Edgar Filing: SLM CORP

e10vq

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q


(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended March 31, 2011
or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to

Commission File Number: 001-13251

SLM Corporation

(Exact name of registrant as specified in its charter)


Delaware		52-2013874
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

300 Continental Drive, Newark, Delaware		19713
(Address of principal executive offices)		(Zip Code)

(302) 283-8000

(Registrant’s telephone number, including area code)

12061 Bluemont Way, Reston, Virginia 20190

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:


Class		Outstanding at April 30, 2011

Voting common stock, $.20 par value		527,420,754 shares

SLM CORPORATION

FORM 10-Q
INDEX
March 31, 2011


Part I. Financial Information
	Item 1.	Financial Statements	2
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	73
	Item 4.	Controls and Procedures	79
PART II. Other Information
	Item 1.	Legal Proceedings	80
	Item 1A.	Risk Factors	80
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	81
	Item 3.	Defaults Upon Senior Securities	81
	Item 4.	(Removed and Reserved)	81
	Item 5.	Other Information	81
	Item 6.	Exhibits	82
Signatures			83
Glossary⁽¹⁾			84


⁽¹⁾		Definitions for capitalized terms used in this document can be found in the “Glossary” at the end of this document.

PART I. FINANCIAL INFORMATION


Item 1.	Financial Statements

SLM CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars and shares in thousands, except per share amounts)
(Unaudited)


	March 31,			December 31,
	2011			2010

Assets
FFELP Loans (net of allowance for losses of $190,235 and $188,858, respectively)	$	145,558,134		$	148,649,400
Private Education Loans (net of allowance for losses of $2,034,318 and $2,021,580, respectively)		35,966,019			35,655,724
Investments
Available-for-sale		78,296			83,048
Other		813,322			873,376

Total investments		891,618			956,424
Cash and cash equivalents		3,871,476			4,342,327
Restricted cash and investments		6,393,243			6,254,493
Goodwill and acquired intangible assets, net		472,345			478,409
Other assets		10,201,973			8,970,272

Total assets	$	203,354,808		$	205,307,049

Liabilities
Short-term borrowings	$	32,316,856		$	33,615,856
Long-term borrowings		161,886,309			163,543,504
Other liabilities		3,944,556			3,136,111

Total liabilities		198,147,721			200,295,471

Commitments and contingencies
Equity
Preferred stock, par value $.20 per share, 20,000 shares authorized:
Series A: 3,300 and 3,300 shares, respectively, issued at stated value of $50 per share		165,000			165,000
Series B: 4,000 and 4,000 shares, respectively, issued at stated value of $100 per share		400,000			400,000
Common stock, par value $.20 per share, 1,125,000 shares authorized: 527,494 and 595,263 shares issued, respectively		105,499			119,053
Additional paid-in capital		4,092,334			5,939,838
Accumulated other comprehensive loss (net of tax benefit of $20,417 and $25,758, respectively)		(35,401	)		(44,664	)
Retained earnings		479,655			308,839

Total equity before treasury stock		5,207,087			6,888,066
Common stock held in treasury at cost: 0 and 68,320 shares, respectively		—			1,876,488

Total equity		5,207,087			5,011,578

Total liabilities and equity	$	203,354,808		$	205,307,049

Supplemental information — assets and liabilities of consolidated variable interest entities:


	March 31,		December 31,
	2011		2010

FFELP Loans, net	$	142,271,427	$	145,750,016
Private Education Loans, net		23,898,923		24,355,683
Restricted cash and investments		6,083,081		5,983,080
Other assets		4,173,741		3,705,716
Short-term borrowings		23,897,738		24,484,353
Long-term borrowings		139,928,763		142,243,771

Net assets of consolidated variable interest entities	$	12,600,671	$	13,066,371

See accompanying notes to consolidated financial statements.

SLM CORPORATION

CONSOLIDATED STATEMENTS OF INCOME
(Dollars and shares in thousands, except per share amounts)
(Unaudited)


	Three Months Ended March 31,
	2011			2010

Interest income:
FFELP Loans	$	877,378		$	806,762
Private Education Loans		603,933			565,154
Other loans		5,911			8,996
Cash and investments		5,339			4,949

Total interest income		1,492,561			1,385,861
Total interest expense		594,595			531,384

Net interest income		897,966			854,477
Less: provisions for loan losses		303,405			359,120

Net interest income after provisions for loan losses		594,561			495,357

Other income (loss):
Gains on sales of loans and securities, net		—			8,653
Losses on derivative and hedging activities, net		(241,882	)		(82,410	)
Servicing revenue		98,252			122,272
Contingency revenue		78,381			80,312
Gains on debt repurchases		37,903			90,081
Other		21,745			13,800

Total other income (loss)		(5,601	)		232,708

Expenses:
Salaries and benefits		135,441			149,102
Other operating expenses		167,759			138,533

Total operating expenses		303,200			287,635
Goodwill and acquired intangible assets impairment and amortization expense		6,064			9,712
Restructuring expenses		3,561			24,804

Total expenses		312,825			322,151

Income from continuing operations, before income tax expense		276,135			405,914
Income tax expense		99,711			159,160

Net income from continuing operations		176,424			246,754
Loss from discontinued operations, net of tax benefit		(1,730	)		(6,614	)

Net income		174,694			240,140
Preferred stock dividends		3,878			18,678

Net income attributable to common stock	$	170,816		$	221,462

Basic earnings (loss) per common share:
Continuing operations	$	.32		$	.47
Discontinued operations		—			(.01	)

Total	$	.32		$	.46

Average common shares outstanding		526,746			484,259

Diluted earnings (loss) per common share:
Continuing operations	$	.32		$	.46
Discontinued operations		—			(.01	)

Total	$	.32		$	.45

Average common and common equivalent shares outstanding		531,964			526,631

Dividends per common share	$	—		$	—

See accompanying notes to consolidated financial statements.

SLM CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Dollars in thousands, except share and per share amounts)
(Unaudited)


																				Accumulated
	Preferred																Additional			Other									Total
	Stock		Common Stock Shares									Preferred		Common			Paid-In			Comprehensive			Retained			Treasury			Stockholders’			Noncontrolling		Total
	Shares		Issued			Treasury			Outstanding			Stock		Stock			Capital			Income (Loss)			Earnings			Stock			Equity			Interest		Equity

Balance at December 31, 2009		8,110,370		552,219,576			(67,221,942	)		484,997,634		$	1,375,370	$	110,444		$	5,090,891		$	(40,825	)	$	604,467		$	(1,861,738	)	$	5,278,609		$	13	$	5,278,622
Comprehensive income:
Net income																								240,140						240,140					240,140
Other comprehensive income, net of tax:
Change in unrealized gains (losses) on investments, net of tax																					63									63					63
Change in unrealized gains (losses) on derivatives, net of tax																					(1,712	)								(1,712	)				(1,712	)
Defined benefit pension plans adjustment																					(37	)								(37	)				(37	)

Comprehensive income																														238,454					238,454
Cash dividends:
Preferred stock, series A ($.87 per share)																								(2,875	)					(2,875	)				(2,875	)
Preferred stock, series B ($.24 per share)																								(955	)					(955	)				(955	)
Preferred stock, series C ($18.13 per share)																								(14,688	)					(14,688	)				(14,688	)
Restricted stock dividend																								(11	)					(11	)				(11	)
Issuance of common shares				1,188,209						1,188,209					238			6,401												6,639					6,639
Preferred stock issuance costs and related amortization																		160						(160	)					—					—
Tax benefit related to employee stock option and purchase plans																		(3,593	)											(3,593	)				(3,593	)
Stock-based compensation cost																		12,235												12,235					12,235
Cumulative effect of accounting change																								(753,856	)					(753,856	)				(753,856	)
Repurchase of common shares:
Benefit plans							(341,846	)		(341,846	)																(4,282	)		(4,282	)				(4,282	)
Noncontrolling interest — other																														—			6		6

Balance at March 31, 2010		8,110,370		553,407,785			(67,563,788	)		485,843,997		$	1,375,370	$	110,682		$	5,106,094		$	(42,511	)	$	72,062		$	(1,866,020	)	$	4,755,677		$	19	$	4,755,696

Balance at December 31, 2010		7,300,000		595,263,474			(68,319,589	)		526,943,885		$	565,000	$	119,053		$	5,939,838		$	(44,664	)	$	308,839		$	(1,876,488	)	$	5,011,578		$	—	$	5,011,578
Comprehensive income:
Net income																								174,694						174,694					174,694
Other comprehensive income, net of tax:
Change in unrealized gains (losses) on investments, net of tax																					(319	)								(319	)				(319	)
Change in unrealized gains (losses) on derivatives, net of tax																					9,374									9,374					9,374
Defined benefit pension plans adjustment																					208									208					208

Comprehensive income																														183,957					183,957
Cash dividends:
Preferred stock, series A ($.87 per share)																								(2,875	)					(2,875	)				(2,875	)
Preferred stock, series B ($.32 per share)																								(1,003	)					(1,003	)				(1,003	)
Issuance of common shares				2,304,659						2,304,659					461			22,474												22,935					22,935
Retirement of common stock in treasury				(70,074,369	)		70,074,369			—					(14,015	)		(1,889,891	)								1,903,906			—					—
Tax benefit related to employee stock option and purchase plans																		(5,079	)											(5,079	)				(5,079	)
Stock-based compensation cost																		24,992												24,992					24,992
Repurchase of common shares:
Benefit plans							(1,754,780	)		(1,754,780	)																(27,418	)		(27,418	)				(27,418	)

Balance at March 31, 2011		7,300,000		527,493,764			—			527,493,764		$	565,000	$	105,499		$	4,092,334		$	(35,401	)	$	479,655		$	—		$	5,207,087		$	—	$	5,207,087

See accompanying notes to consolidated financial statements.

