Sallie Mae 2006 Annual Report Download - page 191

18. Segment Reporting (Continued)
ended December 31, 2006, 2005 and 2004. USA Funds is the Company’s largest customer in both the DMO
and Corporate and Other segments. During the years ended December 31, 2006, 2005 and 2004, USA Funds
accounted for 31 percent, 36 percent and 44 percent, respectively, of the aggregate revenues generated by the
Company’s DMO and Corporate and Other reportable segments. No other customers accounted for more than
10 percent of total revenues in those segments for the years mentioned.
Lending
In the Company’s Lending business segment, the Company originates and acquires both federally
guaranteed student loans, which are administered by ED, and Private Education Loans, which are not federally
guaranteed. Private Education Loans are primarily used by borrowers to supplement FFELP loans to meet the
rising cost of education. As of December 31, 2006, the Company manages $142 billion of student loans, of
which $120 billion or 84 percent are federally insured, and serves nearly 10 million student and parent
customers. In addition to education lending, the Company also originates mortgage and consumer loans with
the intent of selling the majority of such loans. In 2006, the Company originated $2 billion in mortgage and
consumer loans and its mortgage and consumer loan portfolio totaled $619 million at December 31, 2006, of
which $119 million pertains to mortgages in the held for sale portfolio.
In addition to its federally insured FFELP products, the Company originates and acquires Private
Education Loans which consist of two general types: (1) those that are designed to bridge the gap between the
cost of higher education and the amount financed through either capped federally insured loans or the
borrowers’ resources, and (2) those that are used to meet the needs of students in alternative learning programs
such as career training, distance learning and lifelong learning programs. Most higher education Private
Education Loans are made in conjunction with a FFELP Stafford loan and as such are marketed through the
same channel as FFELP loans by the same sales force. Unlike FFELP loans, Private Education Loans are
subject to the full credit risk of the borrower. The Company manages this additional risk through industry-
tested loan underwriting standards and a combination of higher interest rates and loan origination fees that
compensate the Company for the higher risk.
DMO
The Company’s DMO operating segment provides a wide range of accounts receivable and collections
services including student loan default aversion services, defaulted student loan portfolio management services,
contingency collections services for student loans and other asset classes, and accounts receivable management
and collection for purchased portfolios of receivables that are delinquent or have been charged off by their
original creditors as well as sub-performing and non-performing mortgage loans. The Company’s DMO
operating segment serves the student loan marketplace through a broad array of default management services
on a contingency fee or other pay-for-performance basis to 14 FFELP guarantors and for campus based
programs.
In addition to collecting on its own purchased receivables and mortgage loans, the DMO operating
segment provides receivable management and collection services for large federal agencies, credit card clients
and other holders of consumer debt.
Corporate and Other
The Company’s Corporate and Other business segment includes the aggregate activity of its smaller
operating segments primarily its Guarantor Servicing, student loan servicing operating segments, and its
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SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts, unless otherwise stated)