Sallie Mae 2009 Annual Report Download - page 9

Contingency Collection Services
Our APG business segment is also engaged in the collection of defaulted student loans on behalf of
various clients, including schools, Guarantors, ED and other federal and state agencies. We earn fees that are
contingent on the amounts collected. We provide collection services for approximately 16 percent of the total
market for federal student loan collections. We have relationships with approximately 900 colleges and
universities to provide collection services for delinquent student loans and other receivables from various
campus-based programs. We also collect other debt for federal and state agencies, and retail clients.
Competition
The private sector collections industry is highly fragmented with a few large companies and a large
number of small scale companies. The APG businesses that provide third-party collections services for ED,
FFELP Guarantors and other federal holders of defaulted debt are highly competitive. In addition to competing
with other collection enterprises, we also compete with credit grantors who each have unique mixes of internal
collections, outsourced collections and debt sales. The scale, diversification and performance of our APG
business segment have been, and the Company expects them to remain, a competitive advantage for the
Company.
CORPORATE AND OTHER BUSINESS SEGMENT
The Company’s Corporate and Other business segment includes the aggregate activity of its smaller
operating segments, primarily its Guarantor Servicing, Loan Servicing, and Upromise operating segments.
Corporate and Other also includes several smaller products and services, including comprehensive financing
and loan delivery solutions to college financial aid offices and students to streamline the financial aid process.
Please read the section above, “INTRODUCTION TO SLM CORPORATION — Recent Developments
and Expected Future Trends” to see how we expect pending legislation to impact this business segment.
Guarantor Servicing
We earn fees for providing a full complement of administrative services to FFELP Guarantors. FFELP
student loans are guaranteed by these agencies, with ED providing reinsurance to the Guarantor. The
Guarantors are non-profit institutions or state agencies that, in addition to providing the primary guarantee on
FFELP loans, are responsible for other activities, including:
• guarantee issuance — the initial approval of loan terms and guarantee eligibility;
• account maintenance — the maintaining, updating and reporting of records of guaranteed loans;
• default aversion services — these services are designed to prevent a default once a borrower’s loan has
been placed in delinquency status (we perform these activities within our APG business segment);
• guarantee fulfillment — the review and processing of guarantee claims;
• post-claim assistance — assisting borrowers in determining the best way to resolve a defaulted
loan; and
• systems development and maintenance — the development of automated systems to maintain compli-
ance and accountability with ED regulations.
Currently, we provide a variety of these services to 15 Guarantors and, in AY 2008-2009, we processed
$24.0 billion in new FFELP loan guarantees, of which $19.3 billion was for USA Funds, the nation’s largest
Guarantor. We processed guarantees for approximately 35 percent of the FFELP loan market in AY
2008-2009.
Guarantor servicing fee revenue, which includes guarantee issuance and account maintenance fees, was
$136 million for the year ended December 31, 2009, 86 percent of which we earned from services performed
on behalf of USA Funds. Under some of our guarantee services agreements, including our agreement with
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