Navient Corporation · NASDAQ:NAVI
Navient — Debt Investor Presentation (October 2015)
46 slides from Navient's debt investor presentation, Oct 8, 2015
Slide 1: Navient FFELP Student Loan Repayment Data Package
Exhibit 99.1 Navient FFELP Student Loan Repayment Data Package October 7, 2015
Slide 2: Forward-Looking Statements
Forward-Looking Statements The following information is current as of October 7, 2015 (unless otherwise noted). This presentation contains forward-looking statements and information based on management’s current expectations as of the date of this presentation. Statements that are not historical fac
Slide 3: Overview
Overview As the largest issuer of student loan-backed securities, we take our leadership role seriously. We have created this data package to help investors and market participants better understand the performance of our FFELP loan assets and recent, improving performance trends in deferment, forbe
Slide 4: Methodology
Methodology • Unless otherwise noted, the data presented reflect Navient-serviced FFELP loans that are owned by Navient or by a securitization trust. The data are presented as of June 30, 2015. The data do not include Navient-owned FFELP loans that are serviced by third parties, even where Navient a
Slide 5: Vintage Pool Factor Performance
Vintage Pool Factor Performance © 2015 Navient Solutions, Inc. All rights reserved. 5
Slide 6: Vintage Pool Factor Performance
Vintage Pool Factor Performance • The pool factor represents the aggregate remaining outstanding principal balance of the FFELP student loans in a repayment vintage as a percentage of the aggregate principal balance for such vintage at the beginning of repayment • While a percentage of loans remain
Slide 7: Vintage Pool Factor Performance
Vintage Pool Factor Performance • In the Stafford loan portfolio, older vintages that experienced higher prepayment and consolidation activity reached pool factors of less than 10% in the first 6-7 years of repayment. Among more recent Stafford loan vintages with lower consolidation activity, the ch
Slide 8: Vintage Initial and Current Principal Distribution
Vintage Initial and Current Principal Distribution • If all of the loans in each vintage had been pooled into a separate securitization trust, Stafford loan vintages prior to 2006 would be eligible for redemption under the 10% optional servicer clean-up call. Each of our actual securitization trusts
Slide 9: Deferment and Forbearance
Deferment and Forbearance © 2015 Navient Solutions, Inc. All rights reserved. 9
Slide 10: Deferment
Deferment • Deferment is a tool available to borrowers to help them meet their loan repayment obligations. Once the repayment period has begun, the borrower is entitled to defer payments on a FFELP loan when applicable eligibility criteria are met • Deferments are entitlements. Generally, if a borro
Slide 11: Forbearance
Forbearance • Forbearance is a tool servicers can use to assist borrowers in meeting their loan repayment obligations. By granting forbearance, a servicer permits a temporary cessation of payments, allows an extension of time for making payments, or temporarily accepts smaller payments than were pre
Slide 12: Deferment Usage by Vintage: Stafford Loans
Deferment Usage by Vintage: Stafford Loans • Deferment usage increased during the Great Recession and has since declined • School deferment usage was higher in 2005 and 2006 when borrowers were allowed to consolidate during school; during that time, their Stafford loans were placed in school deferme
Slide 13: Deferment Usage by Vintage: Consolidation Loans
Deferment Usage by Vintage: Consolidation Loans • Consolidation loan deferment was higher in 2005 and 2006 when borrowers were allowed to consolidate during school and defer their loans while they completed school • Deferment usage among Consolidation loan borrowers has since declined Deferment Defe
Slide 14: Forbearance Usage by Vintage: Stafford Loans
Forbearance Usage by Vintage: Stafford Loans • Forbearance provides short-term relief to borrowers who cannot make their payments due to temporary hardship, including some borrowers in the reduced payment phase of Income-Driven Repayment plans • Forbearance is higher in earlier repayment periods as
Slide 15: Forbearance Usage by Vintage: Consolidation Loans
Forbearance Usage by Vintage: Consolidation Loans • Forbearance provides short-term relief to borrowers who cannot make their payments due to temporary hardship, including some borrowers in the reduced payment phase of Income-Driven Repayment plans • Forbearance is higher in earlier repayment period
Slide 16: Forbearance Usage: Impact of Forbearance Used for Repayment Plan Changes
Forbearance Usage: Impact of Forbearance Used for Repayment Plan Changes • Excluding the use of short-term forbearances that facilitate a borrower’s repayment plan change, forbearance has been declining • Forbearance among Consolidation loans appears to increase in the later months of repayment, bec
