Sallie Mae 2006 Annual Report Download - page 3

GLOSSARY
Listed below are definitions of key terms that are used throughout this document. See also APPENDIX A,
“FEDERAL FAMILY EDUCATION LOAN PROGRAM,” for a further discussion of the FFELP.
Borrower Benefits — Borrower Benefits are financial incentives offered to borrowers who qualify based
on pre-determined qualifying factors, which are generally tied directly to making on-time monthly payments.
The impact of Borrower Benefits is dependent on the estimate of the number of borrowers who will eventually
qualify for these benefits and the amount of the financial benefit offered to the borrower. We occasionally
change Borrower Benefits programs in both amount and qualification factors. These programmatic changes
must be reflected in the estimate of the Borrower Benefits discount.
Consolidation Loan Rebate Fee — All holders of FFELP Consolidation Loans are required to pay to the
U.S. Department of Education (“ED”) an annual 105 basis point Consolidation Loan Rebate Fee on all
outstanding principal and accrued interest balances of FFELP Consolidation Loans purchased or originated
after October 1, 1993, except for loans for which consolidation applications were received between October 1,
1998 and January 31, 1999, where the Consolidation Loan Rebate Fee is 62 basis points.
Constant Prepayment Rate (“CPR”) — A variable in life of loan estimates that measures the rate at
which loans in the portfolio pay before their stated maturity. The CPR is directly correlated to the average life
of the portfolio. CPR equals the percentage of loans that prepay annually as a percentage of the beginning of
period balance.
“Core Earnings” — In accordance with the Rules and Regulations of the Securities and Exchange
Commission (“SEC”), we prepare financial statements in accordance with generally accepted accounting
principles in the United States of America (“GAAP”). In addition to evaluating the Company’s GAAP-based
financial information, management evaluates the Company’s business segments on a basis that, as allowed
under the Financial Accounting Standards Board’s (“FASB”) Statement of Financial Accounting Standards
(“SFAS”) No. 131, “Disclosures about Segments of an Enterprise and Related Information,” differs from
GAAP. We refer to management’s basis of evaluating our segment results as “Core Earnings” presentations for
each business segment and we refer to these performance measures in our presentations with credit rating
agencies and lenders. While “Core Earnings” results are not a substitute for reported results under GAAP, we
rely on “Core Earnings” performance measures in operating each business segment because we believe these
measures provide additional information regarding the operational and performance indicators that are most
closely assessed by management.
Our “Core Earnings” performance measures are the primary financial performance measures used by
management to evaluate performance and to allocate resources. Accordingly, financial information is reported
to management on a “Core Earnings” basis by reportable segment, as these are the measures used regularly by
our chief operating decision maker. Our “Core Earnings” performance measures are used in developing our
financial plans and tracking results, and also in establishing corporate performance targets and determining
incentive compensation. Management believes this information provides additional insight into the financial
performance of the Company’s core business activities. Our “Core Earnings” performance measures are not
defined terms within GAAP and may not be comparable to similarly titled measures reported by other
companies. “Core Earnings” net income reflects only current period adjustments to GAAP net income.
Accordingly, the Company’s “Core Earnings” presentation does not represent another comprehensive basis of
accounting.
See “NOTE 18 TO THE CONSOLIDATED FINANCIAL STATEMENTS — Segment Reporting” and
“MANAGEMENT’S DISCUSSION AND ANALYSIS — BUSINESS SEGMENTS — Limitations of ‘Core
Earnings’ ” for further discussion of the differences between “Core Earnings” and GAAP, as well as
reconciliations between “Core Earnings” and GAAP.
In prior filings with the SEC of SLM Corporation’s Annual Report on Form 10-K and quarterly report on
Form 10-Q, “Core Earnings” has been labeled as “ ‘Core’ net income” or “Managed net income” in certain
instances.
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