Sallie Mae 2008 Annual Report Download - page 129

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 36 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.
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 segment provides a wide range of accounts receivable and
collections services including student loan default aversion services, defaulted student loan portfolio manage-
ment 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. In 2008,
the Company concluded that its APG purchased paper business no longer produces a mutual strategic fit. The
Company finalized the sale of its international purchased paper non-mortgage business in the first quarter of
2009 and is winding down the domestic side of its purchased paper non-mortgage and purchased paper
mortgage/properties businesses.
The Company also earns fees for a number of services including student loan and guarantee servicing,
loan default aversion and defaulted loan collections, and for providing processing capabilities and information
technology to educational institutions, as well as, 529 college savings plan program management, transfer and
servicing agent services, and administration services through Upromise Investments, Inc. (“UII”) and
Upromise Investment Advisors, LLC (“UIA”). The Company also operates a consumer savings network
through Upromise, Inc. (“Upromise”). References in this Annual Report to “Upromise” refer to Upromise and
its subsidiaries, UII and UIA.
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 “Proposed 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 “Agree-
ment”). Under the Agreement, the lawsuit filed by the Company on October 8, 2007, related to the Proposed
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.
On February 26, 2009, the Administration issued their 2010 budget request to Congress, which included
provisions that could impact significantly the FFELP. The President’s budget overview states: “FFEL
processors would continue to receive federal subsidies for new loans originated in the 2009-2010 academic
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