Sallie Mae 2007 Annual Report Download - page 21

payment for these services includes a contractually agreed upon set percentage of the account maintenance
fees that the guarantors receive from ED.
The Company’s guarantee services agreement with USA Funds has a five-year term that will be
automatically increased by an additional year on October 1 of each year unless a prior notice is given by
either party.
Our primary non-profit competitors in guarantor servicing are state and non-profit guarantee agencies that
provide third-party outsourcing to other guarantors.
(See APPENDIX A, “FEDERAL FAMILY EDUCATION LOAN PROGRAM — Guarantor Funding” for
details of the fees paid to guarantors.)
Upromise
Upromise has a number of programs that encourage consumers to save for the cost of college education.
Upromise has established an affinity marketing program which is designed to increase consumer purchases of
merchant goods and services and to promote saving for college by consumers who are members of this
program. Merchant partners generally pay Upromise transaction fees based on member purchase volume,
either online or in stores depending on the contractual arrangement with the merchant partner. A percentage of
the consumer members’ purchases is set aside in an account maintained by Upromise on the members’ behalf.
Upromise, through its wholly owned subsidiaries, Upromise Investments, Inc. (“UII”), a registered
broker-dealer, and Upromise Investment Advisors, LLC (“UIA”), provides transfer and servicing agent services
and program management associated with various 529 college-savings plans. Upromise manages $19 billion in
529 college-savings plans.
REGULATION
Like other participants in the FFELP, the Company is subject to the HEA and, from time to time, to
review of its student loan operations by ED and guarantee agencies. ED is authorized under its regulations to
limit, suspend or terminate lenders from participating in the FFELP, as well as impose civil penalties if lenders
violate program regulations. The laws relating to the FFELP are subject to revision. In addition, Sallie Mae,
Inc., as a servicer of federal student loans, is subject to certain ED regulations regarding financial responsibil-
ity and administrative capability that govern all third-party servicers of insured student loans. Failure to satisfy
such standards may result in the loss of the government guarantee of the payment of principal and accrued
interest on defaulted FFELP loans. Also, in connection with our guarantor servicing operations, the Company
must comply with, on behalf of its guarantor servicing customers, certain ED regulations that govern guarantor
activities as well as agreements for reimbursement between the Secretary of Education and the Company’s
guarantor servicing customers. Failure to comply with these regulations or the provisions of these agreements
may result in the termination of the Secretary of Education’s reimbursement obligation.
The Company’s originating or servicing of federal and private student loans also subjects it to federal and
state consumer protection, privacy and related laws and regulations. Some of the more significant federal laws
and regulations that are applicable to our student loan business include:
• the Truth-In-Lending Act;
• the Fair Credit Reporting Act;
• the Equal Credit Opportunity Act;
• the Gramm-Leach Bliley Act; and
• the U.S. Bankruptcy Code.
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