

 
6,040

 

 
(20
)
 

 
6,020

 

 
6,020

Litigation settlement

 

 

 

 

 
55,000

 

 
55,000

 

 
55,000

Other
60,061

 
9,531

 
10,681

 
80,273

 
12,749

 
26,743

 

 
119,765

 

 
119,765

Intersegment expenses, net
5,221

 
3,579

 
2,461

 
11,261

 
85,278

 
(12,859
)
 
(83,680
)
 

 

 

Total operating expenses
171,794

 
41,623

 
163,574

 
376,991

 
102,554

 
86,539

 
(85,342
)
 
480,742

 
22,744

 
503,486

Income (loss) before income taxes and corporate overhead allocation
72,967

 
18,233

 
(23,677
)
 
67,523

 
338,517

 
(84,429
)
 

 
321,611

 
(19,157
)
 
302,454

Corporate overhead allocation
(5,856
)
 
(1,952
)
 
(1,952
)
 
(9,760
)
 
(9,759
)
 
19,519

 

 

 

 

Income (loss) before income taxes
67,111

 
16,281

 
(25,629
)
 
57,763

 
328,758

 
(64,910
)
 

 
321,611

 
(19,157
)
 
302,454

Income tax (expense) benefit
(25,502
)
 
(6,189
)
 
9,740

 
(21,951
)
 
(124,928
)
 
26,179

 

 
(120,700
)
 
7,280

 
(113,420
)
Net income (loss)
$
41,609

 
10,092

 
(15,889
)
 
35,812

 
203,830

 
(38,731
)
 

 
200,911

 
(11,877
)
 
189,034

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional information:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Net income (loss)
$
41,609

 
10,092

 
(15,889
)
 
35,812

 
203,830

 
(38,731
)
 

 
200,911

 
 
 
 
Plus: Litigation settlement

 

 

 

 

 
55,000

 

 
55,000

 
 
 
 
Plus: Restructure expense
6,040

 

 

 
6,040

 

 
(20
)
 

 
6,020

 
 
 
 
Plus: Impairment expense

 

 
26,599

 
26,599

 

 

 

 
26,599

 
 
 
 
Less: Net tax effect
(2,295
)
 

 
(10,108
)
 
(12,403
)
 

 
(20,892
)
 

 
(33,295
)
 
 
 
 
Net income (loss), excluding litigation settlement, restructure expense, and impairment expense
$
45,354

 
10,092

 
602

 
56,048

 
203,830

 
(4,643
)
 

 
255,235

 
 
 
 
Total assets
$
133,103

 
121,817

 
52,999

 
307,919

 
26,008,867

 
11,970

 
(434,864
)
 
25,893,892

 

 
25,893,892


 
Year ended December 31, 2009
 
Fee-Based
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Student
Loan
and
Guaranty
Servicing
 
Tuition
Payment
Processing
and
Campus
Commerce
 
Enrollment
Services
 
Total Fee-
Based
 
Asset
Generation and
Management
 
Corporate
Activity
and
Overhead
 
Eliminations
 
Base Net
Income
 
Adjustments
to GAAP
Results
 
GAAP
Results of
Operations
Total interest income
$
112

 
62

 

 
174

 
609,143

 
5,391

 
(2,003
)
 
612,705

 
7,502

 
620,207

Interest expense

 

 

 

 
357,930

 
28,935

 
(2,003
)
 
384,862

 

 
384,862

Net interest income (loss)
112

 
62

 

 
174

 
251,213

 
(23,544
)
 

 
227,843

 
7,502

 
235,345

Less provision for loan losses

 

 

 

 
29,000

 

 

 
29,000

 

 
29,000

Net interest income (loss) after provision for loan losses
112

 
62

 

 
174

 
222,213

 
(23,544
)
 

 
198,843

 
7,502

 
206,345

Other income (expense):
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Loan and guaranty servicing revenue
131,437

 

 

 
131,437

 

 
(1,526
)
 

 
129,911

 

 
129,911

Intersegment servicing revenue
85,048

 

 

 
85,048

 

 

 
(85,048
)
 

 

 

Tuition payment processing and campus commerce revenue

 
53,894

 

 
53,894

 

 

 

 
53,894

 

 
53,894

Enrollment services revenue

 

 
119,397

 
119,397

 

 

 

 
119,397

 

 
119,397

Other income
644

 

 

 
644

 
17,169

 
8,656

 

 
26,469

 

 
26,469

Gain on sale of loans and debt repurchases

 

 

 

 
63,676

 
13,155

 

 
76,831

 

 
76,831

Derivative market value and foreign currency adjustments

 

 

 

 

 

 

 

 
(30,802
)
 
(30,802
)
Derivative settlements, net

 

 

 

 
39,286

 

 

 
39,286

 

 
39,286

Total other income (expense)
217,129

 
53,894

 
119,397

 
390,420

 
120,131

 
20,285

 
(85,048
)
 
445,788

 
(30,802
)
 
414,986

Operating expenses:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Salaries and benefits
84,405

 
25,549

 
23,222

 
133,176

 
6,767

 
16,639

 
(5,456
)
 
151,126

 
159

 
151,285

Cost to provide enrollment services

 

 
74,926

 
74,926

 

 

 

 
74,926

 

 
74,926

Depreciation and amortization
9,025

 
1,484

 
3,959

 
14,468

 
9

 
1,770

 

 
16,247

 
22,249

 
38,496

Impairment expense

 

 
32,728

 
32,728

 

 

 

 
32,728

 

 
32,728

Restructure expense
7,715

 

 

 
7,715

 

 
267

 

 
7,982

 

 
7,982

Other
41,708

 
8,158

 
9,267

 
59,133

 
19,557

 
21,526

 

 
100,216

 

 
100,216

Intersegment expenses, net
4,299

 
2,563

 
1,566

 
8,428

 
81,335

 
(10,171
)
 
(79,592
)
 

 

 

Total operating expenses
147,152

 
37,754

 
145,668

 
330,574

 
107,668

 
30,031

 
(85,048
)
 
