Sallie Mae 2006 Annual Report Download - page 147

4. Allowance for Student Loan Losses (Continued)
until they were charged off, at which time, the loans were placed on non-accrual status and all previously
accrued interest was reversed against income in the month of charge-off. The allowance for loan losses
provided for a portion of the probable losses in accrued interest receivable prior to charge-off.
The Company’s loss estimates are based on a loss emergence period of two years, including when the
borrowers are in school. The Company’s collection policies allow for periods of nonpayment, or modified
repayment, for borrowers requesting additional payment grace periods upon leaving school or experiencing
temporary difficulty meeting payment obligations. This is referred to as forbearance status. The loss emergence
period is in alignment with the Company’s typical collection cycle and the Company takes into account these
periods of nonpayment.
The following table summarizes changes in the allowance for student loan losses for Private Education
Loans for the years ended December 31, 2006, 2005 and 2004.
2006 2005 2004
Years Ended December 31,
Allowance at beginning of year.................... $ 204,112 $ 171,886 $ 165,716
Provision for Private Education Loan losses ........ 257,983 185,078 129,768
Change in net loss estimate..................... — (8,296) —
Total provision .............................. 257,983 176,782 129,768
Other ..................................... — — 372
Charge-offs ................................ (159,560) (153,994) (110,271)
Recoveries ................................. 22,599 19,366 14,007
Net charge-offs.............................. (136,961) (134,628) (96,264)
Balance before securitization of Private Education
Loans..................................... 325,134 214,040 199,592
Reduction for securitization of Private Education
Loans..................................... (16,788) (9,928) (27,706)
Allowance at end of year ........................ $ 308,346 $ 204,112 $ 171,886
Net charge-offs as a percentage of average loans in
repayment ................................. 3.22% 4.14% 3.57%
Allowance as a percentage of the ending total loan
balance ................................... 3.06% 2.56% 3.07%
Allowance as a percentage of the ending loans in
repayment ................................. 6.36% 5.57% 6.05%
Allowance coverage of net charge-offs .............. 2.25 1.52 1.79
Average total loans............................. $ 8,585,270 $6,921,975 $4,794,782
Ending total loans ............................. $10,063,635 $7,960,882 $5,591,497
Average loans in repayment ...................... $ 4,256,780 $3,252,238 $2,696,818
Ending loans in repayment ....................... $ 4,851,305 $3,662,255 $2,842,220
The Company charges the borrower fees on certain Private Education Loans, both at origination and when
the loan enters repayment. Such fees are deferred and recognized into income as a component of interest over
the estimated average life of the related pool of loans.
F-28
SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts, unless otherwise stated)