What changed in this filing

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Item 1. Business

2021-02-25 compared with 2020-02-27 · 256 added, 244 removed, 283 unchanged (64% of the section changed)

Nelnet is a diverse company with a purpose to serve others and a vision to make customers' dreams possible by delivering customer focused products and services.

The largest operating businesses engage in loan servicing;

education technology, services, and payment processing;

and communications.

The largest operating businesses engage in loan servicing and education technology, services, and payment processing, and the Company also has a significant investment in communications.

A significant portion of the Company's revenue is net interest income earned on a portfolio of federally insured student loans.

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The Company believes there may be additional opportunities to purchase FFELP portfolios to generate incremental earnings and cash flow.

However, since all FFELP loans will eventually run off, a key objective of the Company over the last several years is to reposition itself for the post-FFELP environment.

However, since all FFELP loans will eventually run off, a key objective of the Company is to reposition itself for the post-FFELP environment.

To reduce its reliance on interest income from FFELP loans, the Company has expanded its services and products.

This expansion has been accomplished through internal growth and innovation as well as business acquisitions.

The Company is also actively expanding its private education and consumer loan portfolios.

In addition, in 2009, the Company began servicing federally owned student loans for the Department.

On November 12, 2019, the Company announced it filed an application with the Federal Deposit Insurance Corporation and the Utah Department of Financial Institutions to establish Nelnet Bank, a Utah-chartered industrial bank.

If the charter is granted, Nelnet Bank would operate as an internet bank franchise with a home office in Salt Lake City and would leverage the Company's experience and expertise helping students and families plan and pay for their education.

The Company cannot predict the timing of the application process, or if the Company will be successful in obtaining a charter.

The Company is also actively expanding its private education and consumer loan portfolios, and in November 2020 launched Nelnet Bank (as further discussed below).

In addition, the Company has been servicing federally owned student loans for the Department since 2009.

Recent Developments

ALLO’s Recapitalization and Additional Funding

On October 1, 2020, the Company entered into various agreements with SDC Allo Holdings, LLC (“SDC”), a third party global digital infrastructure investor, and ALLO, then a majority owned communications subsidiary of the Company, to recapitalize and provide additional funding for ALLO.

On October 15, 2020, ALLO received proceeds of $197.0 million from SDC for the issuance of membership units of ALLO, and redeemed $160.0 million of non-voting preferred membership units of ALLO held by the Company.

As a result of the receipt of required regulatory approvals on December 21, 2020, SDC, the Company, and members of ALLO’s management own approximately 48 percent, 45 percent, and 7 percent, respectively, of the outstanding voting membership interests of ALLO, and the Company deconsolidated ALLO from the Company’s consolidated financial statements.

Upon the deconsolidation of ALLO, the Company recorded its 45 percent voting membership interests in ALLO at fair value of $133.0 million, and accounts for such investment under the Hypothetical Liquidation at Book Value (“HLBV”) method of accounting.

In addition, the Company recorded its remaining non-voting preferred membership units in ALLO at fair value of $228.5 million, and accounts for such investment as a separate equity investment.

As a result of the deconsolidation of ALLO on December 21, 2020, the Company recognized a gain of $258.6 million in the fourth quarter of 2020.

On January 19, 2021, ALLO closed on certain private debt financing facilities from unrelated third-party lenders providing for an aggregate financing of up to $230.0 million.

With proceeds from this transaction, ALLO redeemed a portion of its non-

voting preferred membership units held by the Company in exchange for an aggregate redemption price payment to the Company of $100.0 million.

See note 2 of the notes to consolidated financial statements included in this report for additional information related to the ALLO recapitalization.

ALLO’s results of operations, prior to deconsolidation, are presented by the Company as a reportable operating segment.

On November 2, 2020, the Company obtained final approval from the Federal Deposit Insurance Corporation (“FDIC”) for federal deposit insurance and for a bank charter from the Utah Department of Financial Institutions (“UDFI”) in connection with the establishment of Nelnet Bank, and Nelnet Bank launched operations.

Nelnet Bank operates as an internet Utah-chartered industrial bank franchise focused on the private education loan marketplace, with a home office in Salt Lake City, Utah.

Nelnet Bank operates as a subsidiary of the Company, and the industrial bank charter allows the Company to maintain its other diversified business offerings.

Operating Segments

The Company has four reportable operating segments summarized below.

The Company’s reportable operating segments are summarized below.

Business activities and operating segments that are not reportable are combined and included in "Corporate and Other Activities."

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• Focuses on student and consumer loan origination services and servicing, loan origination and servicing-related technology solutions, and outsourcing business services

• Includes the brands Nelnet Loan Servicing, Great Lakes Educational Loan Services, Inc.

(“Great Lakes”), Firstmark Services, and Proxi

• Includes the brands Nelnet Diversified Solutions, Nelnet Loan Servicing, Nelnet Servicing, Great Lakes Educational Loan Services, Inc.

(“Great Lakes”), Firstmark Services, GreatNet, and Nelnet Renewable Energy

Education Technology, Services, and Payment Processing (“ETS&PP”)

• Referred to as Nelnet Business Services (“NBS”)

• Includes the brands FACTS, Nelnet Campus Commerce, PaymentSpring, FACTS Education Solutions, Aware3, and Nelnet International

• Includes the brands FACTS, Nelnet Campus Commerce, PaymentSpring, FACTS Education Solutions, Aware3, HigherSchool Instructional Services, Catholic Faith Technologies, CD2 Learning, and Nelnet International

• Services include tuition payment plans and billing, financial needs assessment services, online payment and refund processing, school information system software, payment technologies, and professional development and educational instruction services

Communications

• Includes the operations of ALLO Communications LLC (“ALLO”) within Nelnet Communications Services

• Includes the operations of ALLO prior to the deconsolidation of ALLO on December 21, 2020

• Focuses on providing fiber optic service directly to homes and businesses for internet, telephone, and television services

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• Also referred to as Nelnet Financial Services

• Includes the acquisition and management of the Company's student and other loan assets

• Includes the acquisition and management of student and other loan assets

• Internet Utah-chartered industrial bank focused on the private education loan marketplace

A more detailed description of each of the Company's reportable operating segments and Corporate and Other Activities is provided below.

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• Originating and servicing private education and consumer loans

• Backup servicing for FFELP, private education, and consumer loans

• Providing student loan servicing software and other information technology products and services

• Providing outsourced services including call center, processing, and marketing services

On February 7, 2018, the Company acquired Great Lakes.

The operating results of Great Lakes are included in the Loan Servicing and Systems operating segment from the date of acquisition.

Nelnet Servicing, LLC (“Nelnet Servicing”), a subsidiary of the Company, and Great Lakes are two of the four large private sector companies (referred to as Title IV Additional Servicers, or “TIVAS”) that have student loan servicing contracts awarded by the Department in June 2009 to provide servicing for loans owned by the Department.

As of the acquisition date, Great Lakes was servicing approximately $242 billion in government-owned student loans, approximately $11 billion in FFELP loans, and approximately $2 billion in private education loans.

From the date of acquisition and going forward, Great Lakes and Nelnet Servicing have continued, and will continue, to service their respective government-owned portfolios on behalf of the Department, while maintaining their distinct brands, independent servicing operations, and teams.

Likewise, each entity will continue to compete for new student loan volume under its respective existing contract with the Department.

The Company has integrated, and will continue to integrate, technology as well as shared services and other activities to become more efficient and effective in meeting borrower needs.

During the second quarter of 2018, the Company converted Great Lakes' FFELP and private education loan servicing volume to Nelnet Servicing's servicing platform to leverage the efficiencies of supporting more volume on fewer systems.

• Customer acquisition, management services, and backup servicing for community solar developers

• Providing outsourced services including call center, processing, technology, and marketing services

As of December 31, 2020, the Company serviced $490.2 billion of loans for 15.2 million borrowers.

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Servicing federally-owned student loans for the Department

As discussed above, Nelnet Servicing and Great Lakes are two of four large private sector companies, or TIVAS, awarded student loan servicing contracts by the Department in June 2009 to provide additional servicing capacity for loans owned by the Department.

Nelnet Servicing, LLC (“Nelnet Servicing”), a subsidiary of the Company, and Great Lakes, acquired by the Company in February 2018, are two of the four large private sector companies (referred to as Title IV Additional Servicers, or “TIVAS”) that have student loan servicing contracts awarded by the Department in June 2009 to provide servicing for loans owned by the Department.

