Michael Kaye: Hi, good morning. I think I heard Steve mention lifetime loss estimates now up 1.9%. I thought I heard Jon previously say 1.75%. So that’s an increase in that estimate. Correct? And also, I wanted to ask how can you have confidence of estimating these lifetime losses when you’re having trouble forecasting even current quarter credit metrics, which happened in Q4?
Steve McGarry: Thank you for that question, Michael. So look, I went back and I took a look at what Jon said at the Barclays conference and I would call his comment 10.5 divided by six is really being illustrative to try and put life of loan default rater into perspective. What I’ve done with the 1.9% is, I have taken a look at basically the disclosures that we’ve included since CECL was implemented where we basically provide information on what origination cohorts our defaults come from quarter in and quarter out. And basically what I’ve done is, applied charge off rates informed by the charge off rates that we disclosed occur in the principal and interest repayment cohorts and I essentially normalized the current charge offs that we are seeing excluding things like our best estimates of the defaults from the continuous enrollment program that was the gap year population that we talked about and also normalizing for the issues that we’ve seen in our collection centers, as well as the issues that we have seen with the forbearance changes trying to estimate what was acceleration and what was a continuation of an increase in life of loan default rates.
And I would just add Michael that, look, we’re confronted with administrative changes and operational issues that are quite candidly difficult to forecast. The model doesn’t do that and we need to rely on management judgment to calculate what we think are the appropriate and meaningful overlays. Jon, anything you’d like to add to that.
Jonathan Witter: Yes, Steve, I think that was all right. And Michael, first of all, let me say, thank you for your question and I appreciate and understand the frustration you feel in sort of the charge off performance we showed last year. And let me just assure you, there is no one who takes it more seriously and there is no one who is more sort of disappointed in the fact that we were behind on forecasting those losses then Steve and I. It is something that has and continues to have our utmost attention. As I look forward, first of all, let me say, we’re in a pretty uncertain economic environment. So everything we’re about to say is in that context, obviously, if things change dramatically on a broad macroeconomic perspective, then obviously our outlook and our views can change.
But I think, Michael, there’s three things that give me confidence in sort of our ability to better predict going forward than we have in the last year. First, we’re now a full year into the seasoning of the last of the credit administration practice changes that Steve referenced. I think the last changes went in early last January if memory serves me right. Getting that kind of ability to look and start to understand on a year-over-year basis is really, really useful for us in disentangling sort of the credit administration impacts versus seasonality, and quite frankly just the normalization of life you have post COVID, where I think everyone saw a delinquency and sort of charge off performance sort of behave differently than historic norms.
