Sallie Mae 2006 Annual Report Download - page 8

PART I.
Item 1. Business
INTRODUCTION TO SLM CORPORATION
SLM Corporation, more commonly known as Sallie Mae, is the market leader in education finance. SLM
Corporation is a holding company that operates through a number of subsidiaries. (References in this Annual
Report to “the Company” refer to SLM Corporation and its subsidiaries). At December 31, 2006, we had
approximately 11,000 employees.
Our primary business is to originate and hold student loans by providing funding, delivery and servicing
support for education loans in the United States through our participation in the Federal Family Education
Loan Program (“FFELP”) and through offering non-federally guaranteed Private Education Loans. We
primarily market our FFELP Stafford and Private Education Loans through on-campus financial aid offices. In
recent years, the industry has moved toward a direct-to-consumer marketing model as evidenced by the surge
in FFELP Consolidation Loans which are marketed directly to FFELP Stafford borrowers. We have also
expanded our direct-to-consumer marketing of Private Education Loans.
We have used both internal growth and strategic acquisitions to attain our leadership position in the
education finance marketplace. Our sales force, which delivers our products on campuses across the country, is
the largest in the student loan industry. The core of our marketing strategy is to promote our on-campus
brands, which generate student loan originations through our Preferred Channel. Loans generated through our
Preferred Channel are more profitable than loans acquired through other acquisition channels because we own
them earlier in the student loan’s life and generally incur lower costs to acquire such loans. We have built
brand leadership through the Sallie Mae name, the brands of our subsidiaries and those of our lender partners.
These sales and marketing efforts are supported by the largest and most diversified servicing capabilities in the
industry, providing an unmatched array of services to financial aid offices.
We have expanded into a number of fee-based businesses, most notably, our Debt Management
Operations (“DMO”) business, which is presented as a distinct segment in accordance with the Financial
Accounting Standards Board’s (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 131,
“Disclosures about Segments of an Enterprise and Related Information.” Our DMO business 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. We also purchase and manage portfolios of
sub-performing and non-performing mortgage loans.
We also earn fees for a number of services including student loan and guarantee servicing, 529 Savings
Plan Administration services, and for providing processing capabilities and information technology to
educational institutions. We also operate a consumer savings network through Upromise, Inc. (“Upromise”)
loyalty service.
In December 2004, we completed the Wind-Down of the GSE through the defeasance of all remaining
GSE debt obligations and dissolution of the GSE’s federal charter. The liquidity provided to the Company by
the GSE has been replaced primarily by securitizations. In addition to securitizations, we have access to a
number of additional sources of liquidity including an asset-backed commercial paper program, unsecured
revolving credit facilities, and other unsecured corporate debt and equity security issuances.
On August 22, 2006, the Company completed the acquisition of Upromise. Upromise is the leading
provider of saving for college programs. Through its Upromise affiliates, the company administers 529
college-savings plans and assists its members with automatic savings through rebates on everyday purchases.
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