The Department has also awarded contracts to four not-for-profit entities (“NFP”) to service loans owned by the Department.

These loans include Federal Direct Loan Program loans originated directly by the Department and FFEL Program loans purchased by the Department.

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The amount paid per each unique borrower is dependent on the status of the borrower (e.g., in school or in repayment).

As of December 31, 2019, Nelnet Servicing was servicing $183.8 billion of student loans for 5.6 million borrowers

under its contract, and Great Lakes was servicing $240.0 billion of student loans for 7.4 million borrowers under its contract.

The Department is the Company's largest customer, representing 30 percent of the Company's revenue in 2019.

Nelnet Servicing and Great Lakes' servicing contracts with the Department previously provided for expiration on June 16, 2019.

On May 15, 2019, Nelnet Servicing and Great Lakes each received a contract extension from the Department's Office of Federal Student Aid (“FSA”) pursuant to which FSA extended the expiration date of the current contracts to December 15, 2019.

On November 26, 2019, Nelnet Servicing and Great Lakes each received an additional extension from FSA on their contracts through December 14, 2020.

The contract extensions also provide the potential for two additional six-month extensions at the Department’s discretion through December 14, 2021.

FSA is conducting a contract procurement process entitled Next Generation Financial Services Environment (“NextGen”) for a new framework for the servicing of all student loans owned by the Department.

On January 15, 2019, FSA issued solicitations for three NextGen components:

• NextGen Enhanced Processing Solution (“EPS”)

• NextGen Business Process Operations (“BPO”)

• NextGen Optimal Processing Solution (“OPS”)

On April 1, 2019 and October 4, 2019, the Company responded to the EPS component.

On January 16, 2020, FSA released an amendment to the EPS component and the Company responded on February 3, 2020.

In addition, on August 1, 2019, the Company responded to the BPO component.

On January 10, 2020, FSA released an amendment to the BPO component and the Company responded on January 30, 2020.

The Company is also part of a team that has responded and intends to respond to various aspects of the OPS component;

however, on November 12, 2019, FSA put an indefinite hold on the OPS solicitation.

The Company cannot predict the timing, nature, or outcome of these solicitations.

The Department also has contracts with 31 not-for-profit (“NFP”) entities to service student loans, although five NFP servicers currently service the volume allocated to these 31 entities.

The Company licenses its remote-hosted servicing software to three of the five NFP servicers.

As of December 31, 2020, Nelnet Servicing was servicing $191.7 billion of student loans for 5.6 million borrowers under its contract, and Great Lakes was servicing $251.6 billion of student loans for 7.6 million borrowers under its contract.

The Department is the Company's largest customer, representing 27 percent of the Company's revenue in 2020 and 66 percent of the LSS operating segment’s revenue.

The current servicing contracts with the Department are currently scheduled to expire on June 14, 2021, but provide the potential for an additional six-month extension at the Department’s discretion through December 14, 2021.

The Consolidated Appropriations Act, 2021, signed into law on December 27, 2020, provides that the Department may extend the period of performance for the servicing contracts scheduled to expire on December 14, 2021 for up to two additional years to December 14, 2023.

The Department is conducting a contract procurement process entitled Next Generation Financial Services Environment (“NextGen”) for a new framework for the servicing of all student loans owned by the Department.

On January 15, 2019, the Department issued solicitations for certain NextGen components, including the NextGen Enhanced Processing Solution (“EPS”), which is for a technology servicing system and certain processing functions the Department planned to use under NextGen to service the Department's student loan customers, and the NextGen Business Processing Operations (“BPO”), which is for the back office and call center operational functions for servicing the Department's student loan customers.

On June 24, 2020, the Department awarded and signed contracts with five other companies in connection with the BPO solicitation.

On July 10, 2020, the Department cancelled the solicitation for the EPS component.

In the Department's description of its cancellation of the EPS solicitation component, the Department indicated that it continues to be committed to the goals and vision of NextGen, and that it would be introducing a new solicitation to continue the NextGen strategy in the future.

On October 28, 2020, the Department issued a new federal loan servicing solicitation for an Interim Servicing Solution ("ISS").

ISS was a follow-on to the existing contracts, which would award a full system and servicing solution to two providers.

Under ISS, the selected providers would have provided the technology platform to host the Department's student loan portfolio;

customer service (including contact centers) and back-office processing;

digital engagement layer including borrower-facing website and mobile-applications;

intake, imaging, and fulfillment;

and portfolio-level operations.

As the companies awarded BPO contracts are onboarded, contact center and back-office operations would have shifted from the ISS contract to the BPO providers.

The Consolidated Appropriations Act, 2021 contains provisions directing certain aspects of the NextGen process, including that any new federal student loan servicing environment shall provide for the participation of multiple student loan servicers and the allocation of borrower accounts to eligible student loan servicers based on performance, and directed the suspension of awarding any ISS contract for at least 90 days.

On January 9, 2021, the Department suspended the ISS solicitation.

In the Department’s description of the suspension, it indicated that in consideration of the Consolidated Appropriations Act, 2021, the Government is reassessing its needs and will amend or cancel the subject solicitation in the future.

The Department currently allocates new loan volume among the TIVAS and NFP servicers based on the following performance metrics:

• Two metrics measure the satisfaction among separate customer groups, including borrowers (35 percent) and FSA personnel who work with the servicers (5 percent).

• Three metrics measure the success of keeping borrowers in an on-time repayment status and helping borrowers avoid default as reflected by the percentage of borrowers in current repayment status (30 percent), percentage of borrowers more than 90 days but fewer than 271 days delinquent (15 percent), and percentage of borrowers over 270 days and fewer than 361 days delinquent (15 percent).

• Two metrics measure the satisfaction among separate customer groups, including borrowers (35 percent) and Department personnel who work with the servicers (5 percent).

• Three metrics measure the success of keeping borrowers in an on-time repayment status and helping borrowers avoid

default as reflected by the percentage of borrowers in current repayment status (30 percent), percentage of borrowers more than 90 days but fewer than 271 days delinquent (15 percent), and percentage of borrowers over 270 days and fewer than 361 days delinquent (15 percent).

The loans are evaluated in 15 different loan portfolio stratifications to account for differences in portfolios.

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The average of the September and December quarter-end results are used to allocate volume for the period from March 1 to August 31, and the average of the March and June quarter-end results are used to allocate volume for the period from September 1 to February month end, of each year.

Under the most recent publicly announced performance metrics measurements used by the Department for the quarterly periods January 1, 2019 through June 30, 2019, Great Lakes' and Nelnet Servicing's overall rankings among the nine current servicers for the Department were first and sixth, respectively.

Under the most recent publicly announced performance metrics measurements used by the Department for the quarterly periods January 1, 2020 through June 30, 2020, Great Lakes' and Nelnet Servicing's overall rankings among the then-current nine servicers for the Department at that time were first and tied for fifth, respectively.

Based on these results, Great Lakes' and Nelnet Servicing's allocation of new student loan servicing volumes for the period September 1, 2020 through February 28, 2021 are 20 percent and 10 percent, respectively.

In October 2020, the Department communicated to its servicers that a not-for-profit servicer requested to end its contract with the Department.

Effective October 23, 2020, the percent of allocated new student loan servicing volume that previously was awarded to this servicer will be split among the remaining servicers, resulting in Great Lakes' allocation to increase by two percent and each remaining servicer to obtain an additional one percent allocation.

Incremental revenue components earned by Nelnet Servicing or Great Lakes from the Department (in addition to loan servicing revenues) include:

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Improvements in systems will allow for diversified products to be both originated and serviced with state-of-the-art application and servicing platforms to drive growth for the Company's client partners.

Presenting a very wide market opportunity of new entrants and existing players, consumer lending is expected to be a key growth area.

In both back-up servicing and full servicing partnerships, the Company is a valuable resource for consumer lenders and asset holders as it allows for leveraged economies of scale, high compliance, and secure service to client partners.

The Company serviced private education and consumer loans on behalf of 64 third-party servicing customers as of December 31, 2019.

In addition, the Company provides back-up servicing arrangements to assist 14 entities for more than 3.7 million borrowers.

