(Mark One) | ||
þ
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended December 31, 2008 or | ||
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to |
Delaware | 52-2013874 | |
(State of Other Jurisdiction
of
Incorporation or Organization) |
(I.R.S. Employer
Identification No.) |
|
12061 Bluemont Way, Reston, Virginia | 20190 | |
(Address of Principal Executive Offices) | (Zip Code) |
Large accelerated
filer
þ
|
Accelerated filer o |
Non-accelerated
filer
o
(Do not check if a smaller reporting company) |
Smaller reporting company o |
1
Item 1.
Business
2
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3
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4
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5
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Cumulative % Increase from AY
1997-1998
(1)
Cost of attendance is in current
dollars and includes
tuition, fees and on-campus room and board.
6
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7
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8
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9
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guarantee issuance the initial approval of loan
terms and guarantee eligibility;
account maintenance the maintaining, updating and
reporting of records of guaranteed loans;
default aversion services these services are
designed to prevent a default once a borrowers loan has
been placed in delinquency status (we perform these activities
within our APG business segment);
guarantee fulfillment the review and processing of
guarantee claims;
post-claim assistance assisting borrowers in
determining the best way to pay off a defaulted loan; and
systems development and maintenance the development
of automated systems to maintain compliance and accountability
with ED regulations.
10
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the
Truth-In-Lending
Act;
the Fair Credit Reporting Act;
the Equal Credit Opportunity Act;
the Gramm-Leach Bliley Act; and
the U.S. Bankruptcy Code.
the Fair Debt Collection Practices Act;
the Fair Credit Reporting Act;
the Gramm-Leach-Bliley Act; and
the U.S. Bankruptcy Code.
11
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12
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Item 1A.
Risk
Factors
13
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14
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15
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16
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Item 1B.
Unresolved
Staff Comments
17
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Item 2.
Properties
Approximate
Function
Square Feet
Headquarters
240,000
Loan Servicing and Data Center
450,000
Credit and Collections Center
160,000
Loan Servicing Center
133,000
Loan Servicing Center
133,000
Loan Servicing Center
133,000
Loan Servicing Center
100,000
Asset Performance Group and Collections Center
60,000
Asset Performance Group and Collections Center
46,000
Asset Performance Group and Collections Center
45,000
AMS Headquarters
36,000
(1)
Excludes approximately
30,000 square feet Class B single story building on
four acres, located across the street from the Loan Servicing
Center.
(2)
In the first quarter of 2003, the
Company entered into a ten year lease with the Wyoming County
Industrial Development Authority with a right of reversion to
the Company for the Arcade and Perry, New York facilities.
Approximate
Function
Square Feet
AFS Headquarters
84,000
Upromise
78,000
GRC Headquarters and Asset Performance Group
and Collections Center
59,000
SLM APG
54,000
SLM Financial Headquarters and Operations
42,000
Pioneer Credit Recovery
30,000
Sallie Mae, Inc.
27,000
GRPFS
26,000
AFS Operations
24,000
AFS Operations
16,000
Asset Performance Group and Collections Center
16,000
Pioneer Credit Recovery
14,000
Pioneer Credit Recovery
13,000
NELA
13,000
Pioneer Credit Recovery
12,000
SLM-LSC
11,000
(1)
Space vacated in September 2007;
approximately 30 percent of space is currently being
subleased.
(2)
Space vacated in September 2006;
the Company is actively searching for subtenants or tenants.
(3)
Space vacated in June 2008; the
Company is actively searching for subtenants or tenants.
(4)
Space vacated in September 2008.
18
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Item 3.
Legal
Proceedings
19
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Item 4.
Submission
of Matters to a Vote of Security Holders
20
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40
41
55
59
60
68
71
76
80
83
111
Item 5.
Market
for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
High
$
23.00
$
25.05
$
19.81
$
12.03
Low
14.70
15.45
9.37
4.19
High
$
49.96
$
57.96
$
58.00
$
53.65
Low
40.30
40.60
41.73
18.68
Maximum Number
Total Number of
of Shares that
Shares Purchased
May Yet Be
Total Number
Average Price
as Part of Publicly
Purchased Under
of Shares
Paid per
Announced Plans
the Plans or
Purchased
Share
or Programs
Programs
.3
$
19.82
38.8
.2
23.74
38.8
.1
19.32
38.8
38.8
38.8
38.8
.6
$
20.10
21
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12/31/03
12/31/04
12/31/05
12/31/06
12/31/07
12/31/08
$
100.0
$
143.7
$
150.5
$
135.9
$
56.8
$
25.1
100.0
110.7
117.7
139.9
114.5
52.4
100.0
110.7
116.1
134.2
141.6
89.8
22
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Item 6.
Selected
Financial Data
(Dollars in millions, except per share amounts)
2008
2007
2006
2005
2004
$
1,365
$
1,588
$
1,454
$
1,451
$
1,299
(213
)
(896
)
1,157
1,382
1,914
(.69
)
(2.26
)
2.73
3.25
4.36
(.69
)
(2.26
)
2.63
3.05
4.04
.25
.97
.85
.74
(9
)%
(22
)%
32
%
45
%
73
%
.93
1.26
1.54
1.77
1.92
(.14
)
(.71
)
1.22
1.68
2.80
(11
)
37
28
18
3.45
3.51
3.98
3.82
3.73
$
144,802
$
124,153
$
95,920
$
82,604
$
65,981
168,768
155,565
116,136
99,339
84,094
160,158
147,046
108,087
91,929
78,122
4,999
5,224
4,360
3,792
3,102
7.03
7.84
9.24
7.81
6.93
$
35,591
$
39,423
$
46,172
$
39,925
$
41,457
23
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Item 7.
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Years ended December 31,
2006-2008
(Dollars in millions, except per share amounts, unless otherwise
stated)
24
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25
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26
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27
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28
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29
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1.
Investments
Our investments primarily consist
of overnight/weekly maturity instruments with high credit
quality counterparties. However, we have considered credit and
liquidity risk involving specific instruments. These assumptions
have further been validated by the successful maturity of these
investments in the period immediately following the end of the
reporting period. In the fourth quarter 2008, we recorded an
impairment of $8 million related to our investment in the
Reserve Primary Fund based on an internal assessment of the
collectability of our remaining investment. See LIQUIDITY
AND CAPITAL RESOURCES Counterparty Exposure
for further discussion.
2.
Derivatives
When determining the fair value
of derivatives, we take into account counterparty credit risk
for positions where we are exposed to the counterparty on a net
basis by assessing exposure net of collateral held. (See
Note 9, Derivative Financial Instruments
Risk Management Strategy,
to the consolidated
financial statements for further discussion of our derivative
agreements and their policy to require legally enforceable
netting provisions and collateral agreements.) The net exposure
for each counterparty is adjusted based on market information
available for the specific counterparty including spreads from
credit default swaps. Additionally, when the counterparty has
exposure to the Company related to SLM Corporation derivatives,
we fully collateralize the exposure minimizing the adjustment
necessary to the derivative valuations for our credit risk.
While trusts that contain derivatives are not required to post
collateral to counterparties, the credit quality and securitized
nature of the trusts minimizes any adjustments for the
counterpartys exposure to the trusts. Adjustments related
to credit risk reduced the overall value of our derivatives by
$41 million as of December 31, 2008. We also take into
account changes in liquidity related to derivative positions and
the fair value. We adjusted the fair value of certain less
liquid positions by approximately $201 million to take into
account a significant reduction in liquidity as of
December 31, 2008, related primarily to basis swaps indexed
to interest rate indices with inactive markets. A major
indicator of market inactivity is the widening of the bid/ask
spread in these markets. In general, the widening of
counterparty credit spreads and reduced liquidity for derivative
instruments as indicated by wider bid/ask spreads will reduce
the fair value of derivatives.
3.
Residual Interests
We have never sold our
Residual Interests and we are unaware of any sales of student
loan residual interests by others. As a result, these
instruments have never been considered liquid. This lack of
liquidity has always been taken into account when valuing the
Residual Interests. The discount rate assumption related to the
Private Education Loan Residual Interests has been increased
every quarter since the fourth quarter of 2007 to take into
account changes in credit and liquidity risks. The discount rate
assumption related to the FFELP Loan Residual Interests was
examined and deemed to accurately reflect the risks associated
with these instruments each quarter through the second quarter
of 2008. It was subsequently increased for both quarters ending
30
Table of Contents
September 30, 2008 and December 31, 2008. We use
non-binding broker quotes and industry analyst reports which
show changes in the indicative prices of the asset-backed
securities tranches immediately senior to the Residual Interest
as an indication of potential changes in the discount rate used
to value the Residual Interest. We also use the most current
prepayment and default rate assumptions to project the expected
cash flows used to value Residual Interests. These assumptions
are internally developed and primarily based on analyzing the
actual results of loan performance from past periods. See
Note 8, Student Loan Securitization, to the
consolidated financial statements for a discussion of all
assumption changes made during the quarter to properly determine
the fair value of the Residual Interests as well as a shock
analysis to fair value related to all significant assumptions.
4.
Student Loans
Our FFELP loans and Private
Education Loans are accounted for at cost or at the lower of
cost or fair value if the loan is
held-for-sale.
The fair value is disclosed in compliance with
SFAS No. 107. For both FFELP loans and Private
Education Loans accounted for at cost, fair value is determined
by modeling loan level cash flows using stated terms of the
assets and internally-developed assumptions to determine
aggregate portfolio yield, net present value and average life.
The significant assumptions used to project cash flows are
prepayment speeds, default rates, cost of funds, and required
return on equity. In addition, the Floor Income component of our
FFELP loan portfolio is valued through discounted cash flow and
option models using both observable market inputs and internally
developed inputs. Significant inputs into the models are not
generally market observable. They are either derived internally
through a combination of historical experience and
managements qualitative expectation of future performance
(in the case of prepayment speeds, default rates, and capital
assumptions), or are obtained through external broker quotes (as
in the case of cost of funds). When possible, market
transactions are used to validate the model. In most cases these
are either infrequent or not observable. For FFELP loans
classified as
held-for-sale
and accounted for at the lower of cost or market, the fair value
is based on the committed sales price of the various loan
purchase programs established by ED.
The CPR (see Premium and Discount Amortization above
for discussion of this assumption);
The expected credit losses from the underlying securitized loan
portfolio. Although loss estimates related to the Allowance for
Loan Loss are based on a loss confirmation period of generally
two years, expected credit losses related to the Residual
Interests use a life of loan default rate. The life of loan
default rate is used to determine the percentage of the
loans original balance that will default. The life of loan
default rate is then applied using a curve to determine the
percentage of the overall default rate
31
Table of Contents
that should be recognized annually throughout the life of the
loan. (See also Allowance for Loan Losses above for
the determination of default rates and the factors that may
impact them.)