383,225

 
22,408

 
405,633

Income (loss) before income taxes and corporate overhead allocation
70,089

 
16,202

 
(26,271
)
 
60,020

 
234,676

 
(33,290
)
 

 
261,406

 
(45,708
)
 
215,698

Corporate overhead allocation

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes
70,089

 
16,202

 
(26,271
)
 
60,020

 
234,676

 
(33,290
)
 

 
261,406

 
(45,708
)
 
215,698

Income tax (expense) benefit
(26,636
)
 
(6,156
)
 
9,984

 
(22,808
)
 
(89,178
)
 
19,186

 

 
(92,800
)
 
16,227

 
(76,573
)
Net income (loss)
$
43,453

 
10,046

 
(16,287
)
 
37,212

 
145,498

 
(14,104
)
 

 
168,606

 
(29,481
)
 
139,125

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional information:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
$
43,453

 
10,046

 
(16,287
)
 
37,212

 
145,498

 
(14,104
)
 

 
168,606

 
 
 
 
Plus: Restructure expense
7,715

 

 

 
7,715

 

 
267

 

 
7,982

 
 
 
 
Plus: Impairment expense

 

 
32,728

 
32,728

 

 

 

 
32,728

 
 
 
 
Less: Net tax effect
(2,932
)
 

 
(12,437
)
 
(15,369
)
 

 
917

 

 
(14,452
)
 
 
 
 
Net income (loss), excluding restructure and impairment expense
$
48,236

 
10,046

 
4,004

 
62,286

 
145,498

 
(12,920
)
 

 
194,864

 
 
 
 
Total assets
$
146,530

 
114,581

 
76,140

 
337,251

 
25,899,946

 
12,201

 
(372,971
)
 
25,876,427

 

 
25,876,427



The adjustments required to reconcile from the Company’s “base net income” measure to its GAAP results of operations relate to items that are excluded from management’s evaluation of the Company’s operating results. The following tables reflect adjustments associated with these items by operating segment and Corporate Activity and Overhead:
 
Student
Loan
and
Guaranty
Servicing
 
Tuition
Payment
Processing
and Campus
Commerce
 
Enrollment
Services
 
Asset
Generation
and
Management
 
Corporate
Activity
and
Overhead
 
Total
 
Year ended December 31, 2011
Derivative market value and foreign currency adjustments (a)
$

 

 

 
(7,571
)
 
25,378

 
17,807

Amortization of intangible assets (b)
8,470

 
5,005

 
3,650

 

 

 
17,125

Compensation related to business combinations (c)

 

 

 

 

 

Variable-rate floor income, net of settlements on derivatives (d)

 

 

 

 

 

Net tax effect (e)
(3,219
)
 
(1,902
)
 
(1,387
)
 
2,877

 
(9,643
)
 
(13,274
)
Total adjustments to GAAP
$
5,251

 
3,103

 
2,263

 
(4,694
)
 
15,735

 
21,658

 
Year ended December 31, 2010
Derivative market value and foreign currency adjustments (a)
$

 

 

 
(3,046
)
 
(541
)
 
(3,587
)
Amortization of intangible assets (b)
8,576

 
5,756

 
8,412

 

 

 
22,744

Compensation related to business combinations (c)

 

 

 

 

 

Variable-rate floor income, net of settlements on derivatives (d)

 

 

 

 

 

Net tax effect (e)
(3,259
)
 
(2,189
)
 
(3,199
)
 
1,157

 
210

 
(7,280
)
Total adjustments to GAAP
$
5,317

 
3,567

 
5,213

 
(1,889
)
 
(331
)
 
11,877

 
Year ended December 31, 2009
Derivative market value and foreign currency adjustments (a)
$

 

 

 
34,569

 
(3,767
)
 
30,802

Amortization of intangible assets (b)
4,848

 
7,440

 
9,961

 

 

 
22,249

Compensation related to business combinations (c)

 

 

 

 
159

 
159

Variable-rate floor income, net of settlements on derivatives (d)

 

 

 
(7,502
)
 

 
(7,502
)
Net tax effect (e)
(1,842
)
 
(2,827
)
 
(3,787
)
 
(10,285
)
 
2,514

 
(16,227
)
Total adjustments to GAAP
$
3,006

 
4,613

 
6,174

 
16,782

 
(1,094
)
 
29,481


(a)
Derivative market value and foreign currency adjustments:  “Base net income” excludes the periodic unrealized gains and losses that are caused by the change in fair value on derivatives used in the Company’s risk management strategy in which the Company does not qualify for “hedge treatment” under GAAP.  Included in “base net income” are the economic effects of the Company’s derivative instruments, which includes any cash paid or received being recognized as an expense or revenue upon actual derivative settlements.  “Base net income” also excludes the foreign currency transaction gains or losses caused by the re-measurement of the Company’s Euro-denominated bonds to U.S. dollars.

(b)
Amortization of intangible assets:  “Base net income” excludes the amortization of acquired intangibles.

(c)
Compensation related to business combinations: The Company has structured certain business combinations in which the consideration paid has been dependent on the sellers' continued employment with the Company. As such, the value of the consideration paid is recognized as compensation expense by the Company over the term of the applicable employment agreement. The compensation expense related to existing agreements was fully expensed in 2009. “Base net income” excludes this expense.

(d)
Variable-rate floor income: Loans that reset annually on July 1 can generate excess spread income compared with the rate based on the special allowance payment formula in declining interest rate environments. The Company refers to this additional income as variable-rate floor income. The Company excludes variable-rate floor income, net of settlements paid on derivatives used to hedge student loan assets earning variable-rate floor income, from its “base net income” since the timing and amount of variable-rate floor income (if any) is uncertain, it has been eliminated by legislation for all loans originated on and after April 1, 2006, and it is in excess of expected spreads. In addition, because variable-rate floor income is subject to the underlying rate for the subject loans being reset annually on July 1, it is a factor beyond the Company's control which can affect the period-to-period comparability of results of operations.

