Sallie Mae 2011 Annual Report Download - page 16

disruptions in our business or reductions in the quality of the services we provide. We may be unable to
successfully execute on certain growth and other business strategies or achieve certain business goals or
objectives if cost reductions are too dramatic. Alternatively, we may not be able to achieve our desired cost
savings, and if that is the case our results of operations could be adversely affected.
Incorrect estimates and assumptions by management in connection with the preparation of our consolidated
financial statements could adversely affect the reported assets, liabilities, income and expenses.
Incorrect estimates and assumptions by management in connection with the preparation of our consolidated
financial statements could adversely affect the reported amounts of assets and liabilities and the reported amounts
of income and expenses. The preparation of our consolidated financial statements requires management to make
certain critical accounting estimates and assumptions that could affect the reported amounts of assets and
liabilities and the reported amounts of income and expense during the reporting periods. A description of our
critical accounting estimates and assumptions may be found in Item 7 “Management’s Discussion and Analysis
of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates” and in
“Note 2 — Significant Accounting Policies.” If we make incorrect assumptions or estimates, we may under- or
overstate reported financial results, which could materially and adversely affect our business, financial condition
and results of operations.
Political and Reputational.
The scope and profitability of our lending businesses remain subject to risks arising from legislative and
administrative actions.
Through the HCERA, the U.S. Congress mandated that all future federal student loans be made through the
DSLP, eliminating the FFELP. Further legislative action by Congress could adversely affect our business,
financial condition and results of operations. For instance, during the fourth-quarter 2011, the Administration
announced a Special Direct Consolidation Loan Initiative that provides a temporary incentive to borrowers who
have at least one student loan owned by ED and at least one held by a FFELP lender to consolidate the FFELP
lender’s loans into the DSLP program by providing a 0.25 percentage point interest rate reduction on the FFELP
loans that are eligible for consolidation. We currently do not foresee the initiative having a significant impact on
our FFELP Loans segment. However, the initiative is an example of how the Administration and Congress could
detrimentally affect future estimated cash flows and profitability from our FFELP Loan portfolios through their
actions. Likewise, additional restrictions or requirements imposed on Private Education lending could increase
our costs, affect our ability to service and collect loans and materially and adversely impact our business,
financial condition and results of operations.
Our ability to continue to grow our businesses related to contracting with state and federal governments is
partly reliant on our ability to remain compliant with the laws and regulations applicable to those contracts.
We are subject to a variety of laws and regulations related to our government contracting businesses,
including our contracts with ED. In addition, these government contracts are subject to termination rights, audits
and investigations. If we were found in noncompliance with the contract provisions or applicable laws or
regulations, or the government exercised its termination or other rights for that or other reasons, our reputation
could be negatively affected, and our ability to compete for new contracts could be diminished. If this were to
occur, the future prospects, revenues and results of operations of this portion of our business could be negatively
affected.
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