Sallie Mae 2011 Annual Report Download - page 27

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our Consolidated Financial
Statements and related Notes included elsewhere in this Annual Report on Form 10-K. This discussion and
analysis also contains forward-looking statements and should also be read in conjunction with the disclosures
and information contained in “Forward-Looking and Cautionary Statements” and Item 1A “Risk Factors” in
this Annual Report on Form 10-K.
Through this discussion and analysis, we intend to provide the reader with some narrative context for how
our management views our consolidated financial statements, additional context within which to assess our
operating results, and information on the quality and variability of our earnings, liquidity and cash flows.
Overview
Our primary business is to originate, service and collect loans we make to students and/or their parents to
finance the cost of their education. 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 families. We also provide servicing, loan default aversion and defaulted loan collection services for loans
owned by other institutions, including ED. We also provide processing capabilities to educational institutions,
529 college-savings plan program management services and a consumer savings network.
In addition we are the largest holder, servicer and collector of loans made under FFELP, a program that was
discontinued in 2010.
We monitor and assess our ongoing operations and results based on the following four reportable segments:
(1) Consumer Lending, (2) Business Services, (3) FFELP Loans and (4) Other.
Consumer Lending Segment
In this segment, we originate, acquire, finance and service Private Education Loans. The Private Education
Loans we make are largely to bridge the gap between the cost of higher education and the amount funded through
financial aid, federal loans or borrowers’ resources. In this segment, we earn net interest income on the Private
Education Loan portfolio (after provision for loan losses) as well as servicing fees, primarily late fees. As of
December 31, 2011, we had $36.3 billion of Private Education Loans outstanding. In 2011, we originated
$2.7 billion of Private Education Loans, up 19 percent from $2.3 billion in the prior year.
Business Services Segment
In our Business Services segment we provide loan servicing to our FFELP Loans segment, ED and other
third parties. We provide servicing, default aversion and contingency collections work on behalf of ED,
Guarantors of FFELP Loans, and other institutions. Our Campus Solutions business provides comprehensive
transaction processing solutions and associated technology to college financial aid offices and students to
streamline the financial aid process. We provide 529 college-savings plan account asset servicing and other
transaction processing activities. We offer, tuition, renters’ and student health insurance to college students and
higher education institutions.
FFELP Loans Segment
Our FFELP Loans segment consists of our $138 billion FFELP Loan portfolio and underlying debt and
capital funding these loans. Because we no longer originate FFELP Loans the portfolio is in runoff and is
expected to amortize over approximately the next 20 years with a weighted average remaining life of 7.6 years.
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