(e)
Income taxes are applied based on 38% for the individual operating segments.
Legal Proceedings
Legal Matters and Contingencies [Text Block]
Legal Proceedings

General

The Company is subject to various claims, lawsuits, and proceedings that arise in the normal course of business. These matters principally consist of claims by student loan borrowers disputing the manner in which their student loans have been processed and disputes with other business entities. In addition, from time to time, the Company receives information and document requests from state or federal regulators concerning its business practices. The Company cooperates with these inquiries and responds to the requests. While the Company cannot predict the ultimate outcome of any inquiry or investigation, the Company believes its activities have materially complied with applicable law, including the Higher Education Act, the rules and regulations adopted by the Department of Education thereunder, and the Department’s guidance regarding those rules and regulations. On the basis of present information, anticipated insurance coverage, and advice received from counsel, it is the opinion of the Company’s management that the disposition or ultimate determination of these claims, lawsuits, and proceedings will not have a material adverse effect on the Company’s business, financial position, or results of operations.

Bais Yaakov of Spring Valley v. Peterson's Nelnet, LLC

On January 4, 2011, a complaint against Peterson's Nelnet, LLC (“Peterson's”), a subsidiary of the Company, was filed in the U.S. federal District Court for the District of New Jersey (the “District Court”). The complaint alleges that Peterson's sent six advertising faxes to the named plaintiff in 2008-2009 that were not the result of express invitation or permission granted by the plaintiff and did not include certain opt out language. The complaint also alleges that such faxes violated the federal Telephone Consumer Protection Act (the “TCPA”), purportedly entitling the plaintiff to $500 per violation, trebled for willful violations for each of the six faxes. The complaint further alleges that Peterson's had sent putative class members more than 10,000 faxes that violated the TCPA, amounting to more than $5 million in statutory penalty damages and more than $15 million if trebled for willful violations. The complaint seeks to establish a class action for two different classes of plaintiffs: Class A, to whom Peterson's sent unsolicited fax advertisements containing opt out notices similar to those contained in the faxes received by the named plaintiff; and Class B, to whom Peterson's sent fax advertisements containing opt out notices similar to those contained in the faxes received by the named plaintiff. As of the filing date of this report, the District Court has not established or recognized any class.

On February 16, 2011, Peterson's filed a motion to dismiss the complaint based on a lack of federal question or diversity jurisdiction with respect to the complaint, which was denied by the District Court on April 15, 2011, shortly after a similar motion to dismiss that had been granted in an unrelated case involving alleged TCPA violations related to faxes was reversed by the U.S. Court of Appeals for the Third Circuit (the “Appeals Court”), which has jurisdiction over the District Court.  On April 29, 2011, Peterson's filed an answer to the complaint, but also filed a motion for reconsideration of the motion to dismiss.  On May 17, 2011, the Appeals Court granted a petition for rehearing of the motion to dismiss in the unrelated TCPA fax case, and on May 31, 2011, Peterson's filed a motion for stay pending the outcome of that rehearing.  On September 12, 2011, the motion for stay was granted, and the motion for reconsideration was denied by the District Court. On September 20, 2011, the named plaintiff filed a motion for reconsideration of the District Court's order, and at a hearing on November 22, 2011 the District Court ordered counsel to submit a proposed order to modify the stay for a limited third party subpoena, which the District Court approved on December 5, 2011. On January 18, 2012, the U.S. Supreme Court issued a decision in an unrelated TCPA case which held that federal courts have federal question jurisdiction over private causes of action under the TCPA. On January 20, 2012, the named plaintiff requested that the stay be lifted on the basis of the Supreme Court's decision, and on January 25, 2012 the District Court denied that request since the stay is based on the outcome of the Appeals Court rehearing, and there has been no decision by the Appeals Court with respect to such rehearing.

Peterson's intends to continue to contest the suit vigorously.  Due to the preliminary stage of this matter and the uncertainty and risks inherent in class determination and the overall litigation process, the Company believes that a meaningful estimate of a reasonably possible loss, if any, or range of reasonably possible losses, if any, cannot currently be made.

Oberg Litigation

In September 2009, the Company was served with a Complaint (the “Oberg Complaint”) naming the Company as one of ten defendant student loan lenders in a “qui tam” action brought by Jon H. Oberg on behalf of the United States of America. The Oberg Complaint alleged that the defendants submitted false claims for payment to the Department in order to obtain special allowance payments on certain student loans at a rate of 9.5%, which the Oberg Complaint alleged were in excess of amounts permitted by law, and that approximately $407 million in unlawful 9.5% special allowance payment claims were submitted by the Company. The Oberg Complaint sought a judgment against the defendants in the amount of three times the amount of damages sustained by the government in connection with the alleged overbilling by the defendants for special allowance payments, as well as civil penalties.

During 2010, the Company entered into a settlement agreement to settle all claims associated with the Oberg Complaint. As a result of the settlement, the Company recorded a $55.0 million pre-tax charge during the third quarter of 2010, and paid that amount on November 3, 2010. The Company believed it had strong defenses to the Oberg Complaint, but entered into the settlement agreement in order to eliminate the uncertainty, distraction, and expense of a trial.
Operating Leases
Leases of Lessee Disclosure [Text Block]
Operating Leases

The Company is committed under noncancelable operating leases for office and warehouse space and equipment. Total rental expense incurred by the Company for the years ended December 31, 2011, 2010, and 2009 was $8.2 million, $9.3 million, and $10.4 million, respectively. Minimum future rentals, as of December 31, 2011, under noncancelable operating leases are shown below:
2012
$
6,787

2013
5,708

2014
3,399

2015
1,656

2016 and thereafter
1,664

 
$
19,214


Future rental commitments for leases in the table above have been reduced by minimum non-cancelable sublease rentals aggregating approximately $1.2 million as of December 31, 2011.
Defined Contribution Benefit Plans
Pension and Other Postretirement Benefits Disclosure [Text Block]
Defined Contribution Benefit Plan

The Company has a 401(k) savings plan that cover substantially all of its employees. Employees may contribute up to 100 percent of their pre‑tax salary, subject to IRS limitations. The Company matches up to 100 percent on the first 3 percent of contributions and 50 percent on the next 2 percent. The Company made contributions to the plan of $3.4 million, $3.1 million, and $3.2 million during the years ended December 31, 2011, 2010, and 2009, respectively. Union Bank, an entity under common control with the Company, serves as the trustee and administrator for the plan.
Stock Based Compensation Plans
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]
Stock Based Compensation Plans

Restricted Stock Plan

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. An aggregate of 4,000,000 shares of Class A common stock have been reserved for issuance under the restricted stock plan, subject to antidilution adjustments in the event of certain changes in capital structure.

