NAVI 10-K & 10-Q changes, risk factors and insider trading

Our success is largely dependent upon the creditworthiness of our customers, especially with respect to our education loans.customers. Our research consistently indicates that borrower unemployment rates and the failure of in-school borrowers to graduate or otherwise complete their education are two of the most significant economic factors that affect loan performance. AnyAdverse economic and employment conditions, which may result in material changes in graduation or completion ratesrates, could increase or decrease delinquencies and defaults. Further, decreases in a borrower’s income or increases in their payment obligations to other lenders, whether as a result of unemployment, rising debt levels, inflation outpacing wage growth, or the limited availability of credit generally, may negatively impact a borrower’s ability to meet their repayment obligations. Additionally, modifications to the original repayment terms in the form of loan forbearance, deferment, grace periods and the use of payment modification programs, including income-based repayment programs, can individually and cumulatively impact the performance of our loan portfolios. Modifications to private loans may lower the potential return on investment and may have the related effect of delaying defaults which would otherwise have become apparent in the performance of our portfolios.

Future defaults could be higher than anticipated due to a variety of factors, such as downturns in the economy, public health crises, regulatory changes and other unforeseen future trends. During 2024, global markets continued to experience challenges driven by the economic impact of inflation and elevated interest rates. According to Company-sponsored independent research, young adults who stopped attending college before earning a degree or certificate are among those most likely to have trouble making payments. A significant deterioration in economic and employment conditions, which may result in material changes in graduation or completion rates and employment rates for recent college graduates, can have a significant impact on loan delinquency and default rates. For example, the adoption of artificial intelligence and automation technologies by employers that may materially alter employment patterns, job stability, or earnings prospects could negatively impact our borrowers’ ability to secure or maintain employment at income levels sufficient to meet their repayment obligations. Losses on Private Education Loans are also impacted by various risk characteristics that may be specific to individual loans. Loan status (in-school, grace, forbearance, repayment and delinquency), loan seasoning (number of months in which a payment has been made by a customer), underwriting criteria (e.g., credit scores), existence of a cosigner, school type and whether a loan is a TDR are all factors that can impact the likelihood of default. Additionally,Further, generalthe economicconvergence of exhausted pandemic-era financial buffers, changes in prepayment behavior, and employmentpersistent conditions,macroeconomic includingheadwinds employmentcontributed ratesto delinquency trends and an increase in our provision for recent college graduates, can have a significant impact on loan delinquencylosses andin default rates.2025. If actualfuture loan performance is worse than currently estimated, it could materially affect our estimate of the allowance for loan losses and the related provision for loan losses and as a result adversely affect our results of operations.

We acquired Earnest, a leading financial technology andwith a focus on education finance company,finance, in 2017. Since then, Earnest has become one of the leading providers of education refinance loans.loans, Inand in 2019, Earnest entered the “in-school” lending market. In 2025, Earnest expanded its lending platform with the launch of a personal loan product. We underwrite new Privateconsumer Education Loansloans within our Consumer Lending segment based upon our analysis of extensive credit criteria.criteria, Criteriawhich reviewedmay invary underwritingby consumerproduct. loansSuch criteria are designed to assess a borrower’s creditworthiness and ability to repay and may include anya or allcombination of thequantitative following:and qualitative factors, such as (i) employment or offer of employment and income; (ii) employment status and career specialization; (iii) qualifying credit history, taking into account credit score;score, (ivii) debt to income ratio;ratio, and (viii) demonstrated ability to pay through free cash flow calculations; (vi) attendance at or graduation from an eligible post-secondary school, or separated from an eligible post-secondary school within a specified period of time and met additional credit requirements, or be the parent of a graduate or student; and (vii) savings. We define free cash flow generally as after-tax monthly income of a borrower minus the sum of rent or mortgage payments, student loan payments and any other fixed expenses of such borrower.calculations.

We do not rely on any single factor in making our underwriting decisions. Each of the aboveunderwriting factorscriteria is reviewed and weighted depending on the individual borrower’s or co-borrower’s circumstances at the time the underwriting decision is made. If our underwriting process does not effectively forecast our losses, our operating results, cash flow or financial condition may be materially adversely affected.

