Sallie Mae 2012 Annual Report Download - page 157

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. Borrowings (Continued)
ED Funding Programs
ED Purchase and Participation Programs
In August 2008, ED implemented the Purchase Program and the Participation Program pursuant to The
Ensuring Continued Access to Student Loans Act of 2008 (“ECASLA”). Under the Purchase Program, ED
purchased eligible FFELP Loans at a price equal to the sum of (i) par value, (ii) accrued interest, (iii) the one
percent origination fee paid to ED, and (iv) a fixed amount of $75 per loan. Under the Participation Program, ED
provided short-term liquidity to FFELP lenders by purchasing participation interests in pools of FFELP Loans.
FFELP lenders were charged a rate equal to the preceding quarter commercial paper rate plus 0.50 percent on the
principal amount of participation interests outstanding. Loans eligible for the Participation or Purchase Programs
were limited to FFELP Stafford or PLUS Loans, first disbursed on or after May 1, 2008 but no later than July 1,
2010, with no ongoing borrower benefits other than permitted rate reductions of 0.25 percent for automatic
payment processing. In October 2010, we sold $20.4 billion of loans to ED and paid off $20.3 billion of advances
outstanding under the Participation Program. This program is no longer in effect and is not available as a source
of funding.
ED Conduit Program
Pursuant to ECASLA, on January 15, 2009, ED announced they would purchase eligible FFELP Stafford
and PLUS Loans from a conduit vehicle established to provide funding for eligible student lenders (the “ED
Conduit Program”). Loans eligible for the ED Conduit Program must be first disbursed on or after October 1,
2003, but not later than July 1, 2009, and fully disbursed before September 30, 2009, and meet certain other
requirements, including those relating to borrower benefits. The ED Conduit Program was launched on May 11,
2009 and accepted eligible loans through July 1, 2010. The ED Conduit Program expires on January 19, 2014.
Funding for the ED Conduit Program is provided by the capital markets at a cost based on market rates, with us
being advanced 97 percent of the student loan face amount. If the conduit does not have sufficient funds to make
the required payments on the notes issued by the conduit, then the notes will be repaid with funds from the
Federal Financing Bank (“FFB”). The FFB will hold the notes for a short period of time and, if at the end of that
time, the notes still cannot be paid off, the underlying FFELP Loans that serve as collateral to the ED Conduit
will be sold to ED through a put agreement at a price of 97 percent of the face amount of the loans. Our intent is
to term securitize the loans in the facility before the facility expires. Any loans that remain in the facility as of the
expiration date will be sold to ED at a price of 97 percent of the face amount of the loans. At December 31, 2012
and 2011, we had $9.5 billion and $21.2 billion, respectively, in principal amount of FFELP Loans remaining in
the ED Conduit Program.
Asset-Backed Financing Facilities
FFELP ABCP Facility
The maximum facility amount is $7.5 billion. The scheduled maturity date of the facility is January 9, 2015.
The usage fee for the facility is 0.50 percent over the applicable funding rate. The amended facility features two
contractual step-down reductions on the amount available for borrowing. The first reduction was on January 11,
2013, to $6.5 billion. The second reduction is on January 10, 2014, to $5.5 billion.
Our borrowings under the FFELP ABCP Facility are non-recourse. The maximum amount we may borrow
under the FFELP ABCP Facility is limited based on certain factors, including market conditions and the fair
value of student loans in the facility. In addition to the funding limits described above, funding under the FFELP
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