Sallie Mae 2005 Annual Report Download - page 164

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts, unless otherwise stated)
F-42
9. Student Loan Securitization (Continued)
The table below shows the Company’s off-balance sheet Private Education Loan delinquency trends
as of December 31, 2005, 2004 and 2003.
Off-Balance Sheet Private Education Loan Delinquencies
December 31,
2005
December 31,
2004
December 31,
2003
(Dollars in millions) Balance % Balance % Balance %
Loans in-school/grace/deferment(1) .................. $ 3,679 $ 2,622 $ 1,858
Loans in forbearance(2) ............................. 614 334 255
Loans in repayment and percentage of each status:
Loanscurrent................................... 4,446 95.6% 3,191 95.2% 1,796 96.0%
Loans delinquent 31-60 days(3) .................... 136 2.9 84 2.5 39 2.1
Loans delinquent 61-90 days...................... 35 .7 28 .8 15 .8
Loans delinquent greater than90 days............. 36 .8 49 1.5 20 1.1
Total off-balance sheet Private Education Loans
inrepayment................................. 4,653 100% 3,352 100% 1,870 100%
Total off-balance sheet Private Education Loans, gross. $ 8,946 $ 6,308 $ 3,983
(1) Loans for borrowers who still may be attending school or engaging in other permitted educational activities and
are not yet required to make payments on the loans, e.g., residency periods for medical students or a grace period
for bar exam preparation.
(2) Loans for borrowers who have requested extension of grace period during employment transition or who have
temporarily ceased making full payments due to hardship or other factors, consistent with the established loan
program servicing policies and procedures.
(3) The period of delinquency is based on the number of days scheduled payments are contractually past due.
10. Derivative Financial Instruments
Risk Management Strategy
The Company maintains an overall interest rate risk management strategy that incorporates the use of
derivative instruments to minimize the economic effect of interest rate changes. The Company’s goal is to
manage interest rate sensitivity by modifying the repricing frequency and underlying index characteristics
of certain balance sheet assets and liabilities (including the Residual Interest from off-balance sheet
securitizations) so that the net interest margin is not, on a material basis, adversely affected by movements
in interest rates. As a result of interest rate fluctuations, hedged assets and liabilities will appreciate or
depreciate in market value. Income or loss on the derivative instruments that are linked to the hedged
assets and liabilities will generally offset the effect of this unrealized appreciation or depreciation for the
period the item is being hedged. The Company views this strategy as a prudent management of interest
rate sensitivity. In addition, the Company utilizes derivative contracts to minimize the economic impact of
changes in foreign currency exchange rates on certain debt obligations that are denominated in foreign
currencies. As foreign currency exchange rates fluctuate, these liabilities will appreciate and depreciate in
value. These fluctuations, to the extent the hedge relationship is effective, are offset by changes in the