Sallie Mae 2011 Annual Report Download - page 57

FFELP Loans Provision for Loan Losses and Charge-Offs
The following table summarizes the total FFELP Loan provision for loan losses and charge-offs on both a
GAAP-basis and a “Core Earnings” basis.
Years Ended December 31,
(Dollars in millions) 2011 2010 2009
FFELP Loan provision for loan losses, GAAP ................. $86 $98 $106
FFELP Loan provision for loan losses, “Core Earnings” basis ..... $86 $98 $119
FFELP Loan charge-offs, GAAP ........................... $78 $87 $ 79
FFELP Loan charge-offs, “Core Earnings” basis ............... $78 $87 $ 94
Servicing Revenue and Other Income — FFELP Loans Segment
The following table summarizes the components of “Core Earnings” other income for our FFELP Loans
segment.
Years Ended December 31,
(Dollars in millions) 2011 2010 2009
Servicing revenue ....................................... $ 85 $ 68 $ 75
Gains on loans and investments, net ......................... — 325 284
Other ................................................. 1 (5) 8
Total other income, net ................................... $ 86 $388 $367
Servicing revenue for our FFELP Loans segment primarily consists of borrower late fees.
The gains on loans and investments in 2010 and 2009 related primarily to the sale of $20.4 billion and
$18.5 billion loans, respectively, of FFELP Loans to ED as part of the ED Purchase Program.
Operating Expenses — FFELP Loans Segment
Operating expenses for our FFELP Loans segment primarily include the contractual rates we pay to service
loans in term asset-backed securitization trusts or a similar rate if a loan is not in a term financing facility (which
is presented as an intercompany charge from the Business Services segment who services the loans), the fees we
pay for third-party loan servicing and costs incurred to acquire loans. The intercompany revenue charged from
the Business Services segment and included in those amounts was $739 million, $648 million and $659 million
for the years ended December 31, 2011, 2010 and 2009, respectively. These amounts exceed the actual cost of
servicing the loans.
2011 versus 2010
The increase in operating expenses from the prior year was primarily the result of the increase in servicing
costs related to the $25 billion loan portfolio acquisition on December 31, 2010. Operating expenses, excluding
restructuring-related asset impairments, were 53 basis points and 51 basis points of average FFELP Loans in the
years ended December 31, 2011 and 2010, respectively.
2010 versus 2009
Operating expenses decreased $18 million from the prior year, primarily due to the effect of our cost cutting
initiative in connection with the passage of HCERA. This was partially offset by a one-time fee paid to acquire
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