Slide 17: Deferment: Cumulative Usage to Date Portfolio Loans Still Outstanding
Deferment: Cumulative Usage to Date Portfolio Loans Still Outstanding • Among the Stafford loans, more seasoned loans generally have used more combined school and hardship deferment than less seasoned loans have used • Consolidation loan borrowers are less likely to have used deferment than Stafford
Slide 18: Forbearance: Cumulative Usage to Date Portfolio Loans Still Outstanding
Forbearance: Cumulative Usage to Date Portfolio Loans Still Outstanding • Among the Stafford loans, more seasoned loans have used the most hardship forbearance • When compared to Stafford loan borrowers, Consolidation loan borrowers are less likely to have used forbearance, and usage is more stable
Slide 19: Discretionary Forbearance
Discretionary Forbearance • Except as set forth below, Navient’s policy limits cumulative discretionary forbearance usage to 60 months • While the average duration is approximately three months, FFELP rules allow forbearance to be given in variable increments up to 12 months • In some cases, where a
Slide 20: Repeat Usage of Deferment and Forbearance
Repeat Usage of Deferment and Forbearance • Methodology: - Determine prior deferment and forbearance usage as of June 2010 - Identify the same loan population in June 2015, and determine whether they used additional deferment or forbearance • Borrowers who have not used deferment or forbearance in t
Slide 21: Risk Profile of Loans in Deferment and Forbearance
Risk Profile of Loans in Deferment and Forbearance • Default risk is higher for older loans that have made fewer payments Annualized Default Rate by Payments Made (Years) 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 > 20 0 2.7% 1 2.8% 0.6% • The diagonal represents loans which have made paym
Slide 22: Risk Distribution of Loans in Deferment and Forbearance
Risk Distribution of Loans in Deferment and Forbearance Distribution of Loans in Repayment, Time in Repayment vs. Payments Made Payments Made 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 > 20 0 0% • Loans in deferment and forbearance are more 1 2 0% 0% 0% 0% 0% The population of loans in rep
Slide 23: Income-Driven Repayment
Income-Driven Repayment © 2015 Navient Solutions, Inc. All rights reserved. 23
Slide 24: Income-Driven Repayment Programs
Income-Driven Repayment Programs • There are two income-related programs available in the FFELP: Income-Sensitive Repayment and Income-Based Repayment • Income-Sensitive Repayment - Available to borrowers since July 1, 1995 - Borrowers are eligible if the servicer determines that the borrower’s docu
Slide 25: Income-Based Repayment Program Structure
Income-Based Repayment Program Structure Partial Financial Permanent Standard Expedited Standard Hardship (PFH) Eligibility: If the calculated IBR Eligibility: A borrower may elect to Eligibility: This is the default Payment is lower than the loan’s exit the IBR program entirely, repayment plan once
Slide 26: Income-Based Repayment Calculation Examples: IBR Program With 15% of Discretionary Income
Income-Based Repayment Calculation Examples: IBR Program With 15% of Discretionary Income Example 1 – Stafford Loans: Freshman Through Senior Year Unsubsidized Loans At Origination At Repayment Enters PFH After 3 Years PFH, salary increases and no longer qualifies • Balance = $14,000 • Balance = $16
Slide 27: Characteristics of Loans Using Income-Driven Repayment
Characteristics of Loans Using Income-Driven Repayment • Loans in IDR* generally have higher balances and are more likely to have used deferment and forbearance in the past Stafford Loan Balances Stafford Loan Deferment Usage Stafford Loan Forbearance Usage IDR Avg= $5,000 IDR Avg= 16 IDR Avg= 15 No
Slide 28: Income-Driven Payment Amount Distribution: Stafford Loans
Income-Driven Payment Amount Distribution: Stafford Loans Stafford PFH Payment Amount Due • Among Stafford loans by principal balance, 47% of IBR Some loans in Partial Financial Hardship (PFH) do not owe a Principal, 7% payment, 45% owe some interest, and 7% owe full interest or full interest and so
Slide 29: Income-Driven Payment Amount Distribution: Consolidation Loans
Income-Driven Payment Amount Distribution: Consolidation Loans Consolidation PFH Payment Amount Due • Among Consolidation loans by principal balance, 43% of Some Principal, IBR loans in Partial Financial Hardship (PFH) do not owe a 10% payment, 47% owe some interest, and 10% owe full No Payment, int
Slide 30: Income-Driven Repayment Usage by Vintage: Stafford Loans
