| Fair Value Measurements |
9. Fair Value Measurements We use estimates of fair value in applying various accounting standards in our financial statements. We categorize our fair value estimates based on a hierarchical framework associated with three levels of price transparency utilized in measuring financial instruments at fair value. The fair value of the items discussed below are separately disclosed in this footnote. During the three and six months ended June 30, 2026 and 2025, there were no significant transfers of financial instruments between levels, or changes in our methodology used to value our financial instruments. The following table summarizes the valuation of our financial instruments that are marked-to-market on a recurring basis.
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Fair Value Measurements on a Recurring Basis |
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June 30, 2026 |
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December 31, 2025 |
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(Dollars in millions) |
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Level 1 |
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Level 2 |
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Level 3 |
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Total |
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Level 1 |
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Level 2 |
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Level 3 |
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Total |
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Assets |
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Derivative instruments:(1) |
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Interest rate swaps |
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$ |
— |
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|
$ |
26 |
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$ |
— |
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$ |
26 |
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|
$ |
— |
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$ |
39 |
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$ |
— |
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$ |
39 |
|
Cross-currency interest rate swaps |
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|
— |
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|
— |
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|
|
— |
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|
— |
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— |
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— |
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3 |
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3 |
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Total derivative assets(2) |
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— |
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26 |
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— |
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26 |
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— |
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39 |
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|
3 |
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|
42 |
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Total |
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$ |
— |
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|
$ |
26 |
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|
$ |
— |
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$ |
26 |
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|
$ |
— |
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$ |
39 |
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$ |
3 |
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$ |
42 |
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Liabilities(3) |
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Derivative instruments(1) |
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Interest rate swaps |
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$ |
— |
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|
$ |
— |
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|
$ |
— |
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|
$ |
— |
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|
$ |
— |
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|
$ |
— |
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|
$ |
— |
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|
$ |
— |
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Cross-currency interest rate swaps |
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|
— |
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— |
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(91 |
) |
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(91 |
) |
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— |
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— |
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(79 |
) |
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|
(79 |
) |
Total derivative liabilities(2) |
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— |
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— |
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(91 |
) |
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(91 |
) |
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— |
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— |
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(79 |
) |
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|
(79 |
) |
Total |
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$ |
— |
|
|
$ |
— |
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|
$ |
(91 |
) |
|
$ |
(91 |
) |
|
$ |
— |
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|
$ |
— |
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|
$ |
(79 |
) |
|
$ |
(79 |
) |
(1)Fair value of derivative instruments excludes accrued interest and the value of collateral. (2)Borrowings which are the hedged item in a fair value hedge relationship and which are adjusted for changes in value due to benchmark interest rates only are not carried at full fair value and not reflected in this table. 9. Fair Value Measurements (Continued) The following tables summarize the change in balance sheet carrying value associated with level 3 financial instruments carried at fair value on a recurring basis.
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Three Months Ended June 30, |
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2026 |
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2025 |
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Derivative instruments |
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Derivative instruments |
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(Dollars in millions) |
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Interest
Rate Swaps |
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Cross
Currency
Interest
Rate Swaps |
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Other |
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Total
Derivative
Instruments |
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|
Interest
Rate Swaps |
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|
Cross
Currency
Interest
Rate Swaps |
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Other |
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Total
Derivative
Instruments |
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Balance, beginning of
period |
|
$ |
— |
|
|
$ |
(89 |
) |
|
$ |
— |
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|
$ |
(89 |
) |
|
$ |
— |
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|
$ |
(190 |
) |
|
$ |
— |
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|
$ |
(190 |
) |
Total gains/(losses): |
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Included in earnings(1) |
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— |
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(8 |
) |
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— |
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(8 |
) |
|
|
— |
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|
107 |
|
|
|
— |
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|
107 |
|
Included in other
comprehensive income |
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|
— |
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|
— |
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|
— |
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|
|
— |
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— |
