Basis of Presentation

The accompanying unaudited, consolidated financial statements of Navient have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. The consolidated financial statements include the accounts of Navient and its majority-owned and controlled subsidiaries and those Variable Interest Entities (VIEs) for which we are the primary beneficiary, after eliminating the effects of intercompany accounts and transactions. In the opinion of management, all adjustments considered necessary for a fair statement of the results for the interim periods have been included. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Operating results for the three and nine months ended September 30, 2026 are not necessarily indicative of the results for the year ending December 31, 2026 or for any other period. These unaudited financial statements should be read in conjunction with the audited financial statements and related notes included in Navient LLC's 2025 Form 10-K. Definitions for certain capitalized terms used but not otherwise defined in this Form 10-Q can be found in Navient LLC's 2025 Form 10-K.

Election of Fair Value Option – In School Private Education Loans

Effective July 1, 2026, the Company elected the fair value option available under ASC Topic 825, "Financial Instruments," to account for In School Private Education Loans originated on or after that date. Accordingly, those loan originations, both loans that have been disbursed as well as commitments to disburse at a future date, have been recorded at fair value and will continue to be re-measured each reporting period to the then current fair value of the loans. The loans are classified as “Loans at fair value” on the balance sheet and the commitments are recorded in Other Assets with adjustments to fair value recognized in current period earnings in the “Net Fair Value Changes of Loans” line item of the Income Statement. Prior to this election, upon origination, In School Private Education Loans were accounted for at amortized cost, which required an allowance for loan losses to be recorded, through provision for loan losses, that covered lifetime expected credit losses under the CECL methodology. The Company believes that applying the fair value option, rather than the amortized cost methodology, to these loans better aligns the accounting with how we manage and evaluate these loans and more accurately reflects the economic value of the loans.

2. Significant Accounting Policies (Continued)

Loans Held for Sale

Loans are classified as held-for-sale when we have the intent and ability to sell such loans. Loans which are classified as held for sale are carried at the lower of fair value or amortized cost basis. When first classified as held for sale if the fair value is lower than the carrying value, the expected losses related to credit are first recorded as provision for loan losses and the allowance for loan losses associated with those loans is written off establishing a new cost basis. If the fair value is greater than carrying value then any allowance for loan losses associated with such loans is reversed. Subsequently any adjustment to the lower of amortized cost or fair value is recorded as a separate line item on the income statement (“Gains or losses on Loans Held for Sale”). Associated premium, discount and capitalized origination costs are not amortized into interest income for loans classified as held for sale.

Gain on Sales of Loans

We may sell loans to third parties. These sales may occur through whole loan sales or securitization transactions that qualify for sale treatment. If a transfer of loans qualifies as a sale, we derecognize the loans and recognize a gain or loss as the difference between the carrying basis of the loans sold and liabilities retained and the compensation received. We recognize the results of the transfer of loans based on the settlement date of the transaction. Additionally, we may also sell our residual interests in consolidated securitization trusts to third parties. If both the transfer of the loans to the trust and the sale of the residual interest qualify as sales under ASC Topic 860 “Transfers and Servicing” and the related securitization trust qualifies to be deconsolidated under ASC Topic 810 “Consolidation,” such gain or loss upon deconsolidation of the securitization trust’s net assets or liabilities is also reflected in “Gain on Sales of Loans.”