Sallie Mae 2007 Annual Report Download - page 6

Front-End Borrower Benefits — Financial incentives offered to borrowers at origination. Front-End
Borrower Benefits primarily represent our payment on behalf of borrowers for required FFELP fees, including
the federal origination fee and federal default fee. We account for these Front-End Borrower Benefits as loan
premiums amortized over the estimated life of the loans as an adjustment to the loan’s yield.
Gross Floor Income — Floor Income earned before payments on Floor Income Contracts.
GSE — The Student Loan Marketing Association was a federally chartered government-sponsored
enterprise and wholly owned subsidiary of SLM Corporation that was dissolved under the terms of the
Privatization Act (see definition below) on December 29, 2004.
Guarantors — State agencies or non-profit companies that guarantee (or insure) FFELP student loans
made by eligible lenders under the HEA.
HEA — The Higher Education Act of 1965, as amended.
Interim ABCP Facility — An aggregate of $30 billion asset-backed commercial paper conduit facilities
that we entered into on April 30, 2007 in connection with the Merger (defined below under “Merger
Agreement”).
Lender Partners — Lender Partners are lenders who originate loans under forward purchase commit-
ments to Sallie Mae where we own the loans from inception or, in most cases, acquire the loans soon after
origination.
Managed Basis — We generally analyze the performance of our student loan portfolio on a Managed
Basis, under which we view both on-balance sheet student loans and off-balance sheet student loans owned by
the securitization trusts as a single portfolio, and the related on-balance sheet financings are combined with off-
balance sheet debt. When the term Managed is capitalized in this document, it is referring to Managed Basis.
Merger Agreement — 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. (the “Merger”)
signed a definitive agreement (“Merger Agreement”) to acquire the Company for approximately $25.3 billion
or $60.00 per share of common stock. (See also “Merger Agreement” filed with the SEC on the Company’s
Current Report on Form 8-K, dated April 18, 2007.) 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, a lawsuit filed by the Company related to the Merger, as
well as all counterclaims, was dismissed.
Preferred Lender List — Most higher education institutions select a small number of lenders to
recommend to their students and parents. This recommended list is referred to as the Preferred Lender List.
Preferred Channel Originations — Preferred Channel Originations are comprised of: 1) loans that are
originated by internally marketed Sallie Mae brands, and 2) student loans that are originated by lenders with
forward purchase commitment agreements with Sallie Mae and are committed for sale to Sallie Mae, such that
we either own them from inception or, in most cases, acquire them soon after origination.
Private Education Consolidation Loans — Borrowers with multiple Private Education Loans (defined
below) may consolidate them into a single loan with Sallie Mae (Private Consolidation Loans@). The interest
rate on the new loan is variable rate with the spread set at the lower of the average weighted spread of the
underlying loans (available only to Sallie Mae customers) or a new spread as a result of favorable underwriting
criteria.
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