The discount rate used (see Fair Value Measurement
discussed above).
32
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Increase (Decrease)
Years Ended December 31,
2008 vs. 2007
2007 vs. 2006
2008
2007
2006
$
%
$
%
$
1,365
$
1,588
$
1,454
$
(223
)
(14
)%
$
134
9
%
720
1,015
287
(295
)
(29
)
728
254
645
573
1,167
72
13
(594
)
(51
)
367
902
(367
)
(100
)
(535
)
(59
)
262
437
553
(175
)
(40
)
(116
)
(21
)
(186
)
(95
)
(49
)
(91
)
(96
)
(46
)
(94
)
(445
)
(1,361
)
(339
)
916
67
(1,022
)
(301
)
340
336
397
4
1
(61
)
(15
)
(64
)
272
240
(336
)
(124
)
32
13
121
156
132
(35
)
(22
)
24
18
392
385
338
7
2
47
14
84
23
61
265
23
100
1,357
1,529
1,346
(172
)
(11
)
183
14
(376
)
(482
)
1,995
106
22
(2,477
)
(124
)
(167
)
412
834
(579
)
(141
)
(422
)
(51
)
4
2
4
2
100
(2
)
(50
)
(213
)
(896
)
1,157
683
76
(2,053
)
(177
)
111
37
36
74
200
1
3
$
(324
)
$
(933
)
$
1,121
$
609
65
%
$
(2,054
)
(183
)%
$
(.69
)
$
(2.26
)
$
2.73
$
1.57
69
%
$
(4.99
)
(183
)%
$
(.69
)
$
(2.26
)
$
2.63
$
1.57
69
%
$
(4.89
)
(186
)%
$
$
.25
$
.97
$
(.25
)
(100
)%
$
(.72
)
(74
)%
33
Table of Contents
Increase (Decrease)
December 31,
2008 vs. 2007
2008
2007
$
%
$
44,025
$
35,726
$
8,299
23
%
8,451
8,451
100
71,744
73,609
(1,865
)
(3
)
20,582
14,818
5,764
39
729
1,174
(445
)
(38
)
5,112
10,546
(5,434
)
(52
)
3,535
4,600
(1,065
)
(23
)
2,200
3,044
(844
)
(28
)
1,249
1,301
(52
)
(4
)
11,141
10,747
394
4
$
168,768
$
155,565
$
13,203
8
%
$
41,933
$
35,947
$
5,986
17
%
118,225
111,098
7,127
6
3,604
3,285
319
10
163,762
150,330
13,432
9
7
11
(4
)
(36
)
6,855
7,055
(200
)
(3
)
1,856
1,831
25
1
4,999
5,224
(225
)
(4
)
$
168,768
$
155,565
$
13,203
8
%
34
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35
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36
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Years Ended December 31,
2008
2007
2006
$
143
$
136
$
121
108
110
42
26
26
48
3
11
15
112
102
112
$
392
$
385
$
338
37
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38
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Year Ended
December 31, 2008
Corporate
Lending
APG
and Other
$
2,216
$
$
3,748
2,752
83
304
25
9,103
25
6,665
25
19
2,438
(25
)
6
1,029
1,409
(25
)
6
340
(63
)
121
180
199
180
277
320
49
12
23
589
398
277
638
410
300
951
(158
)
26
336
(56
)
9
4
$
615
$
(106
)
$
17
(1)
Income taxes are based on a
percentage of net income before tax for the individual
reportable segment.
39
Table of Contents
Year Ended
December 31, 2007
Corporate
Lending
APG
and Other
$
2,848
$
$
5,522
2,835
106
868
21
12,179
21
9,597
27
21
2,582
(27
)
1,394
1
1,188
(27
)
(1
)
336
269
156
194
218
194
605
374
19
2
2
690
388
339
709
390
341
673
188
32
249
70
12
2
$
424
$
116
$
20
(1)
Income taxes are based on a
percentage of net income before tax for the individual
reportable segment.
Table of Contents
Year Ended
December 31, 2006
Corporate
Lending
APG
and Other
$
2,771
$
$
4,690
2,092
98
705
7
10,356
7
7,877
23
12
2,479
(23
)
(5
)
303
2,176
(23
)
(5
)
397
239
132
177
155
177
636
287
645
358
250
645
358
250
1,708
255
32
632
94
12
4
$
1,076
$
157
$
20
(1)
Income taxes are based on a
percentage of net income before tax for the individual
reportable segment.
Table of Contents
Years Ended December 31,
2008
2007
2006
Corporate
Corporate
Corporate
Lending
APG
and Other
Lending
APG
and Other
Lending
APG
and Other
$
(442
)
$
$
$
247
$
$
$
532
$
$
(560
)
217
(1,558
)
131
(360
)
(102
)
(169
)
(209
)
(53
)
(24
)
(14
)
(55
)
(28
)
(29
)
(49
)
(34
)
(11
)
$
(1,157
)
$
(24
)
$
(14
)
$
240
$
(28
)
$
(1,587
)
$
405
$
(34
)
$
(371
)
42
Table of Contents
Years Ended December 31,
2008
2007
2006
$
(872
)
$
(818
)
$
(896
)
309
380
16
(563
)
(438
)
(880
)
(141
)
(119
)
(43
)
(704
)
(557
)
(923
)
367
902
262
437
553
$
(442
)
$
247
$
532
(1)
Negative amounts are subtracted
from Core Earnings net income to arrive at GAAP net
income and positive amounts are added to Core
Earnings net income to arrive at GAAP net income.
43
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Years Ended December 31,
2008
2007
2006
$
(445
)
$
(1,361
)
$
(339
)
(107
)
18
109
(552
)
(1,343
)
(230
)
(8
)
2
1
$
(560
)
$
(1,341
)
$
(229
)
(1)
See
Reclassification of
Realized Gains (Losses) on Derivative and Hedging
Activities
below for a detailed breakdown of the
components of realized losses on derivative and hedging
activities.
(2)
Negative amounts are subtracted
from Core Earnings net income to arrive at GAAP net
income and positive amounts are added to Core
Earnings net income to arrive at GAAP net income.
44
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Years Ended December 31,
2008
2007
2006
$
(488
)
$
(67
)
$
(50
)
563
47
(59
)
11
21
2
107
(18
)
(109
)
(552
)
(1,343
)
(230
)
$
(445
)
$
(1,361
)
$
(339
)
(1)
Unrealized gains (losses) on
derivative and hedging activities, net comprises the
following unrealized mark-to-market gains (losses):
Years Ended December 31,
2008
2007
2006
$
(529
)
$
(209
)
$
176
(1,558
)
(360
)
(239
)
360
(58
)
216
64
12
$
(552
)
$
(1,343
)
$
(230
)
45
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Years Ended December 31,
2008
2007
2006
$
69
$
$
(171
)
(169
)
$
(209
)
$
(102
)
$
(169
)
$
(209
)
(1)
Negative amounts are subtracted
from Core Earnings net income to arrive at GAAP net
income and positive amounts are added to Core
Earnings net income to arrive at GAAP net income.
46
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Years Ended December 31,
% Increase (Decrease)
2008
2007
2006
2008 vs. 2007
2007 vs. 2006
$
2,216
$
2,848
$
2,771
(22
)%
3
%
3,748
5,522
4,690
(32
)
18
2,752
2,835
2,092
(3
)
36
83
106
98
(22
)
8
304
868
705
(65
)
23
9,103
12,179
10,356
(25
)
18
6,665
9,597
7,877
(31
)
22
2,438
2,582
2,479
(6
)
4
1,029
1,394
303
(26
)
360
1,409
1,188
2,176
19
(45
)
180
194
177
(7
)
10
49
19
158
100
589
690
645
(15
)
7
638
709
645
(10
)
10
951
673
1,708
41
(61
)
336
249
632
35
(61
)
615
424
1,076
45
(61
)
$
615
$
424
$
1,076
45
%
(61
)%
47
Table of Contents
Years Ended December 31,
2008
2007
2006
Balance
Rate
Balance
Rate
Balance
Rate
$
44,291
4.50
%
$
31,294
6.59
%
$
21,152
6.66
%
73,091
4.35
67,918
6.39
55,119
6.43
19,276
9.01
12,507
11.65
8,585
11.90
955
8.66
1,246
8.49
1,155
8.48
9,279
2.98
12,710
5.57
8,824
5.70
146,892
4.95
%
125,675
6.90
%
94,835
6.94
%
9,999
9,715
8,550
$
156,891
$
135,390
$
103,385
$
1,727
3.43
%
$
%
$
%
696
3.95
166
5.26
1
4.98
33,636
4.81
16,219
5.75
3,901
5.33
36,059
4.73
16,385
5.74
3,902
5.33
111,625
3.76
109,984
5.59
91,461
5.37
147,684
4.00
%
126,369
5.61
%
95,363
5.37
%
3,797
4,272
3,912
5,410
4,749
4,110
$
156,891
$
135,390
$
103,385
.93
%
1.26
%
1.53
%
48
Table of Contents
(Decrease)
Increase
Attributable to
(Decrease)
Change in
Increase
Rate
Volume
$
(1,404
)
$
(3,163
)
$
1,759
(1,181
)
(2,402
)
1,221
$
(223
)
$
(761
)
$
538
$
2,096
$
(98
)
$
2,194
1,962
301
1,661
$
134
$
(399
)
$
533
Years Ended December 31,
2008
2007
2006
1.28
%
1.44
%
1.68
%
(.27
)
(.16
)
.27
1.17
1.26
1.53
(.24
)
.93
%
1.26
%
1.53
%
(1)
Before commitment and liquidity
fees associated with the 2008 Asset-Backed Financing Facilities,
which are referred to as the 2008 Asset-Backed Financing
Facilities fees (see LIQUIDITY AND CAPITAL
RESOURCES Additional Funding Sources for General
Corporate Purposes for a further discussion).
(2)
Composition of student loan spread:
5.60
%
7.92
%
7.93
%
.28
.05
.04
(.55
)
(.63
)
(.67
)
(.11
)
(.12
)
(.12
)
(.16
)
(.18
)
(.14
)
5.06
7.04
7.04
(3.78
)
(5.60
)
(5.36
)
1.28
%
1.44
%
1.68
%
(3)
Comprised of investments, cash and
other loans.
