Sallie Mae 2013 Annual Report Download - page 85

On December 23, 2011, the President signed the Consolidated Appropriations Act of 2012 into law. This
law includes changes that permit FFELP lenders or beneficial holders to change the index on which the Special
Allowance Payments (“SAP”) are calculated for FFELP Loans first disbursed on or after January 1, 2000. We
elected to use the one-month LIBOR rate rather than the CP rate commencing on April 1, 2012 in connection
with our entire $128 billion of CP indexed loans. This change will help us to better match loan yields with our
financing costs. This election did not materially affect our results for 2012.
As of December 31, 2013, our FFELP Loan portfolio totaled approximately $105 billion, comprised of
$40 billion of FFELP Stafford and $65 billion of FFELP Consolidation Loans. The weighted-average life of
these portfolios is 4.9 years and 9.3 years, respectively, assuming a Constant Prepayment Rate (“CPR”) of
4 percent and 3 percent, respectively.
Floor Income
The following table analyzes the ability of the FFELP Loans in our portfolio to earn Floor Income after
December 31, 2013 and 2012, based on interest rates as of those dates.
December 31, 2013 December 31, 2012
(Dollars in billions)
Fixed
Borrower
Rate
Variable
Borrower
Rate Total
Fixed
Borrower
Rate
Variable
Borrower
Rate Total
Student loans eligible to earn Floor Income ..... $89.9 $13.3 $103.2 $108.6 $15.1 $123.7
Less: post-March 31, 2006 disbursed loans
required to rebate Floor Income ............ (45.5) (.9) (46.4) (57.3) (1.0) (58.3)
Less: economically hedged Floor Income
Contracts .............................. (31.7) — (31.7) (35.2) — (35.2)
Student loans eligible to earn Floor Income ..... $12.7 $12.4 $ 25.1 $ 16.1 $14.1 $ 30.2
Student loans earning Floor Income ........... $12.7 $ .6 $ 13.3 $ 16.0 $ 2.0 $ 18.0
We have sold Floor Income Contracts to hedge the potential Floor Income from specifically identified pools
of FFELP Consolidation Loans that are eligible to earn Floor Income.
The following table presents a projection of the average balance of FFELP Consolidation Loans for which
Fixed Rate Floor Income has been economically hedged through Floor Income Contracts for the period
January 1, 2014 to June 30, 2016. The hedges related to these loans do not qualify as effective hedges.
Years Ended December 31,
(Dollars in billions) 2014 2015 2016
Average balance of FFELP Consolidation Loans whose Floor
Income is economically hedged ........................ $28.3 $27.2 $10.4
FFELP Loans Provision for Loan Losses and Charge-Offs
The following table summarizes the total FFELP Loan provision for loan losses and charge-offs.
Years Ended December 31,
(Dollars in millions) 2013 2012 2011
FFELP Loan provision for loan losses .................... $52 $72 $86
FFELP Loan charge-offs ............................... $78 $92 $78
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