SLM CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)


	Three Months Ended
	March 31,
	2011			2010

Operating activities
Net income	$	174,694		$	240,140
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Loss from discontinued operations, net of tax		1,730			6,614
Gains on sale of loans and securities, net		—			(8,653	)
Gains on debt repurchases		(37,903	)		(90,081	)
Goodwill and acquired intangible assets impairment and amortization expense		6,064			9,712
Stock-based compensation expense		24,992			12,278
Unrealized (gains)/losses on derivative and hedging activities		56,796			(122,044	)
Provisions for loan losses		303,405			359,120
Student loans originated for sale, net		—			(6,722,387	)
Decrease in restricted cash — other		53,904			25,755
(Increase) in accrued interest receivable		(103,934	)		(158,066	)
Increase in accrued interest payable		145,645			79,833
Decrease in other assets		212,287			821,729
(Decrease) in other liabilities		(78,761	)		(3,366	)

Total adjustments		584,225			(5,789,556	)

Total net cash provided by (used in) operating activities		758,919			(5,549,416	)

Investing activities
Student loans acquired and originated		(1,278,529	)		(1,689,074	)
Reduction of student loans:
Installment payments, claims and other		4,551,933			3,484,121
Proceeds from sales of student loans		188,520			75,493
Other loans — repaid		14,699			82,688
Other investing activities, net		(955,202	)		(911,947	)
Purchases of available-for-sale securities		(70,534	)		(18,688,583	)
Proceeds from maturities of available-for-sale securities		53,444			19,182,117
Purchases of other securities		(50,063	)		(10,458	)
Proceeds from maturities of other securities		67,394			39,007
(Increase) in restricted cash		(91,823	)		(52,489	)

Cash provided by investing activities — continuing operations		2,429,839			1,510,875

Cash provided by investing activities — discontinued operations		28,424			42,752

Total net cash provided by investing activities		2,458,263			1,553,627

Financing activities
Borrowings collateralized by loans in trust — issued		818,447			1,544,073
Borrowings collateralized by loans in trust — repaid		(2,712,317	)		(2,099,724	)
Asset-backed commercial paper conduits, net		(1,237,935	)		(441,723	)
ED Participation Program, net		—			6,740,199
ED Conduit Program facility, net		(911,868	)		368,537
Other long-term borrowings issued		1,966,802			1,463,534
Other long-term borrowings repaid		(1,814,721	)		(2,541,703	)
Other financing activities, net		206,605			(247,746	)
Excess tax benefit from the exercise of stock-based awards		832			100
Common stock issued		—			11
Preferred dividends paid		(3,878	)		(18,517	)
Noncontrolling interest, net		—			(363	)

Net cash (used in) provided by financing activities		(3,688,033	)		4,766,678

Net (decrease) increase in cash and cash equivalents		(470,851	)		770,889
Cash and cash equivalents at beginning of period		4,342,327			6,070,013

Cash and cash equivalents at end of period	$	3,871,476		$	6,840,902

Cash disbursements made (refunds received) for:
Interest	$	612,519		$	549,075

Income taxes paid	$	165,243		$	5,097

Income taxes (received)	$	(18,008	)	$	(498,229	)

See accompanying notes to consolidated financial statements.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information at March 31, 2011 and for the three months ended

March 31, 2011 and 2010 is unaudited)

(Dollars in thousands, except per share amounts, unless otherwise noted)


1.	Significant Accounting Policies

Basis of Presentation

The accompanying unaudited, consolidated financial statements of SLM Corporation (“we,” “us,” “our,” or the “Company”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair statement of the results for the interim periods have been included. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Operating results for the three months ended March 31, 2011 are not necessarily indicative of the results for the year ending December 31, 2011. These unaudited financial statements should be read in conjunction with the audited financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2010 (the “2010 Form 10-K”).

Reclassifications

Certain reclassifications have been made to the balances as of and for the three months ended March 31, 2010 to be consistent with classifications adopted for 2011, and had no effect on net income, total assets, or total liabilities.

Recently Issued Accounting Standards

Troubled Debt Restructurings

In April 2011, the Financial Accounting Standards Board released Accounting Standards Update No. 2011-02, Receivables, which provides clarification for creditors in determining whether or not a restructuring of a loan is considered a troubled debt restructuring. This new guidance is effective for us as of July 1, 2011; but will be applied retrospectively to January 1, 2011 upon adoption. We may identify student loans that are considered a troubled debt restructuring that were previously not and this may require us to increase the amount of recorded impairment. We are currently evaluating the new guidance and have not yet determined what effect, if any, it will have on our consolidated financial statements.


2.	Allowance for Loan Losses

Our provisions for loan losses represent the periodic expense of maintaining an allowance sufficient to absorb incurred losses, net of expected recoveries, in the held-for-investment loan portfolios. The evaluation of the provisions for student loan losses is inherently subjective as it requires material estimates that may be susceptible to significant changes. We believe that the allowance for student loan losses is appropriate to cover probable losses incurred in the loan portfolios. We segregate our Private Education Loan portfolio into two classes of loans — traditional and non-traditional. Non-traditional loans are loans to borrowers attending for-profit schools with an original FICO score of less than 670 and borrowers attending not-for-profit schools with an original FICO score of less than 640. The FICO score used in determining whether a loan is non-traditional is the greater of the borrower or co-borrower FICO score at origination. Traditional loans are defined as all other Private Education Loans that are not classified as non-traditional.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Information at March 31, 2011 and for the three months ended

March 31, 2011 and 2010 is unaudited)

(Dollars in thousands, except per share amounts, unless otherwise noted)


2.	Allowance for Loan Losses (Continued)

In determining the allowance for loan losses, we estimate the principal amount of loans that will default over the next two years (two years being the expected period between a loss event and default). In the first quarter of 2011, we implemented a new model to estimate these Private Education Loan defaults. Both the prior model and new model are considered “migration models”. Our prior allowance model (in place through December 31, 2010) segmented the portfolio into categories of similar risk characteristics based on loan program type, school type, loan status, seasoning, underwriting criteria (credit scores) and the existence or absence of a cosigner using school type, credit scores, cosigner status, loan status and seasoning as the primary risk characteristics. Our new model uses these same primary risk characteristics but also further segments the portfolio by the number of months the loan is in its repayment period (seasoning). While our previous allowance process incorporated the impact of seasoning, the new model more directly incorporates this aspect. Another change in the new allowance model relates to the historical period of experience that we use as a starting point for projecting future defaults. Our new model is based upon a seasonal average, adjusted to the previous three to six months of actual collection experience as the starting point and applies expected macroeconomic changes and collection procedure changes to estimate expected losses caused by loss events incurred as of the balance sheet date. Our previous model primarily used a one year historical default experience period and did not include the ability to directly model an economic expectation or collection procedure change. As a result, the previous allowance process included qualitative adjustments for these factors. As such, the new model is less dependent on a long look-back period because we do not believe that our delinquency and default experience over the past few years is indicative of the probable losses incurred in the loan portfolio today. While the model we use as a part of the allowance for loan losses process changed in the first quarter, the overall process for calculating the appropriate amount of allowance for Private Education Loan loss as disclosed in the 2010 Form 10-K has not changed. The new model is more reactive to recent borrower behavior, loan performance, and collection performance, as well as expectations about economic factors. There was no adjustment to our allowance for loan loss upon implementing this new default projection model in the first quarter of 2011. In addition, there was no change in how we estimate the amount we will recover over time related to these defaulted amounts.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Information at March 31, 2011 and for the three months ended

March 31, 2011 and 2010 is unaudited)

(Dollars in thousands, except per share amounts, unless otherwise noted)


2.	Allowance for Loan Losses (Continued)


	Allowance for Loan Losses
	Three Months Ended March 31, 2011
				Private Education			Other
	FFELP Loans			Loans			Loans			Total

Allowance for Loan Losses
Beginning balance	$	188,858		$	2,021,580		$	72,516		$	2,282,954
Total provision		23,122			275,048			5,235			303,405
Charge-offs		(20,313	)		(273,002	)		(3,954	)		(297,269	)
Loan sales		(1,432	)		—			—			(1,432	)
Reclassification of interest reserve⁽¹⁾		—			10,692			—			10,692

Ending Balance	$	190,235		$	2,034,318		$	73,797		$	2,298,350

Allowance:
Ending balance: individually evaluated for impairment	$	—		$	122,862		$	61,309		$	184,171
Ending balance: collectively evaluated for impairment	$	190,235		$	1,911,456		$	12,488		$	2,114,179
Ending balance: loans acquired with deteriorated credit quality	$	—		$	—		$	—		$	—
Loans:
Ending balance: individually evaluated for impairment	$	—		$	474,550		$	115,693		$	590,243
Ending balance: collectively evaluated for impairment	$	143,916,560		$	38,402,114		$	207,657			182,526,331
Ending balance: loans acquired with deteriorated credit quality	$	—		$	—		$	—		$	—
Charge-offs as a percentage of average loans in repayment and forbearance (annualized)		.07	%		3.8	%		—	%
Charge-offs as a percentage of average loans in repayment (annualized)		.09	%		3.9	%		—	%
Allowance as a percentage of the ending total loan balance		.13	%		5.2	%		22.8	%
Allowance as a percentage of the ending loans in repayment		.20	%		7.2	%		—	%
Allowance coverage of charge-offs (annualized)		2.3			1.8			4.6
Ending total loans⁽²⁾	$	143,916,560		$	38,876,664		$	323,350
Average loans in repayment	$	95,504,452		$	28,127,066		$	—
Ending loans in repayment	$	94,309,517		$	28,120,260		$	—


⁽¹⁾		Represents the additional allowance related to the amount of uncollectible interest reserved within interest income that is transferred in the period to the allowance for loan losses when interest is capitalized to a loan’s principal balance.