The capital markets may from time-to-time experience periods of significant volatility, such as the volatility we have experienced in recent years due to rising“higher for longer” interest rates and other economic pressures. This volatility can dramatically and adversely affect financing costs when compared to historical norms or make funding unavailable at any costs.cost. We cannot provide any assurance that the cost and availability of funding in the capital markets will not continue to be impacted by current economic pressures. Other factors that could make financing more expensive or unavailable to us include, but are not limited to, financial losses, events that have an adverse impact on our reputation, changes in the activities of our business partners, events that have an adverse impact on the financial services industry generally, counterparty availability, negative credit rating actions with respect to us, asset-backed securities sponsored by us or the U.S. federal government, changes affecting our assets, the ability of existing or future Navient-sponsored securitization trusts to hedge interest rate and currency risk, corporate and regulatory actions, absolute and comparative interest rate changes, general economic conditions and the legal, regulatory and tax environments governing funding transactions, including existing or future securitization and derivatives transactions. If financing is difficult, expensive or unavailable, our results of operations, cash flow or financial condition could be materially and adversely affected. Further, rising interest rates and expectations of inflation may negatively impact borrower demand for our private education loan products.

The rate at which borrowers prepay their loans can have a material impact on profitability, results of operations, financial condition, cash flows or future business prospects by affecting our net interest margin, the future cash flows from our loans including loans held by our securitization trusts. Higher or lower prepayments can result from a variety of causes including borrower activity and changes in the education loan market as a result of market conditions, interest rate movements, loan forgiveness or other government sponsored initiatives or programs. FFELP Loans and Private Education Loans may be voluntarily prepaid without penalty by the borrower, refinanced or consolidated with the borrower’s other loans through refinancing or repaid by the Department of Education (ED) in connection with certain government sponsored programs. Prepayment rates on education loans are subject to a variety of economic, political, competitive and other factors, including changes in our competitors’ business strategies, changes in interest rates, availability of alternative financings (including refinance and consolidations), legislative, executive, policy and regulatory changes affecting the education loan market and the general economy. Refinance products offered by us, our competitors, and the federal government may increase the repayment rate on our FFELP Loans and Private Education Loans.

In particular, new interpretations of current laws, rules or regulations or future laws, executive orders or other policy initiatives which operate to encourage or require consolidation, abolish existing or create additional income-based repayment or debt forgiveness programs or establish other policies and programs also may increase or decrease the prepayment rates on education loans. In addition, the timing of the implementation and execution of certain government sponsored programs, like the Borrower Defense Loan Discharge program, may also increase or decrease the prepayment rates on FFELP Loans. For example, induring recentthe years,prior administration, ED has introduced various debt relief programs to provide relief to borrowers, includingwhich triggered increased consolidation activity. In 2025, consolidation activity declined significantly due to a change in administration, shifting federal education loan policy priorities, and the SAVEpassage Plan.of Thethe SAVEBig PlanBeautiful Bill. However, federal student loan policies continue to evolve, which could lead to renewed consolidation activity and otheraffect forgivenessprepayment orrates debton repaymentour programsexisting faceeducation legalloan challenges,portfolio. These changes may materially and haveadversely notimpact beenour fullyprofitability, implementedoperating toresults, date.financial condition, cash flows, and future business prospects.

Floor Income can be volatile as market rates and the rates on the underlying education loans move up and down. Subject to prevailing market conditions, we generallyhave hedgehistorically hedged this risk by using derivatives in an effort to lock in a portion of our Floor Income over the term of the contract. A rise in interest rates will reduce the amount of Floor Income received on the FFELP Loans not presently hedged with derivatives, which will compress our net interest margins. Further, our ability to hedge Floor Income and our ability to enter into hedges relative to that Floor Income is dependent on the future interest rate environment and therefore is variable, which may adversely affect our earnings. Additionally, net interest margins can be negatively impacted by unusual variances between 30-day and 90-day Average SOFR.

We continually strive to align our cost structure with our business operations. The ability to properly size our cost structure is dependent upon a number of variables, including our ability to successfully execute on our business plans, growth or strategic initiatives and future legislative or regulatory changes. On January 30, 2024, as a result of an in-depth review of our business, we announced three strategic actions to simplify our company, reduce our expense base, and enhance our flexibility. See “Business — Recent Business Developments” for more information on our strategic actions. We have made substantial progress on these strategic actions to datedate, but could fail to successfully completeincluding the implementationadoption of a variable, outsourced servicing model in July 2024 and the divestments of our strategichealthcare actionsservices orbusiness mayin September 2024 and our government services business in February 2025 as well as the completion of the transition services related to each of these transactions in 2025, but could fail to fully realize the anticipated benefits from thethese strategic actions or the benefits may take longer to realize than expected. Further, we may fail to implement, or be unable to achieve, necessary cost savings commensurate with our business and prospects. If we undertake cost reductions based on our business plan or the implementation of our recently announced strategic actions, those reductions, if not undertaken properly, could cause disruptions in our business, reductions in the quality of the services we provide or even cause us to fail to comply with applicable regulatory standards. In each case, our business, results of operations and financial condition could be adversely affected.