The following table summarizes restricted stock activity:
 
Years ended December 31,
 
2011
 
2010
 
2009
Non-vested shares at beginning of year
311,119

 
320,461

 
329,173

Granted
82,845

 
96,327

 
72,471

Vested
(54,184
)
 
(48,523
)
 
(43,873
)
Canceled
(54,062
)
 
(57,146
)
 
(37,310
)
Non-vested shares at end of year
285,718

 
311,119

 
320,461


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. As of December 31, 2011, there was $3.0 million of unrecognized compensation cost included in “additional paid-in capital” on the consolidated balance sheet related to restricted stock, which is expected to be recognized as compensation expense as shown in the table below.
2012
$
952

2013
680

2014
491

2015
349

2016
235

2017 and thereafter
304

 
$
3,011


To date, the shares issued under this plan vest immediately or vest in either three or ten years. The Company pays dividends on non-vested stock. For the years ended December 31, 2011, 2010, and 2009, the Company recognized compensation expense of $1.3 million, $1.5 million, and $1.6 million, respectively, related to shares issued under the restricted stock plan.

Employee Share Purchase Plan

The Company has an employee share purchase plan pursuant to which employees are entitled to purchase common stock from payroll deductions at a 15% discount from market value. All employees, other than those whose customary employment is 20 hours or less per week, who have been employed for at least six months, or another period determined by the Company's compensation committee not in excess of two years, are eligible to purchase Class A common stock under the plan. During the years ended December 31, 2011, 2010, and 2009, the Company recognized compensation expense of approximately $137,000, $141,000, and $216,000, respectively, in connection with issuing 29,989 shares, 31,729 shares, and 52,311 shares, respectively, under this plan.

Employee Stock Purchase Loan Plan

The Company has entered into loan agreements with employees pursuant to the Company's Employee Stock Purchase Loan Plan (the “Loan Plan”). Loans under this plan mature ten years from grant date and bear interest equal to the three-month LIBOR rate plus 50 basis points. As of December 31, 2011 and 2010, the balance of the loans granted under the Loan Plan was $1.1 million and $1.2 million, respectively, and is reflected as a reduction to stockholders' equity on the consolidated balance sheets. During 2010, the Company's Board of Directors terminated the Loan Plan effective as of December 31, 2010 such that no future awards or loans will be made under the plan. Such termination does not affect loans outstanding.

Non-employee Directors Compensation Plan

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

For the years ended December 31, 2011, 2010, and 2009, the Company recognized approximately $641,000, $585,000, and $575,000, respectively, of expense related to this plan. The following table provides the number of shares issued under this plan for the years ended December 31, 2011, 2010, and 2009.

 
Shares issued - not deferred
 
Shares issued - deferred
 
Total
Year ended December 31, 2011
13,059

 
20,843

 
33,902

Year ended December 31, 2010
14,632

 
12,466

 
27,098

Year ended December 31, 2009
7,143

 
36,078

 
43,221

Related Parties
Related Party Transactions Disclosure [Text Block]
Related Parties

Union Bank is controlled by Farmers & Merchants Investment Inc. (“F&M”) which owns a majority of Union Bank's common stock and a minority share of Union Bank's non-voting preferred stock. Michael S. Dunlap, a significant shareholder, Chief Executive Officer, Chairman, and a member of the Board of Directors of the Company, along with his spouse, owns or controls a significant portion of the stock of F&M, while Mr. Dunlap's sister, Angela L. Muhleisen, also owns or controls a significant portion of F&M stock. Mr. Dunlap serves as a Director and Co-President of F&M. Ms. Muhleisen serves as Director and Co-President of F&M and as a Director, Chairperson, President, and Chief Executive Officer of Union Bank. Union Bank is deemed to have beneficial ownership of various shares of the Company because it serves in a capacity of trustee and has sole voting and/or investment power. Mr. Dunlap and Ms. Muhleisen beneficially own a significant percent of the voting rights of the Company's outstanding common stock.

The Company has entered into certain contractual arrangements with Union Bank. These transactions are summarized below.

Loan Sales and Purchases

During 2009 and 2008, the Company sold $76.4 million (par value) and $535.4 million (par value), respectively, of FFELP student loans (the “FFELP Loans”) to Union Bank. The Company recognized losses of $0.8 million and $3.9 million, respectively, on these loan sales, which represented unamortized loan costs on the portfolios. These loans were sold pursuant to an affiliate transaction exemption granted by the Federal Reserve Board which allowed Union Bank to purchase FFELP loans from the Company. In connection with the exemption and the loan purchases by Union Bank, an Assurance Commitment Agreement (the “Commitment Agreement”) was also entered into, by and among, the Company, Union Bank, and Mr. Dunlap. Per the terms of the Commitment Agreement, the Company provided certain assurances to Union Bank designed to mitigate potential losses related to the FFELP Loans, including holding amounts in escrow equal to the unguaranteed portion and reimbursing Union Bank for losses, if any, related to the portfolio. As part of this agreement, the Company was also obligated to buy back loans once they were 30 days delinquent. In 2010 and 2009, the Company bought back from Union Bank $11.7 million (par value) and $36.9 million (par value), respectively, in loans and incurred expenses of $128,000 and $374,000, respectively, related to this obligation.

In March 2010, the Company purchased $524.2 million (par value) of federally insured student loans from Union Bank, which represented all outstanding FFELP loans remaining under the provisions of the Commitment Agreement. As a result of this loan purchase, the Company no longer has a commitment to hold amounts in escrow, reimburse Union Bank for losses, and buy back delinquent loans related to this portfolio.

