Sallie Mae 2005 Annual Report Download - page 17

7
PART I.
Item 1. Business
INTRODUCTION TO SLM CORPORATION
SLM Corporation, more commonly known as Sallie Mae, is the market leader in education finance.
SLM Corporation is a holding company that operates through a number of subsidiaries. (References in
this annual report to “the Company” refer to SLM Corporation and its subsidiaries). At December 31,
2005, we had approximately 11,000 employees.
We were formed 33 years ago as the Student Loan Marketing Association, a federally chartered
government-sponsored enterprise (the “GSE”), with the goal of furthering access to higher education by
providing a secondary market for student loans. On December 29, 2004, we completed a privatization
process that began in 1996 with the passage of the Privatization Act by defeasing the GSE’s remaining debt
obligations and dissolving its federal charter.
We are the largest private source of funding, delivery and servicing support for education loans in the
United States primarily, through our participation in the Federal Family Education Loan Program
(“FFELP”). We originate, acquire and hold student loans, with the net interest income and gains on the
sales of student loans in securitization being the primary source of our earnings. We also earn fees for pre-
default and post-default receivables management services. We have structured the Company to be the
premier player in every phase of the student loan life cycle—from originating and servicing student loans
to default aversion and debt management of delinquent and defaulted student loans. We also provide a
wide range of financial services, processing capabilities and information technology to meet the needs of
educational institutions, lenders, students and their families, and guarantee agencies.
In the education finance marketplace, we believe that what distinguishes us from our competition is
the breadth and sophistication of the products and services we offer to colleges, universities and students.
In addition to student loans, these offerings include the streamlining of the financial aid process through
university-branded websites, tuition payment plans, call centers and other solutions that support the
financial aid office.
In recent years we have diversified our business through the acquisition of several companies that
provide receivables management and debt collection services. Initially these acquisitions were
concentrated in the student loan industry, with General Revenue Corporation (“GRC”) and Pioneer
Credit Recovery (“PCR”), both purchased in 2002. In 2004 we acquired a majority stake in AFS Holdings,
LLC, the parent company of Arrow Financial Services, LLC (collectively, “AFS”), a debt management
company that purchases and services distressed debt in several industries including and outside of
education receivables. In 2005, we acquired GRP/AG Holdings, LLC (“GRP”), a debt management
company that acquires and manages portfolios of sub-performing and non-performing mortgage loans.
BUSINESS SEGMENTS
We provide our array of credit products and related services to the higher education and consumer
credit communities and others through two primary business segments: our Lending business segment and
our Debt Management Operations business segment, or DMO. These defined business segments operate
in distinct business environments and have unique characteristics and face different opportunities and
challenges. They are considered reportable segments under The Financial Accounting Standards Board’s
(“FASB’s”) Statement of Financial Accounting Standards (“SFAS”) No. 131, “Disclosures about Segments
of an Enterprise and Related Information,” based on quantitative thresholds applied to the Company’s
financial statements. In addition, within our Corporate and Other business segment, we provide a number
of complementary products and services to financial aid offices and schools that are managed within
smaller operating segments, the most prominent being our Guarantor Servicing and Loan Servicing