A failure of our operating systems or infrastructure could disrupt our business. Our business is dependent on the ability to process and monitor large numbers of daily transactions in compliance with contractual, legal and regulatory standards and our own product specifications, both currently and in the future. In May 2024, we entered into an outsourcing agreement that transitioned our student loan servicing to MOHELA, a leading provider of student loan servicing for government and commercial enterprises. We, however, maintain certain technology solutions for our other lines of business and to support transition services agreements related to our recent strategic transactions.business. As our processing demands change, both in volume and in terms and conditions, our ability to develop and maintain our operating systems and infrastructure may become increasingly challenging. There is no assurance that we have adequately or efficiently developed, maintained, acquired or scaled such systems and infrastructure or will do so in the future.

The servicing, financial, accounting, data processing and other operating systems and facilities that support our business may fail to operate properly or become disabled as a result of events that are beyond our control, adversely affecting our ability to timely process transactions. For example, we or our third-party service providers may in the future incorporate artificial intelligence technology in certain operations, processes or services. Artificial intelligence models are complex and may produce inaccurate, inadequate or otherwise harmful outputs that are not easily detectable. Any such failure could adversely affect our ability to service our clients and result in financial loss or liability to our clients, disrupt our business, and result in regulatory action or cause reputational damage.

Despite the plans and facilities we have in place, our ability to conduct business may be adversely affected by a prolonged disruption in the infrastructure that supports our business. This may include a disruption involving electrical, communications, Internet, artificial intelligence, transportation or other services used by us or third parties with which we conduct business.

Our operations rely on the secure processing, storage and transmission of personal, confidential and other information in our computer systems and networks. Although we take protective measures we deem reasonable and appropriate, like other financial institutions,services companies, our computer systems, software and networks are at risk for unauthorized access, computer viruses, malicious attacks, ransomware attacks and other cybersecurity events that could have a security impact beyond our control. These technologies, systems and networks, and those of third parties, have been, and may continue to be, the target of cyber-attacks that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of our customers’ confidential, proprietary and other information, the loss of access to our systems and networks or those of third parties we rely upon or otherwise disrupt our business operations or those of our customers or other third parties. Information security risks for institutions that handle large numbers of financial transactions on a daily basis such as Navient have increased in recent years, in part because of the proliferation of new technologies, the use of the Internet and telecommunications technologies to conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, terrorists, activists and other external parties. In addition, our increased use of mobile and cloud technologies could heighten these and other operational risks. We aresuccessfully currently transitioningtransitioned from an on-premiseon-premises information technology operations to a cloud-first architecture,architecture which we expect to be completed by the end ofin 2025. This transition heightens certain operational risks such as those related to information security and cybersecurity attacks. While most cloud environments offer robust and greater security measures, if configured correctly, they are still at risk for cybersecurity attacks and breaches. Any failure by our service providers, including our mobile or cloud technology service providers or MOHELA, as the servicer of our student loan portfolios, to adequately safeguard their systems and prevent cyber-attacks could disrupt our operations or those of third parties we rely upon and result in interruptions of services or loss of access or misappropriation, corruption or loss of confidential or propriety information. Moreover, the loss of confidential customer identification information could harm our reputation, result in the termination of contracts by our existing customers and subject us to liability under state, federal and international laws that protect confidential personal data, resulting in increased costs, loss of revenues and substantial penalties.

In May 2024, we entered into an outsourcing agreement that transitioned our student loan servicing to MOHELA. See “Business — Recent Business Developments” for more information regarding this outsourcing transaction. Additionally, we are currently working to fully transitiontransitioned from an on-premiseon-premises information technology operations to a cloud-first architecture.architecture in 2025. Cloud service providers have experienced, and may continue to experience, outages and disruptions that could impact business operations. Additionally, the transition to a cloud-first architecture requiresrequired significant changes in information technology management and operations, which could lead to temporary inefficiencies and increased resources and operational costs as the Company adaptscontinues to adapt to a new environment.