49
Table of Contents
50
Table of Contents
includes the net interest margin related to our off-balance
sheet student loan securitization trusts. This includes any
related fees or costs such as the Consolidation Loan Rebate
Fees, premium/discount amortization and Repayment Borrower
Benefits yield adjustments;
includes the reclassification of certain derivative net
settlement amounts. The net settlements on certain derivatives
that do not qualify as SFAS No. 133 hedges are
recorded as part of the gain (loss) on derivative and
hedging activities, net line on the income statement and
are therefore not recognized in the on-balance sheet student
loan spread. Under this presentation, these gains and losses are
reclassified to the income statement line item of the
economically hedged item. For our Core Earnings net
interest margin, this would primarily include:
(a) reclassifying the net settlement amounts related to our
written Floor Income Contracts to student loan interest income
and (b) reclassifying the net settlement amounts related to
certain of our basis swaps to debt interest expense;
excludes unhedged Floor Income earned on the Managed student
loan portfolio; and
includes the amortization of upfront payments on Floor Income
Contracts in student loan income that we believe are
economically hedging the Floor Income.
51
Table of Contents
Years Ended December 31,
2008
2007
2006
.83
%
.96
%
1.25
%
5.09
5.12
5.13
1.63
1.67
1.84
(.51
)
(.11
)
.30
1.49
1.49
1.69
(.19
)
1.30
%
1.49
%
1.69
%
(1)
Before commitment and liquidity
fees associated with the 2008 Asset-Backed Financing Facilities,
which are referred to as the 2008 Asset-Backed Financing
Facilities fees (see LIQUIDITY AND CAPITAL
RESOURCES Additional Funding Sources for General
Corporate Purposes for a further discussion).
Core Earnings basis Private Education Loan Spread,
before 2008 Asset-Backed Financing Facilities fees and after
provision for loan losses
2.41
%
.41
%
3.75
%
Composition of Core Earnings basis student loan
spread:
Core Earnings basis student loan yield
5.77
%
8.12
%
8.10
%
Consolidation Loan Rebate Fees
(.52
)
(.57
)
(.56
)
Repayment Borrower Benefits
(.11
)
(.11
)
(.09
)
Premium and discount amortization
(.14
)
(.17
)
(.16
)
Core Earnings basis student loan net yield
5.00
7.27
7.29
Core Earnings basis student loan cost of funds
(3.37
)
(5.60
)
(5.45
)
Core Earnings basis student loan spread, before 2008
Asset-Backed Financing Facilities fees
1.63
%
1.67
%
1.84
%
Comprised of investments, cash and other loans
The average balances of our Managed interest-earning assets for
the respective periods are:
FFELP loans
$
141,647
$
127,940
$
111,469
Private Education Loans
32,597
26,190
19,723
Total student loans
174,244
154,130
131,192
Other interest-earning assets
12,403
17,455
14,148
Total Managed interest-earning assets
$
186,647
$
171,585
$
145,340
52
Table of Contents
53
Table of Contents
December 31, 2008
FFELP
FFELP
Private
Stafford and
Consolidation
Total
Education
Other
(1)
Loans
FFELP
Loans
Total
$
18,961
$
$
18,961
$
7,972
$
26,933
32,455
70,511
102,966
14,231
117,197
51,416
70,511
121,927
22,203
144,130
1,151
1,280
2,431
(535
)
1,896
222
222
(91
)
(47
)
(138
)
(1,308
)
(1,446
)
52,476
71,744
124,220
20,582
144,802
473
473
1,629
2,102
6,583
15,078
21,661
12,062
33,723
7,056
15,078
22,134
13,691
35,825
105
462
567
(361
)
206
92
92
(18
)
(9
)
(27
)
(505
)
(532
)
7,143
15,531
22,674
12,917
35,591
$
59,619
$
87,275
$
146,894
$
33,499
$
180,393
42
%
58
%
100
%
41
%
59
%
100
%
33
%
48
%
81
%
19
%
100
%
(1)
FFELP category is primarily
Stafford loans and also includes federally insured PLUS and HEAL
loans.
54
Table of Contents
December 31, 2007
FFELP
FFELP
Private
Stafford and
Consolidation
Total
Education
Other
(1)
Loans
FFELP
Loans
Total
$
14,390
$
$
14,390
$
6,735
$
21,125
20,469
72,306
92,775
9,437
102,212
34,859
72,306
107,165
16,172
123,337
915
1,344
2,259
(468
)
1,791
118
118
(48
)
(41
)
(89
)
(1,004
)
(1,093
)
35,726
73,609
109,335
14,818
124,153
1,004
1,004
3,117
4,121
8,334
15,968
24,302
11,082
35,384
9,338
15,968
25,306
14,199
39,505
154
482
636
(355
)
281
28
28
(20
)
(9
)
(29
)
(362
)
(391
)
9,472
16,441
25,913
13,510
39,423
$
45,198
$
90,050
$
135,248
$
28,328
$
163,576
33
%
67
%
100
%
33
%
67
%
100
%
28
%
55
%
83
%
17
%
100
%
(1)
FFELP category is primarily
Stafford loans and also includes federally insured PLUS and HEAL
loans.
Table of Contents
Year Ended December 31, 2008
FFELP
FFELP
Private
Stafford and
Consolidation
Education
Other
(1)
Loans
Total FFELP
Loans
Total
$
44,291
$
73,091
$
117,382
$
19,276
$
136,658
8,299
15,966
24,265
13,321
37,586
$
52,590
$
89,057
$
141,647
$
32,597
$
174,244
38
%
62
%
100
%
37
%
63
%
100
%
30
%
51
%
81
%
19
%
100
%
Year Ended December 31, 2007
FFELP
FFELP
Private
Stafford and
Consolidation
Education
Other
(1)
Loans
Total FFELP
Loans
Total
$
31,294
$
67,918
$
99,212
$
12,507
$
111,719
11,533
17,195
28,728
13,683
42,411
$
42,827
$
85,113
$
127,940
$
26,190
$
154,130
32
%
68
%
100
%
33
%
67
%
100
%
28
%
55
%
83
%
17
%
100
%
Year Ended December 31, 2006
FFELP
FFELP
Private
Stafford and
Consolidation
Education
Other
(1)
Loans
Total FFELP
Loans
Total
$
21,152
$
55,119
$
76,271
$
8,585
$
84,856
19,546
15,652
35,198
11,138
46,336
$
40,698
$
70,771
$
111,469
$
19,723
$
131,192
28
%
72
%
100
%
37
%
63
%
100
%
31
%
54
%
85
%
15
%
100
%
(1)
FFELP category is primarily
Stafford loans and also includes federally insured PLUS and HEAL
loans.
56
Table of Contents
December 31, 2008
December 31, 2007
Fixed
Variable
Fixed
Variable
Borrower
Borrower
Borrower
Borrower
Rate
Rate
Total
Rate
Rate
Total
$
104.9
$
16.1
$
121.0
$
89.3
$
17.1
$
106.4
15.0
7.0
22.0
15.9
9.2
25.1
119.9
23.1
143.0
105.2
26.3
131.5
(64.3
)
(1.3
)
(65.6
)
(45.9
)
(1.5
)
(47.4
)
(28.6
)
(28.6
)
(15.7
)
(17.4
)
(33.1
)
$
27.0
$
21.8
$
48.8
$
43.6
$
7.4
$
51.0
$
4.3
$
4.8
$
9.1
$
1.3
$
7.4
$
8.7
Years Ended December 31,
2009
2010
2011
2012
2013
$
21
$
19
$
16
$
16
$
4
57
Table of Contents
On-Balance Sheet Private Education
Loan Delinquencies
December 31,
December 31,
December 31,
2008
2007
2006
Balance
%
Balance
%
Balance
%
$
10,159
$
8,151
$
5,218
862
974
359
9,748
87.2
%
6,236
88.5
%
4,214
86.9
%
551
4.9
306
4.3
250
5.1
296
2.6
176
2.5
132
2.7
587
5.3
329
4.7
255
5.3
11,182
100
%
7,047
100
%
4,851
100
%
22,203
16,172
10,428
(535
)
(468
)
(365
)
21,668
15,704
10,063
222
118
64
(1,308
)
(1,004
)
(372
)
$
20,582
$
14,818
$
9,755
50.4
%
43.6
%
46.5
%
12.8
%
11.5
%
13.1
%
7.2
%
12.1
%
6.9
%
(1)
Loans for borrowers who still may
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 full 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.
58
Table of Contents
Off-Balance Sheet Private Education
Loan Delinquencies
December 31,
December 31,
December 31,
2008
2007
2006
Balance
%
Balance
%
Balance
%
$
3,461
$
4,963
$
5,608
700
1,417
822
8,843
92.8
%
7,403
94.7
%
6,419
94.5
%
315
3.3
202
2.6
222
3.3
121
1.3
84
1.1
60
.9
251
2.6
130
1.6
91
1.3
9,530
100
%
7,819
100
%
6,792
100
%
13,691
14,199
13,222
(361
)
(355
)
(303
)
13,330
13,844
12,919
92
28
(505
)
(362
)
(86
)
$
12,917
$
13,510
$
12,833
69.6
%
55.1
%
51.4
%
7.2
%
5.3
%
5.5
%
6.8
%
15.3
%
10.8
%
(1)
Loans for borrowers who still may
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 full 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.
Table of Contents
Managed Basis Private Education
Loan Delinquencies
December 31,
December 31,
December 31,
2008
2007
2006
Balance
%
Balance
%
Balance
%
$
13,620
$
13,114
$
10,826
1,562
2,391
1,181
18,591
89.8
%
13,639
91.7
%
10,633
91.3
%
866
4.2
508
3.4
472
4.0
417
2.0
260
1.8
192
1.7
838
4.0
459
3.1
346
3.0
20,712
100
%
14,866
100
%
11,643
100
%
35,894
30,371
23,650
(896
)
(823
)
(668
)
34,998
29,548
22,982
314
146
64
(1,813
)
(1,366
)
(458
)
$
33,499
$
28,328
$
22,588
57.7
%
48.9
%
49.2
%
10.2
%
8.3
%
8.7
%
7.0
%
13.9
%
9.2
%
(1)
Loans for borrowers who still may
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 full 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.