Income-Driven Repayment Usage by Vintage: Stafford Loans • Usage of Income-Driven Repayment programs has increased since IBR was introduced in 2009 • Newer vintages show higher early usage of IDR as they transition from school to repayment Income-Driven Repayment Income-Driven Repayment (Reduced Pay
Slide 31: Income-Driven Repayment Usage by Vintage: Consolidation Loans
Income-Driven Repayment Usage by Vintage: Consolidation Loans • Usage of Income-Driven Repayment programs has increased since IBR was introduced in 2009 Income-Driven Repayment Income-Driven Repayment (Reduced Payment Period) (Reduced Payment Period) 30% 30% 25% 25% 20% 20% 15% 15% 10% 10% 5% 5% 0%
Slide 32: Income-Driven Repayment Overlap With Deferment and Forbearance
Income-Driven Repayment Overlap With Deferment and Forbearance • Loans in Income-Driven Repayment may be in repayment, deferment, or forbearance status • On average, 13% of loans in Income-Driven Repayment are also in deferment or forbearance Repayment Status of Loans in Reduced Payment Period 100%
Slide 33: Income-Driven Repayment Amortization
Income-Driven Repayment Amortization • IDR loans amortize over time - Stafford loan pool factors for loans after entering IDR are between 0.6 and 0.7, five years after entering the reduced payment period - Consolidation loan pool factors for loans after entering IDR are between 0.8 and 0.9, five yea
Slide 34: Default Performance of Loans in Income-Driven Repayment
Default Performance of Loans in Income-Driven Repayment • Defaults during the reduced payment period are low due to the decreased payment and the fact that some loans have no payment due under Partial Financial Hardship • Older loans that continue to use IDR more than 8-10 years into repayment are m
Slide 35: IBR Loan Forgiveness
IBR Loan Forgiveness © 2015 Navient Solutions, Inc. All rights reserved. 35
Slide 36: Loan Forgiveness Under the Income-Based Repayment Plan
Loan Forgiveness Under the Income-Based Repayment Plan • Qualifying payments include: - PFH payments, including $0 payments - Permanent standard payments - Any other payments made under a 10- year repayment term (or any payments not less than this amount) - Months of economic hardship deferment • Th
Slide 37: Loan Forgiveness Mechanics
Loan Forgiveness Mechanics Assumptions: Stafford loan • Where debt and income are similar or income exceeds debt, it is more 6.8% fixed interest rate likely that loans will amortize or default before they are forgiven Starts PFH immediately 3% annual income increase • Where the debt level exceeds in
Slide 38: Loan Forgiveness Expectations
Loan Forgiveness Expectations Distribution of Stafford Loans in PFH by Loan Balance and Potential Income • Based on the distribution of loans by Balances 10,000 20,000 30,000 40,000 50,000 Income 60,000 70,000 80,000 90,000 100,000 More aggregate balance, we expect between 10,000 20,000 0.8% 0.9% 1.
Slide 39: Prepayments
Prepayments © 2015 Navient Solutions, Inc. All rights reserved. 39
Slide 40: Consolidation Refinancing: Securitized Portfolio
Consolidation Refinancing: Securitized Portfolio • Securitization trust consolidation refinancing activity has increased within the last 18 months • In 2012, the availability of the Special Direction Consolidation Loan program drove significant refinancing activity • This data consists of Navient-se
Slide 41: Prepayment Components: Securitized Non-Consolidation Loans
Prepayment Components: Securitized Non-Consolidation Loans • The Constant Prepayment rate equals the annualized amount by which actual pool amortization exceeds expected pool amortization, as a percent of loans in repayment • The Constant Default Rate is the portion of the Constant Prepayment Rate r
Slide 42: Prepayment Components: Securitized Consolidation Loans
Prepayment Components: Securitized Consolidation Loans • The Constant Prepayment rate equals the annualized amount by which actual pool amortization exceeds expected pool amortization, as a percent of loans in repayment • The Constant Default Rate is the portion of the Constant Prepayment Rate relat
Slide 43: Additional Considerations
Additional Considerations © 2015 Navient Solutions, Inc. All rights reserved. 43
Slide 44: Structural Limits on Portfolio Extension: Stafford Loan Program
Structural Limits on Portfolio Extension: Stafford Loan Program • Loan forgiveness, policy limits on hardship deferment and forbearance, and portfolio performance dynamics mean that every status has an end point Stafford Loan Final Payoff Dates Given Repayment Program Usage Hardship Longest Date For
Slide 45: Structural Limits on Portfolio Extension: Consolidation Loan Portfolio
Structural Limits on Portfolio Extension: Consolidation Loan Portfolio • Loan forgiveness, policy limits on hardship deferment and forbearance, and portfolio performance dynamics mean that every status has an end point Consolidation Loan Final Payoff Dates Given Repayment Program Usage Hardship Long
Slide 46: Navient
NAVI=ENT.