Presenting a very wide market opportunity of new entrants and existing players, consumer lending is currently expected to be a growth area.

In both backup servicing and full servicing partnerships, the Company is a valuable resource for consumer lenders and asset holders as it allows for leveraged economies of scale, high compliance, and secure service to client partners.

NDS serviced private education and consumer loans on behalf of 39 third-party servicing customers as of December 31, 2020.

The Company expects that private education loan servicing revenue will increase beginning in the first half of 2021 as a result of the Company being selected to service all of the approximately $10 billion portfolio of private education loans (representing approximately 475,000 borrowers) that Wells Fargo announced in December 2020 it had agreed to sell to investors.

Backup servicing for FFELP, private education, and consumer loans

NDS offers protection against unexpected business failure or any event that stretches a third party service provider’s resources beyond its capability to perform essential services through backup servicing.

Backup servicing for loan asset owners, investors, financiers, and other stakeholders is a way to safeguard assets and mitigate financial risk, generally in conjunction with a structured long-term financing of the assets (like an asset-backed securitization).

NDS’s backup service provides a trigger response plan with pre-built system profiles that remain on standby, ready to be utilized if a contracted asset manager or service provider cannot perform its duties.

The Company performs testing and maintenance against the loan transfer process each month with backup clients and certifies compliance.

For a monthly fee, these arrangements require a 30 to 90 day notice from a triggering event to transfer the customer's servicing volume to the Company's platform and becoming a full servicing customer.

NDS offers backup servicing for FFEL, private education, and consumer loan programs that leverages existing servicing systems and full service experience.

NDS provides backup servicing arrangements to assist 17 entities for more than 5.6 million borrowers.

Providing student loan servicing software and other information technology products and services

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The Company earns a monthly fee from its remote hosting customers for each loan or unique borrower on the Company's platform, with a minimum monthly charge for most contracts.

As of December 31, 2019, 6.4 million borrowers were hosted on the Company's hosted servicing software solution platforms.

Providing outsourced services including call center, processing, and marketing services

The Company provides business process outsourcing primarily specializing in contact center management.

As of December 31, 2020, 6.6 million borrowers were hosted on the Company's hosted servicing software solution platforms, including 4.0 million borrowers that were serviced by three of the four NFP servicers that have contracts to service loans for the Department and 2.3 million borrowers that were serviced by the Great Lakes’ former parent company in accordance with a contract that expired in January 2021.

Customer acquisition, management services, and backup servicing for community solar developers

NDS, under the brand Nelnet Renewable Energy, works with solar developers and financiers to provide marketing, sales, and customer engagement services to meet key milestones before solar projects are interconnected to the grid and provide the subsequent operational support for the term of the subscriber agreement, including addressing incoming inquiries, verifying eligibility, billing, payment processing, and reconciliation.

The Company earns a one-time fee for subscriber acquisition and a

recurring fee for subscriber management.

Additionally, NDS provides backup servicing capabilities to solar developers and financiers, which provides assurances that projects will still be serviced in the event the primary servicer’s situation changes.

Providing outsourced services including call center, processing, technology, and marketing services

NDS provides business process outsourcing primarily specializing in contact center management.

The contact center solutions and services include taking inbound calls, helping with outreach campaigns and sales, and interacting with customers through multi-channels.

Processing services include application processing and verification, payment processing, credit dispute, and account management services.

NDS also outsources technology expertise and capacity to supplement development needs in organizations.

The Company's scalable servicing platform allows it to provide compliant, efficient, and reliable service at a low cost, giving the Company a competitive advantage over others in the industry .

The principal competitor for existing and prospective FFELP and private education loan servicing business is Navient Corporation (“Navient”), which in 2018 entered into an agreement with First Data to provide technology solutions for servicing Navient's federal education loans in addition to the technology role they already played with respect to private education loans.

The principal competitor for existing and prospective FFELP and private education loan servicing business is Navient Corporation (“Navient”), which in 2018 entered into an agreement with First Data, now part of Fiserv, to provide technology solutions for servicing Navient's federal education loans in addition to the technology role they already played with respect to private education loans.

Navient is the largest for-profit provider of servicing functions.

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This ensures access to specialized teams with a dedicated focus on servicing these borrowers.

With the elimination of new loan originations under the FFEL Program, four TIVAS servicers, including Nelnet Servicing and Great Lakes, were named by the Department in 2009 as servicers of federally-owned loans.

With the elimination of new loan originations under the FFEL Program, four TIVAS servicers, including Nelnet Servicing and Great Lakes, and four NFPs, are servicers of federally-owned loans.

The two other TIVAS servicers are FedLoan Servicing (Pennsylvania Higher Education Assistance Agency (“PHEAA”)) and Navient.

In addition, the Department has contracts with 31 NFP entities to service student loans that are serviced by 5 prime NFP servicers.

The Company currently licenses its hosted servicing software to three prime NFP servicers that represent 13 NFP organizations.

PHEAA is the only other TIVAS servicer offering a hosted Federal Direct Loan Program servicing solution to the NFP servicers.

The Company is one of the leaders in the development of servicing software for guaranty agencies, consumer and private education loan programs, the Federal Direct Loan Program, and FFELP student loans.

NDS currently licenses its hosted servicing software to three of the four NFP servicers.

NDS is one of the leaders in the development of servicing software for guaranty agencies, consumer and private education loan programs, the Federal Direct Loan Program, and FFELP student loans.

Many student loan lenders and servicers utilize the Company's software either directly or indirectly.

The Company believes the investments it has made to scale its systems and to create a secure infrastructure to support the Department's servicing volume and requirements increase its competitive advantage as a long-term partner in the loan servicing market.

NDS believes the investments it has made to scale its systems and to create a secure infrastructure to support the Department's servicing volume and requirements increase its competitive advantage as a long-term partner in the loan servicing market.

Education Technology, Services, and Payment Processing

NBS provides service and technology to administrators, teachers, students, and families of K-12 schools and higher education institutions.

NBS provides services and technology to administrators, teachers, students, and families of K-12 schools and higher education institutions.

The Company’s payment processing services and technologies also serve customers outside of education.

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(v) professional development and educational instruction services, and (vi) innovative technology products that aid in teacher and student evaluations.

The Company provides services for more than 11,500 K-12 schools and serves nearly 4.2 million students and families.

The Company provides services for more than 11,000 K-12 schools and serves over 4 million students and families.

The Company’s K-12 business generated $153.4 million in revenue for the year ended December 31, 2020.

The Company is the market leader in education financial management services, including actively managed tuition payment plans, financial needs assessment (grant and aid), incidental billing, advanced accounting, and payment forms.

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The Company earns tuition payment plan services revenue by collecting a fee from either the institution or the payer to administer the plan.

Additionally, the Company may earn revenue for payment processing fees when

families make tuition payments.

Additionally, the Company may earn revenue for payment processing fees when families make tuition payments.

The Company's grant and aid assessment service helps K-12 schools evaluate and determine the amount of financial aid to disburse to the families it serves.

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FACTS Family App provides families with mobile access to the information they need and Parent Alert allows for instant communication with families when needed.

Prior to the re-branding effort in 2018, FACTS SIS was branded and known as RenWeb School Management Solutions.

The Company offers student information systems to schools in Australia and New Zealand through Nelnet International.

The Company offers the school information system to more than 50 countries globally through Nelnet International.

The combination of the Company’s school administration software and tuition management and grant and aid assessment services has significantly increased the value of the Company’s offerings in this area, allowing the Company to deliver a comprehensive suite of solutions to schools.

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FACTS Education Solutions also offers an innovative technology product that aids in both teacher and student evaluation.

On December 31, 2020, the Company acquired HigherSchool Instructional Services, a services company that provides supplemental instructional services and educational professional development for approximately 50 K-12 schools in New York City.

HigherSchool Instructional Services compliments and will integrate operationally with FACTS Education Solutions.

Higher Education

In the higher education market, the Company (known as Nelnet Campus Commerce) offers solutions including (i) actively managed tuition payment plans and (ii) payments technology and processing.

The newest product to launch in this market is CampusKey, which provides students with a mobile app to replace their plastic student ID card.

The Company provides service for more than 1,300 colleges and universities worldwide and serves 7.6 million students and families.