Table of Contents
61
Table of Contents
Activity in Allowance for Private Education Loans
On-Balance Sheet
Off-Balance Sheet
Managed Basis
Years Ended December 31,
Years Ended December 31,
Years Ended December 31,
2008
2007
2006
2008
2007
2006
2008
2007
2006
$
886
$
308
$
204
$
334
$
86
$
78
$
1,220
$
394
$
282
586
884
258
288
349
15
874
1,233
273
(460
)
(332
)
(160
)
(226
)
(107
)
(24
)
(686
)
(439
)
(184
)
36
32
23
9
45
32
23
(424
)
(300
)
(137
)
(217
)
(107
)
(24
)
(641
)
(407
)
(161
)
38
8
46
1,086
892
325
413
328
69
1,499
1,220
394
(6
)
(17
)
6
17
$
1,086
$
886
$
308
$
413
$
334
$
86
$
1,499
$
1,220
$
394
4.98
%
5.04
%
3.22
%
2.68
%
1.46
%
.43
%
3.86
%
3.07
%
1.62
%
4.39
%
4.54
%
2.99
%
2.31
%
1.27
%
.38
%
3.37
%
2.71
%
1.47
%
4.89
%
5.48
%
2.96
%
3.02
%
2.35
%
.65
%
4.18
%
4.02
%
1.66
%
9.71
%
12.57
%
6.36
%
4.34
%
4.28
%
1.26
%
7.24
%
8.21
%
3.38
%
2.56
2.95
2.25
1.91
3.13
3.46
2.34
3.00
2.44
$
22,203
$
16,172
$
10,428
$
13,691
$
14,199
$
13,222
$
35,894
$
30,371
$
23,650
$
8,533
$
5,949
$
4,257
$
8,088
$
7,305
$
5,721
$
16,621
$
13,254
$
9,978
$
11,182
$
7,047
$
4,851
$
9,530
$
7,819
$
6,792
$
20,712
$
14,866
$
11,643
(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
loans principal balance. Prior to 2008, the interest
provision was reversed in interest income and then provided for
through provision within the allowance for loan loss. For the
year ended December 31, 2007, this amount was
$21 million and $27 million on an On-Balance Sheet
Basis and a Managed Basis, respectively, and for the year ended
December 31, 2006, this amount was $12 million and
$15 million on an On-Balance Sheet Basis and a Managed
Basis, respectively.
62
Table of Contents
December 31, 2008
December 31, 2007
December 31, 2006
Non-
Non-
Non-
Traditional
Traditional
Total
Traditional
Traditional
Total
Traditional
Traditional
Total
$
30,949
$
4,945
$
35,894
$
25,791
$
4,580
$
30,371
$
20,006
$
3,644
$
23,650
17,715
2,997
20,712
12,711
2,155
14,866
9,821
1,822
11,643
707
792
1,499
438
782
1,220
179
215
394
2.1
%
14.3
%
3.9
%
1.5
%
11.9
%
3.1
%
.6
%
7.2
%
1.6
%
2.3
%
16.0
%
4.2
%
1.7
%
17.1
%
4.0
%
.9
%
5.9
%
1.7
%
4.0
%
26.4
%
7.2
%
3.5
%
36.3
%
8.2
%
1.8
%
11.8
%
3.4
%
2.4
2.3
2.3
2.6
3.3
3.0
3.3
2.0
2.4
7.1
%
28.9
%
10.2
%
5.2
%
26.3
%
8.3
%
5.4
%
26.0
%
8.7
%
2.6
%
12.7
%
4.0
%
1.7
%
11.1
%
3.1
%
1.5
%
10.6
%
3.0
%
6.7
%
9.0
%
7.0
%
12.8
%
19.4
%
13.9
%
8.7
%
11.9
%
9.2
%
(1)
Full year actuals for the years
ended December 31, 2008, 2007 and 2006.
63
Table of Contents
Activity in Allowance for Private Education Loans
On-Balance Sheet
Off-Balance Sheet
Managed Basis
Years Ended December 31,
Years Ended December 31,
Years Ended December 31,
2008
2007
2006
2008
2007
2006
2008
2007
2006
$
1,004
$
372
$
250
$
362
$
86
$
78
$
1,366
$
458
$
328
586
884
258
288
349
15
874
1,233
273
(320
)
(246
)
(119
)
(153
)
(79
)
(24
)
(473
)
(325
)
(143
)
38
8
46
1,308
1,010
389
505
356
69
1,813
1,366
458
(6
)
(17
)
6
17
$
1,308
$
1,004
$
372
$
505
$
362
$
86
$
1,813
$
1,366
$
458
3.75
%
4.14
%
2.79
%
1.90
%
1.09
%
.43
%
2.85
%
2.46
%
1.44
%
3.31
%
3.72
%
2.59
%
1.64
%
.94
%
.38
%
2.49
%
2.17
%
1.30
%
5.83
%
6.16
%
3.55
%
3.66
%
2.54
%
.66
%
5.01
%
4.48
%
1.93
%
11.70
%
14.25
%
7.68
%
5.29
%
4.63
%
1.26
%
8.75
%
9.19
%
3.93
%
4.08
4.08
3.14
3.29
4.56
3.46
3.83
4.19
3.19
$
22,426
$
16,290
$
10,492
$
13,782
$
14,227
$
13,222
$
36,208
$
30,517
$
23,714
$
8,533
$
5,949
$
4,257
$
8,088
$
7,305
$
5,721
$
16,621
$
13,254
$
9,978
$
11,182
$
7,047
$
4,851
$
9,530
$
7,819
$
6,792
$
20,712
$
14,866
$
11,643
(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
loans principal balance. Prior to 2008, the interest
provision was reversed in interest income and then provided for
through provision within the allowance for loan loss. For the
year ended December 31, 2007, this amount was
$21 million and $27 million on an On-Balance Sheet
Basis and a Managed Basis, respectively, and for the year ended
December 31, 2006, this amount was $12 million and
$15 million on an On-Balance Sheet Basis and a Managed
Basis, respectively.
(2)
Ending total loans represents gross
Private Education Loans, plus the receivable for partially
charged-off loans.
64
Table of Contents
December 31, 2008
December 31, 2007
December 31, 2006
Non-
Non-
Non-
Traditional
Traditional
Total
Traditional
Traditional
Total
Traditional
Traditional
Total
$
31,101
$
5,107
$
36,208
$
25,848
$
4,669
$
30,517
$
20,037
$
3,677
$
23,714
17,715
2,997
20,712
12,711
2,155
14,866
9,821
1,822
11,643
859
954
1,813
495
871
1,366
209
249
458
1.4
%
11.1
%
2.9
%
1.2
%
9.5
%
2.5
%
.6
%
6.3
%
1.4
%
2.8
%
18.7
%
5.0
%
1.9
%
18.7
%
4.5
%
1.0
%
6.8
%
1.9
%
4.8
%
31.8
%
8.8
%
3.9
%
40.4
%
9.2
%
2.1
%
13.7
%
3.9
%
4.2
3.5
3.8
3.6
4.6
4.2
4.2
2.7
3.2
7.1
%
28.9
%
10.2
%
5.2
%
26.3
%
8.3
%
5.4
%
26.0
%
8.7
%
2.6
%
12.7
%
4.0
%
1.7
%
11.1
%
3.1
%
1.5
%
10.6
%
3.0
%
6.7
%
9.0
%
7.0
%
12.8
%
19.4
%
13.9
%
8.7
%
11.9
%
9.2
%
(1)
Full year actuals for the years
ended December 31, 2008, 2007 and 2006.
(2)
Ending total loans represents gross
Private Education Loans, plus the receivable for partially
charged-off loans.
65
Table of Contents
66
Table of Contents
Monthly Scheduled Payments Due
Not Yet in
0 to 24
25 to 48
More than 48
Repayment
Total
$
$
$
$
13,620
$
13,620
1,406
106
50
1,562
12,551
3,798
2,242
18,591
728
93
45
866
351
44
22
417
691
97
50
838
$
15,727
$
4,138
$
2,409
$
13,620
35,894
(896
)
314
(1,813
)
$
33,499
8.9
%
2.6
%
2.1
%
%
7.0
%
67
Table of Contents
Monthly Scheduled Payments Due
Not Yet in
0 to 24
25 to 48
More than 48
Repayment
Total
$
$
$
$
13,114
$
13,114
2,228
118
45
2,391
9,184
2,807
1,648
13,639
407
64
37
508
221
25
14
260
376
52
31
459
$
12,416
$
3,066
$
1,775
$
13,114
30,371
(823
)
146
(1,366
)
$
28,328
17.9
%
3.8
%
2.5
%
%
13.9
%
Monthly Scheduled Payments Due
Not Yet in
0 to 24
25 to 48
More than 48
Repayment
Total
$
$
$
$
10,826
$
10,826
1,106
50
25
1,181
7,181
2,151
1,301
10,633
366
66
40
472
149
27
16
192
254
60
32
346
$
9,056
$
2,354
$
1,414
$
10,826
23,650
(668
)
64
(458
)
$
22,588
12.2
%
2.1
%
1.8
%
%
9.2
%
December 31,
December 31,
December 31,
2008
2007
2006
Forbearance
% of
Forbearance
% of
Forbearance
% of
Balance
Total
Balance
Total
Balance
Total
$
1,075
69
%
$
1,641
69
%
$
870
74
%
368
23
629
26
262
22
119
8
121
5
49
4
$
1,562
100
%
$
2,391
100
%
$
1,181
100
%
Table of Contents
On-Balance Sheet FFELP
Loan Delinquencies
December 31,
2008
2007
2006
Balance
%
Balance
%
Balance
%
$
39,270
$
31,200
$
23,171
12,483
10,675
8,325
58,811
83.8
%
55,128
84.4
%
45,664
86.0
%
4,044
5.8
3,650
5.6
2,787
5.2
2,064
2.9
1,841
2.8
1,468
2.8
5,255
7.5
4,671
7.2
3,207
6.0
70,174
100
%
65,290
100
%
53,126
100
%
121,927
107,165
84,622
2,431
2,259
1,563
124,358
109,424
86,185
(138
)
(89
)
(20
)
$
124,220
$
109,335
$
86,165
57.6
%
60.9
%
62.8
%
16.2
%
15.6
%
14.0
%
15.1
%
14.1
%
13.5
%
(1)
Loans for borrowers who still may
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 or who have temporarily ceased making full payments
due to hardship or other factors.
(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 full 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.
69
Table of Contents
Off-Balance Sheet FFELP
Loan Delinquencies
December 31,
2008
2007
2006
Balance
%
Balance
%
Balance
%
$
4,115
$
5,060
$
7,392
2,821
2,950
3,789
12,441
81.9
%
13,703
79.2
%
16,655
77.7
%
881
5.8
1,017
5.9
1,278
6.0
484
3.2
577
3.3
777
3.6
1,392
9.1
1,999
11.6
2,721
12.7
15,198
100
%
17,296
100
%
21,431
100
%
22,134
25,306
32,612
567
636
741
22,701
25,942
33,353
(27
)
(29
)
(14
)
$
22,674
$
25,913
$
33,339
68.7
%
68.4
%
65.7
%
18.1
%
20.8
%
22.3
%
15.7
%
14.6
%
15.0
%
(1)
Loans for borrowers who still may
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 or who have temporarily ceased making full payments
due to hardship or other factors.
(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 full 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.