During the years ended December 31, 2011, 2010, and 2009, the Company purchased student loans of $0.1 million (par value), $989.2 million (par value), and $47.6 million (par value), respectively, from Union Bank, which includes $535.9 million (par value) and $36.9 million (par value) of loans purchased in 2010 and 2009, respectively, under the Commitment Agreement as discussed previously. No premiums were paid for loans purchased in 2011, 2010, and 2009.

Loan Servicing

The Company serviced $496.3 million, $530.0 million, and $539.8 million of loans for Union Bank as of December 31, 2011, 2010, and 2009, respectively. Servicing revenue earned by the Company from servicing loans for Union Bank was $1.9 million, $1.8 million, and $1.9 million for the years ended December 31, 2011, 2010, and 2009, respectively. As of both December 31, 2011 and 2010, accounts receivable includes $0.2 million due from Union Bank for loan servicing.

Funding

Participation Agreement

The Company maintains an agreement with Union Bank, as trustee for various grantor trusts, under which Union Bank has agreed to purchase from the Company participation interests in student loans (the “FFELP Participation Agreement”). The Company uses this facility as a source to fund FFELP student loans. As of December 31, 2011 and 2010, $509.2 million and $350.4 million, respectively, of loans were subject to outstanding participation interests held by Union Bank, as trustee, under this agreement. The agreement automatically renews annually and is terminable by either party upon five business days notice. This agreement provides beneficiaries of Union Bank's grantor trusts with access to investments in interests in student loans, while providing liquidity to the Company on a short-term basis. The Company can participate loans to Union Bank to the extent of availability under the grantor trusts, up to $750 million or an amount in excess of $750 million if mutually agreed to by both parties. Loans participated under this agreement have been accounted for by the Company as loan sales. Accordingly, the participation interests sold are not included on the Company's consolidated balance sheets.

Bonds and Notes Payable

The Company has from time to time repurchased certain of its own asset-backed securities (bonds and notes payable). For accounting purposes, these notes have been effectively retired and are not included on the Company's consolidated balance sheets. However, these securities are legally outstanding at the trust level and the Company could sell these notes to third parties or redeem the notes at par as cash is generated by the trust estate. During 2010, the Company participated $218.7 million of these securities to Union Bank, as trustee for various grantor trusts, and obtained cash proceeds equal to the par value of the notes. The Company has entered into a Guaranteed Purchase Agreement with Union Bank whereby the Company must purchase these notes back from Union Bank at par upon the request of Union Bank. As of December 31, 2010, $107.1 million of these securities were outstanding and subject to the participation agreement and are included in “bonds and notes payable” on the Company's consolidated balance sheet. During the first quarter of 2011, the Company redeemed all outstanding notes under this participation.

Operating Cash Accounts

The majority of the Company's cash operating accounts are maintained at Union Bank. The Company also participates in the Short term Federal Investment Trust (“STFIT”) of the Student Loan Trust Division of Union Bank, which is included in “cash and cash equivalents - held at a related party” and “restricted cash - due to customers” on the accompanying consolidated balance sheets. As of December 31, 2011 and 2010, the Company had $119.5 million and $326.9 million, respectively, invested in the STFIT or deposited at Union Bank in operating accounts, of which $84.2 million and $50.1 million as of December 31, 2011 and 2010, respectively, represented cash collected for customers. Interest income earned by the Company on the amounts invested in the STFIT for the years ended December 31, 2011, 2010, and 2009 was $0.2 million, $1.1 million, and $2.9 million, respectively.

529 Plan Administration Services

The Company provides certain 529 Plan administration services to certain college savings plans (the “College Savings Plans”) through a contract with Union Bank, as the program manager. Union Bank is entitled to a fee as program manager pursuant to its program management agreement with the College Savings Plans. For the years ended December 31, 2011, 2010, and 2009, the Company has received fees of $2.3 million, $5.7 million, and $3.4 million, respectively, from Union Bank related to the administration services provided to the College Savings Plans.

Lease Arrangements

Union Bank leases approximately 4,000 square feet in the Company's corporate headquarters building. Union Bank paid the Company approximately $73,000, $71,000, and $70,000 for commercial rent and storage income during 2011, 2010, and 2009, respectively. The lease agreement expires on June 30, 2018.

On October 31, 2011, the Company entered into a lease agreement with Union Bank under which the Company will lease office space of approximately 1,300 square feet for $25,000 per year. The initial term of the lease expires on November 30, 2012, and the lease agreement provides for automatic renewals each year. The Company paid Union Bank approximately $4,000 during 2011 in accordance with the lease agreement.

Other Fees Paid to Union Bank

During the years ended December 31, 2011, 2010, and 2009, the Company paid Union Bank approximately $64,000, $358,000, and $210,000, respectively, in administrative services; approximately $104,000, $120,000, and $118,000, respectively, in commissions, and approximately $185,000, 177,000, and $72,000, respectively, in cash management fees.

Other Fees Received from Union Bank

During the years ended December 31, 2011, 2010, and 2009, Union Bank paid the Company approximately $144,000, $112,000, and $110,000, respectively, under an employee sharing arrangement and approximately $25,000, $52,000, and $57,000, respectively, for health and productivity services.

Investment Services

In December 2010, Union Bank established various trusts whereby Union Bank serves as trustee for the purpose of purchasing, holding, managing, and selling investments in student loan asset backed securities. Union Bank, in its individual capacity, and the Company have both invested money into the trusts. As of December 31, 2011 and 2010, the Company had $8.0 million and $4.9 million, respectively, invested in the trusts, and such investments are included in "investments" on the consolidated balance sheets.