Higher education institutions contract with the Company to administer actively managed payment plans that allow the student and family to make recurring payments on either a semester or annual basis.

In the higher education market, the Company (known as Nelnet Campus Commerce) offers solutions including (i) tuition payment plans and (ii) payments technology and processing.

The Company provides service for more than 1,200 colleges and universities worldwide and serves over 7 million students and families.

The Company’s higher education business generated $126.0 million in revenue for the year ended December 31, 2020.

Higher education institutions contract with the Company to administer tuition payment plans that allow the student and family to make recurring payments on either a semester or annual basis.

The Company earns tuition payment plan services revenue by collecting a fee from either the student or family to administer the plan.

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The Company earns revenue for e-billing, hosting and maintenance, credit card processing fees, and e-payment transaction fees, which are powered by the Company's secure payment processing systems.

The Company also offers a product, CampusKey, which provides students with a mobile app to replace their plastic student ID card.

The Company's payment technology and processing solutions are sold as a subscription service to colleges and universities.

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Under the brands PaymentSpring and Aware3, the Company has expanded its customer base to include both education and non-education customers.

PaymentSpring offers technology and payment services including electronic transfer and credit card processing, reporting, billing and invoicing, mobile and virtual terminal solutions, and specialized integrations to business

Aware3 is a mobile first technology focused on increasing engagement, online giving, and communication for church and not-for-profit customers.

On December 31, 2020, the Company acquired CD2 LLC (“CD2”).

CD2 has been operating since 2010 and includes two divisions, CD2 Learning, which is the brand for corporate sales, and Catholic Faith Technologies, which is the brand for churches, schools, and ministries.

CD2 provides a platform technology solution that includes five features:

learning management, collaboration/workflow, gamification, customer management/document storage, and employee boarding.

The acquisition of CD2 further expands NBS’s non-education customer base.

For the year ended December 31, 2020, the Company earned $6.2 million in revenue from its non-education services.

The Company is the largest provider of tuition management and financial needs assessment services to the private and faith-based K-12 market in the United States.

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Communications

The Company provides communication services through ALLO, a majority owned subsidiary.

The Company provided communication services through ALLO, a former majority owned subsidiary, until a recapitalization and additional funding for ALLO resulted in a deconsolidation of ALLO from the Company’s consolidated financial statements on December 21, 2020.

See “Recent Developments - ALLO Recapitalization and Additional Funding” above.

The Company continues to hold a significant investment in ALLO.

ALLO derives its revenue primarily from the sale of telecommunication services, including internet, telephone, and television services, to business, governmental, and residential customers in Nebraska and Colorado, and specializes in high-speed internet and broadband services available through its all-fiber network.

ALLO currently serves or has announced plans to serve the Scottsbluff, Gering, Bridgeport, North Platte, Ogallala, Alliance, Lincoln, Hastings, and Imperial communities in Nebraska, and Fort Morgan and Breckenridge, Colorado.

Total households in these communities is approximately 161,000.

As of December 31, 2019, the Company provided services to approximately 48,000 residential households, an increase of over 10,000, or 28 percent, from the prior year.

ALLO currently serves or has announced plans to serve 13 communities in Nebraska and two in Colorado.

ALLO plans to continue to increase market share and revenue in its existing markets and is currently evaluating opportunities to expand to additional communities.

Internet and television services

Internet and television services include data and video products and services to residential, governmental, and business subscribers.

ALLO data services provide high-speed internet access over ALLO's all-fiber network at various symmetrical speeds up to 1 gigabit per second for residential customers, depending on the nature of the network facilities that are available, the level of service selected, and the geographic market availability.

ALLO also offers a variety of data connectivity services for businesses and governmental entities, including Ethernet services capable of multiple connections over ALLO's fiber-based networks.

ALLO's Internet Protocol Television Video (“IPTV”) services range from limited basic service to advanced television, which includes several plans, each with hundreds of local, national, and music channels, including premium and pay-per-view channels, as well as video on demand service.

Subscribers may also subscribe to ALLO's advanced video services, which consist of high definition television, digital video recorders (“DVR”), and/or a whole home DVR.

ALLO's whole home DVR gives customers the ability to watch recorded shows on any television in the house, record multiple shows at one time, and utilize an intuitive on-screen guide and user interface.

ALLO expects that internet services will continue to increase as a more significant component of its overall services, and offset the anticipated decline in traditional residential telephone and television services.

Telephone services

Local calling services include a full suite of telephone services, including basic services, primary rate interface (“PRI”), and session initiation protocol (“SIP”).

ALLO's service plans include options for voicemail and other enhanced custom calling features including hunting, caller ID, call forwarding, and call waiting, among others.

Services are charged at a fixed monthly rate or can be bundled with selected services at a discounted rate.

ALLO provides a hosted private branch exchange (“PBX”) package, which utilizes a soft switch and allows the customer the flexibility of utilizing new telephone technology and features without investing in a new telephone system.

The package bundles local service, calling features, and internet protocol (“IP”) business telephones.

Long-distance services include traditional domestic and international long distance, which enables customers to make calls that terminate outside their local calling area.

These services also include toll-free calls and conference calling.

ALLO offers a variety of long distance plans, including unlimited flat-rate calling plans, and offers a combination of subscription and usage fees.

Sales and marketing

The key components of ALLO's overall marketing strategy include:

• Promoting the advantages of an all-fiber network connected directly to homes and businesses capable of delivering synchronous internet speeds of over one gigabit per second

• Building complete fiber communities by passing substantially all homes and businesses within its network

• Organizing sales and marketing activities around consumer, enterprise, and carrier customers

• Positioning ALLO as a single point of contact for customers’ communications needs

• Providing customers with a broad array of internet, television, and telephone services and bundling these services whenever possible

• Providing excellent local customer service, including 24/7/365 customer support to coordinate installation of new services, repair, and maintenance functions

• Developing and delivering new services to meet evolving customer needs and market demands

• Utilizing proven modern technology to deliver services

ALLO currently offers services through social media platforms, direct marketing, call centers, its website, communication centers, and commissioned sales representatives.

ALLO markets its services both individually and as bundled services, including its triple-play offering of internet, television, and telephone services.

By bundling service offerings, ALLO is able to offer and sell a more complete and competitive package of services, which simultaneously increases its margin per customer and adds value for the consumer or business.

ALLO also believes that bundling leads to increased customer loyalty and retention.

Network architecture and technology

ALLO has made significant investments in its technologically advanced telecommunications networks.

As a result, ALLO is able to deliver high-quality, reliable internet, telephone, and television services through fiber optics.

ALLO's wide-ranging network and extensive use of fiber provide an easy reach into existing and new areas.

By bringing the fiber network to the customer premises, ALLO can increase its service offerings, quality, and bandwidth services.

ALLO's existing fiber network enables it to efficiently respond and adapt to changes in technology and is capable of supporting the rising customer demand for bandwidth in order to support the growing number of internet devices in the home.

ALLO's all-fiber network enhances its operating efficiencies by facilitating new network and technology choices that provide for lower costs to operate.

ALLO's networks are supported by an advanced digital telephone switch and IPTV service platform.

The digital switch provides all local telephone customers with access to a full suite of telecommunication products, custom calling features, and value-added services.

ALLO's fiber network utilizes fiber-to-the-premise (“FTTP”) networks to offer bundled residential and commercial services.

ALLO leverages its high definition IPTV headend equipment to distribute content across its network, allowing it to provide a sharp video picture and to better manage costs of future channel additions and upgrades.

ALLO's network provides substantially all of its marketable homes and businesses with bandwidth of 1 gigabit per second or more.

Growth strategy

As discussed above, ALLO plans to increase its customer base with its superior all-fiber network by increasing its share in existing markets and potentially entering additional markets currently served by carriers using traditional copper and coaxial cable in their telecommunications networks.

In addition, ALLO is focused on increasing revenues per customer by capitalizing on increased demand for bandwidth by commercial and residential customers and introducing new value add products.

Telecommunications businesses are highly competitive and continue to face increased competition as a result of technology changes and industry legislative and regulatory developments.

ALLO faces actual or potential competition from many existing and emerging companies, including incumbent and competitive local telephone companies, long distance carriers and resellers, wireless companies, internet service providers (“ISPs”), satellite companies, cable television companies, and in some cases by new forms of providers who are able to offer competitive services through software applications, requiring a comparatively small initial investment.