The CFPB has authority with respect to several aspects of our business. It has authority to write regulations under federal consumer financial protection laws and to directly or indirectly enforce those laws and examine us for compliance. The CFPB also has examination and enforcement authority with respect to various federal consumer financial laws for some providers of consumer financial products and services, including us. New rulesrules, if implemented, could have a material effect on our consumer lending or other businesses and may result in significant capital expenditures to develop systems that enable us to comply with the new regulations.

We are now, and may in the future be, subject to inquiries and audits from state and federal regulators as well as litigation from private plaintiffs. In recent years, we have entered into consent orders and other settlements. We have provided monetary and other relief in connection with the resolution of some of these actions and settlements. We have also enhanced our procedures and controls, expanded the risk and control functions within each line of business, and invested in technology and hired additional risk, control and compliance personnel.technology.

We expect regulatory scrutiny and governmental investigations and enforcement actions to continue for us and for the financial services industry as a whole. Such actions can have significant consequences for a financial institutionservices company such as ours, including loss of customers and business and the inability to operate certain businesses.

Certain provisions of Delaware law and of our amended and restated certificate of incorporation and secondthird amended and restated by-laws are intended to deter coercive takeover practices and inadequate takeover bids by, among other things, encouraging prospective acquirers to negotiate directly with our Board of Directors rather than to attempt a hostile takeover. These provisions include, among others:

Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation that may be initiated by our shareholders, which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed to us or our shareholders by any of our directors, officers, employees or agents, (iii) any action asserting a claim against us arising under the General Corporation Law of the State of Delaware (DGCL) or (iv) any action asserting a claim against us that is governed by the internal affairs doctrine. By becoming a shareholder in our company, holders of our common stock will be deemed to have notice of and have consented to the provisions of our amended and restated certificate of incorporation related to choice of forum. The choice of forum provision in our amended and restated certificate of incorporation may limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us.

In 2010, Congress passed legislation ending the origination of education loans under the FFELP program. Since then, all federal education loans have been originated through the Direct Student Loan Program (DSLP) of the ED. While the 2010 law did not alter or affect the terms and conditions of existing FFELP Loans, it significantly impacted the education loan industry. As a result of this legislation, net income on our FFELP Loan portfolio is declining, and is anticipated to continue to decline, over time as those existing FFELP Loans are paid down, refinanced or repaid after default.

Acquisitions, new products, strategic investments or divestitures that we pursue may not be successful and could harm our business and financial condition.

Our growth strategy has included making opportunistic acquisitions of, or material investments in, loan portfolios and complementary businesses and products.products, as well as offering new products, such as the personal loan product launched by Earnest in 2025.

All acquisitions of companies, operations or loan portfolios involve financial risks as well as the offering of new products, involve financial and operational risks. There may be additional risks if we enter into a line of business or launch a new product in which we have limited experience or which operates in a legal, regulatory or competitive environment with which we are not familiar. The expected benefits of acquisitions and investments also may not be realized for various reasons, including the loss of key personnel, customers or vendors. If we fail to integrate or realize the expected benefits of our acquisitions or investments, we may lose the return on these acquisitions or investments or incur additional transaction costs, and our business and financial condition may be harmed as a result.

Our strategy also includes, and may continue to include, making divestituresdivestments of certain brands or businesses, such as the sale of our healthcare services business in September 2024 and our government services business in February 2025. If we are unable to complete divestitures or successfully transition divested businesses, including the effective management of the related separation and stranded overhead costs, transition services, and the maintenance of relationships with customers and other business partners, our business, financial condition or results of operations could be negatively impacted. Even if such transactions are completed, the anticipated growth and other strategic objectives of such transactions may not be fully realized or may take longer to realize than expected, which may adversely affect any anticipated benefits from such transactions.

We are subject to a variety of legal proceedings in virtually every part of our business (see "Note 12 — Commitments, Contingencies and Guarantees"). While we believe we have adopted appropriate legal and risk management and compliance programs, the diverse nature of our current and former operations, including operations of business we have recently acquired,acquired or exited, means that legal and compliance risks will continue to exist and additional legal proceedings and other contingencies, the outcome of which cannot be predicted with certainty, will arise from time to time. Some of these legal proceedings or other contingencies may materially adversely affect our business, financial condition or results from operations.

Our success is dependent, in large part, on our ability to attract and retain personnel with the knowledge and skills to lead our business. Experienced personnel in our industry are in high demand, and competition for talent is very high. We must hire, retain and motivate appropriate numbers of talented people with diverse skills in order to serve our clients, respond quickly to rapid and ongoing technology, industry and macroeconomic developments, and grow and manage our business. As our business evolves, we must also hire and retain an increasing number of professionals with different skills and professional expectations than those of the professionals we have historically hired and retained. If we are unable to successfully integrate, motivate and retain these professionals, our ability to continue to secure work in those industries and for our services and solutions may suffer.