Prior to May 1, 2011, the Company and Union Bank employed certain individuals as dual employees and such employees provided consulting and advisory services to Union Bank as trustee for these trusts, and Union Bank agreed to pay the Company for the share of such employees' salary and payroll based on the value of such services rendered as well as the loss of value of such dual employees' services to the Company.  On May 9, 2011, one of the Company's subsidiaries entered into a management agreement with Union Bank, effective as of May 1, 2011, under which the subsidiary performs various advisory and management services on behalf of Union Bank with respect to investments in securities by the trusts, including identifying securities for purchase or sale by the trusts.  The agreement provides that Union Bank will pay to the subsidiary annual fees of 25 basis points on the outstanding balance of the investments in the trusts.  As of December 31, 2011, the outstanding balance of investments in the trusts was $394.2 million.  In addition, Union Bank will pay additional fees to the subsidiary of 50 percent of the gains from the sale of securities from the trusts.  For the year ended December 31, 2011, the Company recognized $5.1 million of fee revenue related to this agreement, which is included in "other income" on the consolidated statements of income.

401(k) Plan Administer

Union Bank administers the Company's 401(k) defined contribution plan. Fees paid to Union Bank to administer the plan are paid by the plan participants and were approximately $270,000, $239,000, and $193,000 during the years ended December 31, 2011, 2010, and 2009, respectively.

Letter of Credit

As of December 31, 2011, Union Bank has issued a $25,000 letter of credit for the Company's benefit. Union Bank charged no fee for providing this service.
Fair Value
Fair Value Disclosures [Text Block]
Fair Value

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

The Company categorizes its fair value estimates based on a hierarchical framework associated with three levels of price transparency utilized in measuring financial instruments at fair value. For additional information regarding the Company's policies for determining fair value and the hierarchical framework, see note 2, "Summary of Significant Accounting Policies and Practices - Fair Value Measurements."

The following tables present the Company’s financial assets and liabilities that are measured at fair value on a recurring basis.

 
As of December 31, 2011
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets:
 
 
 
 
 
 
 
Investments - trading securities (a):
 
 
 
 
 
 
 
Student loan auction rate asset-backed securities
$

 
42,412

 

 
42,412

Equity securities
6,847

 

 

 
6,847

Debt securities
1,521

 

 

 
1,521

      Total investments - trading securities
8,368

 
42,412

 

 
50,780

Fair value of derivative instruments (b)

 
92,219

 

 
92,219

      Total assets
$
8,368

 
134,631

 

 
142,999

Liabilities:
 
 
 
 
 
 
 
Fair value of derivative instruments (b):
$

 
43,840

 

 
43,840

      Total liabilities
$

 
43,840

 

 
43,840

 
 
 
 
 
 
 
 
 
As of December 31, 2010
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets:
 

 
 

 
 
 
 

Investments - trading securities (a)
 
 
 
 
 
 
 
Student loan auction rate asset-backed securities
$

 

 
11,861

 
11,861

Equity securities
6,250

 

 

 
6,250

Debt securities
25,125

 

 

 
25,125

      Total investments - trading securities
31,375

 

 
11,861

 
43,236

Fair value of derivative instruments (b)

 
118,346

 

 
118,346

Total assets
$
31,375

 
118,346

 
11,861

 
161,582

Liabilities:
 

 
 

 
 
 
 

Fair value of derivative instruments (b)
$

 
16,089

 

 
16,089

Total liabilities
$

 
16,089

 

 
16,089


(a)
Investments represent investments classified by the Company as trading securities which are recorded at fair value on a recurring basis. Level 1 investments are measured based upon quoted prices and include investments traded on an active exchange, such as the New York Stock Exchange, as well as corporate, mortgage-backed security, and U.S. government bonds and U.S. Treasury securities that trade in active markets. Level 2 and level 3 investments include student loan auction rate asset-backed securities. The fair value for the student loan auction rate asset-backed securities is determined using indicative quotes from broker dealers or an income approach valuation technique (present value using the discount rate adjustment technique) that considers, among other things, rates currently observed in publicly traded debt markets for debt of similar terms to companies with comparable credit risk.

(b)
All derivatives are accounted for at fair value on a recurring basis.  The fair value of derivative financial instruments is determined using a market approach in which derivative pricing models use the stated terms of the contracts and observable yield curves, forward foreign currency exchange rates, and volatilities from active markets.  

When determining the fair value of derivatives, the Company takes into account counterparty credit risk for positions where it is exposed to the counterparty on a net basis by assessing exposure net of collateral held. The net exposures for each counterparty are adjusted based on market information available for the specific counterparty.

The following table presents a roll forward of the fair value of level 3 (significant unobservable inputs) assets.

 
 
Level 3
Balance at December 31, 2009
 
$

   Total realized and unrealized gains (losses) included in income, net (a)
 
150

   Purchases
 
12,061

   Redemptions/Sales
 
(350
)
Balance at December 31, 2010
 
11,861

   Total realized and unrealized gains (losses) included in income, net (a)
 
(78
)
   Purchases
 
93,823

   Redemptions/Sales
 
(63,194
)
   Transfers out of level 3 (b)
 
(42,412
)
Balance at December 31, 2011
 
$

 
 
 
(a) Realized and unrealized gains (losses) related to the Company's asset-backed securities investments are included in "other income" in the Company's consolidated statements of income.

(b) On December 31, 2011, the Company transferred its asset-backed securities investments from level 3 to level 2 as a result of an increase in market activity for such securities.

The Company measures certain assets at fair value on a nonrecurring basis in accordance with GAAP. For the years ended December 31, 2010 and 2009, these adjustments to fair value resulted from the write-down to fair value of goodwill and intangible assets. For assets measured at fair value on a nonrecurring basis during the years ended December 31, 2011, 2010, and 2009 that were still held on the balance sheet at each respective period end, the following table provides the fair value hierarchy and the carrying value of the related individual assets at year end.
 
Level 3
 
2011
 
2010
 
2009
Goodwill (a)
$
117,118

 
117,118

 
143,717

Intangible assets (b)
28,374

 
38,712

 
53,538

 
$
145,492

 
155,830

 
197,255


(a)
Goodwill is reviewed annually for impairment and whenever triggering events or changes in circumstances indicate its carrying value may not be recoverable.