Due to consolidation and strategic alliances within the industry, ALLO cannot predict the number of competitors it will face at any given time.

The wireless business has expanded significantly, causing many residential subscribers of traditional telephone services to discontinue those services and rely exclusively on wireless service.

Consumers are finding individual television shows of interest to them through the internet and are watching content that is downloaded to

their computers.

Some providers, including television and cable television content owners, have initiated what are referred to as “over-the-top” services that deliver video content to televisions and computers over the internet.

The incumbent telephone carriers in the markets ALLO serves enjoy certain business advantages, including size, financial resources, favorable regulatory position, a more diverse product mix, brand recognition, and connection to virtually all of ALLO's customers and potential customers.

The largest cable operators also enjoy certain business advantages, including size, financial resources, ownership of or superior access to desirable programming and other content, a more diverse product mix, brand recognition, and first-in-the-field advantages with a customer base that generates positive cash flow for their operations.

ALLO's competitors continue to add features and adopt aggressive pricing and packaging for services comparable to the services ALLO offers.

Their success in selling some services competitive with ALLO's can lead to revenue erosion in other related areas.

ALLO faces intense competition in its markets for long distance, internet access, and other ancillary services that are important to ALLO's business and to its growth strategy.

Asset Generation and Management

AGM includes the acquisition, management, and ownership of the Company's loan assets.

AGM includes the acquisition, management, and ownership of the Company's loan assets (excluding loan assets held by Nelnet Bank).

Loans consist of federally insured student loans (originated under the FFEL Program), private education loans, and consumer loans.

Substantially all of the Company's loan portfolio (97.7 percent as of December 31, 2019) is federally insured.

As of December 31, 2019, the Company's loan portfolio was $20.7 billion.

Substantially all of AGM’s loan portfolio (97.8 percent as of December 31, 2020) is federally insured.

As of December 31, 2020, AGM's loan portfolio was $19.6 billion.

The Company generates a substantial portion of its earnings from the spread, referred to as the Company's loan spread, between the yield it receives on its loan portfolio and the associated costs to finance such portfolio.

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In addition to the 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.

The Company's portfolio of federally insured student loans is subject to minimal credit risk, as these loans are guaranteed by the Department at levels ranging from 97 percent to 100 percent.

AGM's portfolio of federally insured student loans is subject to minimal credit risk, as these loans are guaranteed by the Department at levels ranging from 97 percent to 100 percent.

The Higher Education Act regulates every aspect of the federally insured student loan program, including certain communications with borrowers, loan originations, and default aversion.

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In the case of death, disability, or bankruptcy of the borrower, the guarantee covers 100 percent of the loan's principal and accrued interest.

FFELP loans are guaranteed by state agencies or nonprofit companies designated as guarantors, with the Department providing reinsurance to the guarantor.

FFELP loans are

guaranteed by state agencies or nonprofit companies designated as guarantors, with the Department providing reinsurance to the guarantor.

Guarantors are responsible for performing certain functions necessary to ensure the program's soundness and accountability.

Generally, the guarantor is responsible for ensuring that loans are serviced in compliance with the requirements of the Higher Education Act.

When a borrower defaults on a FFELP loan, the Company submits a claim to the guarantor, who provides reimbursements of principal and accrued interest, subject to the applicable risk share percentage.

The Company's portfolios of private education loans and consumer loans are subject to credit risk and defaults may increase above current levels based on numerous factors, including a decline in the economy or an increase in unemployment.

When a borrower defaults on a FFELP loan, AGM submits a claim to the guarantor, who provides reimbursements of principal and accrued interest, subject to the applicable risk share percentage.

AGM’s portfolios of private education and consumer loans are subject to credit risk and defaults may increase above current levels based on numerous factors, including a decline in the economy or an increase in unemployment.

Origination and acquisition

The Reconciliation Act of 2010 discontinued originations of new FFELP loans, effective July 1, 2010.

However, the Company believes there will be ongoing opportunities to continue to purchase FFELP loan portfolios from current FFELP participants looking to exit or adjust their FFELP businesses.

For example, from July 1, 2010 through December 31, 2019, the Company purchased a total of $26.6 billion of FFELP student loans from various third parties, including a total of $1.5 billion during 2019.

However, the Company believes there may be ongoing opportunities to continue to purchase FFELP loan portfolios from current FFELP participants looking to exit or adjust their FFELP businesses.

For example, the Company purchased a total of $1.3 billion of FFELP student loans from various third parties during 2020.

However, since all FFELP loans will eventually pay off, a key objective of the Company over the last several years is to reposition itself for the post-FFELP environment.

As such, the Company is actively expanding its private education and consumer loan portfolios.

During 2019, the Company relaunched U-fi, a marketing partnership with Union Bank and Trust Company ("Union Bank"), a company under common control with the Company.

U-fi is a refinance and private student loan product that helps people pay for their education and for those who have finished their education, to refinance and consolidate their debt.

During 2019, U-fi generated $108.7 million in new refinance education loans for Union Bank.

During 2019, the Company purchased $71.5 million of private education loans (including $67.7 million of U-fi loans from Union Bank) and $405.7 million of consumer loans.

The Company's competition for the purchase of FFELP, private education, and consumer loan portfolios includes banks, hedge funds, and other finance companies.

During 2020, the Company purchased $152.0 million of private education loans and $137.0 million of consumer loans.

In December of 2020, Wells Fargo announced the sale of its approximately $10 billion portfolio of private education student loans representing approximately 475,000 borrowers.

In conjunction with the sale, the Company was selected as servicer of the portfolio and will begin servicing the portfolio following a series of loan transfers during the first half of 2021.

In addition, the Company has entered into agreements to participate in a joint venture to acquire the portfolio.

The Company expects to own approximately 8 percent of the interest in the loans and, dependent upon financing, currently expects to invest approximately $100 million as part of the acquisition.

In addition, the Company will serve as the sponsor and administrator for loan securitizations on behalf of the purchaser group as the loans are securitized, and provide the required level of risk retention as the loans are permanently financed.

This transaction is expected to close during the first half of 2021, with the securitizations occurring subsequent to closing.

AGM's competition for the purchase of FFELP, private education, and consumer loan portfolios includes banks, hedge funds, and other finance companies.

Interest rate risk management

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The current and future interest rate environment can and will affect the Company's interest income and net income.

The effects on the Company's results of operations as a result of the changing interest rate environments are further outlined in the MD&A - "Asset Generation and Management Operating Segment - Results of Operations - Loan Spread Analysis" and Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk - Interest Rate Risk.”

The effects on the Company's results of operations as a result of the changing interest rate environments are further outlined in the MD&A - "Asset Generation and Management Operating Segment - Results of Operations - Loan Spread Analysis" and in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk - Interest Rate Risk.”

As discussed under “Recent Developments - Nelnet Bank” above, Nelnet Bank launched operations on November 2, 2020.

Nelnet Bank was funded by the Company with an initial capital contribution of $100 million, consisting of $55.9 million of cash and $44.1 million of student loan asset-backed securities.

In addition, the Company made a pledged deposit of $40.0 million with Nelnet Bank, as required under an agreement with the FDIC.

Nelnet Bank operates as an internet Utah chartered industrial bank franchise focused on the private education loan marketplace, with a home office in Salt Lake City, Utah.

Currently, Nelnet Bank originates school refinance or consolidation loans, which are funded by deposits from custodians and commercial and institutional customers.

Throughout Nelnet Bank’s three-year de novo period, Nelnet Bank plans to continue to launch products focused on helping students achieve their dreams, with the origination of in-school student loans and expansion of deposit products to consumers over the next year.

As of December 31, 2020, Nelnet Bank had $17.5 million in private education loans.

Corporate and Other Activities

Whitetail Rock Capital Management, LLC ("WRCM")

Other business activities and operating segments that are not reportable are combined and included in Corporate and Other Activities.

Corporate and Other Activities include the following items:

• The operating results of Whitetail Rock Capital Management, LLC (“WRCM”), the Company's SEC-registered investment advisor subsidiary

• Income earned on certain investment activities, including renewable energy (solar) and real estate

• Interest expense incurred on unsecured and certain other corporate related debt transactions

• Other product and service offerings that are not considered reportable operating segments

Corporate and Other Activities also include certain corporate activities and overhead functions related to executive management, internal audit, human resources, accounting, legal, enterprise risk management, information technology, occupancy, and marketing.