70
Table of Contents
Managed Basis FFELP
Loan Delinquencies
December 31,
2008
2007
2006
Balance
%
Balance
%
Balance
%
$
43,385
$
36,260
$
30,563
15,304
13,625
12,114
71,252
83.5
%
68,831
83.3
%
62,319
83.6
%
4,925
5.8
4,667
5.7
4,065
5.5
2,548
2.9
2,418
2.9
2,245
3.0
6,647
7.8
6,670
8.1
5,928
7.9
85,372
100
%
82,586
100
%
74,557
100
%
144,061
132,471
117,234
2,998
2,895
2,304
147,059
135,366
119,538
(165
)
(118
)
(34
)
$
146,894
$
135,248
$
119,504
59.3
%
62.3
%
63.6
%
16.5
%
16.7
%
16.4
%
15.2
%
14.2
%
14.0
%
(1)
Loans for borrowers who still may
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 or who have temporarily ceased making full payments
due to hardship or other factors.
(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 full 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.
Table of Contents
Activity in Allowance for FFELP Loans
On-Balance Sheet
Off-Balance Sheet
Managed Basis
Years Ended December 31,
Years Ended December 31,
Years Ended December 31,
2008
2007
2006
2008
2007
2006
2008
2007
2006
$
89
$
20
$
14
$
29
$
14
$
11
$
118
$
34
$
25
106
89
14
21
32
3
127
121
17
(58
)
(21
)
(5
)
(21
)
(15
)
(3
)
(79
)
(36
)
(8
)
1
1
(3
)
(2
)
(2
)
3
(1
)
(1
)
$
138
$
89
$
20
$
27
$
29
$
14
$
165
$
118
$
34
.09
%
.04
%
.01
%
.13
%
.08
%
.01
%
.10
%
.05
%
.01
%
.07
%
.03
%
.01
%
.11
%
.07
%
.01
%
.08
%
.04
%
.01
%
.11
%
.08
%
.02
%
.12
%
.11
%
.04
%
.11
%
.09
%
.03
%
.20
%
.14
%
.04
%
.18
%
.17
%
.06
%
.19
%
.14
%
.05
%
2.39
4.18
4.03
1.27
1.90
4.73
2.09
3.23
4.28
$
121,927
$
107,165
$
84,622
$
22,134
$
25,306
$
32,612
$
144,061
$
132,471
$
117,234
$
66,392
$
58,999
$
47,155
$
16,086
$
18,624
$
21,630
$
82,478
$
77,623
$
68,785
$
70,174
$
65,290
$
53,126
$
15,198
$
17,296
$
21,431
$
85,372
$
82,586
$
74,557
Years Ended
December 31,
2008
2007
2006
$
586
$
884
$
258
106
89
14
28
42
15
$
720
$
1,015
$
287
72
Table of Contents
Years Ended
December 31,
2008
2007
2006
$
874
$
1,233
$
273
127
121
17
28
40
13
$
1,029
$
1,394
$
303
Years Ended
December 31,
2008
2007
2006
$
320
$
246
$
119
58
21
5
17
11
5
$
395
$
278
$
129
Years Ended
December 31,
2008
2007
2006
$
473
$
325
$
143
79
36
8
17
11
5
$
569
$
372
$
156
73
Table of Contents
Years Ended December 31,
2008
2007
2006
Volume
Rate
Volume
Rate
Volume
Rate
$
13,272
1.69
%
$
8,544
2.67
%
$
6,339
1.81
%
5,749
7,193
5,932
.01
6,622
3.00
9,033
3.14
10,059
2.29
688
695
.02
1,679
.01
26,331
1.61
25,465
2.01
24,009
1.44
907
1.26
8,473
4.16
6,228
4.39
27,238
1.59
33,938
2.54
30,237
2.05
611
1.98
2,441
2.72
4,188
2.54
$
27,849
1.60
%
$
36,379
2.56
%
$
34,425
2.11
%
(1)
Primarily includes spot purchases
(including Wholesale Consolidation Loans for the year ended
December 31, 2007), other commitment clients, and
subsidiary acquisitions.
74
Table of Contents
Year Ended
December 31, 2008
FFELP
Private
Total
$
19,894
$
6,437
$
26,331
701
701
206
206
462
149
611
986
280
1,266
2,446
921
3,367
24,695
7,787
32,482
(986
)
(280
)
(1,266
)
457
741
1,198
$
24,166
$
8,248
$
32,414
Year Ended
December 31, 2007
FFELP
Private
Total
$
17,577
$
7,888
$
25,465
7,048
7,048
248
57
305
1,120
1,120
2,206
235
2,441
3,744
582
4,326
2,279
444
2,723
34,222
9,206
43,428
(3,744
)
(582
)
(4,326
)
539
703
1,242
$
31,017
$
9,327
$
40,344
75
Table of Contents
Year Ended
December 31, 2006
FFELP
Private
Total
$
16,398
$
7,611
$
24,009
457
61
518
5,710
5,710
4,092
96
4,188
7,141
255
7,396
1,716
146
1,862
35,514
8,169
43,683
(7,141
)
(255
)
(7,396
)
658
472
1,130
$
29,031
$
8,386
$
37,417
December 31,
2008
2007
2006
$
44,025
$
35,726
$
24,841
8,451
71,744
73,609
61,324
20,582
14,818
9,755
729
1,174
1,309
8,445
14,870
8,175
2,200
3,044
3,341
9,947
8,953
4,859
$
166,123
$
152,194
$
113,604
(1)
Investments include cash and cash
equivalents, short and long-term investments, restricted cash
and investments, leveraged leases, and municipal bonds.
(2)
Other assets include accrued
interest receivable, goodwill and acquired intangible assets and
other non-interest earning assets.
Table of Contents
Years Ended
December 31,
December 31,
December 31,
2008
2007
2006
$
11,593
$
7,404
$
5,398
1,437
1,439
1,349
801
498
192
13,831
9,341
6,939
5,791
7,267
6,129
$
19,622
$
16,608
$
13,068
Years Ended
December 31,
December 31,
December 31,
2008
2007
2006
$
3,652
$
6,963
$
7,786
362
855
1,191
62
103
54
4,076
7,921
9,031
545
648
1,282
$
4,621
$
8,569
$
10,313
77
Table of Contents
On-Balance Sheet
Year Ended December 31, 2008
FFELP
FFELP
Total Private
Total On-
Stafford and
Consolidation
Total
Education
Balance Sheet
Other
(1)
Loans
FFELP
Loans
Portfolio
$
35,726
$
73,609
$
109,335
$
14,818
$
124,153
462
462
149
611
(703
)
(392
)
(1,095
)
(41
)
(1,136
)
(703
)
70
(633
)
108
(525
)
21,889
1,358
23,247
7,357
30,604
21,186
1,428
22,614
7,465
30,079
(409
)
529
120
228
348
(4,027
)
(3,822
)
(7,849
)
(1,929
)
(9,778
)
$
52,476
$
71,744
$
124,220
$
20,582
$
144,802
Off-Balance Sheet
Year Ended December 31, 2008
FFELP
FFELP
Total Private
Total Off-
Stafford and
Consolidation
Total
Education
Balance Sheet
Other
(1)
Loans
FFELP
Loans
Portfolio
$
9,472
$
16,441
$
25,913
$
13,510
$
39,423
(311
)
(83
)
(394
)
(57
)
(451
)
(311
)
(83
)
(394
)
(57
)
(451
)
246
211
457
742
1,199
(65
)
128
63
685
748
(84
)
(36
)
(120
)
(228
)
(348
)
(2,180
)
(1,002
)
(3,182
)
(1,050
)
(4,232
)
$
7,143
$
15,531
$
22,674
$
12,917
$
35,591
Managed Portfolio
Year Ended December 31, 2008
FFELP
FFELP
Total Private
Total
Stafford and
Consolidation
Total
Education
Managed Basis
Other
(1)
Loans
FFELP
Loans
Portfolio
$
45,198
$
90,050
$
135,248
$
28,328
$
163,576
462
462
149
611
(1,014
)
(475
)
(1,489
)
(98
)
(1,587
)
(1,014
)
(13
)
(1,027
)
51
(976
)
22,135
1,569
23,704
8,099
31,803
21,121
1,556
22,677
8,150
30,827
(493
)
493
(6,207
)
(4,824
)
(11,031
)
(2,979
)
(14,010
)
$
59,619
$
87,275
$
146,894
$
33,499
$
180,393
$
22,135
$
2,031
$
24,166
$
8,248
$
32,414
(1)
FFELP category is primarily
Stafford loans and also includes PLUS and HEAL loans.
(2)
Represents loans that we either own
on-balance sheet or loans that we consolidated from our
off-balance sheet securitization trusts.
(3)
As of December 31, 2008, the
ending balance includes $13.7 billion of FFELP Stafford and
Other Loans and $2.6 billion of FFELP Consolidation Loans
disbursed on or after October 1, 2007, which are impacted
by CCRAA legislation.
(4)
The Total Managed Acquisitions line
includes incremental consolidations from third parties and
acquisitions.
78
Table of Contents
On-Balance Sheet
Year Ended December 31, 2007
FFELP
Total
Stafford
FFELP
Private
Total On-
and
Consolidation
Total
Education
Balance Sheet
Other
(1)
Loans
FFELP
Loans
Portfolio
$
24,841
$
61,324
$
86,165
$
9,755
$
95,920
2,206
2,206
235
2,441
(2,352
)
(801
)
(3,153
)
(45
)
(3,198
)
(2,352
)
1,405
(947
)
190
(757
)
19,835
8,437
28,272
8,388
36,660
17,483
9,842
27,325
8,578
35,903
(4,413
)
6,652
2,239
536
2,775
(1,871
)
(1,871
)
(2,185
)
(4,209
)
(6,394
)
(2,180
)
(8,574
)
$
35,726
$
73,609
$
109,335
$
14,818
$
124,153
Off-Balance Sheet
Year Ended December 31, 2007
FFELP
Total
Stafford
FFELP
Private
Total Off-
and
Consolidation
Total
Education
Balance Sheet
Other
(1)
Loans
FFELP
Loans
Portfolio
$
15,028
$
18,311
$
33,339
$
12,833
$
46,172
(933
)
(207
)
(1,140
)
(93
)
(1,233
)
(933
)
(207
)
(1,140
)
(93
)
(1,233
)
330
209
539
704
1,243
(603
)
2
(601
)
611
10
(1,494
)
(745
)
(2,239
)
(536
)
(2,775
)
1,871
1,871
(3,459
)
(1,127
)
(4,586
)
(1,269
)
(5,855
)
$
9,472
$
16,441
$
25,913
$
13,510
$
39,423
Managed Portfolio
Year Ended December 31, 2007
FFELP
Total
Stafford
FFELP
Private
Total
and
Consolidation
Total
Education
Managed
Other
(1)
Loans
FFELP
Loans
Basis Portfolio
$
39,869
$
79,635
$
119,504
$
22,588
$
142,092
2,206
2,206
235
2,441
(3,285
)
(1,008
)
(4,293
)
(138
)
(4,431
)
(3,285
)
1,198
(2,087
)
97
(1,990
)
20,165
8,646
28,811
9,092
37,903
16,880
9,844
26,724
9,189
35,913
(5,907
)
5,907
(5,644
)
(5,336
)
(10,980
)
(3,449
)
(14,429
)
$
45,198
$
90,050
$
135,248
$
28,328
$
163,576
$
20,165
$
10,852
$
31,017
$
9,327
$
40,344
(1)
FFELP category is primarily
Stafford loans and also includes PLUS and HEAL loans.