(b)
Long-lived assets, such as purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

The following table presents the fair value adjustments included in the consolidated statements of income related to the decrease in value of the above assets. The fair value adjustments were recorded by the Company as impairment charges and are included in “impairment expense” in the consolidated statements of income.
 
Year ended December 31,
 
2010
 
2009
Goodwill
$
(26,599
)
 
(31,461
)
Intangible assets

 
(1,267
)
 
$
(26,599
)
 
(32,728
)

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

 
As of December 31, 2011
 
As of December 31, 2010
 
Fair value
 
Carrying value
 
Fair value
 
Carrying value
Financial assets:
 
 
 
 
 
 
 
Student loans receivable
$
23,894,005

 
24,297,876

 
24,836,538

 
23,948,014

Student loans receivable - held for sale

 

 
84,987

 
84,987

Cash and cash equivalents
42,570

 
42,570

 
283,801

 
283,801

Investments
50,780

 
50,780

 
43,236

 
43,236

Restricted cash
377,423

 
377,423

 
453,748

 
453,748

Restricted cash – due to customers
109,809

 
109,809

 
88,528

 
88,528

Restricted investments
236,899

 
236,899

 
215,009

 
215,009

Accrued interest receivable
308,401

 
308,401

 
318,152

 
318,152

Derivative instruments
92,219

 
92,219

 
118,346

 
118,346

 
 
 
 
 
 
 
 
Financial liabilities:
 

 
 

 
 

 
 

Bonds and notes payable
23,003,453

 
24,434,540

 
24,651,191

 
24,672,472

Accrued interest payable
19,634

 
19,634

 
19,153

 
19,153

Due to customers
109,809

 
109,809

 
88,528

 
88,528

Derivative instruments
43,840

 
43,840

 
16,089

 
16,089

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

Student Loans Receivable and Student Loans Receivable – Held for Sale

The Company’s student loans are accounted for at cost or at the lower of cost or market if the loan is held-for-sale. Student loans classified as held for sale at December 31, 2010 are those loans which the Company sold in January 2011 and were valued using the sales price (100% of par value) less the estimated credit risk related to this portfolio. The Company retained credit risk related to this portfolio and will pay cash to purchase back any loans which become 60 days delinquent. For all other loans, fair values were determined by modeling loan cash flows using stated terms of the assets and internally-developed assumptions to determine aggregate portfolio yield, net present value, and average life. The significant assumptions used to project cash flows are prepayment speeds, default rates, cost of funds, required return on equity, and future interest rates and indice relationships. A number of significant inputs into the models are internally derived and not observable to market participants.

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

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

Bonds and Notes Payable

Bonds and notes payable are accounted for at cost in the financial statements except when denominated in a foreign currency. Foreign currency-denominated borrowings are re-measured at current spot rates in the financial statements. The fair value of bonds and notes payable was determined from quotes from broker dealers or through standard bond pricing models using the stated terms of the borrowings, observable yield curves, and market credit spreads. Fair value adjustments for unsecured corporate debt are made based on indicative quotes from observable trades.

Quarterly Financial Information
Quarterly Financial Information [Text Block]
Quarterly Financial Information (Unaudited)
 
2011
 
First quarter
 
Second quarter
 
Third quarter
 
Fourth quarter
Net interest income
$
85,777

 
88,736

 
96,761

 
93,291

Less provision for loan losses
3,750

 
5,250

 
5,250

 
7,000

Net interest income after provision for loan losses
82,027

 
83,486

 
91,511

 
86,291

Loan and guaranty servicing revenue
40,413

 
41,735

 
42,549

 
50,960

Tuition payment processing and campus commerce revenue
19,369

 
14,761

 
16,774

 
16,893

Enrollment services revenue
33,868

 
32,315

 
35,505

 
28,782

Other income
6,492

 
6,826

 
3,931

 
12,264

Gain on sale of loans and debt repurchases, net
8,307

 

 

 
33

Derivative market value and foreign currency adjustments and derivative settlements, net
(3,036
)
 
(20,335
)
 
(13,631
)
 
11,355

Salaries and benefits
(43,912
)
 
(42,881
)
 
(44,132
)
 
(47,026
)
Cost to provide enrollment services
(22,839
)
 
(22,140
)
 
(23,825
)
 
(17,744
)
Depreciation and amortization
(6,776
)
 
(6,769
)
 
(7,917
)
 
(8,282
)
Operating expenses - other
(26,105
)
 
(28,767
)
 
(28,904
)
 
(29,639
)
Income tax expense
(32,928
)
 
(21,106
)
 
(24,410
)
 
(39,008
)
Net income
$
54,880

 
37,125

 
47,451

 
64,879

Earnings per common share - basic
$
1.13

 
0.76

 
0.98

 
1.37

Earnings per common share - dilutive
$
1.13

 
0.76

 
0.98

 
1.37

 
2010
 
First quarter
 
Second quarter
 
Third quarter
 
Fourth quarter
Net interest income
$
85,109

 
97,414

 
92,213

 
96,335

Less provision for loan losses
5,000

 
6,200

 
5,500

 
6,000

Net interest income after provision for loan losses
80,109

 
91,214

 
86,713

 
90,335

Loan and guaranty servicing revenue
40,738

 
42,151

 
38,088

 
37,607

Tuition payment processing and campus commerce revenue
17,382

 
12,795

 
14,527

 
15,120

Enrollment services revenue
33,271

 
35,403

 
36,439

 
34,784

Other income
7,260

 
8,496

 
9,432

 
6,122

Gain on sale of loans and debt repurchases, net
10,177

 
8,759

 
9,885

 
49,810

Derivative market value and foreign currency adjustments and derivative settlements, net
1,682

 
(10,608
)
 
(35,391
)
 
33,640

Salaries and benefits
(40,644
)
 
(40,962
)
 
(41,085
)
 
(43,320
)
Cost to provide enrollment services
(22,025
)
 
(24,111
)
 
(23,709
)
 
(21,802
)
Depreciation and amortization
(10,783
)
 
(9,728
)
 
(9,025
)
 