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|
— |
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|
— |
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|
|
— |
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Settlements |
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|
— |
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|
6 |
|
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— |
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|
6 |
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— |
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|
8 |
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— |
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|
8 |
|
Transfers in and/or out
of level 3 |
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|
— |
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|
— |
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— |
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|
— |
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|
— |
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|
— |
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|
|
— |
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|
— |
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Balance, end of period |
|
$ |
— |
|
|
$ |
(91 |
) |
|
$ |
— |
|
|
$ |
(91 |
) |
|
$ |
— |
|
|
$ |
(75 |
) |
|
$ |
— |
|
|
$ |
(75 |
) |
Change in mark-to-
market gains/
(losses) relating
to instruments
still held at the
reporting date(2) |
|
$ |
— |
|
|
$ |
(2 |
) |
|
$ |
— |
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|
$ |
(2 |
) |
|
$ |
— |
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$ |
115 |
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$ |
— |
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$ |
115 |
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Six Months Ended June 30, |
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2026 |
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2025 |
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Derivative instruments |
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Derivative instruments |
|
(Dollars in millions) |
|
Interest
Rate Swaps |
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Cross
Currency
Interest
Rate Swaps |
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|
Other |
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|
Total
Derivative
Instruments |
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|
Interest
Rate Swaps |
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|
Cross
Currency
Interest
Rate Swaps |
|
|
Other |
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|
Total
Derivative
Instruments |
|
Balance, beginning of
period |
|
$ |
— |
|
|
$ |
(76 |
) |
|
$ |
— |
|
|
$ |
(76 |
) |
|
$ |
— |
|
|
$ |
(244 |
) |
|
$ |
— |
|
|
$ |
(244 |
) |
Total gains/(losses): |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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Included in earnings(1) |
|
|
— |
|
|
|
(28 |
) |
|
|
— |
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|
|
(28 |
) |
|
|
— |
|
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|
152 |
|
|
|
— |
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|
152 |
|
Included in other
comprehensive income |
|
|
— |
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|
|
— |
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|
— |
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|
— |
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— |
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— |
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— |
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— |
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Settlements |
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|
— |
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|
13 |
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— |
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|
13 |
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|
— |
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|
17 |
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|
— |
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|
17 |
|
Transfers in and/or out
of level 3 |
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|
— |
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|
— |
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|
— |
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|
— |
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|
— |
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|
— |
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|
|
— |
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|
— |
|
Balance, end of period |
|
$ |
— |
|
|
$ |
(91 |
) |
|
$ |
— |
|
|
$ |
(91 |
) |
|
$ |
— |
|
|
$ |
(75 |
) |
|
$ |
— |
|
|
$ |
(75 |
) |
Change in mark-to-
market gains/
(losses) relating
to instruments
still held at the
reporting date(2) |
|
$ |
— |
|
|
$ |
15 |
|
|
$ |
— |
|
|
$ |
15 |
|
|
$ |
— |
|
|
$ |
169 |
|
|
$ |
— |
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|
$ |
169 |
|
(1)“Included in earnings” is comprised of the following amounts recorded in the specified line item in the consolidated statements of income:
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Three Months Ended June 30, |
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|
Six Months Ended June 30, |
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(Dollars in millions) |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
Gains (losses) on derivative and hedging activities, net |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Interest expense |
|
|
(8 |
) |
|
|
107 |
|
|
|
(28 |
) |
|
|
152 |
|
Total |
|
$ |
(8 |
) |
|
$ |
107 |
|
|
$ |
(28 |
) |
|
$ |
152 |
|
(2)Recorded in “gains (losses) on derivative and hedging activities, net” in the consolidated statements of income for interest rate swaps. Recorded in interest expense for cross-currency interest rate swaps in fair value hedges. 9. Fair Value Measurements (Continued) The following table presents the significant inputs that are unobservable or from inactive markets used in the recurring valuations of the level 3 financial instruments detailed above.
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(Dollars in millions) |
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Fair Value at June 30, 2026 |
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|
Valuation
Technique |
|
Input |
|
Range and
Weighted
Average |
Derivatives |
|
|
|
|
|
|
|
|
|
Cross-currency interest rate swaps |
|
$ |
(91 |
) |
|
Discounted cash flow |
|
Constant Prepayment Rate |
|
5% |
Total |
|
|
(91 |
) |
|
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The following table summarizes the fair values of our financial assets and liabilities, including derivative financial instruments.
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|
June 30, 2026 |
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|
December 31, 2025 |
|
(Dollars in millions) |
|
Fair
Value |
|
|
Carrying
Value |
|
|
Difference |
|
|
Fair
Value |
|
|
Carrying
Value |
|
|
Difference |
|
Earning assets |
|
|
|
|
|
|
|
|
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|
|
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|
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|
Private Education Loans |
|
$ |
15,089 |
|
|
$ |
15,674 |
|
|
$ |
(585 |
) |
|
$ |
15,051 |
|
|
$ |
15,451 |
|
|
$ |
(400 |
) |
FFELP Loans |
|
|
26,499 |
|
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|
26,575 |
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|
(76 |
) |
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|
28,096 |
|
|
|
28,141 |
|
|
|
(45 |
) |
Cash and investments |
|
|
2,255 |
|
|
|
2,255 |
|
|
|
— |
|
|
|
2,270 |
|
|
|
2,270 |
|
|
|
— |
|
Total earning assets |
|
|
43,843 |
|
|
|
44,504 |
|
|
|
(661 |
) |
|
|
45,417 |
|
|
|
45,862 |
|
|
|
(445 |
) |
Interest-bearing liabilities |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Short-term borrowings |
|
|
4,224 |
|
|
|
4,214 |
|
|
|
(10 |
) |
|
|
5,084 |
|
|
|
5,073 |
|
|
|
(11 |
) |
Long-term borrowings |
|
|
39,374 |
|
|
|
40,123 |
|
|
|
749 |
|
|
|
40,120 |
|
|
|
40,633 |
|
|
|
513 |
|
Total interest-bearing liabilities |
|
|
43,598 |
|
|
|
44,337 |
|
|
|
739 |
|
|
|
45,204 |
|
|
|
45,706 |
|
|
|
502 |
|
Derivative financial instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
|
26 |
|
|
|
26 |
|
|
|
— |
|
|
|
39 |
|
|
|
39 |
|
|
|
— |
|
Cross-currency interest rate swaps |
|
|
(91 |
) |
|
|
(91 |
) |
|
|
— |
|
|
|
(76 |
) |
|
|
(76 |
) |
|
|
— |
|
Excess of net asset fair value over carrying value |
|
|
|
|
|
|
|
$ |
78 |
|
|
|
|
|
|
|
|
$ |
57 |
|
|