⁽²⁾		Ending total loans for Private Education Loans includes the receivable for partially charged-off loans.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Information at March 31, 2011 and for the three months ended

March 31, 2011 and 2010 is unaudited)

(Dollars in thousands, except per share amounts, unless otherwise noted)


2.	Allowance for Loan Losses (Continued)


	Allowance for Loan Losses
	Three Months Ended March 31, 2010
				Private Education			Other
	FFELP Loans			Loans			Loans			Total

Allowance for Loan Losses
Beginning balance	$	161,168		$	1,443,440		$	76,261		$	1,680,869
Total provision		22,996			325,022			11,102			359,120
Charge-offs		(21,404	)		(284,478	)		(8,699	)		(314,581	)
Loan sales		(1,694	)		—			—			(1,694	)
Reclassification of interest reserve⁽¹⁾		—			10,642			—			10,642
Consolidation of securitization trusts⁽²⁾		25,149			524,050			—			549,199

Ending Balance	$	186,215		$	2,018,676		$	78,664		$	2,283,555

Allowance:
Ending balance: individually evaluated for impairment	$	—		$	63,503		$	60,844		$	124,347
Ending balance: collectively evaluated for impairment	$	186,215		$	1,955,173		$	17,820		$	2,159,208
Ending balance: loans acquired with deteriorated credit quality	$	—		$	—		$	—		$	—
Loans:
Ending balance: individually evaluated for impairment	$	—		$	314,910		$	125,286		$	440,196
Ending balance: collectively evaluated for impairment	$	143,914,476		$	37,978,010		$	286,449		$	182,178,935
Ending balance: loans acquired with deteriorated credit quality	$	—		$	—		$	—		$	—
Charge-offs as a percentage of average loans in repayment and forbearance (annualized)		.09	%		4.4	%		—	%
Charge-offs as a percentage of average loans in repayment (annualized)		.11	%		4.7	%		—	%
Allowance as a percentage of the ending total loan balance		.13	%		5.3	%		19.1	%
Allowance as a percentage of the ending loans in repayment		.23	%		8.2	%		—	%
Allowance coverage of charge-offs (annualized)		2.1			1.7			2.2
Ending total loans⁽³⁾	$	143,914,476		$	38,292,920		$	411,735
Average loans in repayment	$	82,437,527		$	24,645,633		$	—
Ending loans in repayment	$	82,457,392		$	24,705,990		$	—


⁽¹⁾		Represents the additional allowance related to the amount of uncollectible interest reserved within interest income that is transferred in the period to the allowance for loan losses when interest is capitalized to a loan’s principal balance.

⁽²⁾		Upon the adoption of the new consolidation accounting guidance on January 1, 2010, we consolidated all of our previously off-balance sheet securitization trusts.

⁽³⁾		Ending total loans for Private Education Loans includes the receivable for partially charged-off loans.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Information at March 31, 2011 and for the three months ended

March 31, 2011 and 2010 is unaudited)

(Dollars in thousands, except per share amounts, unless otherwise noted)


2.	Allowance for Loan Losses (Continued)

The following tables provide information regarding the loan status and aging of past due loans as of March 31, 2011 and December 31, 2010.


	FFELP Loan Delinquencies
	March 31,						December 31,
	2011						2010
(Dollars in millions)	Balance			%			Balance			%

Loans in-school/grace/deferment⁽¹⁾	$	27,773					$	28,214
Loans in forbearance⁽²⁾		21,834						22,028
Loans in repayment and percentage of each status:
Loans current		78,756			83.5	%		80,026			82.8	%
Loans delinquent 31-60 days⁽³⁾		5,050			5.4			5,500			5.7
Loans delinquent 61-90 days⁽³⁾		3,069			3.2			3,178			3.3
Loans delinquent greater than 90 days⁽³⁾		7,434			7.9			7,992			8.2

Total FFELP Loans in repayment		94,309			100	%		96,696			100	%

Total FFELP Loans, gross		143,916						146,938
FFELP Loan unamortized premium		1,832						1,900

Total FFELP Loans		145,748						148,838
FFELP Loan allowance for losses		(190	)					(189	)

FFELP Loans, net	$	145,558					$	148,649

Percentage of FFELP Loans in repayment					65.5	%					65.8	%

Delinquencies as a percentage of FFELP Loans in repayment					16.5	%					17.2	%

FFELP Loans in forbearance as a percentage of loans in repayment and forbearance					18.8	%					18.6	%


⁽¹⁾		Loans for borrowers who may still be attending school or engaging in other permitted educational activities and are not yet required to make payments on the loans, e.g., residency periods for medical students or a grace period for bar exam preparation, as well as loans for borrowers who have requested extension of grace period during employment transition.

⁽²⁾		Loans for borrowers who have used their allowable deferment time or do not qualify for deferment, that need additional time to obtain employment or who have temporarily ceased making payments due to hardship or other factors.

⁽³⁾		The period of delinquency is based on the number of days scheduled payments are contractually past due.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Information at March 31, 2011 and for the three months ended

March 31, 2011 and 2010 is unaudited)

(Dollars in thousands, except per share amounts, unless otherwise noted)


2.	Allowance for Loan Losses (Continued)


	Private Education Traditional Loan Delinquencies
	March 31,						December 31,
	2011						2010
(Dollars in millions)	Balance			%			Balance			%

Loans in-school/grace/deferment⁽¹⁾	$	7,414					$	7,419
Loans in forbearance⁽²⁾		1,155						1,156
Loans in repayment and percentage of each status:
Loans current		23,193			91.3	%		22,850			91.2	%
Loans delinquent 31-60 days⁽³⁾		745			2.9			794			3.2
Loans delinquent 61-90 days⁽³⁾		424			1.7			340			1.4
Loans delinquent greater than 90 days⁽³⁾		1,039			4.1			1,060			4.2

Total traditional loans in repayment		25,401			100	%		25,044			100	%

Total traditional loans, gross		33,970						33,619
Traditional loans unamortized discount		(788	)					(801	)

Total traditional loans		33,182						32,818
Traditional loans receivable for partially charged-off loans		593						558
Traditional loans allowance for losses		(1,298	)					(1,231	)

Traditional loans, net	$	32,477					$	32,145

Percentage of traditional loans in repayment					74.8	%					74.5	%

Delinquencies as a percentage of traditional loans in repayment					8.7	%					8.8	%

Loans in forbearance as a percentage of loans in repayment and forbearance					4.4	%					4.4	%

Loans in repayment greater than 12 months as a percentage of loans in repayment⁽⁴⁾					69.8	%					67.9	%


⁽¹⁾		Loans for borrowers who may still be attending school or engaging in other permitted educational activities and are not yet required to make payments on the loans, e.g., residency periods for medical students or a grace period for bar exam preparation.

⁽²⁾		Loans for borrowers who have requested extension of grace period generally during employment transition or who have temporarily ceased making payments due to hardship or other factors, consistent with established loan program servicing policies and procedures.

⁽³⁾		The period of delinquency is based on the number of days scheduled payments are contractually past due.

⁽⁴⁾		Based on number of months in an active repayment status for which a scheduled monthly payment was due.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Information at March 31, 2011 and for the three months ended

March 31, 2011 and 2010 is unaudited)

(Dollars in thousands, except per share amounts, unless otherwise noted)


2.	Allowance for Loan Losses (Continued)


	Private Education Non-Traditional Loan Delinquencies
	March 31,						December 31,
	2011						2010
(Dollars in millions)	Balance			%			Balance			%

Loans in-school/grace/deferment⁽¹⁾	$	909					$	921
Loans in forbearance⁽²⁾		188						184
Loans in repayment and percentage of each status:
Loans current		2,002			73.6	%		2,038			72.6	%
Loans delinquent 31-60 days⁽³⁾		185			6.8			217			7.7
Loans delinquent 61-90 days⁽³⁾		140			5.2			131			4.7
Loans delinquent greater than 90 days⁽³⁾		392			14.4			422			15.0

Total non-traditional loans in repayment		2,719			100	%		2,808			100	%

Total non-traditional loans, gross		3,816						3,913
Non-traditional loans unamortized discount		(88	)					(93	)

Total non-traditional loans		3,728						3,820
Non-traditional loans receivable for partially charged-off loans		497						482
Non-traditional loans allowance for losses		(736	)					(791	)

Non-traditional loans, net	$	3,489					$	3,511

Percentage of non-traditional loans in repayment					71.3	%					71.8	%

Delinquencies as a percentage of non-traditional loans in repayment					26.4	%					27.4	%

Loans in forbearance as a percentage of loans in repayment and forbearance					6.5	%					6.1	%

Loans in repayment greater than 12 months as a percentage of loans in repayment⁽⁴⁾					64.8	%					61.3	%


⁽¹⁾		Loans for borrowers who may still be attending school or engaging in other permitted educational activities and are not yet required to make payments on the loans, e.g., residency periods for medical students or a grace period for bar exam preparation.

