Sallie Mae 2009 Annual Report Download - page 256

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Sharing loss on the loan. FFELP loans originated after October 1, 1993 are subject to Risk Sharing on loan
default claim payments unless the default results from the borrower’s death, disability or bankruptcy. FFELP
loans serviced by a servicer that has Exceptional Performer designation from ED were subject to one-percent
Risk Sharing for claims filed on or after July 1, 2006 and before October 1, 2007. The CCRAA reduces
default insurance to 95 percent of the unpaid principal and accrued interest for loans first disbursed on or after
October 1, 2012.
Special Allowance Payment (“SAP”) — FFELP loans disbursed prior to April 1, 2006 (with the
exception of certain PLUS and SLS loans discussed below) generally earn interest at the greater of the
borrower rate or a floating rate determined by reference to the average of the applicable floating rates (91-day
Treasury bill rate or commercial paper) in a calendar quarter, plus a fixed spread that is dependent upon when
the loan was originated and the loan’s repayment status. If the resulting floating rate exceeds the borrower
rate, ED pays the difference directly to the Company. This payment is referred to as the Special Allowance
Payment or SAP and the formula used to determine the floating rate is the SAP formula. The Company refers
to the fixed spread to the underlying index as the SAP spread. For loans disbursed after April 1, 2006, FFELP
loans effectively only earn at the SAP rate, as the excess interest earned when the borrower rate exceeds the
SAP rate (Floor Income) must be refunded to ED.
Variable rate PLUS Loans and SLS Loans earn SAP only if the variable rate, which is reset annually,
exceeds the applicable maximum borrower rate. For PLUS loans disbursed on or after January 1, 2000, this
limitation on SAP was repealed effective April 1, 2006.
A schedule of SAP rates is set forth on pages A-7 and A-8 of the Company’s 2009 Annual Report on
Form 10-K.
Variable Rate Floor Income — Variable Rate Floor Income is Floor Income that is earned only through
the next reset date. For FFELP Stafford loans whose borrower interest rate resets annually on July 1, the
Company may earn Floor Income or Embedded Floor Income based on a calculation of the difference between
the borrower rate and the then current interest rate (see definitions for capitalized terms, above).
G-5