Sallie Mae 2007 Annual Report Download - page 130

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts, unless otherwise stated)
1. Organization and Business
SLM Corporation (the “Company”) is a holding company that operates through a number of subsidiaries.
The Company was formed 35 years ago as the Student Loan Marketing Association, a federally chartered
government-sponsored enterprise (the “GSE”), with the goal of furthering access to higher education by acting
as a secondary market for student loans. In 2004, the Company completed its transformation to a private
company through its wind-down of the GSE. The GSE’s outstanding obligations were placed into a Master
Defeasance Trust Agreement as of December 29, 2004, which was fully collateralized by direct, noncallable
obligations of the United States.
The Company’s primary business is to originate and hold student loans by providing funding, delivery
and servicing support for education loans in the United States through its participation in the Federal Family
Education Loan Program (“FFELP”) and through offering non-federally guaranteed Private Education Loans.
The Company primarily markets its FFELP Stafford and Private Education Loans through on-campus financial
aid offices. In recent years, there has been a surge in FFELP Consolidation Loans which are marketed directly
to FFELP Stafford borrowers. The Company has also expanded its marketing of direct-to-consumer Private
Education Loans.
The Company has expanded into a number of fee-based businesses, most notably its Asset Performance
Group (“APG”), formerly known as 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.” The Company’s APG 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 as well as sub-performing and non-performing mortgage loans.
The Company also earns fees for a number of services including student loan and guarantee servicing,
529 college-savings plan administration services, and for providing processing capabilities and information
technology to educational institutions. The Company also operates a consumer savings network through
Upromise, Inc. (“Upromise”).
On April 16, 2007, the Company announced that a buyer group (“Buyer Group”) led by J.C. Flowers &
Co. (“J.C. Flowers”), Bank of America, N.A. and JPMorgan Chase, N.A. signed a definitive agreement
(“Merger Agreement”) to acquire the Company (the “Merger”) for approximately $25.3 billion or $60.00 per
share of common stock. On January 25, 2008, the Company, Mustang Holding Company Inc. (“Mustang
Holding”), Mustang Merger Sub, Inc. (“Mustang Sub”), J.C. Flowers, Bank of America, N.A. and JPMorgan
Chase Bank, N.A. entered into a Settlement, Termination and Release Agreement (the “Agreement”). Under
the Agreement, the lawsuit filed by the Company on October 8, 2007, related to the Merger, as well as all
counterclaims, was dismissed and the Merger Agreement dated April 15, 2007, among the Company, Mustang
Holding and Mustang Sub was terminated on January 25, 2008.
2. Significant Accounting Policies
Consolidation
The consolidated financial statements include the accounts of SLM Corporation and its subsidiaries, after
eliminating the effects of intercompany accounts and transactions.
Financial Interpretation (“FIN”) No. 46(R), “Consolidation of Variable Interest Entities,” requires Variable
Interest Entities (“VIEs”) to be consolidated by their primary beneficiaries if they do not effectively disperse
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