These costs are allocated to each operating segment based on estimated use of such activities and services.

Whitetail Rock Capital Management, LLC

As of December 31, 2020, WRCM, the Company's SEC-registered investment advisor subsidiary, had $1.87 billion in assets under management for third-party customers, consisting of student loan asset-backed securities and Nelnet stock.

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During 2020, WRCM earned $3.6 million in management fees and generated $7.2 million in performance fees.

Assuming assets under management remain at their current levels, management fees should be relatively stable in future years.

The Company currently anticipates that opportunities for WRCM to earn meaningful performance fees in future periods are more limited.

Real estate and other investments

The Company makes investments to further diversify itself both within and outside of its historical core education-related businesses, including investments in real estate and early-stage and emerging growth companies.

The Company currently anticipates that assets under management will decrease from current levels and that opportunities to earn meaningful performance fees in future periods will be more limited.

Solar, real estate, and other investments

The Company makes investments to further diversify itself both within and outside of its historical core education-related businesses, including investments in renewable energy resources (solar projects), real estate, and early-stage and emerging growth companies.

The Company’s investments in certain tax-advantaged projects promoting renewable energy resources (solar projects) are designed to generate a return primarily through the realization of federal income tax credits, operating cash flows, and other tax benefits, over specified time periods.

The solar projects are currently forecasted to generate more than 214 megawatts of power each year.

Recent real estate investments have been focused on the development of commercial properties in the Midwest, and particularly in Lincoln, Nebraska, where the Company is headquartered.

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In addition, the Company has a total equity investment in Hudl of $128.6 million.

In addition, the Company invests in certain tax-advantaged projects promoting renewable energy resources (solar projects).

The Company’s investments in these projects are designed to generate a return primarily through the realization of federal income tax credits, operating cash flows, and other tax benefits, over specified time periods.

Regulation and Supervision

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• The Servicemembers Civil Relief Act (“SCRA”), which applies to all debts incurred prior to commencement of active military service and limits the amount of interest, including certain fees or charges that are related to the obligation or liability

• The Military Lending Act (“MLA”), which protects active duty members of the military, their spouses, and their dependents from certain lending practices

• The Electronic Funds Transfer Act (“EFTA”) and Regulation E, which protect individual consumers engaged in electronic fund transfers (“EFTs”)

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• The California Consumer Privacy Act (“CCPA”), which enhances the privacy rights and consumer protection for residents of California

• The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which provides temporary relief measures currently in place through September 30, 2021 for federal student loans held by the Department, during the COVID-19 pandemic

• Laws prohibiting unfair, deceptive, or abusive acts or practices (“UDAAP”)

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Most states also have statutes that prohibit unfair and deceptive practices.

To the extent states enact requirements that differ from federal standards or state officials and courts adopt interpretations of federal consumer laws that differ from those adopted by the CFPB under the Dodd-Frank Act, the Company's ability to offer the same products and services to consumers nationwide may be limited.

To the extent states enact requirements that

differ from federal standards or state officials and courts adopt interpretations of federal consumer laws that differ from those adopted by the CFPB under the Dodd-Frank Act, the Company's ability to offer the same products and services to consumers nationwide may be limited.

As a third-party service provider to financial institutions, the Company is subject to periodic examination by the Federal Financial Institutions Examination Council (“FFIEC”).

FFIEC is a formal interagency body of the U.S.

government empowered

to prescribe uniform principles, standards, and report forms for the federal examination of financial institutions by the Federal Reserve Banks, the Federal Deposit Insurance Corporation (“FDIC”), and the CFPB, and to make recommendations to promote uniformity in the supervision of financial institutions.

In 2019, several states enacted laws regulating and monitoring the activity of student loan servicers.

government empowered to prescribe uniform principles, standards, and report forms for the federal examination of financial institutions by the Federal Reserve Banks, the FDIC, and the CFPB, and to make recommendations to promote uniformity in the supervision of financial institutions.

Several states have enacted laws regulating and monitoring the activity of student loan servicers.

Some of these laws stipulate additional licensing fees which increase the Company’s cost of doing business.

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The Company's contracts with higher education institution clients also require the Company to comply with regulations promulgated by the Department regarding the handling of student financial aid funds received by institutions on behalf of their students under Title IV of the Higher Education Act.

These regulations are designed to ensure students have convenient access to their Title IV funds, do not incur unreasonable fees, and are not led to believe they must open a financial account to receive such funds.

Communications

The telecommunications business is subject to extensive federal, state, and local regulation.

Under the Telecommunications Act of 1996 (“Telecommunications Act”), federal and state regulators share responsibility for implementing and enforcing statutes and regulations designed to encourage competition and to preserve and advance widely available, quality telephone service at affordable prices.

At the federal level, the Federal Communications Commission (“FCC”) generally exercises jurisdiction over facilities and services of local exchange carriers to the extent they are used to provide, originate, or terminate interstate or international communications.

The FCC has the authority to condition, modify, cancel, terminate, or revoke operating authority for failure to comply with applicable federal laws or FCC rules, regulations, and policies.

State regulatory commissions generally exercise jurisdiction over carriers’ facilities and services to the extent they are used to provide, originate, or terminate intrastate communications.

These regulatory commissions may dictate service standards and may require the payment of fees to remain in good standing with the applicable regulatory commission.

In addition, municipalities and other local government agencies regulate the public rights-of-way necessary to install and operate networks.

The Communications Act of 1934 (“Communications Act”) requires, among other things, that telecommunications carriers offer services at just and reasonable rates and on non-discriminatory terms and conditions.

The 1996 amendments to the Communications Act, contained in the Telecommunications Act, dramatically changed, and likely will continue to change, the landscape of the telecommunications industry.

The central aim of the Telecommunications Act is to open local telecommunications markets to competition while enhancing universal service.

The Telecommunications Act imposes a number of interconnection and other requirements on all local communications providers.

All telecommunications carriers have a duty to interconnect directly or indirectly with the facilities and equipment of other telecommunications carriers.

Municipalities where ALLO operates may require ALLO to obtain permits for street opening and construction.

These permits or other licenses or agreements typically require the payment of fees.

In addition, ALLO's aerial and underground construction operations are subject to extensive laws and regulations relating to the maintenance of safe conditions in the workplace.

Internet services

The provision of internet access services is not significantly regulated by either the FCC or the state commissions.

However, the FCC has in recent years taken some steps toward the imposition of some controls on the provision of internet access, and has asserted that it has jurisdictional authority in some areas related to the promotion of an open internet.

The extent of the FCC’s jurisdiction with respect to the internet has not been resolved, and this lack of resolution could lead to increased costs for ALLO in connection with its provision of internet services and affect ALLO's ability to effectively compete.

Internet services have become the subject of increasing regulatory interest.

Congress and federal regulators have adopted a wide range of measures directly or potentially affecting internet use, including, for example, consumer privacy, copyright protections, defamation liability, taxation, obscenity, and unsolicited commercial email.

ALLO's internet services are subject to the Communications Assistance for Law Enforcement Act (“CALEA”) requirements regarding law enforcement surveillance.

Content owners are now seeking additional legal mechanisms to combat copyright infringement over the internet.

Pending and future legislation in this area could adversely affect ALLO's operations as an internet service provider ("ISP") and relationship with internet customers.

Additionally, the FCC and Congress are considering subjecting internet access services to the Universal Service funding requirements.

These funding requirements could impose significant new costs on ALLO's high-speed internet service.

State and local governmental organizations have also adopted internet-related regulations.

These various governmental jurisdictions are also considering additional regulations in these and other areas, such as privacy, pricing, service and product quality, and taxation.

The adoption of new internet regulations or the adaptation of existing laws to the internet could adversely affect ALLO's business.

In 2015, an FCC Net Neutrality Order went into effect.

On December 14, 2017, the FCC voted to repeal the Open Internet Order and effectively the net neutrality rules.

The previous rules prohibited ISPs from engaging in blocking, throttling, and paid prioritization, and transparency rules compelling the disclosure of network management policies were enhanced.

The FCC was also granted the authority under the rules to hear complaints and take enforcement action if it determined that the interconnection activities of ISPs were not just and reasonable, or if ISPs failed to meet general obligations not to harm consumers or what are referred to as edge providers.

