Sallie Mae 2006 Annual Report Download - page 15

FFELP loans. We also offer specialized loan products to graduate and professional students primarily through
our MBALoans», LAWLOANS»and MEDLOANS
SM
programs. Generally, these loans do not require
borrowers to begin repaying their loans until after graduation and allow a grace period from six to nine
months.
In the third quarter of 2004 we began to offer Tuition Answer
SM
loans directly to the consumer through
targeted direct mail campaigns and web-based initiatives. Under the Tuition Answer loan program, creditwor-
thy parents, sponsors and students may borrow between $1,500 and $40,000 per year to cover any college-
related expense. No school certification is required, although a borrower must provide enrollment documenta-
tion. At December 31, 2006, we had $1.9 billion of Tuition Answer loans outstanding.
We also offer alternative Private Education Loans for information technology, cosmetology, mechanics,
medical/dental/lab, culinary and broadcasting. On average, these career training programs typically last fewer
than 12 months. Generally, these loans require the borrower to begin repaying the loan immediately; however,
students can opt to make relatively small payments while enrolled. At December 31, 2006, we had $2.3 billion
of career training loans outstanding.
Acquisitions
We have acquired several companies in the student loan industry that have increased our sales and
marketing capabilities, added significant new brands and greatly enhanced our product offerings. The following
table provides a timeline of strategic acquisitions that have played a major role in the growth of our Lending
business.
Sallie Mae Timeline — Student Lending
07/99
Nellie Mae
07/00
SLFR
1999 2000 2001 2002 2003 2004 2005 2006
11/03
AMS
11/03
SLFA
07/00
USA Group-SLM
combination
10/04
Southwest
Financing
We fund our operations through the issuance of student loan asset-backed securities (securitizations) and
unsecured debt securities. We issue these securities in both the domestic and overseas capital markets using
both public offerings and private placements. The major objective when financing our business is to find low
cost financing that also minimizes interest rate risk by matching the interest rate and reset characteristics of
our Managed assets and liabilities, generally on a pooled basis, to the extent practicable. As part of this
process, we use derivative financial instruments extensively to reduce our interest rate and foreign currency
exposure. This helps in stabilizing our student loan spread in various interest rate environments. We are always
looking for ways to minimize funding costs and to provide liquidity for our student loan acquisitions. To that
end, we are continually expanding and diversifying our pool of investors by establishing debt programs in
multiple markets that appeal to varied investor bases and by educating potential investors about our business.
Finally, we take appropriate steps to ensure sufficient liquidity by financing in multiple markets, which include
the institutional, retail, floating-rate, fixed-rate, unsecured, asset-backed, domestic and international markets.
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