⁽²⁾		Loans for borrowers who have requested extension of grace period generally during employment transition or who have temporarily ceased making payments due to hardship or other factors, consistent with established loan program servicing policies and procedures.

⁽³⁾		The period of delinquency is based on the number of days scheduled payments are contractually past due.

⁽⁴⁾		Based on number of months in an active repayment status for which a scheduled monthly payment was due.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Information at March 31, 2011 and for the three months ended

March 31, 2011 and 2010 is unaudited)

(Dollars in thousands, except per share amounts, unless otherwise noted)


2.	Allowance for Loan Losses (Continued)

The following table provides information regarding accrued interest receivable on our Private Education Loans at March 31, 2011 and December 31, 2010. The table also discloses the amount of accrued interest on loans greater than 90 days past due as compared to our allowance for uncollectible interest. The allowance for uncollectible interest exceeds the amount of accrued interest on our 90 days past due portfolio for all periods presented.


	Accrued Interest Receivable
			Greater than		Allowance for
			90 days		Uncollectible
	Total		Past Due		Interest

March 31, 2011
Private Education Loans — Traditional	$	1,033,242	$	34,922	$	47,527
Private Education Loans — Non-Traditional		195,200		19,287		36,810

Total	$	1,228,442	$	54,209	$	84,337

December 31, 2010
Private Education Loans — Traditional	$	1,062,289	$	34,644	$	56,755
Private Education Loans — Non-Traditional		208,587		20,270		37,057

Total	$	1,270,876	$	54,914	$	93,812

FFELP Loans are substantially guaranteed as to their principal and accrued interest in the event of default, therefore, the key credit quality indicator for this portfolio is loan status. The impact of changes in loan status is incorporated quarterly into the allowance for loan losses calculation. For Private Education Loans, the key credit quality indicators are the school type/FICO scores, the existence of a cosigner, the loan status and loan seasoning. The school type/FICO score are assessed at origination and maintained through the traditional/non-traditional loan designation. The other Private Education Loan key quality indicators can

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Information at March 31, 2011 and for the three months ended

March 31, 2011 and 2010 is unaudited)

(Dollars in thousands, except per share amounts, unless otherwise noted)


2.	Allowance for Loan Losses (Continued)

change and are incorporated quarterly into the allowance for loan losses calculation. The following table highlights the principal balance (excluding the receivable for partially charged-off loans) of our Private Education Loan portfolio stratified by the key credit quality indicators.


	Private Education Loans
	Credit Quality Indicators
	March 31, 2011					December 31, 2010
(Dollars in millions)	Balance⁽³⁾		% of Balance			Balance⁽³⁾		% of Balance

Credit Quality Indicators
School Type/FICO Scores:
Traditional	$	33,970		90	%	$	33,619		90	%
Non-Traditional⁽¹⁾		3,816		10			3,913		10

Total	$	37,786		100	%	$	37,532		100	%

Cosigners:
With cosigner	$	22,727		60	%	$	22,259		59	%
Without cosigner		15,059		40			15,273		41

Total	$	37,786		100	%	$	37,532		100	%

Seasoning⁽²⁾:
1-12 payments	$	9,453		25	%	$	9,963		27	%
13-24 payments		6,934		18			6,951		19
25-36 payments		4,765		13			4,675		12
37-48 payments		3,200		8			3,019		8
More than 48 payments		5,111		14			4,584		12
Not yet in repayment		8,323		22			8,340		22

Total	$	37,786		100	%	$	37,532		100	%


⁽¹⁾		Defined as loans to borrowers attending for-profit schools (with a FICO score of less than 670 at origination) and borrowers attending not-for-profit schools (with a FICO score of less than 640 at origination).

⁽²⁾		Number of months in active repayment for which a scheduled payment was due.

⁽³⁾		Balance represents gross Private Education Loans.

We offer temporary interest rate reductions to Private Education Loan borrowers who are both experiencing financial difficulties and meet other criteria. At March 31, 2011 and December 31, 2010, approximately $475 million and $444 million, respectively, had qualified at some point for an interest rate reduction modification since the inception of the program in May 2009. These modifications met the criteria of a troubled debt restructuring in accordance with ASC 310-40 Receivables — Troubled Debt Restructurings by Creditors and are individually evaluated for impairment. The allowance for loan losses associated with these loans was $123 million and $114 million at March 31, 2011 and December 31, 2010, respectively. Subsequent to modification, $70 million and $53 million defaulted through March 31, 2011 and December 31, 2010, respectively. At March 31, 2011 and December 31, 2010, approximately $235 million and $257 million, respectively, had qualified for the program and were currently receiving a reduction in their interest rate.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Information at March 31, 2011 and for the three months ended

March 31, 2011 and 2010 is unaudited)

(Dollars in thousands, except per share amounts, unless otherwise noted)


3.	Borrowings

The following table summarizes our borrowings as of March 31, 2011 and December 31, 2010.


	March 31, 2011						December 31, 2010
	Short		Long				Short		Long
(Dollars in millions)	Term		Term		Total		Term		Term		Total

Unsecured borrowings:
Senior unsecured debt	$	3,741	$	16,894	$	20,635	$	4,361	$	15,742	$	20,103
Brokered deposits		1,324		2,808		4,132		1,387		3,160		4,547
Retail and other deposits		1,500		—		1,500		1,370		—		1,370
Other⁽¹⁾		1,064		—		1,064		887		—		887

Subtotal unsecured borrowings		7,629		19,702		27,331		8,005		18,902		26,907

Secured borrowings:
FFELP Loans securitizations		—		111,042		111,042		—		112,425		112,425
Private Education Loans securitizations		—		20,983		20,983		—		21,409		21,409
ED Conduit Program facility		23,573		—		23,573		24,484		—		24,484
ABCP borrowings		325		4,671		4,996		—		5,853		5,853
Acquisition financing⁽²⁾		—		1,064		1,064		—		1,064		1,064
FHLB-DM facility		525		—		525		900		—		900
Indentured trusts		—		1,187		1,187		—		1,246		1,246

Subtotal secured borrowings		24,423		138,947		163,370		25,384		141,997		167,381

Total before hedge accounting adjustments		32,052		158,649		190,701		33,389		160,899		194,288
Hedge accounting adjustments		265		3,237		3,502		227		2,644		2,871

Total	$	32,317	$	161,886	$	194,203	$	33,616	$	163,543	$	197,159


⁽¹⁾		“Other” primarily consists of cash collateral held related to derivative exposures that are recorded as a short-term debt obligation.

⁽²⁾		Relates to the acquisition of the $25 billion of student loans at the end of 2010.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Information at March 31, 2011 and for the three months ended

March 31, 2011 and 2010 is unaudited)

(Dollars in thousands, except per share amounts, unless otherwise noted)


3.	Borrowings (Continued)

Secured Borrowings

We currently consolidate all of our financing entities that are VIEs as a result of being the entities’ primary beneficiary. As a result, these financing VIEs are accounted for as secured borrowings. We consolidate the following financing VIEs as of March 31, 2011 and December 31, 2010:


	March 31, 2011
	Debt Outstanding						Carrying Amount of Assets Securing Debt
	Short		Long				Outstanding
(Dollars in millions)	Term		Term		Total		Loans		Cash		Other Assets		Total

Secured Borrowings:
ED Conduit Program Facility	$	23,573	$	—	$	23,573	$	23,572	$	680	$	619	$	24,871
ABCP borrowings		325		4,671		4,996		5,383		91		46		5,520
Securitizations — FFELP Loans		—		111,042		111,042		111,833		3,924		609		116,366
Securitizations — Private Education Loans		—		20,983		20,983		23,899		1,246		958		26,103
Indentured trusts		—		1,187		1,187		1,484		141		14		1,639

Total before hedge accounting adjustments		23,898		137,883		161,781		166,171		6,082		2,246		174,499
Hedge accounting adjustments		—		2,046		2,046		—		—		1,929		1,929

Total	$	23,898	$	139,929	$	163,827	$	166,171	$	6,082	$	4,175	$	176,428

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Information at March 31, 2011 and for the three months ended

March 31, 2011 and 2010 is unaudited)

(Dollars in thousands, except per share amounts, unless otherwise noted)


3.	Borrowings (Continued)


	December 31, 2010
	Debt Outstanding						Carrying Amount of Assets Securing Debt
	Short		Long				Outstanding
(Dollars in millions)	Term		Term		Total		Loans		Cash		Other Assets		Total

Secured Borrowings:
ED Conduit Program Facility	$	24,484	$	—	$	24,484	$	24,511	$	819	$	634	$	25,964
ABCP borrowings		—		5,853		5,853		6,290		94		53		6,437
Securitizations — FFELP Loans		—		112,425		112,425		113,400		3,728		966		118,094
Securitizations — Private Education Loans		—		21,409		21,409		24,355		1,213		690		26,258
Indentured trusts		—		1,246		1,246		1,549		129		15		1,693

Total before hedge accounting adjustments		24,484		140,933		165,417		170,105		5,983		2,358		178,446
Hedge accounting adjustments		—		1,311		1,311		—		—		1,348		1,348

Total	$	24,484	$	142,244	$	166,728	$	170,105	$	5,983	$	3,706	$	179,794

On April 26, 2011, we issued a $562 million Private Education Loan ABS transaction at an all-in LIBOR equivalent cost of one-month LIBOR plus 1.99 percent. This issue has a weighted average life of 3.8 years and initial over-collateralization of approximately 21 percent.

On March 3, 2011, we issued an $812 million FFELP ABS transaction at an all-in LIBOR equivalent cost of one-month LIBOR plus 1.14 percent. This issue has a weighted average life of 5.8 years and initial over-collateralization of approximately 3 percent.