20242025 GAAP net loss was $80 million ($0.81 diluted loss per share), compared with net income wasof $131 million ($1.18 diluted earnings per share), compared with $228 million ($1.85 diluted earnings per share) in 2023.2024. See “Results of Operations — GAAP Comparison of 20242025 Results with 20232024” for a discussion of the primary contributors to the change in GAAP earnings between periods.

20242025 Core Earnings net loss was $35 million ($0.35 diluted Core Earnings loss per share), compared with Core Earnings net income wasof $221 million ($2.00 diluted Core Earnings per share), compared with $303 million ($2.45 diluted Core Earnings per share) in 2023.2024. See “Segment Results” for a discussion of the primary contributors to the change in Core Earnings between periods.

2025 GAAP and Core Earnings results included a net increase to pre-tax income of $43 million ($0.30 diluted earnings per share), comprised of the following significant items:

FFELP Loan prepayments of $5.4$977 billionmillion compared to $3.1$5.4 billion in 2023.2024.

PaidRepurchased $70$111 million inof common stock dividends.shares.

Issued $728$2.2 millionbillion of asset-backed securities and retired $500 million of unsecured debt.securities.

For the year ended December 31, 2024,2025, net loss was $80 million, or $0.81 diluted loss per common share, compared with net income wasof $131 million, or $1.18 diluted earnings per common share, compared with net income of $228 million, or $1.85 diluted earnings per common share, for the year-ago period.

The primary contributors to the change in net income (loss) are as follows:

Provisions for loan losses decreasedincreased $10$167 million, from $123$113 million to $113$280 million:

The provision for FFELPPrivate Education Loan losses of $1$249 million in the current period wasincluded $41 million associated with loan originations and $208 million primarily theassociated resultwith of an increase inelevated delinquency balances partiallyas offsetwell byas elevatedour prepaymentforecasted activitymacroeconomic over the prior year.outlook. The provision of $56$112 million in the year-ago period wasincluded primarily$39 amillion resultrelated ofto the continued extension of the FFELP Loan portfolio and the resulting increase in bothlowering the expected futurerecovery defaultsrate on defaulted loans, $32 million associated with loan originations and the$41 premiummillion allocatedrelated to alla expectedgeneral futurereserve defaults.build.

Asset recovery and business processing revenue decreased $50$248 million primarily as a result of the sale of our healthcare services business in the third quarter of 2024 ($33$88 million of the decrease), as well as a decrease inand our government services revenuebusiness primarilyin relatedFebruary to2025 congressional($160 fundingmillion notof beingthe approveddecrease). toWith continuethe performingsale of our government services underbusiness, aNavient particularno contract.longer provides business processing segment services.

Net gains on derivative and hedging activities increaseddecreased $59$100 millionmillion. primarilyThe dueprimary tofactor affecting the change was interest rate fluctuations. Valuations of derivative instruments fluctuate based upon many factors including changes in interest rates and other market factors. As a result, net gains and losses on derivative and hedging activities may vary significantly in future periods.

Restructuring and other reorganization expenses increaseddecreased $14$22 million primarily due to ana increasedecrease in severance-related costs.costs The current period’s restructuring and other reorganization expenses of $39 million included $29 million of severance-related costsincurred in connection with the various strategic initiatives beingthat have been and continue to be implemented to simplify the company, reduce our expense base and enhance our flexibility.

The following table presents Core Earnings results for our FederalConsumer Education LoansLending segment.

The risk factors disclosed in our 2025 Form 10-K should be considered together with information included in this Form 10-Q. WeExcept as described below, we believe there have been no material changes to the risk factors previously disclosed in our 2025 Form 10-K.

Item is a non-GAAP financial measure. For a description and reconciliation, see “Non-GAAP Financial Measures – Core EarningsEarnings.”

First-quarterSecond-quarter 2026 GAAP net income was $17$25 million ($0.17$0.26 diluted earnings per share), compared with net lossincome of $2$14 million ($0.02$0.13 diluted lossearnings per share) for the year-ago quarter. See “Results of Operations — GAAP Comparison of First-QuarterSecond-Quarter 2026 Results with First-QuarterSecond-Quarter 2025” for a discussion of the primary contributors to the change in GAAP earnings between periods.