(2)
Represents loans that we either own
on-balance sheet or loans that we consolidated from our
off-balance sheet securitization trusts.
(3)
As of December 31, 2007, the
ending balance includes $1.3 billion of FFELP Stafford and
Other Loans and $1.4 billion of FFELP Consolidation Loans
disbursed on or after October 1, 2007, which are impacted
by CCRAA legislation.
(4)
The Total Managed Acquisitions line
includes incremental consolidations from third parties and
acquisitions.
79
Table of Contents
On-Balance Sheet
Year Ended December 31, 2006
FFELP
Total
Stafford
FFELP
Private
Total On-
and
Consolidation
Total
Education
Balance Sheet
Other
(1)
Loans
FFELP
Loans
Portfolio
$
19,988
$
54,859
$
74,847
$
7,757
$
82,604
4,092
4,092
96
4,188
(2,201
)
(2,078
)
(4,279
)
(14
)
(4,293
)
(2,201
)
2,014
(187
)
82
(105
)
19,585
4,697
24,282
7,818
32,100
17,384
6,711
24,095
7,900
31,995
(5,973
)
11,931
5,958
254
6,212
(5,034
)
(9,638
)
(14,672
)
(4,737
)
(19,409
)
(1,524
)
(2,539
)
(4,063
)
(1,419
)
(5,482
)
$
24,841
$
61,324
$
86,165
$
9,755
$
95,920
Off-Balance Sheet
Year Ended December 31, 2006
FFELP
Total
Stafford
FFELP
Private
Total Off-
and
Consolidation
Total
Education
Balance Sheet
Other
(1)
Loans
FFELP
Loans
Portfolio
$
20,670
$
10,575
$
31,245
$
8,680
$
39,925
(2,258
)
(672
)
(2,930
)
(32
)
(2,962
)
(2,258
)
(672
)
(2,930
)
(32
)
(2,962
)
424
233
657
472
1,129
(1,834
)
(439
)
(2,273
)
440
(1,833
)
(5,366
)
(592
)
(5,958
)
(254
)
(6,212
)
5,034
9,638
14,672
4,737
19,409
(3,476
)
(871
)
(4,347
)
(770
)
(5,117
)
$
15,028
$
18,311
$
33,339
$
12,833
$
46,172
Managed Portfolio
Year Ended December 31, 2006
FFELP
Total
Stafford
FFELP
Private
and
Consolidation
Total
Education
Total Managed
Other
(1)
Loans
FFELP
Loans
Basis Portfolio
$
40,658
$
65,434
$
106,092
$
16,437
$
122,529
4,092
4,092
96
4,188
(4,459
)
(2,750
)
(7,209
)
(46
)
(7,255
)
(4,459
)
1,342
(3,117
)
50
(3,067
)
20,009
4,930
24,939
8,290
33,229
15,550
6,272
21,822
8,340
30,162
(11,339
)
11,339
(5,000
)
(3,410
)
(8,410
)
(2,189
)
(10,599
)
$
39,869
$
79,635
$
119,504
$
22,588
$
142,092
$
20,009
$
9,022
$
29,031
$
8,386
$
37,417
(1)
FFELP category is primarily
Stafford loans and also includes PLUS and HEAL loans.
(2)
Represents FFELP/Stafford loans
that we either own on-balance sheet or in our off-balance sheet
securitization trusts that we consolidate.
(3)
The Total Managed Acquisitions line
includes incremental consolidations from third parties and
acquisitions.
Table of Contents
Years Ended
December 31,
2008
2007
2006
$
143
$
134
$
119
3
11
15
(51
)
24
2
85
25
41
$
180
$
194
$
177
Years Ended
December 31,
2008
2007
2006
$
241
$
351
$
327
237
227
201
111
112
117
$
589
$
690
$
645
81
Table of Contents
Year Ended December 31, 2008
Purchased
Purchased
Paper
Paper
Non-
Mortgage/
Contingency
Mortgage
Properties
& Other
Total APG
$
10
$
$
330
$
340
129
(192
)
(63
)
139
(192
)
330
277
6
1
5
12
193
38
167
398
199
39
172
410
13
4
8
25
(73
)
(235
)
150
(158
)
(26
)
(83
)
53
(56
)
(47
)
(152
)
97
(102
)
4
4
$
(51
)
$
(152
)
$
97
$
(106
)
82
Table of Contents
Year Ended December 31, 2007
Purchased
Purchased
Paper
Paper
Non-
Mortgage/
Contingency
Mortgage
Properties
& Other
Total APG
$
9
$
$
327
$
336
217
52
269
226
52
327
605
1
1
2
164
28
196
388
165
28
197
390
13
5
9
27
48
19
121
188
18
7
45
70
30
12
76
118
2
2
$
28
$
12
$
76
$
116
Year Ended December 31, 2006
Purchased
Purchased
Paper
Paper
Non-
Mortgage/
Contingency
Mortgage
Properties
& Other
Total APG
$
24
$
$
373
$
397
199
40
239
223
40
373
636
145
19
194
358
145
19
194
358
10
4
9
23
68
17
170
255
25
6
63
94
43
11
107
161
4
4
$
39
$
11
$
107
$
157
Table of Contents
Years Ended
December 31,
2008
2007
2006
$
5,353
$
6,111
$
3,438
483
556
278
9.0
%
9.1
%
8.1
%
$
655
$
463
$
348
129
217
199
20
%
47
%
56
%
$
544
$
587
$
274
Years Ended
December 31,
2008
2007
2006
$
39
$
1,307
$
556
(192
)
52
40
29
1,171
607
19
855
462
66
%
73
%
76
%
$
675
$
1,162
$
518
69
%
77
%
75
%
84
Table of Contents
Years Ended
December 31,
2008
2007
2006
$
9,852
$
8,195
$
6,971
1,726
1,509
1,667
$
11,578
$
9,704
$
8,638
85
Table of Contents
Years Ended
December 31,
% Increase (Decrease)
2008
2007
2006
2008 vs. 2007
2007 vs. 2006
$
6
$
(1
)
$
(5
)
700
%
80
%
121
156
132
(22
)
18
26
23
29
13
(21
)
108
110
42
(2
)
162
65
85
84
(24
)
1
320
374
287
(14
)
30
23
2
1,050
100
277
339
250
(18
)
36
300
341
250
(12
)
36
26
32
32
(19
)
9
12
12
(25
)
$
17
$
20
$
20
(15
)%
%
86
Table of Contents
Years Ended
December 31,
2008
2007
2006
$
90
$
109
$
148
91
94
33
96
136
69
$
277
$
339
$
250
87
Table of Contents
88
Table of Contents
89
Table of Contents
90
Table of Contents
91
Table of Contents
December 31, 2008
December 31, 2007
Available Capacity
Available Capacity
Unlimited
(1)
$
4,070
$
7,582
643
801
1,349
600
133
83
5,004
10,257
5,192
6,500
807
332
5,933
4,040
11,335
26,730
5,222
18,731
$
16,557
$
45,461
(1)
The ED Purchase and Participation
Programs provide unlimited funding for eligible FFELP Stafford
and PLUS loans made by the Company with first disbursements
between May 1, 2008 through June 30, 2010. See
ED Funding Programs discussed earlier in this
section.
(2)
At December 31, 2008, includes
$97 million due from The Reserve Primary Fund (see
Counterparty Exposure below).
(3)
Excludes $26 million and
$196 million of investments pledged as collateral related
to certain derivative positions and $82 million and
$93 million of other non-liquid investments classified at
December 31, 2008 and December 31, 2007, respectively,
as cash and investments on our balance sheet in accordance with
GAAP.
(4)
Includes $1.6 billion and
$1.3 billion at December 31, 2008 and
December 31, 2007, respectively, of cash collateral pledged
by derivative counterparties and held by the Company in
unrestricted cash.
(5)
At December 31, 2008, includes
$1.1 billion of cash and liquid investments at Sallie Mae
Bank, which Sallie Mae Bank was not authorized to dividend to
the Company without FDIC approval. This cash primarily will be
used to originate Private Education Loans in the first quarter
of 2009.
(6)
At December 31, 2008, excludes
commitments of $308 million from Lehman Brothers Bank, FSB,
a subsidiary of Lehman Brothers Holdings, Inc. Lehman Brothers
Holdings, Inc. declared bankruptcy on September 15, 2008.
The Companys line of credit commitments decreased by
$1.0 billion effective October 23, 2008.
(7)
At December 31, 2008, includes
$486 million (face amount and accrued interest) of student
loans committed to be sold to ED, but not settled until January
2009. Also includes approximately $241 million of
unencumbered FFELP student loans qualified to be financed by
EDs Participation Program that were subsequently financed
under that program.
(8)
General corporate purposes
primarily include originating Private Education Loans and
repaying unsecured debt as it matures.
92
Table of Contents
93
Table of Contents
On-Balance Sheet
Off-Balance Sheet
SLM Corporation
Securitizations
Securitizations
Contracts
Contracts
Contracts
$
234
$
926
$
716
60
%
42
%
42
%
0
%
0
%
0
%
94
Table of Contents
Years Ended December 31,
2008
2007
2006
Ending Balance
Ending Balance
Ending Balance
Total
Total
Total
Short
Long
Managed
Short
Long
Managed
Short
Long
Managed
Term
Term
Basis
Term
Term
Basis
Term
Term
Basis
$
6,794
$
31,182
$
37,976
$
8,297
$
36,796
$
45,093
$
3,187
$
45,501
$
48,688
1,148
1,108
2,256
254
254
31
1,972
2,003
100
2,481
2,581
93
2,852
2,945
24,768
24,768
25,960
67
26,027
4,953
4,953
(on-balance
sheet)
(1)(3)
7,365
7,365
80,601
80,601
68,048
68,048
50,147
50,147
37,159
37,159
42,088
42,088
49,865
49,865
1,827
1,827
1,342
1,342
248
248
$
41,933
$
152,022
$
193,955
$
35,953
$
149,480
$
185,433
$
3,528
$
153,318
$
156,846
(1)
The book basis of the assets that
secure the on-balance sheet secured financings is approximately
$128.8 billion in total at December 31, 2008.
(2)
Includes $1.9 billion
outstanding in the 2008 Asset-Backed Loan Facility at
December 31, 2008.
(3)
The Company has the option of
paying off this amount with cash or by putting the loans to ED
as previously discussed.