The final version of the net neutrality repeal order restores the Federal Trade Commission's jurisdiction over broadband internet access services.

The uncertainty around how the Federal Trade Commission will respond and challenges to the FCC repeal could limit ALLO’s ability to efficiently manage internet service and respond to operational and competitive challenges.

Television services

Federal regulations currently restrict the prices that cable systems charge for the minimum level of television programming service, referred to as “basic service,” and associated equipment.

All other television service offerings are now universally exempt from rate regulation.

Although basic service rate regulation operates pursuant to a federal formula, local governments, commonly referred to as local franchising authorities, are primarily responsible for administering this regulation.

The majority of ALLO's local franchising authorities have never been certified to regulate basic service cable rates (and order rate reductions and refunds), but they generally retain the right to do so (subject to potential regulatory limitations under state franchising laws), except in those specific communities facing “effective competition,” as defined under federal law.

There have been frequent calls to impose expanded rate regulation on the cable industry.

As a result of rapidly increasing cable programming costs, it is possible that Congress may adopt new constraints on the retail pricing or packaging of cable programming.

Federal rate regulations currently include certain marketing restrictions that could affect ALLO's pricing and packaging of service tiers and equipment.

As ALLO attempts to respond to a changing marketplace with competitive pricing practices, it may face regulations that impede its ability to compete.

IPTV operations require state or local franchise or other authorization in order to provide cable service to customers.

ALLO is subject to regulation under a Communications Act framework that addresses such issues as the use of local streets and rights of way;

the carriage of public, educational, and governmental channels;

the provision of channel space for leased commercial access;

the amount and payment of franchise fees;

consumer protection;

and similar issues.

In addition, federal laws and FCC regulations place limits on the common ownership of cable systems and competing multichannel television distribution systems, and on the common ownership of cable systems and local telephone systems in the same geographic area.

The FCC has recently expanded its oversight and regulation of cable television-related matters.

Federal law and regulations also affect numerous issues related to television programming and other content.

Under federal law, certain local television broadcast stations (both commercial and non-commercial) can elect, every three years, to take advantage of rules that require a cable operator to distribute the station’s content to the cable system’s customers without charge, or to forego this “must-carry” obligation and to negotiate for carriage on an arm’s length contractual basis, which typically involves the payment of a fee by the cable operator, and sometimes involves other considerations as well.

The current three-year cycle began on January 1, 2018.

ALLO has negotiated agreements with the local television broadcast stations that would have been eligible for “must carry” treatment in each of its current markets.

The contractual relationships between cable operators and most providers of content who are not television broadcast stations generally are not subject to FCC oversight or other regulation.

The Communications Act requires most utilities owning utility poles to provide access to poles and conduits, and subjects the rates charged for this access to either federal or state regulation.

The FCC's pole attachment rules promote broadband deployment through the ability to access investor-owned utility poles on reasonable rates, terms, and conditions, subject to penalties in certain cases involving unauthorized attachments.

ALLO's IPTV systems are subject to a federal copyright compulsory license covering carriage of television and radio broadcast signals.

The possible modification or elimination of this copyright compulsory license is the subject of continuing legislative proposals and administrative review and could adversely affect ALLO's ability to obtain desired broadcast programming.

IPTV operators also must obtain music rights for locally originated programming and advertising from the major music performing rights organizations.

These licensing fees have been the source of litigation in the past, and license fee disputes may arise in the future.

Telephone services

ALLO offers voice communications services over a broadband network.

The FCC has ruled that competitive telephone companies are entitled to interconnect with incumbent providers of traditional telecommunications services, which ensures that services can compete in the market.

The FCC has also declared that certain services are not subject to traditional state public utility regulation.

The full extent of the FCC preemption of state and local regulation of services is not yet clear.

These regulations are designed to ensure students have convenient access

to their Title IV funds, do not incur unreasonable fees, and are not led to believe they must open a financial account to receive such funds.

Asset Generation and Management

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Even where a securitization trust qualifies for an exemption, many of the Company's derivative counterparties are subject to capital, margin, and business conduct requirements and therefore the Company may be impacted.

Where securitization trusts do not qualify for an exemption, the Company may be unable to enter into new swaps to hedge interest rate or currency risk or the costs

associated with such swaps may increase.

Where securitization trusts do not qualify for an exemption, the Company may be unable to enter into new swaps to hedge interest rate risk or the costs associated with such swaps may increase.

With respect to existing securitization trusts, an inability to amend, novate, or otherwise materially modify existing swap contracts could result in a downgrade of outstanding asset-backed securities.

As a result, the Company's business, ability to access the capital markets for financing, and costs may be impacted by these regulations.

Nelnet Bank, chartered in November 2020, is a Utah Industrial Bank that is regulated by the FDIC and the UDFI.

Nelnet Bank, which originates private education loans, is subject to federal and state consumer protection, privacy, and related laws and regulations.

In addition to having to comply with the majority of laws and regulations addressed in the Loan Servicing and Systems section, there are additional laws and regulations that Nelnet Bank must comply with.

Some of the more significant laws and regulations applicable to Nelnet Bank include:

• Regulation W and Federal Reserve Act Sections 23A and 23B - Designed to prevent losses to a bank resulting from affiliate engagement and transfer of a bank’s federal deposit insurance safety net to an affiliate

• Community Reinvestment Act - Encourages depository institutions to help meet the credit needs of the communities in which they operate

• Federal Trade Commission (“FTC”) Act - Prevents unfair or deceptive acts or practices (UDAP) and ensures consumer privacy (including the Telephone Sales Rule, FTC Guides Concerning the Use of Endorsements and Testimonials in Advertising, and FTC Policy Statement Regarding Advertising Substantiation)

• Regulation O - Places limits and conditions on credit extensions that a bank can offer to its executive officers, principal shareholders, directors, and related interests

• Right to Financial Privacy Act - Establishes specific procedures that government authorities must follow when requesting a customer’s financial records from a bank or other financial institution

Regulation D, the Truth in Savings Act (reserve requirements), and Regulation DD (disclosure of deposit terms to customers) will be applicable to Nelnet Bank once consumer deposit products are launched, which is tentatively scheduled for the fourth quarter of 2021.

Governmental bodies in the United States and abroad have adopted, or are considering the adoption of, laws and regulations restricting the transfer and requiring the safeguarding of nonpublic personal information.

For example, in the United States, the Company and its financial institution clients are, respectively, subject to the Federal Trade Commission’s and the federal banking regulators’ privacy and information safeguarding requirements under the GLBA.

For example, in the United States, the Company and its financial institution clients are, respectively, subject to the FTC’s and the federal banking regulators’ privacy and information safeguarding requirements under the GLBA.

The GLBA requires financial institutions to periodically disclose their privacy policies and practices relating to sharing such information and enables customers to opt out of the Company’s ability to share information with unaffiliated third parties under certain circumstances.

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Data privacy and data protection are areas of increasing state legislative focus.

For example, the California Consumer Privacy Act (the “CCPA”), which became effective on January 1, 2020, applies to for-profit businesses that conduct business in California and meet certain revenue or data collection thresholds.

The CCPA gives consumers the right to request disclosure of information collected about them, and whether that information has been sold or shared with others, the right to request deletion of personal information (subject to certain exceptions), the right to opt out of the sale of the consumer’s personal information, and the right not to be discriminated against for exercising these rights.

For example, the CCPA, which became effective on January 1, 2020, applies to for-profit businesses that conduct business in California and meet certain revenue or data collection thresholds.

The CCPA gives consumers the right to request disclosure of information collected about them, and whether that information has been sold or shared with others, the right to

request deletion of personal information (subject to certain exceptions), the right to opt out of the sale of the consumer’s personal information, and the right not to be discriminated against for exercising these rights.

The CCPA contains several exemptions, including an exemption applicable to information that is collected, processed, sold, or disclosed pursuant to the GLBA.

The California Attorney General has not yet adopted regulations implementing the CCPA, and the California State Legislature has amended the CCPA since its passage.

In addition, similar laws may be adopted by other states where the Company does business.

In addition, the California Privacy Rights and Enforcement Act of 2020, which amends and expands upon the CCPA, will become effective on January 1, 2023.

Further, similar laws may be adopted by other states where the Company does business.

