Sallie Mae 2005 Annual Report Download - page 111

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As of December 31, 2005, the expiration dates and range of and average purchase prices for
outstanding equity forward contracts were as follows:
Year of maturity
(Contracts in millions of shares)
Outstanding
Contracts
Range of
purchase prices
Average
purchase price
2007................................ 5.4 $54.74 $54.74
2008................................ 7.3 54.74 54.74
2009................................ 14.8 54.74 54.74
2010................................ 15.2 54.74 – 54.96 54.74
42.7 $54.74
The closing price of the Company’s common stock on December 30, 2005 was $55.09.
In December 2005, the Company retired 65 million shares of common stock held in treasury at an
average price of $37.35 per share. This retirement decreased the balance in treasury stock by $2.4 billion,
with corresponding decreases of $13 million in common stock and $2.4 billion in retained earnings.
OTHER RELATED EVENTS AND INFORMATION
Reauthorization
On February 8, 2006, the President signed the Higher Education Reconciliation Act of 2005
(“Reauthorization Legislation”). The Reauthorization Legislation was included as Title VIII of the Deficit
Reduction Act of 2005 (S. 1932), an omnibus budget bill that cut nearly $40 billion in spending over five
years, with $12 billion coming from federal student loan programs. The vast majority of the savings are
generated by requiring lenders to rebate Floor Income under the new loans issued after April 1, 2006. The
major new student loan provisions include the following, with effective dates generally July 1, 2006 unless
otherwise indicated:
•Lenders rebate Floor Income on new loans after April 1, 2006.
•Borrower origination fees are gradually reduced to zero in FFELP by 2010, and to one percent in
Direct Loan program by 2010.
•Collection of one percent FFELP guaranty fee is mandated for all guarantors, including those with
voluntary flexible agreements, but can be paid on behalf of the borrower by lenders or guarantors.
•Lender reinsurance is reduced to 99 percent with Exceptional Performer designation for claims
filed after July 1, 2006, and 97 percent without designation on loans disbursed after July 1, 2006.
•“Super 2-Step” and in-school consolidation loopholes will be closed as of July 1, 2006.
•Recycling of 9.5 percent loans is prohibited for loan holders with more than $100 million in 9.5
percent loans, as of date of enactment, and other 9.5 percent reforms enacted in 2004 are made
permanent.
•The limitation on SAP for PLUS loans made after January 1, 2000 is repealed.
•Loan limits are increased as of July 1, 2007.
•A moratorium on new schools-as-lender is created after April 1, 2006, and additional requirements
are created for schools continuing to participate in this program.
•Graduate students become eligible to take out PLUS loans.
•Compensation for guarantor collections via loan consolidation is reduced from a maximum of 18.5
percent to 10 percent, along with a cap on the proportion of collection via consolidations.
Requirements for collections via loan rehabilitations are made somewhat easier.
•New grant programs are available for Pell-eligible students.