Years Ended December 31,
2008
2007
2006
Average
Average
Average
Average
Average
Average
Balance
Rate
Balance
Rate
Balance
Rate
$
39,794
3.65
%
$
46,095
5.58
%
$
43,754
5.50
%
854
4.07
166
5.26
1
4.98
2,363
3.90
2,768
4.90
3,252
4.57
24,855
5.27
13,938
5.85
4,874
5.36
1,727
3.43
76,028
3.26
62,765
5.55
43,310
5.40
39,625
3.11
45,733
5.68
50,112
5.49
2,063
2.35
637
4.85
172
5.03
$
187,309
3.58
%
$
172,102
5.60
%
$
145,475
5.44
%
(1)
Includes the 2008 Asset-Backed Loan
Facility.
95
Table of Contents
Moodys
S&P
Fitch
P-2
(1)
A-3
F3
Baa2
(1)
BBB-
BBB
(1)
Under review for potential
downgrade.
Debt Issued
For The Years
Outstanding at
Ended December 31,
December 31,
2008
2007
2008
2007
$
$
$
$
59
3,914
4,192
161
12,127
12,805
1,464
5,749
2,437
1,348
19,874
21,750
597
597
2,437
1,568
37,976
45,093
2,845
552
2,256
254
$
5,282
$
2,120
$
40,232
$
45,347
(1)
All foreign currency denominated
notes are hedged using derivatives that exchange the foreign
denomination for U.S. dollars.
96
Table of Contents
Years Ended December 31,
2008
2007
2006
Loan
Loan
Loan
No. of
Amount
Pre-Tax
Gain
No. of
Amount
Pre-Tax
Gain
No. of
Amount
Pre-Tax
Gain
Transactions
Securitized
Gain
%
Transactions
Securitized
Gain
%
Transactions
Securitized
Gain
%
$
$
%
$
$
%
2
$
5,004
$
17
.3
%
4
9,503
55
.6
1
2,001
367
18.4
3
5,088
830
16.3
$
%
1
2,001
$
367
18.4
%
9
19,595
$
902
4.6
%
9
18,546
3
8,955
5
14,476
4
12,506
9
18,546
8
23,431
4
12,506
9
$
18,546
9
$
25,432
13
$
32,101
(1)
In certain securitizations there
are terms within the deal structure that result in such
securitizations not qualifying for sale treatment and
accordingly, they are accounted for on-balance sheet as variable
interest entities (VIEs). Terms that prevent sale
treatment include: (1) allowing the Company to hold certain
rights that can affect the remarketing of certain bonds,
(2) allowing the trust to enter into interest rate cap
agreements after initial settlement of the securitization, which
do not relate to the reissuance of third-party beneficial
interests or (3) allowing the Company to hold an
unconditional call option related to a certain percentage of the
securitized assets.
97
Table of Contents
As of December 31, 2008
FFELP
Consolidation
Private
Stafford and
Loan
Education
PLUS
Trusts
(1)
Loan Trusts
Total
$
250
$
918
$
1,032
$
2,200
7,057
15,077
13,690
35,824
3.0 yrs.
8.1 yrs.
6.4 yrs
0
%
N/A
0
%
2-19
%
1-6
%
2-15
%
12
%
4
%
6
%
.11
%
.23
%
5.22
%
13.1
%
11.9
%
26.3
%
As of December 31, 2007
Consolidation
Private
FFELP
Loan
Education
Stafford and PLUS
Trusts
(1)
Loan Trusts
Total
$
390
$
730
$
1,924
$
3,044
9,338
15,968
14,199
39,505
2.7 yrs.
7.4 yrs.
7.0 yrs
0
%
N/A
0
%
0-37
%
3-8
%
1-30
%
21
%
6
%
9
%
.11
%
.21
%
5.28
%
12.0
%
9.8
%
12.9
%
(1)
Includes $762 million and
$283 million related to the fair value of the Embedded
Floor Income as of December 31, 2008 and 2007,
respectively. Changes in the fair value of the Embedded Floor
Income are primarily due to changes in the interest rates and
the pay down of the underlying loans.
(2)
At December 31, 2007, we had
unrealized gains (pre-tax) in accumulated other comprehensive
income of $301 million that related to the Residual
Interests. There were no such gains at December 31, 2008.
(3)
The Company uses CPR curves for
Residual Interest valuations that are based on seasoning (the
number of months since entering repayment). Under this
methodology, a different CPR is applied to each year of a
loans seasoning. Repayment status CPR used is based on the
number of months since first entering repayment (seasoning).
Life of loan CPR is related to repayment status only and does
not include the impact of the loan while in interim status. The
CPR assumption used for all periods includes the impact of
projected defaults.
(4)
Remaining expected credit losses as
of the respective balance sheet date.
98
Table of Contents
December 31,
December 31,
2008
2007
$
35,591
$
39,423
1,557
2,706
937
1,413
38,085
43,542
37,228
42,192
(69
)
(104
)
37,159
42,088
166
305
37,325
42,393
$
760
$
1,149
99
Table of Contents
Years Ended December 31,
2008
2007
2006
$
247
$
285
$
336
323
419
368
570
704
704
191
20
14
(76
)
(9
)
(8
)
115
11
6
685
715
710
2
(425
)
(24
)
(254
)
(157
)
$
262
$
437
$
553
$
37,586
$
42,411
$
46,336
$
2,596
$
3,385
$
3,101
.70
%
1.03
%
1.19
%
Prepayment speed assumptions were decreased for all three asset
types primarily as a result of a significant reduction in
prepayment activity experienced which is expected to continue
into the foreseeable future. The decrease in prepayment speeds
is primarily due to a reduction in third-party consolidation
activity as a result of the CCRAA (for FFELP only) and the
current U.S. economic and credit environment. This resulted
in a $114 million unrealized
mark-to-market
gain.
Life of loan default rate assumptions for Private Education
loans were increased as a result of the continued weakening of
the U.S. economy. This resulted in a $79 million
unrealized
mark-to-market
loss.
100
Table of Contents
Cost of funds assumptions related to the underlying auction rate
securities bonds ($2.3 billion face amount of bonds) within
FFELP loan ($1.7 billion face amount of bonds) and Private
Education Loan ($0.6 billion face amount of bonds) trusts
were increased to take into account the expectations these
auction rate securities will continue to reset at higher rates
for an extended period of time. This resulted in a
$116 million unrealized
mark-to-market
loss.
The discount rate assumption related to the Private Education
Loan and FFELP Residual Interests was increased. The Company
assessed the appropriateness of the current risk premium, which
is added to the risk free rate for the purpose of arriving at a
discount rate, in light of the current economic and credit
uncertainty that exists in the market as of December 31,
2008. This discount rate is applied to the projected cash flows
to arrive at a fair value representative of the current economic
conditions. The Company increased the risk premium by
1,550 basis points and 390 basis points for Private
Education and FFELP, respectively, to take into account the
current level of cash flow uncertainty and lack of liquidity
that exists with the Residual Interests. This resulted in a
$904 million unrealized
mark-to-market
loss.
1 Year
2 to 3
4 to 5
Over
or Less
Years
Years
5 Years
Total
$
$
14,184
$
5,324
$
11,674
$
31,182
727
381
1,108
6,722
14,390
13,262
48,199
82,573
$
6,722
$
29,301
$
18,967
$
59,873
$
114,863
(1)
Includes Financial Interpretation
(FIN) No. 46(R) long-term beneficial interests
of $80.6 billion of notes issued by consolidated variable
interest entities in conjunction with our on-balance sheet
securitization transactions and included in long-term notes in
the consolidated balance sheet. Timing of obligations is
estimated based on the Companys current projection of
prepayment speeds of the securitized assets.
(2)
Only includes principal obligations
and specifically excludes SFAS No. 133 derivative
market value adjustments of $3.4 billion for long-term
notes. Interest obligations on notes is predominantly variable
in nature, resetting quarterly based on 3 month LIBOR.
101
Table of Contents
1 Year
2 to 3
or Less
Years
Total
$
221
$
800
$
1,021
102
Table of Contents
judgments and estimates; manages risk of compliance with
financial reporting requirements;
information and effectiveness of IT infrastructure;
infrastructure resources;
with the Sarbanes-Oxley Act;
103
Table of Contents
104
Table of Contents
Frequency of
Index
Variable
Funding
Resets
Assets
Funding
(1)
Gap
daily
$
114.7
$
7.4
$
107.3
weekly
7.2
.1
7.1
annual
.5
.5
quarterly
1.5
1.5
monthly
17.5
17.5
annual
.5
.5
daily
quarterly
.1
109.8
(109.7
)
monthly
2.3
2.0
.3
monthly/quarterly
3.1
(3.1
)
monthly
25.3
(25.3
)
daily/weekly
8.5
2.1
6.4
16.0
19.0
(3.0
)
$
168.8
$
168.8
$
(1)
Funding includes all derivatives
that qualify as hedges under SFAS No. 133.
(2)
Funding includes $7.4 billion
of ED Purchase and Participation Program.
(3)
Funding includes the 2008
Asset-Backed Loan Facility.
(4)
Funding includes auction rate
securities and the 2008 ABCP Facilities.
(5)
Assets include restricted and
non-restricted cash equivalents and other overnight-type
instruments.
(6)
Assets include receivables and
other assets (including Retained Interests, goodwill and
acquired intangibles). Funding includes other liabilities and
stockholders equity (excluding Series B Preferred
Stock).
105
Table of Contents
Frequency of
Index
Variable
Funding
Resets
Assets
Funding
(1)
Gap
daily
$
134.7
$
7.5
$
127.2
weekly
9.8
6.7
3.1
annual
1.0
.3
.7
quarterly
6.6
3.5
3.1
monthly
25.0
15.3
9.7
annual
.6
.1
.5
daily
116.1
(116.1
)
quarterly
11.8
(11.8
)
monthly
2.3
2.0
.3
monthly
22.0
(22.0
)
daily/weekly
10.1
1.6
8.5
12.4
15.6
(3.2
)
$
202.5
$
202.5
$
(1)
Funding includes all derivatives
that management considers economic hedges of interest rate risk
and reflects how we internally manage our interest rate exposure.
(2)
Funding includes $7.4 billion
of ED Purchase and Participation Program.
(3)
Funding includes $2.5 billion
of auction rate securities.
(4)
Funding includes the 2008
Asset-Backed Loan Facility.
(5)
Funding includes auction rate
securities and the 2008 ABCP Facility.
(6)
Assets include restricted and
non-restricted cash equivalents and other overnight-type
instruments.
(7)
Assets include receivables and
other assets (including goodwill and acquired intangibles).
Funding includes other liabilities and stockholders equity
(excluding Series B Preferred Stock).
