Sallie Mae 2014 Annual Report Download - page 71

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• the creation of a governance structure, including a separation oversight committee of representatives from the
Company and Navient, by which matters related to the separation and other transactions contemplated by the
separation and distribution agreement will be monitored and managed.
Transition Services
During a transition period, Navient and its affiliates provided the Bank with significant servicing capabilities with respect
to Private Education Loans held by the Company and its subsidiaries. On October 13, 2014, we transitioned the Private
Education Loan servicing to our own platform. The last remaining significant operational transition left to be completed is the
transition of the loan origination function. We anticipate the completion of this transition to occur in the first half of 2015.
Beyond this transition period, it is currently anticipated that Navient will continue to service Private Education Loans owned by
the Company or its subsidiaries with respect to individual borrowers who also have Private Education Loans which are owned
by Navient, in order to optimize the customer’ s experience. In addition, Navient will continue to service and collect the Bank’s
portfolio of FFELP Loans indefinitely.
Indemnification Obligations
Navient has also agreed to be responsible, and indemnify us, for all claims, actions, damages, losses or expenses that may
arise from the conduct of all activities of pre-Spin-Off SLM occurring prior to the Spin-Off other than those specifically
excluded in the Separation and Distribution Agreement. Some significant examples of the types of indemnification obligations
Navient has under the Separation and Distribution Agreement and related ancillary agreements include:
• Pursuant to a tax sharing agreement, Navient has agreed to indemnify us for $283 million in deferred taxes that the
Company will be legally responsible for but that relate to gains recognized by the Company’s predecessor on debt
repurchases made prior to the Spin-Off. The remaining amount of this indemnification at December 31, 2014 is $224
million. In addition, Navient has agreed to indemnify us for tax assessments incurred related to identified uncertain tax
positions taken prior to the date of the Spin-Off. At December 31, 2014, we have recorded a receivable of $16 million
related to this indemnification.
• Navient has responsibility to assume new or ongoing litigation matters relating to the conduct of most pre-Spin-Off
SLM businesses operated or conducted prior to the Spin-Off.
• At the time of this filing, the Bank remains subject to a Consent Order, Order to Pay Restitution and Order to Pay Civil
Money Penalty dated May 13, 2014 issued by the 2014 FDIC Order. The 2014 FDIC Order replaces a prior cease and
desist order jointly issued in August 2008 by the FDIC and the UDFI which was terminated on July 15, 2014.
Specifically, on May 13, 2014, the Bank reached settlements with the FDIC and the DOJ regarding disclosures and
assessments of certain late fees, as well as compliance with the SCRA. The DOJ Order was approved by the U.S.
District Court for the District of Delaware on September 29, 2014. Under the FDIC’s 2014 Order, the Bank agreed to
pay $3.3 million in fines and oversee the refund of up to $30 million in late fees assessed on loans owned or originated
by the Bank since its inception in November 2005. Navient is responsible for funding all liabilities, restitution and
compensation under orders such as these, other than fines directly levied against the Bank.
Long-Term Arrangements
The Loan Servicing and Administration Agreement governs the terms by which Navient provides servicing,
administration and collection services for the Bank’s portfolio of FFELP Loans and Private Education Loans, as well as
servicing history information with respect to Private Education Loans previously serviced by Navient and access to certain
promissory notes in Navient’ s possession. The loan servicing and administration agreement has a fixed term with a renewal
option in favor of the Bank.
The Data Sharing Agreement states the Bank will continue to have the right to obtain from Navient certain post-Spin-Off
performance data relating to Private Education Loans owned or serviced by Navient to support and facilitate ongoing
underwriting, originations, forecasting, performance and reserve analyses.
The Tax Sharing Agreement governs the respective rights, responsibilities and obligations of the Company and Navient
after the Spin-Off relating to taxes, including with respect to the payment of taxes, the preparation and filing of tax returns and
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