On January 14, 2011, we issued a $2 billion five-year 6.25 percent fixed rate unsecured bond. The bond was issued to yield 6.50 percent before underwriting fees. The rate on the bond was swapped from a fixed rate to a floating rate equal to an all-in cost of one-month LIBOR plus 4.46 percent. The proceeds of this bond were designated for general corporate purposes.

We also repurchase our outstanding unsecured debt in both open-market repurchases and public tender offers. Repurchasing debt helps us to better manage our short-term and long-term funding needs. In the first quarter of 2011 we repurchased $825 million face amount of our senior unsecured notes in the aggregate, with maturity dates ranging from 2011 to 2014, which resulted in a total gain of $64 million.

We have $5.2 billion in Private Education Loan securitization bonds outstanding at March 31, 2011, where we have the ability to call the bonds at a discount to par between the fourth quarter of 2011 and 2014. We have concluded that it is probable we will call these bonds at the call date at the respective discount. Probability is based on our assessment of whether these bonds can be refinanced at the call date at or lower than a breakeven cost of funds based on the call discount. As a result, we are accreting this call discount as a reduction to interest expense through the call date. If it becomes less than probable that we will call these bonds at a future date, it will result in our reversing this prior accretion as a cumulative catch-up adjustment.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Information at March 31, 2011 and for the three months ended

March 31, 2011 and 2010 is unaudited)

(Dollars in thousands, except per share amounts, unless otherwise noted)


3.	Borrowings (Continued)

We have accreted approximately $200 million, cumulatively, and $28 million in the three months ended March 31, 2011 as a reduction of interest expense.

Securitization Activity

The following table summarizes our securitization activity for the three months ended March 31, 2011 and 2010. The securitizations in the periods presented below were accounted for as financings.


	Three Months Ended March 31,
	2011				2010
			Loan				Loan
	No. of		Amount		No. of		Amount
(Dollars in millions)	Transactions		Securitized		Transactions		Securitized

Securitizations:
FFELP Consolidation Loans		1	$	773		—	$	—
Private Education Loans		—		—		1		1,929

Total securitizations		1	$	773		1	$	1,929

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Information at March 31, 2011 and for the three months ended

March 31, 2011 and 2010 is unaudited)

(Dollars in thousands, except per share amounts, unless otherwise noted)


4.	Derivative Financial Instruments

Our risk management strategy, use and accounting of derivatives has not materially changed from that discussed in our 2010 Form 10-K. Please refer to Note 9, “Derivative Financial Instruments” in our 2010 Form 10-K for a full discussion.

Summary of Derivative Financial Statement Impact

The following tables summarize the fair values and notional amounts of all derivative instruments at March 31, 2011 and December 31, 2010, and their impact on other comprehensive income and earnings for the three months ended March 31, 2011 and 2010.

Impact of Derivatives on Consolidated Balance Sheet


		Cash Flow						Fair Value						Trading						Total
	Hedged Risk	March 31,			Dec. 31,			March 31,			Dec. 31,			March 31,			Dec. 31,			March 31,			Dec. 31,
(Dollars in millions)	Exposure	2011			2010			2011			2010			2011			2010			2011			2010

Fair Values⁽¹⁾
Derivative Assets
Interest rate swaps	Interest rate	$	—		$	—		$	787		$	967		$	161		$	200		$	948		$	1,167
Cross currency interest rate swaps	Foreign currency and interest rate		—			—			2,592			1,925			84			101			2,676			2,026
Other⁽²⁾	Interest rate		—			—			—			—			26			26			26			26

Total derivative assets⁽³⁾			—			—			3,379			2,892			271			327			3,650			3,219
Derivative Liabilities
Interest rate swaps	Interest rate		(46	)		(75	)		(18	)		—			(348	)		(348	)		(412	)		(423	)
Floor Income Contracts	Interest rate		—			—			—			—			(2,106	)		(1,315	)		(2,106	)		(1,315	)
Cross currency interest rate swaps	Foreign currency and interest rate		—			—			(181	)		(215	)		(1	)		—			(182	)		(215	)
Other⁽²⁾	Interest rate		—			—			—			—			—			(1	)		—			(1	)

Total derivative liabilities⁽³⁾			(46	)		(75	)		(199	)		(215	)		(2,455	)		(1,664	)		(2,700	)		(1,954	)

Net total derivatives		$	(46	)	$	(75	)	$	3,180		$	2,677		$	(2,184	)	$	(1,337	)	$	950		$	1,265


⁽¹⁾		Fair values reported are exclusive of collateral held and pledged and accrued interest. Assets and liabilities are presented without consideration of master netting agreements. Derivatives are carried on the balance sheet based on net position by counterparty under master netting agreements, and classified in other assets or other liabilities depending on whether in a net positive or negative position.

⁽²⁾		“Other” includes the fair value of Euro-dollar futures contracts, the embedded derivatives in asset-backed financings, and derivatives related to our Total Return Swap Facility. The embedded derivatives are required to be accounted for as derivatives.

⁽³⁾		The following table reconciles gross positions without the impact of master netting agreements to the balance sheet classification:


	Other Assets						Other Liabilities
	March 31,			December 31,			March 31,			December 31,
(Dollars in millions)	2011			2010			2011			2010

Gross position	$	3,650		$	3,219		$	(2,700	)	$	(1,954	)
Impact of master netting agreements		(792	)		(782	)		792			782

Derivative values with impact of master netting agreements (as carried on balance sheet)		2,858			2,437			(1,908	)		(1,172	)
Cash collateral (held) pledged		(1,063	)		(886	)		749			809

Net position	$	1,795		$	1,551		$	(1,159	)	$	(363	)

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Information at March 31, 2011 and for the three months ended

March 31, 2011 and 2010 is unaudited)

(Dollars in thousands, except per share amounts, unless otherwise noted)


4.	Derivative Financial Instruments (Continued)

The above fair values include adjustments for counterparty credit risk for both when we are exposed to the counterparty, net of collateral postings, and when the counterparty is exposed to us, net of collateral postings. The net adjustments decreased the overall net asset position at March 31, 2011 and December 31, 2010 by $60 million and $72 million, respectively. In addition, the above fair values reflect adjustments for illiquid derivatives as indicated by a wide bid/ask spread in the interest rate indices to which the derivatives are indexed. These adjustments decreased the overall net asset position at March 31, 2011 and December 31, 2010 by $116 million and $129 million, respectively.


	Cash Flow				Fair Value				Trading				Total
	March 31,		Dec. 31,		March 31,		Dec. 31,		March 31,		Dec. 31,		March 31,		Dec. 31,
(Dollars in billions)	2011		2010		2011		2010		2011		2010		2011		2010

Notional Values
Interest rate swaps	$	1.1	$	1.6	$	15.2	$	13.5	$	111.2	$	118.9	$	127.5	$	134.0
Floor Income Contracts		—		—		—		—		74.2		39.3		74.2		39.3
Cross currency interest rate swaps		—		—		17.3		17.5		.3		.3		17.6		17.8
Other⁽¹⁾		—		—		—		—		1.6		1.0		1.6		1.0

Total derivatives	$	1.1	$	1.6	$	32.5	$	31.0	$	187.3	$	159.5	$	220.9	$	192.1


⁽¹⁾		“Other” includes Euro-dollar futures contracts, embedded derivatives bifurcated from securitization debt, as well as derivatives related to our Total Return Swap Facility.

Impact of Derivatives on Consolidated Statements of Income


	Three Months Ended March 31,
							Realized Gain
	Unrealized Gain						(Loss)						Unrealized Gain
	(Loss) on						on						(Loss)						Total Gain
	Derivatives⁽¹⁾⁽²⁾						Derivatives⁽³⁾						on Hedged Item⁽¹⁾						(Loss)
(Dollars in millions)	2011			2010			2011			2010			2011			2010			2011			2010

Fair Value Hedges:
Interest rate swaps	$	(198	)	$	55		$	128		$	120		$	205		$	(63	)	$	135		$	112
Cross currency interest rate swaps		701			(1,348	)		76			101			(878	)		1,363			(101	)		116

Total fair value derivatives		503			(1,293	)		204			221			(673	)		1,300			34			228
Cash Flow Hedges:
Interest rate swaps		(2	)		(1	)		(14	)		(15	)		—			—			(16	)		(16	)

Total cash flow derivatives		(2	)		(1	)		(14	)		(15	)		—			—			(16	)		(16	)
Trading:
Interest rate swaps		(22	)		110			40			6			—			—			18			116
Floor Income Contracts		151			19			(226	)		(210	)		—			—			(75	)		(191	)
Cross currency interest rate swaps		(17	)		(7	)		2			2			—			—			(15	)		(5	)
Other		3			(6	)		(1	)		(2	)		—			—			2			(8	)

Total trading derivatives		115			116			(185	)		(204	)		—			—			(70	)		(88	)

Total		616			(1,178	)		5			2			(673	)		1,300			(52	)		124
Less: realized gains (losses) recorded in interest expense		—			—			190			206			—			—			190			206

Gains (losses) on derivative and hedging activities, net	$	616		$	(1,178	)	$	(185	)	$	(204	)	$	(673	)	$	1,300		$	(242	)	$	(82	)


⁽¹⁾		Recorded in “Gains (losses) on derivative and hedging activities, net” in the consolidated statements of income.

⁽²⁾		Represents ineffectiveness related to cash flow hedges.

⁽³⁾		For fair value and cash flow hedges, recorded in interest expense. For trading derivatives, recorded in “Gains (losses) on derivative and hedging activities, net.”

