Sallie Mae 2010 Annual Report Download - page 3

PART I.
Item 1. Business
SLM Corporation, more commonly known as Sallie Mae, is the nation’s leading saving, planning and paying
for education company. SLM Corporation is a holding company that operates through a number of subsidiaries.
References in this Annual Report to “we,” “us,” “our” and “the Company,” refer to SLM Corporation and its
subsidiaries, except as otherwise indicated or unless the context otherwise requires. The Company was formed in
1972 as the Student Loan Marketing Association, a federally chartered government sponsored enterprise (“GSE”),
with the goal of furthering access to higher education by providing liquidity to the student loan marketplace. On
December 29, 2004, we completed the privatization process that began in 1997 and resulted in the dissolution of
the GSE.
Our primary business is to originate, service and collect loans made to students and/or their parents to
finance the cost of their education. We provide funding, delivery and servicing support for education loans in
the United States, through our non-federally guaranteed Private Education Loan programs and as a servicer
and collector of loans for the Department of Education (“ED”). In addition we are the largest holder, servicer
and collector of loans made under the Federal Family Education Loan Program (“FFELP”), a program that
was recently discontinued.
We have used internal growth and strategic acquisitions to attain our leadership position in the education
finance market. The core of our marketing strategy is to generate student loan originations by promoting our
products on campus through the financial aid office and through direct marketing to students and their parents.
These sales and marketing efforts are supported by the largest and most diversified servicing capabilities in the
industry.
We also earn fee income by providing student loan-related services including student loan servicing, loan
default aversion and defaulted loan collections, processing capabilities and information technology to
educational institutions, and 529 college-savings plan program management services and a consumer savings
network.
At December 31, 2010, we had approximately 7,600 employees.
We are in the process of relocating our headquarters from Reston, Virginia to Newark, Delaware, and
expect to complete the move by March 31, 2011.
Recent Developments and Expected Future Trends
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, all federal
loans to students are now made through the Direct Student Loan Program (“DSLP”). The FFELP, through
which we historically generated the majority of our net income, was eliminated. However, HCERA does not
alter or affect the terms and conditions of existing FFELP Loans. The $1.37 billion net interest income we
earned on our FFELP Loan portfolio in 2010 will decline as the portfolio amortizes.
In addition, SAFRA eliminates the Guarantor function and the services we provide to Guarantors. We
earned an origination fee when we processed a loan guarantee for a Guarantor client and a maintenance fee
for the life of the loan for servicing the Guarantor’s portfolio of loans. Since FFELP Loans are no longer
originated, we will no longer earn the origination fee paid by the Guarantor. The portfolio that generates the
maintenance fee is now in run off, and the maintenance fees we earn will decline as the portfolio amortizes. In
2010, we earned Guarantor origination fees of $34 million and maintenance fees of $56 million.
Our student loan contingent collection business is also affected by HCERA. We currently have
13 Guarantors and ED as clients. We earn revenue from Guarantors for collecting defaulted loans as well as
for managing their portfolios of defaulted loans. In 2010, contingency collection revenue from Guarantor
clients totaled $245 million. We anticipate that revenue from Guarantors will be relatively stable through 2012
and then begin to steadily decline as the portfolio of defaulted loans we manage is resolved and amortizes.
2