Sallie Mae 2011 Annual Report Download - page 192

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
16. Segment Reporting (Continued)
FFELP Loans Segment
Our FFELP Loans segment consists of our FFELP Loan portfolio and the underlying debt, related
derivatives and capital funding the loans. FFELP Loans are insured or guaranteed by state or not-for-profit
agencies and are also protected by contractual rights to recovery from the United States pursuant to guaranty
agreements among ED and these agencies. These guarantees generally cover at least 97 percent of a FFELP
Loan’s principal and accrued interest for loans disbursed before and after July 1, 2006, respectively. In the case
of death, disability or bankruptcy of the borrower, these guarantees cover 100 percent of the loan’s principal and
accrued interest.
At December 31, 2011, we held $138 billion of FFELP Loans, of which 94 percent were funded with
nonrecourse, long-term debt; 76 percent of our FFELP Loans being funded to term by securitization trusts,
15 percent funded through the ED Conduit Program which terminates on January 19, 2014, and 3 percent funded
through our multiyear asset-backed commercial paper (“ABCP”) facility. As a result of the long-term funding
used in the FFELP Loan portfolio and the insurance and guarantees provided on these loans, the net interest
margin recorded in the FFELP Loans segment is relatively stable and the capital requirements with respect to the
segment are modest. In addition to the net interest margin, we earn fee income largely from late fees on the loans.
Our FFELP Loan portfolio will amortize over approximately 20 years. Our goal is to maximize the cash
flow generated by the portfolio. We will seek to acquire other third-party FFELP Loan portfolios to add net
interest income and servicing revenue.
The Higher Education Act (the “HEA”) regulates every aspect of the FFELP, including communications
with borrowers and default aversion requirements. Failure to service a FFELP Loan properly could jeopardize the
insurance and guarantees and federal support on these loans. The insurance and guarantees on our existing loans
were not affected by HCERA.
The following table includes asset information for our FFELP Loans segment.
December 31,
(Dollars in millions) 2011 2010
FFELP Loans, net ............................................... $138,130 $148,649
Cash and investments(1) ........................................... 6,067 5,963
Other ......................................................... 4,415 3,911
Total assets .................................................... $148,612 $158,523
(1) Includes restricted cash and investments.
Other Segment
The Other segment consists primarily of the financial results related to activities of our holding company,
including the repurchase of debt, the corporate liquidity portfolio and all overhead. We also include results from
smaller wind-down and discontinued operations within this segment. Overhead expenses include costs related to
executive management, the board of directors, accounting, finance, legal, human resources, stock-based
compensation expense and information technology costs related to infrastructure and operations.
At December 31, 2011 and 2010, the Other segment had total assets of $823 million and $2.8 billion,
respectively.
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