Sallie Mae 2013 Annual Report Download - page 29

• certify and disburse all Private Education Loans through schools.
In 2009, we introduced, and SLM BankCo will continue to offer, the Smart Option private education loan
product emphasizing in-school payment features to minimize total finance charges. The product features three
repayment types. The first two, Interest Only and $25 Fixed Pay options, require monthly payments while the
student is in school and they accounted for approximately 56 percent of the Private Education Loans originated
during the fiscal year ended December 31, 2013. The third repayment option is the more traditional deferred
private education loan product where customers do not begin making payments until after graduation.
Private Education Loan Servicing
A subsidiary of SLM BankCo (“Private ServiceCo”) will provide servicing and loan collection for Private
Education Loans originated and held by Sallie Mae Bank, as well as those sold to third parties. As part of the
Spin-Off of the consumer banking business and the education loan management business, SLM BankCo will
obtain ownership, and transition into management and operation of, all assets and personnel needed to operate all
aspects of its Private Education Loan business from asset origination to asset servicing to asset funding. Over
time, SLM BankCo’s business plan contemplates seeking additional funding, liquidity and revenue from the sale
or securitization of loan assets it originates as well as the servicing of the loan assets it sells to third parties. SLM
BankCo’s business plan does not contemplate servicing financial assets originated by other institutions. The
physical and logistical separation of SLM BankCo’s servicing and collection platforms from those of NewCo is
currently expected to be completed within twelve months after completion of the Spin-Off, but could take
significantly longer. During that period, SLM BankCo’s Private Education Loan servicing will be conducted by
NewCo, Sallie Mae Bank and Private ServiceCo employees pursuant to various transition agreements. For
further detail on these agreements, see the section titled “SLM BankCo’s Post-Separation Relationship with
NewCo.”
Upromise
The Upromise save-for-college membership program stands alone as a consumer service committed
exclusively to helping Americans save money for higher education. Membership is free and each year more than
one million customers enroll as members to use the service. Members earn money for college by receiving cash
back when shopping at on-line or brick-and-mortar retailers, booking travel, dining out or buying gas or groceries
at participating merchants or by using their Upromise MasterCard. As of December 31, 2013, more than 1,000
merchants participated by providing discounts on purchases that are returned to the customer. Since inception,
Upromise members have saved approximately $800 million for college, and more than 340,000 members
actively use the Upromise credit card for everyday purchases.
Sallie Mae Insurance Services
Through the existing Sallie Mae Insurance Services venture, SLM BankCo will continue to partner with an
established insurance brokerage to offer America’s college students and young adults insurance programs that
address their unique life-stage needs, including tuition insurance, renters insurance, life insurance and auto
insurance.
SLM BankCo Funding Sources
Deposits
Sallie Mae Bank gathers low-cost retail deposits through its direct banking platform which serves as an
important source of funding. Sallie Mae Bank also utilizes brokered deposits as needed to supplement its funding
needs and enhance its liquidity position. As of December 31, 2013, Sallie Mae Bank had $9.3 billion of customer
deposits, representing 86 percent of interest earning assets, composed of $2.9 billion of retail deposits, $5.9
billion of brokered deposits and $0.5 billion of other deposits on a pro forma basis.
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