Sallie Mae 2013 Annual Report Download - page 11

has ranged from six percent to eight percent for this contract period. Currently, we are participating in ED’s
procurement process for a new debt collection contract and expect them to announce the recipients by April 30,
2014.
Since the second quarter of 2009, we have been one of four large servicers awarded a servicing contract by
ED to service Direct Student Loan Program (“DSLP”) federal loans owned by ED. We serviced approximately
5.7 million accounts under this DSLP servicing contract as of December 31, 2013. The DSLP servicing contract
spans five years with one five-year renewal at the option of ED. In November 2013, ED gave notice to Sallie
Mae of its intent to exercise its five-year renewal option to extend the DSLP servicing contract. As such, we will
continue to compete for DSLP servicing volume from ED with the three other large servicing companies that also
have similar contracts. New account allocations for the upcoming contract year are awarded annually based on
each company’s performance on five different metrics over the most recently ended contract year: defaulted
borrower count, defaulted borrower dollar amount, a survey of borrowers, a survey of schools and a survey of ED
personnel. Pursuant to the contract terms related to annual volume allocation of new loans, the maximum any
servicer could be awarded is 40 percent of net new borrowers in that contract year. Our share of new loans
serviced for ED under the contract increased to 18 percent in 2013 from 15 percent in the prior contract year as a
result of our relative standing, as compared to other servicing companies, on the ED Scorecard. We earned $109
million of revenue under the contract for the year ended December 31, 2013.
To date, the DSLP servicing contract with ED has not contributed meaningful net income to us; however,
the opportunity to significantly and profitably expand the services we can provide under the DSLP directly to ED
or otherwise, has been an important component of the Business Services segment’s growth strategy and will
continue to be an important component of NewCo’s Business Services segment growth strategy if the Spin-Off
occurs. In fiscal year 2014, ED is projected to originate more than $112 billion in new federal education loans
and spend more than $1.7 billion in contracted services. To expand the services we provide under the DSLP, we
or, upon completion of the Spin-Off, NewCo will seek to improve on the performance metrics that determine the
allocation of new accounts under the servicing contract with ED.
We have generated significant volumes of work and consistently delivered high levels of objectively
measurable performance under both the ED collection contract and the DSLP servicing contract. However, to
date, the servicing contract structure has not permitted us to scale the work we are doing to achieve meaningful
profitability.
Other
Upromise generates transaction fees through our Upromise consumer savings network. Since inception
through December 31, 2013, members have earned approximately $800 million in rewards by purchasing
products at hundreds of online retailers, booking travel, purchasing a home, dining out, buying gas and groceries,
using the Upromise World MasterCard, or completing other qualified transactions. We earn a fee for the
marketing and administrative services we provide to companies that participate in the Upromise savings network.
We also compete with other loyalty shopping services and companies. After the Spin-Off, the Upromise
consumer savings network will be operated by SLM BankCo.
Previously, we provided program management services for 529 college-savings plans through our 529
college-savings plan administration business and our Campus Solutions business provided processing capabilities
to educational institutions designed to help campus business offices increase their services to students and
families. However, in the second quarter of 2013, we sold our Campus Solutions business and recorded an after-
tax gain of $38 million. Additionally, in the fourth quarter of 2013, we sold our 529 college-savings plan
administration business and recorded an after-tax gain of $71 million.
FFELP Loans Segment
Our FFELP Loans segment consists of our FFELP Loan portfolio (approximately $104.6 billion as of
December 31, 2013) and the underlying debt and capital funding the loans. We are currently the largest holder of
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