The federal government may also pass data privacy or data protection legislation.

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Consultants, suppliers, and other business partners are also required to sign nondisclosure agreements to protect the Company's proprietary rights.

As of December 31, 2019, the Company had approximately 6,600 employees.

None of the Company's employees are covered by collective bargaining agreements.

The Company is not involved in any material disputes with any of its employees, and the Company believes that relations with its employees are good.

Human Capital Resources

The Company’s employees (referred to by the Company as associates) are critical to its success, and the executive team puts significant focus on human capital resources.

In addition, the executive team regularly updates the Company’s board of directors and its committees on the operation and status of human capital trends and activities.

Key areas of focus for the Company include:

Headcount data

Total associate headcount by reportable segment as of December 31, 2020 follows:

Number Percent of total

NDS 4,314 69.6 %

NBS 1,195 19.3

Nelnet Bank 16 0.3

Corporate and other 663 10.6

6,199 100.0 %

None of the Company’s associates are covered by collective bargaining agreements.

The Company is not involved in any material disputes with any of its associates, and the Company believes that relations with its associates are good.

Employee recruitment, engagement, and retention

The Company works diligently to attract the best talent from a diverse range of sources in order to meet the current and future demands of its businesses, and has established relationships with trade schools, universities, professional associations, and industry groups to proactively attract talent.

In 2020, the Company hired approximately 1,900 new associates.

In 2020, the Company conducted an associate engagement survey using a leading outside firm that specializes in employee engagement.

Ninety-four percent of the Company’s associates participated in the survey, 14 points above the survey provider’s industry benchmark.

There were many questions, but the overarching goal of the survey was to determine overall associate engagement through understanding how associates feel about working for the Company and if associates would recommend the Company as a great place to work.

The results of that survey were an overall engagement score of 79 out of 100, which was 5 points above the survey provider’s industry benchmark.

The Company’s management team has collected all the feedback, and is focusing on making associate-suggested changes to become an even better place to work.

The Company believes its positive associate engagement has resulted in higher levels of associate retention.

For 2020, associate voluntary turnover was approximately 20 percent, an 8 percentage point decrease from 2019.

The average associate has over 6 years of service.

Diversity and inclusion

The Company embraces diversity among its associates, including their unique backgrounds, experiences, and talents, and the Company strives to cultivate a culture and vision that supports and enhances its ability to recruit, develop, and retain diverse talent at every level.

The Company demonstrates its commitment to diversity, equity, and inclusion at the highest levels of the Company.

An equal number of the Company’s independent directors are women and men.

As of December 31, 2020, the Company’s workforce was approximately 57 percent women.

People of color, as defined by the U.S.

Equal Employment Opportunity Commission's EEO-1 race and ethnicity categories for the U.S., represented approximately 20 percent of the Company’s workforce (based on associate self-identification).

The Company is making progress in the number of women and people of color working in leadership positions (defined by the Company as an associate with one or more direct report) across the organization.

As of December 31, 2020, women and people of color held 50 percent and 8 percent of leadership positions in the Company, respectively.

The Company has acknowledged that people of color are underrepresented in leadership positions at Nelnet, and is committed to have its workforce reflect the diversity in its communities.

As part of its diversity and inclusion focus in 2020, the Company made an unwavering commitment to Black lives matter and to stand in support of all people of color and be a part of the long-term solution to systemic racism and inequality in the world.

Accordingly, the Company deepened its support of organizations advancing racial and socioeconomic equality and social justice, and in 2020 the Company created the Service, Not Silence fundraising and volunteer campaign.

Through this fundraiser, associates could donate to local and national organizations advancing these issues, with donations matched by the Nelnet Foundation 3:1.

The campaign raised over $1 million.

The Company also revised its scholarship program for the children of Nelnet associates to better recognize minority and low-income students.

To further Nelnet’s objective of creating an inspiring work environment and furthering associate development, the Company developed and launched the Nelnet Diversity, Equity, and Inclusion Council (the “Council”), sponsored by the Chief Executive Officer and the Executive Director of People Services.

This Council of 25 members represents locations, functions, and business segments across the entire Company.

Its top priorities include:

• Implementing a comprehensive diversity and inclusion learning and development plan to build awareness and drive inclusive behaviors;

• Developing the Company’s diversity pipeline through recruiting, hiring, developing, mentoring, and retaining diverse top talent;

• Promoting a work environment that enables associates to feel safe to express their ideas and perspectives and feel they belong.

During 2020, the Council partnered with Nelnet University to launch a robust mentoring program.

The program is available to all associates, prioritizing mentorships for associates from underrepresented racial and ethnic groups.

Associates participating in this program are partnered with tenured Nelnet leaders for guidance, support, and coaching.

The Council has also provided training sessions for all associates on cultural competence and unconscious bias.

In addition, the Company has changed new

hire recruiting methods and strategies to increase pools of minority, women, veteran, and disabled candidates, and has created other programs to increase diversity throughout the Company focused on race and gender.

Talent, development, and training

The Company’s talent strategy is focused on attracting the best talent from a diverse range of sources, recognizing and rewarding their performance, and continually developing, engaging, and retaining them.

The Company is committed to the continued development of its people.

Strategic talent reviews and succession planning occur on a planned cadence annually across all business areas.

The executive team convenes meetings with senior leadership and the board of directors to review top enterprise talent.

The Company continues to provide opportunities for associates to grow their careers internally, with over half of open management positions filled internally during 2020.

The Company provides a variety of professional, technical, and leadership training courses to help its associates grow in their current roles and build new skills.

The Company emphasizes individual development planning as part of its annual goal setting process, and offers mentoring programs, along with change management and project management upskilling opportunities.

The Company has leadership development resources for all leaders across the organization and continues to build tools for leaders to develop their teams on the job and in roles to create new opportunities to learn and grow.

Training is provided in a number of formats to accommodate the learner’s style, location, and technological knowledge and access, including instructor-led courses and hundreds of online courses in the Company’s learning management system.

The Company also offers tuition assistance to associates for degree programs, non-degree seeking individual classes, or certificate programs that are related to areas of business at Nelnet.

During 2020, the Company paid over $400,000 in tuition assistance for its associates.

Competitive pay, benefits, wellness, and safety

The general compensation philosophy of the Company, as an organization that values the long-term success of its shareholders, customers, and associates, is that the Company will pay fair, competitive, and equitable compensation that is designed to encourage focus on the long-term performance objectives of the Company and is differentiated based on both the individual’s performance and the performance of their respective business segment.

In carrying out this philosophy, the Company structures its overall compensation framework with the general objectives of encouraging ownership, savings, wellness, productivity, and innovation.

In addition, total compensation is intended to be market competitive compared to select industry surveys, internally consistent, and aligned with the philosophy of a performance-based organization.

The Company provides a comprehensive benefits package, opportunities for retirement savings, and a robust wellness program.

The holistic wellness program focuses on four pillars:

personal, professional, physical, and financial well-being.

In response to the COVID-19 pandemic, the Company has implemented and continues to implement safety measures in all its facilities.

The Company has implemented adjustments to its operations designed to keep associates safe and comply with federal and local guidelines, including those regarding social distancing.

As of March 2020, the majority of associates were working and continue to work from home.

Culture, values, and ethics

The Company believes acting ethically and responsibly is the right thing to do, and embraces core values of open, honest communication in work environments.

The Company also believes that it must do its part to improve the world for current and future generations, and as part of this philosophy the Company contributes time, talent, and resources to strengthen the communities where the Company does business.

The Company’s associates participate in many initiatives focused on supporting their communities both financially and with their time.

Ethics are deeply embedded in the Company’s values and business processes.

The Company has a Code of Ethics and Conduct that all associates are required to read and acknowledge.

The Company regularly re-enforces its commitment to ethics and integrity in associate communications, in its everyday actions, and in processes and controls.

As a part of the Company’s on-going efforts to ensure its associates conduct business with the highest levels of ethics and integrity, the Company has compliance training programs.

The Company also maintains an Ask Ethics email through which associates can raise concerns they may have about business behavior they do not feel comfortable discussing personally with managers or human resources personnel.

In addition, the Company maintains a separate anonymous portal for any associate concerns about the Company's financial reporting, internal controls, and related matters.

Available Information

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What changed 10-K

Item 1. Business