(8,908
)
Impairment expense

 

 

 
(26,599
)
Restructure expense
(1,197
)
 
(72
)
 
(4,751
)
 

Litigation settlement

 

 
(55,000
)
 

Operating expenses - other
(29,055
)
 
(33,348
)
 
(26,717
)
 
(30,645
)
Income tax (expense) benefit
(32,593
)
 
(29,996
)
 
226

 
(51,057
)
Net income (loss)
$
54,322

 
49,993

 
(368
)
 
85,087

Earnings (loss) per common share - basic
$
1.09

 
1.00

 
(0.01
)
 
1.76

Earnings (loss) per common share - dilutive
$
1.08

 
0.99

 
(0.01
)
 
1.75

Condensed Parent Company Financial Statements
Condensed Financial Information of Parent Company Only Disclosure [Text Block]
Condensed Parent Company Financial Statements

The following represents the condensed balance sheets as of December 31, 2011 and 2010 and condensed statements of income and cash flows for each of the years in the three-year period ended December 31, 2011 for Nelnet, Inc.

The Company is limited in the amount of funds that can be transferred to it by its subsidiaries through intercompany loans, advances, or cash dividends. These limitations relate to the restrictions by trust indentures under the education lending subsidiaries debt financing arrangements. The amounts of cash and investments restricted in the respective reserve accounts of the education lending subsidiaries are shown on the consolidated balance sheets as restricted cash and investments.
Balance Sheets
(Parent Company Only)
As of December 31, 2011 and 2010
 
2011
 
2010
Assets:
 
 
 
Cash and cash equivalents
$
15,598

 
164,429

Investments
37,469

 
43,236

Investment in subsidiary debt
149,029

 
257,363

Restricted cash
34,176

 
20,604

Restricted cash - due to customers
40,768

 
51,257

Investment in subsidiaries
903,328

 
1,071,666

Other assets
191,757

 
108,261

Fair value of derivative instruments
11,586

 
23,426

Total assets
$
1,383,711

 
1,740,242

Liabilities:
 
 
 
Notes payable
$
165,087

 
613,255

Notes payable to related party

 
107,050

Accrued interest payable
27

 
3,245

Other liabilities
67,784

 
42,713

Due to customers
40,768

 
51,257

Fair value of derivative instruments
43,840

 
16,089

Total liabilities
317,506

 
833,609

Shareholders' equity:
 
 
 
Common stock
471

 
483

Additional paid-in capital
49,245

 
76,263

Retained earnings
1,017,629

 
831,057

Employee notes receivable
(1,140
)
 
(1,170
)
Total shareholders' equity
1,066,205

 
906,633

Total liabilities and shareholders' equity
$
1,383,711

 
1,740,242

Statements of Income
(Parent Company Only)
Years ended December 31, 2011, 2010, and 2009
 
2011
 
2010
 
2009
Operating revenues
$
4,304

 
31,846

 
30,892

Operating expenses
6,634

 
5,839

 
4,428

Net operating (loss) income
(2,330
)
 
26,007

 
26,464

Net interest income
2,970

 
5,779

 
4,680

Gain on purchase of debt
7,255

 
26,129

 
26,137

Derivative market value and foreign currency adjustments and derivative settlements, net
(55,911
)
 
(21,415
)
 
34,901

Equity in earnings of subsidiaries
256,299

 
188,738

 
101,373

Income tax expense
(3,948
)
 
(36,204
)
 
(54,430
)
Net income
$
204,335

 
189,034

 
139,125

Statements of Cash Flows
(Parent Company Only)
Years ended December 31, 2011, 2010, and 2009
 
2011
 
2010
 
2009
Net income
$
204,335

 
189,034

 
139,125

Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
 
 
 
 
 
Depreciation and amortization
423

 
723

 
1,264

Derivative market value adjustment
36,226

 
2,077

 
(4,207
)
Proceeds from termination of derivative instruments
13,607

 
12,783

 
3,870

Payments to terminate derivative instruments
(10,242
)
 
(763
)
 
(15,069
)
Equity in earnings of subsidiaries
(256,299
)
 
(188,738
)
 
(101,373
)
Gain on purchase of debt
(7,255
)
 
(26,129
)
 
(26,137
)
Purchase of subsidiary debt, net
108,334

 
3,055

 
(183,905
)
Non-cash compensation expense
2,029

 
2,280

 
2,644

Change in investments - trading securities, net
5,767

 
(43,236
)
 
3,876

Decrease in other assets
341,412

 
361,020

 
310,328

Decrease in accrued interest payable
(3,218
)
 
(1,084
)
 
(903
)
Increase (decrease) in other liabilities
17,344

 
4,922

 
(47,397
)
Net cash provided by operating activities
452,463

 
315,944

 
82,116

Cash flows from investing activities, net of business acquisitions:
 
 
 
 
 
(Increase) decrease in restricted cash
(3,083
)
 
11,313

 
66,769

Capital contributions to/from subsidiary, net

 

 
28,168

Business acquisition - contingent consideration
(5,893
)
 

 

Net cash (used in) provided by investing activities
(8,976
)
 
11,313

 
94,937

Cash flows from financing activities:
 
 
 
 
 
Payments on notes payable
(440,913
)
 
(317,081
)
 
(183,743
)
Payments on notes payable due to a related party
(107,050
)
 
(111,675
)
 

Proceeds from issuance of notes payable due to a related party

 
218,725

 

Dividends paid
(17,763
)
 
(34,131
)
 
(3,492
)
Proceeds from issuance of common stock
512

 
528

 
449

Repurchases of common stock
(27,134
)
 
(39,805
)
 
(430
)
Payments received on employee stock notes receivable
30

 
279

 
101

Net cash used in financing activities
(592,318
)
 
(283,160
)
 
(187,115
)
Net (decrease) increase in cash and cash equivalents
(148,831
)
 
44,097

 
(10,062
)
Cash and cash equivalents, beginning of year
164,429

 
120,332

 
130,394

Cash and cash equivalents, end of year
$
15,598

 
164,429

 
120,332