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Information at March 31, 2011 and for the three months ended

March 31, 2011 and 2010 is unaudited)

(Dollars in thousands, except per share amounts, unless otherwise noted)


4.	Derivative Financial Instruments (Continued)

Impact of Derivatives on Consolidated Statements of Changes in Stockholders’ Equity (net of tax)


	Three Months
	Ended
	March 31,
(Dollars in millions)	2011			2010

Total gains (losses) on cash flow hedges	$	(2	)	$	(15	)
Realized (gains) losses reclassified to interest expense^(1)(2)(3)		10			12
Hedge ineffectiveness reclassified to earnings⁽¹⁾⁽⁴⁾		1			1

Total change in stockholders’ equity for unrealized gains (losses) on derivatives	$	9		$	(2	)


⁽¹⁾	Amounts included in “Realized gains (losses) on derivatives” in the “Impact of Derivatives on Consolidated Statements of Income” table above.

⁽²⁾	Includes net settlement income/expense.

⁽³⁾	We expect to reclassify $10 million of after-tax net losses from accumulated other comprehensive income to earnings during the next 12 months related to amortization of cash flow hedges that were hedging debt instruments that are outstanding as of the reporting date.

⁽⁴⁾	Recorded in “Gains (losses) derivatives and hedging activities, net” in the consolidated statements of income.

Collateral

Collateral held and pledged at March 31, 2011 and December 31, 2010 related to derivative exposures between us and our derivative counterparties are detailed in the following table:


(Dollars in millions)	March 31, 2011		December 31, 2010

Collateral held:
Cash (obligation to return cash collateral is recorded in short-term borrowings)⁽¹⁾	$	1,063	$	886
Securities at fair value (not recorded in financial statements)⁽²⁾		975		585

Total collateral held	$	2,038	$	1,471

Derivative asset at fair value including accrued interest	$	3,157	$	2,540

Collateral pledged to others:
Cash (right to receive return of cash collateral is recorded in investments)	$	749	$	809
Securities at fair value (recorded in restricted investments)⁽³⁾		49		36

Total collateral pledged	$	798	$	845

Derivative liability at fair value including accrued interest and premium receivable	$	782	$	747


⁽¹⁾		At March 31, 2011 and December 31, 2010, $204 million and $108 million, respectively, were held in restricted cash accounts.

⁽²⁾		We do not have the ability to sell or re-pledge these securities. As such the securities are not recorded in the financial statements.

⁽³⁾		Counterparty has the right to sell or re-pledge securities.

Our corporate derivatives contain credit contingent features. At our current unsecured credit rating, we have fully collateralized our corporate derivative liability position (including accrued interest and net of premiums receivable) of $750 million with our counterparties as of the collateral call date. Further downgrades would not result in any additional collateral requirements, except to increase the frequency of collateral calls. Two counterparties have the right to terminate the contracts with further downgrades. We currently have a liability position with these derivative counterparties (including accrued interest and net of premiums receivable) of $124 million and have posted $118 million of collateral to these counterparties. If the credit

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Information at March 31, 2011 and for the three months ended

March 31, 2011 and 2010 is unaudited)

(Dollars in thousands, except per share amounts, unless otherwise noted)


4.	Derivative Financial Instruments (Continued)

contingent feature was triggered for these two counterparties and the counterparties exercised their right to terminate, we would be required to deliver additional assets totaling $6 million to settle the contracts. Trust related derivatives do not contain credit contingent features related to our or the trusts’ credit ratings.


5.	Other Assets

The following table provides detail on our other assets at March 31, 2011 and December 31, 2010.


	March 31, 2011					December 31, 2010
	Ending		% of			Ending		% of
(Dollars in millions)	Balance		Balance			Balance		Balance

Accrued interest receivable	$	3,031		30	%		2,927		33	%
Derivatives at fair value		2,858		28			2,437		27
Accounts receivable — general		1,430		14			730		8
Income tax asset, net current and deferred		1,322		13			1,283		14
Benefit and insurance-related investments		461		4			462		5
Fixed assets, net		284		3			291		4
Purchased paper-related receivables		68		1			96		1
Other loans		251		2			271		3
Other		496		5			473		5

Total	$	10,201		100	%	$	8,970		100	%

The “Derivatives at fair value” line in the above table represents the fair value of our derivatives in a net asset position by counterparty, exclusive of accrued interest and collateral. At March 31, 2011 and December 31, 2010, these balances included $3.2 billion and $2.7 billion, respectively, of cross-currency interest rate swaps and interest rate swaps designated as fair value hedges that were offset by an increase in interest-bearing liabilities related to the hedged debt. As of March 31, 2011 and December 31, 2010, the cumulative mark-to-market adjustment to the hedged debt was $(3.4) billion and $(2.7) billion, respectively.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Information at March 31, 2011 and for the three months ended

March 31, 2011 and 2010 is unaudited)

(Dollars in thousands, except per share amounts, unless otherwise noted)


6.	Stockholders’ Equity and Stock-Based Compensation

The following table summarizes our common share repurchases and issuances for the three months ended March 31, 2011 and 2010.


	Three Months Ended
	March 31,
(Shares in millions)	2011		2010

Common shares repurchased:
Benefit plans⁽¹⁾		1.8		.3

Total shares repurchased		1.8		.3

Average purchase price per share	$	15.62	$	12.53

Common shares issued		2.3		1.2

Authority remaining at end of period for repurchases		38.8		38.8


⁽¹⁾	Includes shares withheld from stock option exercises and vesting of restricted stock for employees’ tax withholding obligations and shares tendered by employees to satisfy option exercise costs.

The closing price of our common stock on the New York Stock Exchange on March 31, 2011 was $15.30.

In March 2011, we retired all 70 million shares of common stock held in treasury. This retirement decreased the balance in treasury stock by $1.9 billion, with corresponding decreases of $14 million in common stock and $1.9 billion in additional paid-in capital. There was no impact to total equity from this transaction.

In the first quarter, we changed our stock-based compensation plans so that retirement eligible employees would not forfeit unvested stock-based compensation upon their retirement. This change had the effect of accelerating $11 million of future stock-based compensation expenses associated with these unvested stock grants into the current period for those employees that are retirement eligible or who will become retirement eligible prior to the vesting date.

Dividend and Share Repurchase Program

On April 20, 2011, we declared a quarterly dividend of $.10 per share on our common stock, the first since early 2007. The dividend is payable June 17, 2011, to shareholders of record at the close of business on June 3, 2011. We also authorized the repurchase of up to $300 million of outstanding common stock in open-market transactions and terminated all previous authorizations.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Information at March 31, 2011 and for the three months ended

March 31, 2011 and 2010 is unaudited)

(Dollars in thousands, except per share amounts, unless otherwise noted)


7.	Earnings (Loss) per Common Share

Basic earnings (loss) per common share (“EPS”) are calculated using the weighted average number of shares of common stock outstanding during each period. A reconciliation of the numerators and denominators of the basic and diluted EPS calculations follows for the three months ended March 31, 2011 and 2010.


	Three Months Ended
	March 31,
	2011			2010

Numerator:
Net income from continuing operations	$	176,424		$	246,754
Less: preferred stock dividends		3,878			18,678

Net income from continuing operations attributable to common stock		172,546			228,076
Adjusted for dividends of Series C Preferred Stock⁽¹⁾		—			14,688

Net income from continuing operations attributable to common stock, adjusted		172,546			242,764
Loss from discontinued operations		(1,730	)		(6,614	)

Net income attributable to common stock, adjusted	$	170,816		$	236,150

Denominator (shares in thousands):
Weighted average shares used to compute basic EPS		526,746			484,259
Effect of dilutive securities:
Dilutive effect of convertible preferred stock Series C⁽¹⁾		—			41,240
Dilutive effect of stock options, non-vested deferred compensation and restricted stock, restricted stock units and Employee Stock Purchase Plan (“ESPP”)⁽²⁾		5,218			1,132

Dilutive potential common shares⁽³⁾		5,218			42,372

Weighted average shares used to compute diluted EPS		531,964			526,631

Basic earnings (loss) per common share:
Continuing operations	$	.32		$	.47
Discontinued operations		—			(.01	)

Total	$	.32		$	.46

Diluted earnings (loss) per common share:
Continuing operations	$	.32		$	.46
Discontinued operations		—			(.01	)

Total	$	.32		$	.45


⁽¹⁾	Our 7.25 percent mandatory convertible preferred stock Series C was issued on December 31, 2007. The Series C Preferred Stock was fully converted to common shares on December 15, 2010.

⁽²⁾	Includes the potential dilutive effect of additional common shares that are issuable upon exercise of outstanding stock options, non-vested deferred compensation and restricted stock, restricted stock units, and the outstanding commitment to issue shares under the ESPP, determined by the treasury stock method.

⁽³⁾	For the three months ended March 31, 2011 and 2010, stock options covering approximately 16 million and 33 million shares, respectively, and restricted stock of 2 million shares and 0 shares, respectively, were outstanding but not included in the computation of diluted earnings per share because they were anti-dilutive.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Information at March 31, 2011 and for the three months ended

March 31, 2011 and 2010 is unaudited)

(Dollars in thousands, except per share amounts, unless otherwise noted)


8.	Restructuring Activities

Total restructuring expenses of $4 million and $26 million were recorded in the three months ended March 31, 2011 and 2010, respectively.

The following table summarizes the restructuring expenses incurred during the three months ended March 31, 2011 and 2010 and cumulative restructuring expenses incurred through March 31, 2011 associated with our restructuring plans.


