Sallie Mae 2010 Annual Report Download - page 113

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts, unless otherwise stated)
1. Organization and Business
SLM Corporation (“we”, “us”, “our”, or the “Company”) is a holding company that operates through a
number of subsidiaries. We were formed 38 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, we completed our transformation to a private
company through our 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.
We provide Private Education Loans that help students and their families bridge the gap between family
resources, federal loans, grants, student aid, scholarships and the cost of a college education. We also provide
savings products to help save for a college education. In addition we provide servicing and collection services on
federal loans. We also offer servicing, collection and transaction support directly to colleges and universities in
addition to the saving for college industry. Finally, we are the largest private owner of Federal Family Education
Loan Program (“FFELP”) Loans.
On March 30, 2010, President Obama signed into law H.R. 4872, the Health Care and Education
Reconciliation Act of 2010 (“HCERA”), which included the SAFRA Act. Effective July 1, 2010, legislation
eliminated the authority to originate new loans under FFELP and required that all new federal loans be made
through the Direct Student Loan Program (“DSLP”). Consequently, we no longer originate FFELP Loans. Net
interest income from our FFELP Loan portfolio and fees associated with servicing FFELP Loans and
collecting on delinquent and defaulted FFELP Loans on behalf of Guarantors has been our largest source of
income. The new law does not alter or affect the terms and conditions of existing FFELP Loans.
2. Significant Accounting Policies
Consolidation
The consolidated financial statements include the accounts of SLM Corporation and its majority-owned
and controlled subsidiaries and those Variable Interest Entities (“VIEs”) for which we are the primary
beneficiary, after eliminating the effects of intercompany accounts and transactions.
On January 1, 2010, we adopted the new consolidation accounting guidance. Under the new consolidation
accounting guidance, if an entity has a variable interest in a VIE and that entity is determined to be the
primary beneficiary of the VIE then that entity will consolidate the VIE. The primary beneficiary is the entity
which has both: (1) the power to direct the activities of the VIE that most significantly impact the VIE’s
economic performance and (2) the obligation to absorb losses or receive benefits of the entity that could
potentially be significant to the VIE. As it relates to our securitized assets, we are the servicer of the
securitized assets and own the Residual Interest of the securitization trusts. As a result, we are the primary
beneficiary of our securitization trusts and consolidated those trusts that were previously off-balance sheet at
their historical cost basis on January 1, 2010. The historical cost basis is the basis that would exist if these
securitization trusts had remained on-balance sheet since they settled. The new guidance did not change the
accounting of any other VIEs we had a variable interest in as of January 1, 2010.
After the adoption of the new accounting guidance, our results of operations no longer reflect securitiza-
tion, servicing and Residual Interest revenue related to these securitization trusts, but instead report interest
income, provisions for loan losses associated with the securitized assets and interest expense associated with
the debt issued from the securitization trusts to third parties, consistent with our accounting treatment of prior
on-balance securitization trusts.
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