Sallie Mae 2006 Annual Report Download - page 148

4. Allowance for Student Loan Losses (Continued)
Allowance for FFELP Student Loan Losses
The Company maintains an allowance for Risk Sharing loan losses on its FFELP portfolio. Since October
2005, the Company has qualified for the EP designation which at that time ended the Risk Sharing on the
Company’s FFELP loans. Subsequently, the Reconciliation Legislation reinstated a one-percent Risk Sharing
under EP designation for claims filed on or after July 1, 2006. In response to this decrease in insurance levels,
the Company established an additional $10 million Risk-Sharing allowance as of December 31, 2005 for an
estimate of losses on FFELP student loans based on the one-percent reduction in default insurance for
servicers with the EP designation. At December 31, 2006, the allowance was $20 million.
Delinquencies
The table below shows the Company’s Private Education Loan delinquency trends as of December 31,
2006, 2005 and 2004. Delinquencies have the potential to adversely impact earnings if the account charges off
and results in increased servicing and collection costs.
Balance % Balance % Balance %
2006 2005 2004
December 31,
(Dollars in millions)
Loans in-school/grace/deferment
(1)
......... $ 5,218 $4,301 $2,787
Loans in forbearance
(2)
................. 359 303 166
Loans in repayment and percentage of each
status:
Loans current ....................... 4,214 86.9% 3,311 90.4% 2,555 89.9%
Loans delinquent 31-60 days
(3)
.......... 250 5.1 166 4.5 124 4.4
Loans delinquent 61-90 days ........... 132 2.7 77 2.1 56 2.0
Loans delinquent greater than 90 days .... 255 5.3 108 3.0 107 3.7
Total Private Education Loans in
repayment ....................... 4,851 100% 3,662 100% 2,842 100%
Total Private Education Loans, gross ....... 10,428 8,266 5,795
Private Education Loan unamortized
discount ........................... (365) (305) (203)
Total Private Education Loans ............ 10,063 7,961 5,592
Private Education Loan allowance for losses . . (308) (204) (172)
Private Education Loans, net ............. $ 9,755 $7,757 $5,420
Percentage of Private Education Loans in
repayment ......................... 46.5% 44.3% 49.0%
Delinquencies as a percentage of Private
Education Loans in repayment .......... 13.1% 9.6% 10.1%
(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 generally during employment transition or who have tempo-
rarily ceased making full payments due to hardship or other factors, consistent with the established loan program servicing pro-
cedures and policies.
(3)
The period of delinquency is based on the number of days scheduled payments are contractually past due.
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SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts, unless otherwise stated)