						Cumulative
	Three Months Ended					Expense⁽¹⁾ as of
	March 31,					March 31,
	2011			2010		2011

Severance costs	$	1,380		$	24,797	$	164,182
Lease and other contract termination costs		—			—		10,929
Exit and other costs		2,181			7		18,424

Total restructuring costs from continuing operations⁽¹⁾		3,561			24,804		193,535
Total restructuring costs from discontinued operations		(22	)		1,478		29,211

Total	$	3,539		$	26,282	$	222,746

⁽¹⁾

Aggregate restructuring expenses from continuing operations incurred across our reportable segments during the three months ended March 31, 2011 and 2010 totaled $1 million and $19 million, respectively, in our FFELP Loans reportable segment; $1 million and $2 million, respectively, in our Consumer Lending reportable segment; $1 million and $3 million, respectively, in our Business Services reportable segment; and $1 million and $1 million, respectively, in our Other reportable segment.

Since the fourth quarter of 2007 through March 31, 2011, cumulative severance costs were incurred in conjunction with aggregate completed and planned position eliminations of approximately 5,500 positions. Position eliminations were across all of our reportable segments, ranging from senior executives to servicing center personnel.

The following table summarizes changes in the restructuring liability balance, which is included in other liabilities in the accompanying consolidated balance sheet.


				Lease and
				Other
				Contract
	Severance			Termination			Exit and
	Costs			Costs			Other Costs			Total

Balance at December 31, 2009	$	9,195		$	3,781		$	—		$	12,976
Net accruals from continuing operations		80,536			1,430			3,270			85,236
Net accruals from discontinued operations		3,108			2,384			70			5,562
Cash paid		(45,235	)		(3,440	)		(1,678	)		(50,353	)

Balance at December 31, 2010		47,604			4,155			1,662			53,421
Net accruals from continuing operations		1,380			—			2,181			3,561
Net accruals from discontinued operations		(24	)		—			2			(22	)
Cash paid		(25,478	)		(492	)		(3,845	)		(29,815	)

Balance at March 31, 2011	$	23,482		$	3,663		$	—		$	27,145

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Information at March 31, 2011 and for the three months ended

March 31, 2011 and 2010 is unaudited)

(Dollars in thousands, except per share amounts, unless otherwise noted)


9.	Fair Value Measurements

We use estimates of fair value in applying various accounting standards for our financial statements. We categorize our fair value estimates based on a hierarchical framework associated with three levels of price transparency utilized in measuring financial instruments at fair value. During the three months ended March 31, 2011, there were no significant transfers of financial instruments between levels, or changes in our methodology or assumptions used to value our financial instruments. Please refer to Note 15, “Fair Value Measurements” in our 2010 Form 10-K for a full discussion.

The following tables summarize the valuation of our financial instruments that are marked-to-market on a recurring basis in the consolidated financial statements as of March 31, 2011 and December 31, 2010.


	Fair Value Measurements on a Recurring											Fair Value Measurements on a Recurring
	Basis as of March 31, 2011											Basis as of December 31, 2010
(Dollars in millions)	Level 1		Level 2			Level 3			Total			Level 1			Level 2			Level 3			Total

Assets
Available-for-sale investments:
U.S. Treasury securities	$	50	$	—		$	—		$	50		$	39		$	—		$	—		$	39
Agency residential mortgage backed securities		—		65			—			65			—			68			—			68
Guaranteed investment contracts		—		28			—			28			—			20			—			20
Other		—		13			—			13			—			12			—			12

Total available-for-sale investments		50		106			—			156			39			100			—			139
Derivative instruments:⁽¹⁾
Interest rate swaps		—		821			127			948			—			1,017			150			1,167
Cross currency interest rate swaps		—		521			2,155			2,676			—			427			1,599			2,026
Other		—		—			26			26			—			—			26			26

Total derivative assets		—		1,342			2,308			3,650			—			1,444			1,775			3,219
Counterparty netting										(792	)											(782	)

Subtotal⁽³⁾										2,858												2,437
Cash collateral held										(1,063	)											(886	)

Net derivative assets										1,795												1,551

Total	$	50	$	1,448		$	2,308		$	1,951		$	39		$	1,544		$	1,775		$	1,690

Liabilities⁽²⁾
Derivative instruments⁽¹⁾
Interest rate swaps	$	—	$	(200	)	$	(212	)	$	(412	)	$	—		$	(183	)	$	(240	)	$	(423	)
Floor Income Contracts		—		(2,106	)		—			(2,106	)		—			(1,315	)		—			(1,315	)
Cross currency interest rate swaps		—		(38	)		(144	)		(182	)		—			(43	)		(172	)		(215	)
Other		—		—			—			—			(1	)		—			—			(1	)

Total derivative instruments		—		(2,344	)		(356	)		(2,700	)		(1	)		(1,541	)		(412	)		(1,954	)
Counterparty netting										792												782

Subtotal⁽³⁾										(1,908	)											(1,172	)
Cash collateral pledged										749												809
Net derivative liabilities										(1,159	)											(363	)

Total	$	—	$	(2,344	)	$	(356	)	$	(1,159	)	$	(1	)	$	(1,541	)	$	(412	)	$	(363	)


⁽¹⁾		Fair value of derivative instruments excludes accrued interest and the value of collateral.

⁽²⁾		Borrowings which are the hedged items in a fair value hedge relationship and which are adjusted for changes in value due to benchmark interest rates only are not carried at full fair value and are not reflected in this table.

⁽³⁾		As carried on the balance sheet.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Information at March 31, 2011 and for the three months ended

March 31, 2011 and 2010 is unaudited)

(Dollars in thousands, except per share amounts, unless otherwise noted)


9.	Fair Value Measurements (Continued)

The following tables summarize the change in balance sheet carrying value associated with Level 3 financial instruments carried at fair value on a recurring basis during the three months ended March 31, 2011 and 2010.


	Three Months Ended March 31, 2011⁽³⁾
	Derivative instruments
				Cross
				Currency						Total
	Interest			Interest						Derivative
(Dollars in millions)	Rate Swaps			Rate Swaps			Other			Instruments

Balance, beginning of period	$	(90	)	$	1,427		$	26		$	1,363
Total gains/(losses) (realized and unrealized):
Included in earnings⁽¹⁾		27			633			2			662
Included in other comprehensive income		—			—			—			—
Settlements		(22	)		(49	)		(2	)		(73	)
Transfers in and/or out of Level 3		—			—			—			—

Balance, end of period	$	(85	)	$	2,011		$	26		$	1,952

Change in unrealized gains/(losses) relating to instruments still held at the reporting date⁽²⁾	$	5		$	582		$	3		$	590


	Three Months Ended March 31, 2010
				Derivative instruments
										Cross
										Currency						Total
	Residual			Interest			Floor Income			Interest						Derivative
(Dollars in millions)	Interests			Rate Swaps			Contracts			Rate Swaps			Other			Instruments			Total

Balance, beginning of period	$	1,828		$	(272	)	$	(54	)	$	1,596		$	(18	)	$	1,252		$	3,080
Total gains/(losses) (realized and unrealized):
Included in earnings⁽¹⁾		—			(5	)		3			(873	)		(7	)		(882	)		(882	)
Included in other comprehensive income		—			—			—			—			—			—			—
Settlements		—			4			51			(48	)		3			10			10
Cumulative effect of accounting change⁽³⁾		(1,828	)		(56	)		—			873			—			817			(1,011	)
Transfers in and/or out of Level 3		—			—			—			—			—			—			—

Balance, end of period	$	—		$	(329	)	$	—		$	1,548		$	(22	)	$	1,197		$	1,197

Change in unrealized gains/(losses) relating to instruments still held at the reporting date⁽²⁾	$	—		$	3		$	—		$	(921	)	$	(6	)	$	(924	)	$	(924	)


⁽¹⁾	“Included in earnings” is comprised of the following amounts recorded in the specified line item in the consolidated statements of income:


	Three Months Ended
	March 31,
(Dollars in millions)	2011		2010

Gains (losses) on derivative and hedging activities, net	$	613	$	(928	)
Interest expense		49		46

Total	$	662	$	(882	)


⁽²⁾	Recorded in “gains (losses) on derivative and hedging activities, net” in the consolidated statements of income.

⁽³⁾	Upon adoption of new consolidation accounting guidance on January 1, 2010, we consolidated previously off-balance sheet securitization trusts. This resulted in the removal of the Residual Interests and the recording of the fair value of swaps previously not in our consolidated results.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Information at March 31, 2011 and for the three months ended

March 31, 2011 and 2010 is unaudited)

(Dollars in thousands, except per share amounts, unless otherwise noted)


9.	Fair Value Measurements (Continued)

The following table summarizes the fair values of our financial assets and liabilities, including derivative financial instruments, as of March 31, 2011 and December 31, 2010.