First-quarterSecond-quarter 2026 Core Earnings net income was $19$27 million ($0.20$0.29 diluted Core Earnings per share), compared with $26$21 million ($0.25$0.20 diluted Core Earnings per share) for the year-ago quarter. See “Segment Results” for a discussion of the primary contributors to the change in Core Earnings between periods.

Financial highlights of first-quartersecond-quarter 2026 include:

Issued $683$500 million of unsecured debt and $1.3 billion of asset-backed securities.

GAAP Comparison of First-QuarterSecond-Quarter 2026 Results with First-QuarterSecond-Quarter 2025

For the three months ended MarchJune 31,30, 2026, net income was $17$25 million, or $0.17$0.26 diluted earnings per common share, compared with net lossincome of $2$14 million, or $0.02$0.13 diluted lossearnings per common share, for the year-ago period.

• Net interest income increaseddecreased by $1$6 million primarily due to an increase in mark-to-market gains on fair value hedges recorded in interest expense. This was partially offset by the paydown of the FFELP portfolio,portfolio and the Private Education Loan portfolio's changing product mix with Refinance Loans increasing as a percentage of the portfolio,portfolio. andThe Refinance Loan portfolio earns a lower net interest margin compared to the impactnon-refinance ofportfolio, decreasingdue to lower expected credit losses, which reduces the overall net interest rates on the different index resets for the Private Education Loans and related funding.margin.

○ The provision for Private Education Loan losses decreased $4$11 million from $22$29 million to $18 million.

○ The provision for FFELP Loan losses increasedremained $1unchanged million fromat $8 million to $9 million.

• Other income decreased $10$11 million primarily related to thea $24 million decrease in transition services revenue we had providedearned related to our various strategic initiatives. The transition services related to the outsourcing of loan servicing and the sale of our healthcare services business ended in May 2025. The transition services related to the sale of our government services business ended in October 2025. This $24 million decrease was partially offset by a $12 million gain on an investment in the current period.

• Operating expenses decreased $38$56 million, $23 million of which was due to a decline in business processing expenses as a result of the sale of our government services business in February 2025 ($20 million of the reduction is in the Business Processing segment and $3 million of the reduction is in the Other segment). In addition, there was ana $11$23 million decline in expenses in connection with providing transition services related to our various strategic initiatives. As of October 2025 we had no further obligations to provide these transition services. There was aan $7$11 million increase in marketing and other expenses associated with the growth of our consumer lending businesses. The remaining $11$21 million decrease primarily relates to cost saving initiatives implemented, which have reduced our operating costs mostly in connection with our shared service functions and corporate footprint.

• The effective income tax rates for the current year and year-ago periods were 48%41% and 54%,9%, respectively. The movement in the effective income tax ratesrate werewas elevatedprimarily driven by state tax expense in bothconnection periodswith primarilyuncertain duetax topositions as well as changes in the valuation allowancesallowance attributed to disallowed interest expense and operating loss carryovers.

We repurchased 2.32.6 million and 2.64.5 million shares of our common stock during the firstsix quartersmonths ofended June 30, 2026 and June 30, 2025, respectively. As a result of repurchases, our average outstanding diluted shares decreased by 67 million common shares (or 6%7%) from the year-ago period.

Comparison of First-QuarterSecond-Quarter 2026 Results with First-QuarterSecond-Quarter 2025

Net interest income decreased $13$2 million, primarily due to the changing product mix ofwith the loan portfolio (Refinance Loans increasedincreasing as a percentage of the portfolio. The Refinance Loan portfolio), asearns wella aslower net interest margin compared to the impactnon-refinance ofportfolio, decreasingdue to lower expected credit losses, which reduces the overall net interest rates on the different index resets for the segment assets and debt.margin.

Private Education Loan forbearances: $235$271 million, downup $48$21 million from $283$250 million.

Operating expensesExpenses increased $4$6 million primarily reflecting marketing and other expenses associated with the growth of our consumer lending businesses.

As of MarchJune 31,30, 2026, our Private EducationFFELP Loan portfolio totaled $15.6$26.5 billion, comprised of $9.0 billion of refinance loans and $6.6 billion of non-refinance loans.billion. The weighted-average life of thesethis portfoliosportfolio as of MarchJune 31,30, 2026 was 58 years and 4 years, respectively, assuming a Constant Prepayment Rate (CPR) of 10%3% through 2028 and 8%,5% respectively. As of March 31, 2025, the CPR assumption was 10% for both refinance and non-refinance loans.thereafter.