	March 31, 2011									December 31, 2010
	Fair			Carrying						Fair			Carrying
(Dollars in millions)	Value			Value			Difference			Value			Value			Difference

Earning assets
FFELP loans	$	143,790		$	145,558		$	(1,768	)	$	147,163		$	148,649		$	(1,486	)
Private Education Loans		32,572			35,966			(3,394	)		30,949			35,656			(4,707	)
Other loans (presented in “other assets” on the balance sheet)		90			251			(161	)		88			270			(182	)
Cash and investments		11,156			11,156			—			11,553			11,553			—

Total earning assets		187,608			192,931			(5,323	)		189,753			196,128			(6,375	)

Interest-bearing liabilities
Short-term borrowings		32,311			32,317			6			33,604			33,616			12
Long-term borrowings		154,776			161,886			7,110			154,355			163,544			9,189

Total interest-bearing liabilities		187,087			194,203			7,116			187,959			197,160			9,201

Derivative financial instruments
Floor Income/Cap contracts		(2,106	)		(2,106	)		—			(1,315	)		(1,315	)		—
Interest rate swaps		536			536			—			744			744			—
Cross currency interest rate swaps		2,494			2,494			—			1,811			1,811			—
Other		26			26			—			25			25			—

Excess of net asset fair value over carrying value							$	1,793								$	2,826


10.	Commitments and Contingencies

Mark A. Arthur et al. v. SLM Corporation. As previously disclosed, this suit involves allegations we contacted consumers on their cellular telephones via autodialer without their consent in violation of the Telephone Consumer Protection Act, 47 U.S.C. § 227 et seq. (“TCPA”). Each violation under the TCPA provides for $500 in statutory damages ($1,500 if a willful violation is shown). Plaintiffs seek statutory damages, damages for willful violations, attorneys’ fees, costs, and injunctive relief. We have vigorously denied all claims asserted against us, but agreed to the settlement to avoid the burden and expense of continued litigation. On January 21, 2011, and February 7, 2011, we filed submissions with the Court to advise that approximately 1.76 million individuals had been omitted from the original notice list for a total of approximately 6.6 million class members. In response, Class Counsel asked us to contribute additional unspecified amounts to the previously negotiated $19.5 million settlement fund. On February 10, 2011, the Court granted a Consented Motion to Stay Implementation of Settlement and Certain Deadlines. The Court ordered Class Counsel to file a status report on March 18, 2011.

As of the date of this filing, we are continuing our efforts to determine the number of class members who were omitted from the notice list of class members and the additional amounts to be contributed to the settlement fund.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Information at March 31, 2011 and for the three months ended

March 31, 2011 and 2010 is unaudited)

(Dollars in thousands, except per share amounts, unless otherwise noted)


10.	Commitments and Contingencies (Continued)

In the ordinary course of business, we and our subsidiaries are routinely defendants in or parties to pending and threatened legal actions and proceedings including actions brought on behalf of various classes of claimants. These actions and proceedings may be based on alleged violations of consumer protection, securities, employment and other laws. In certain of these actions and proceedings, claims for substantial monetary damage are asserted against us and our subsidiaries.

In the ordinary course of business, we and our subsidiaries are subject to regulatory examinations, information gathering requests, inquiries and investigations. In connection with formal and informal inquiries in these cases, we and our subsidiaries receive numerous requests, subpoenas and orders for documents, testimony and information in connection with various aspects of our regulated activities.

In view of the inherent difficulty of predicting the outcome of such litigation and regulatory matters, we cannot predict what the eventual outcome of the pending matters will be, what the timing or the ultimate resolution of these matters will be, or what the eventual loss, fines or penalties related to each pending matter may be.

We are required to establish reserves for litigation and regulatory matters where those matters present loss contingencies that are both probable and estimable. When loss contingencies are not both probable and estimable, we do not establish reserves.

Based on current knowledge, reserves have been established for certain litigation or regulatory matters where the loss is both probable and estimable. Based on current knowledge, management does not believe that loss contingencies, if any, arising from pending investigations, litigation or regulatory matters will have a material adverse effect on our consolidated financial position, liquidity, results of operations or cash flows.


11.	Segment Reporting

FFELP Loans Segment

Our FFELP Loans segment consists of our $145.6 billion FFELP Loan portfolio as of March 31, 2011 and the underlying debt and capital funding the loans. We no longer originate FFELP Loans; however, we are actively seeking to acquire FFELP Loan portfolios.

The following table includes asset information for our FFELP Loans segment.


	March 31,		December 31,
	2011		2010

FFELP Loans, net	$	145,558	$	148,649
Cash and investments⁽¹⁾		5,978		5,963
Other		4,627		3,911

Total assets	$	156,163	$	158,523


(1)		Includes restricted cash and investments.

Consumer Lending Segment

We originate, acquire, finance and service Private Education Loans. The portfolio totaled $36.0 billion at March 31, 2011. We also provide savings products, primarily in the form of retail deposits, to help customers save for a college education.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Information at March 31, 2011 and for the three months ended

March 31, 2011 and 2010 is unaudited)

(Dollars in thousands, except per share amounts, unless otherwise noted)


11.	Segment Reporting (Continued)

The following table includes asset information for our Consumer Lending segment.


	March 31,		December 31,
	2011		2010

Private Education Loans, net	$	35,966	$	35,656
Cash and investments⁽¹⁾		2,679		3,372
Other		4,454		4,004

Total assets	$	43,099	$	43,032


⁽¹⁾		Includes restricted cash and investments.

Business Services Segment

The Business Services segment generates its revenue from servicing our FFELP Loan portfolio as well as servicing FFELP and other loans for other financial institutions, Guarantors and ED. The segment also performs default aversion work and contingency collections on behalf of Guarantors and ED, Campus Solutions, account asset servicing and transaction processing activities.

At March 31, 2011 and December 31, 2010, the Business Services segment had total assets of $829 million and $930 million, respectively.

Other Segment

The Other segment primarily consists of the financial results related to the repurchase of debt, the corporate liquidity portfolio and all overhead. We also include results from smaller wind-down and discontinued operations within this segment.

At March 31, 2011 and December 31, 2010, the Other segment had total assets of $3.3 billion and $2.8 billion, respectively.

Measure of Profitability

The tables below include the condensed operating results for each of our reportable segments. Management, including the chief operating decision makers, evaluates the Company on certain performance measures that we refer to as “Core Earnings” performance measures for each operating segment. We use “Core Earnings” to manage each business segment because “Core Earnings” reflect adjustments to GAAP financial results for three items, discussed below, that create significant volatility mostly due to timing factors generally beyond the control of management. Accordingly, we believe that “Core Earnings” provide management with a useful basis from which to better evaluate results from ongoing operations against the business plan or against results from prior periods. Consequently, we disclose this information as we believe it provides investors with additional information regarding the operational and performance indicators that are most closely assessed by management. The two items adjusted for in our “Core Earnings” presentations are: (1) our use of derivatives instruments to hedge our economic risks that do not qualify for hedge accounting treatment or do qualify for hedge accounting treatment but result in ineffectiveness and (2) the accounting for goodwill and acquired intangible assets. The tables presented below reflect “Core Earnings” operating measures reviewed and utilized by management to manage the business. Reconciliation of the “Core Earnings” segment totals to our consolidated operating results in accordance with GAAP is also included in the tables below.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Information at March 31, 2011 and for the three months ended

March 31, 2011 and 2010 is unaudited)

(Dollars in thousands, except per share amounts, unless otherwise noted)


11.	Segment Reporting (Continued)

Our “Core Earnings” performance measures are not defined terms within GAAP and may not be comparable to similarly titled measures reported by other companies. Unlike financial accounting, there is no comprehensive, authoritative guidance for management reporting. The management reporting process measures the performance of the operating segments based on the management structure of the Company and is not necessarily comparable with similar information for any other financial institution. Our operating segments are defined by the products and services they offer or the types of customers they serve, and they reflect the manner in which financial information is currently evaluated by management. Intersegment revenues and expenses are netted within the appropriate financial statement line items consistent with the income statement presentation provided to management. Changes in management structure or allocation methodologies and procedures may result in changes in reported segment financial information.

Segment Results and Reconciliations to GAAP


	Quarter Ended March 31, 2011
	FFELP		Consumer		Business								Total “Core						Total
(Dollars in millions)	Loans		Lending		Services		Other			Eliminations⁽¹⁾			Earnings”			Adjustments⁽²⁾			GAAP
Interest income:
Student loans	$	736	$	604	$	—	$	—		$	—		$	1,340		$	141		$	1,481
Other loans		—		—		—		6			—			6			—			6
Cash and investments		1		3		3		1			(3	)		5			—			5

Total interest income		737		607		3		7			(3	)		1,351			141			1,492
Total interest expense		370		197		—		15			(3	)		579			15			594

Net interest income		367		410		3		(8	)		—			772			126			898
Less: provisions for loan losses		23		275		—		5			—			303			—			303

Net interest income (loss) after provisions for loan losses		344		135		3		(13	)		—			469			126			595
Servicing revenue		25		17		245		—			(189	)		98			—			98
Contingency revenue		—		—		78		—			—			78			—			78
Gains on debt repurchases		—		—		—		64			—			64			(26	)		38
Other income (loss)		—		—		11		2			—			13			(233	)		(220	)

Total other income (loss)		25		17		334		66			(189	)		253			(259	)		(6	)
Expenses:
Direct operating expenses		195		82		128		8			(189	)		224			—			224
Overhead expenses		—		—		—		79			—			79			—			79

Operating expenses		195		82		128		87			(189	)		303			—			303
Goodwill and acquired intangible assets impairment and amortization		—		—		—		—			—			—			6			6
Restructuring expenses		1		1		1		1			—			4			—			4

Total expenses		196		83		129		88			(189	)		307			6			313

Income (loss) from continuing operations, before income tax expense (benefit)		173		69		208		(35	)		—			415			(139	)		276
Income tax expense (benefit)⁽³⁾		64		25		76		(12	)		—			153			(54	)		99

Net income (loss) from continuing operations		109		44		132		(23	)		—			262			(85	)		177
Loss from discontinued operations, net of taxes		—		—		—		(2	)		—			(2	)		—			(2	)

Net income (loss)	$	109	$