106
Table of Contents
December 31,
December 31,
2008
2007
On-Balance
On-Balance
Sheet
Managed
Sheet
Managed
7.8
7.9
9.0
8.9
5.7
5.7
5.0
5.0
.2
.1
.2
.2
7.4
7.5
8.0
8.0
.3
.3
.2
.2
6.8
6.7
6.6
6.4
5.0
5.3
5.0
5.2
107
Table of Contents
Years Ended December 31,
(Shares in millions)
2008
2007
2006
1.8
2.2
4.2
5.4
44.0
1.0
3.3
1.6
1.0
53.3
9.2
$
24.51
$
44.59
$
52.41
1.9
109.2
6.7
48.2
42.7
10.9
(4.2
)
(5.4
)
(44.0
)
48.2
38.8
38.8
15.7
(1)
On December 31, 2007, the
Company and Citibank agreed to physically settle the contract as
detailed below. Consequently, the common shares outstanding and
shareholders equity on the Companys year-end balance
sheet reflect the physical settlement of the equity forward
contract. As of December 31, 2007, the 44 million
shares under this equity forward contract are reflected in
treasury stock.
(2)
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.
108
Table of Contents
109
Table of Contents
Item 7A.
Quantitative
and Qualitative Disclosures about Market Risk
Year Ended December 31, 2008
Asset
Interest Rates:
and Funding
Change from
Change from
Index
Increase of
Increase of
Mismatches
(1)
100 Basis
300 Basis
Increase of
Points
Points
25 Basis Points
$
%
$
%
$
%
$
(6
)
(3
)%
$
13
7
%
$
(297
)
(162
)%
460
82
956
171
95
17
$
454
121
%
$
969
258
%
$
(202
)
(54
)%
$
.974
141
%
$
2.076
301
%
$
(.433
)
(63
)%
Year Ended December 31, 2007
Interest Rates:
Asset
Change from
Change from
and Funding
Increase of
Increase of
Index
Mismatches
(1)
100 Basis
300 Basis
Increase of
Points
Points
25 Basis Points
$
%
$
%
$
%
$
11
1
%
$
32
4
%
$
(229
)
(27
)%
213
16
375
28
80
6
$
224
46
%
$
407
85
%
$
(149
)
(31
)%
$
.361
16
%
$
.674
30
%
$
(.361
)
(16
)%
(1)
If an asset is not funded with the
same index/frequency reset of the asset then it is assumed the
funding index increases 25 basis points while holding the
asset index constant.
110
Table of Contents
At December 31, 2008
Interest Rates:
Change from
Change from
Increase of
Increase of
100 Basis
300 Basis
Points
Points
Fair Value
$
%
$
%
$
107,319
$
(758
)
(1
)%
$
(1,602
)
(1
)%
14,141
9,265
(9
)
(25
)
14,590
(848
)
(6
)
(2,108
)
(14
)
$
145,315
$
(1,615
)
(1
)%
$
(3,735
)
(3
)%
$
135,070
$
(837
)
(1
)%
$
(2,500
)
(2
)%
3,604
(293
)
(8
)
(273
)
(8
)
$
138,674
$
(1,130
)
(1
)%
$
(2,773
)
(2
)%
At December 31, 2007
Interest Rates:
Change from
Change from
Increase of
Increase of
100 Basis
300 Basis
Points
Points
Fair Value
$
%
$
%
$
111,552
$
(303
)
%
$
(603
)
(1
)%
17,289
16,321
(20
)
(59
)
15,092
(887
)
(6
)
(1,566
)
(10
)
$
160,254
$
(1,210
)
(1
)%
$
(2,228
)
(1
)%
$
141,055
$
(1,424
)
(1
)%
$
(3,330
)
(2
)%
3,285
392
12
1,471
45
$
144,340
$
(1,032
)
(1
)%
$
(1,859
)
(1
)%
Table of Contents
Item 8.
Financial
Statements and Supplementary Data
Item 9.
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure
Item 9A.
Controls
and Procedures
112
Table of Contents
Item 9B.
Other
Information
113
Table of Contents
Item 10.
Directors,
Executive Officers and Corporate Guidance
Item 11.
Executive
Compensation
Item 12.
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
Item 13.
Certain
Relationships and Related Transactions, and Director
Independence
Item 14.
Principal
Accounting Fees and Services
114
Table of Contents
116
117
Item 15.
Exhibits,
Financial Statement Schedules
(a)
1. Financial
Statements
F-2
F-3
F-4
F-5
F-6
F-8
F-9
2.
Financial
Statement Schedules
3.
Exhibits
4.
Appendices
(b)
Exhibits
2
Agreement and Plan of Reorganization by and among the Student
Loan Marketing Association, SLM Holding Corporation, and Sallie
Mae Merger Company incorporated by reference to the
correspondingly numbered exhibits to the Companys
Registration Statement on
Form S-4,
as amended.
3
.1
Amended and Restated Certificate of Incorporation of the
Company, incorporated by reference to
Exhibit 4.1 of the Companys Current Report on
Form 8-K
filed on January 2, 2008
3
.2
Amended By-Laws of the Company incorporated by reference to
Exhibit 3.1(ii) of the Companys Current Report on
Form 8-K
filed on August 6, 2008.
10
.1
Board of Directors Stock Option Plan (Incorporated by reference
to the Company Definitive Proxy Statement on
Schedule 14A, as filed with the Securities and Exchange
Commission on April 10, 1998.
10
.2
SLM Holding Corporation Management Incentive Plan, incorporated
by reference to Exhibit B of the Companys Definitive
Proxy Statement on Schedule 14A, as filed on April 10,
1998.
10
.3
Stock Option Agreement, SLM Corporation Incentive Plan, ISO,
Price-Vested with Replacements 2004, incorporated by reference
to Exhibit 10.2 of the Companys Quarterly Report on
Form 10-Q
filed on November 9, 2004.
115
Table of Contents
10
.4
Stock Option Agreement, SLM Corporation Incentive Plan,
Non-Qualified, Price-Vested Options-2004, incorporated by
reference to Exhibit 10.3 of the Companys Quarterly
Report on
Form 10-Q
filed on November 9, 2004.
10
.5
Terms of Performance Stock Grant, incorporated by reference to
Exhibit 10.4 of the Companys Quarterly Report on
Form 10-Q
filed on November 9, 2004.
10
.6
Settlement Agreement and Release (1) (Filed with the
Securities and Exchange Commission with the Company Quarterly
Report on
Form 10-Q
for the quarter ended March 31, 2005).
10
.7
First Amendment to Settlement Agreement and Release (1)
(Filed with the Securities and Exchange Commission with the
Company Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2005).
10
.8
Second Amendment to Settlement Agreement and Release (1)
(Filed with the Securities and Exchange Commission with the
Company Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2005).
10
.9
Amended and Restated SLM Corporation Incentive Plan,
incorporated by reference to Exhibit 10.24 of the
Companys Current Report on
Form 8-K
filed on May 25, 2005.
10
.10
Directors Stock Plan, incorporated by reference to
Exhibit 10.25 of the Companys Current Report on
Form 8-K
filed on May 25, 2005.
10
.11
Employment Agreement between the Company and Thomas J.
Fitzpatrick, President and Chief Executive Officer, effective as
of June 1, 2005, incorporated by reference to
Exhibit 10.23 of the Companys Quarterly Report on
Form 10-Q
filed on November 8, 2005.
10
.12
SLM Corporation Incentive Plan Performance Stock Term Sheet
Core Net Income Target, incorporated by reference to
Exhibit 10.25 of the Companys Annual Report on
Form 10-K
filed on March 9, 2006.
10
.13
Stock Option Agreement SLM Corporation Incentive Plan
Net-Settled, Price-Vested Options 1 year
minimum 2006, incorporated by reference to
Exhibit 10.25 of the Companys Annual Report on
Form 10-K
filed on March 9, 2006.
10
.14
SLM Corporation Change in Control Severance Plan for Senior
Officers, incorporated by reference to Exhibit 10.27 of the
Companys Annual Report on
Form 10-K
filed on March 9, 2006.
10
.15
Participation Purchase and Security Agreement between Mustang
Funding I LLC, Bank of American, JP Morgan Chase, Chase Bank
USA, Sallie Mae, incorporated by reference to Exhibit 10.31
of the Companys Quarterly Report on
Form 10-Q
filed on August 7, 2007.
10
.16
Participation Purchase and Security Agreement between Mustang
Funding II LLC, Bank of American, JP Morgan Chase, Chase
Bank USA, Sallie Mae, incorporated by reference to
Exhibit 10.31 of the Companys Quarterly Report on
Form 10-Q
filed on August 7, 2007.
10
.17
Confidential Agreement and Release between the Company and Kevin
F. Moehn, dated December 19, 2007, incorporated by
reference to Exhibit 10.28 of the Companys Annual
Report on
Form 10-K
filed on February 29, 2008.
10
.18
Confidential Agreement and Release between the Company and June
M. McCormack, dated December 22, 2007, incorporated by
reference to Exhibit 10.29 of the Companys Annual
Report on
Form 10-K
filed on February 29, 2008.
10
.19
Retainer Agreement between Anthony P. Terracciano and the
Company, incorporated by reference to Exhibit 10.30 of the
Companys Quarterly Report on
Form 10-Q
filed on May 9, 2008.
10
.20
Employment Agreement between Albert L. Lord and the Company,
incorporated by reference to Exhibit 10.31 of the
Companys Quarterly Report on
Form 10-Q
filed on May 9, 2008.
10
.21
Note of Purchase and Security Agreement between Phoenix
Funding I, Sallie Mae, Bank of NY Trust Company,
Deutsche Bank Trust Company Americas, UBS Real Estate
Securities, UBS Securities LLC, incorporated by reference to
Exhibit 10.31 of the Companys Quarterly Report on
Form 10-Q
filed on May 9, 2008.
Table of Contents
10
.22
Note of Purchase and Security Agreement between Rendezvous
Funding I, Bank of America, JPMorgan Chase, Bank of America
Securities LLC, JP Morgan Securities, Barclays Bank PLC, Royal
Bank of Scotland, Deutsche Bank Securities, Credit Suisse, Bank
of NY Trust Co., Sallie Mae, incorporated by reference to
Exhibit 10.31 of the Companys Quarterly Report on
Form 10-Q
filed on May 9, 2008.
10
.23
Note of Purchase and Security Agreement between Bluemont
Funding I, Bank of America, JPMorgan Chase, Bank of America
Securities LLC, JP Morgan Securities, Barclays Bank PLC, Royal
Bank of Scotland, Deutsche Bank Securities, Credit Suisse, Bank
of NY Trust Co., Sallie Mae, incorporated by reference to
Exhibit 10.31 of the Companys Quarterly Report on
Form 10-Q
filed on May 9, 2008.
10
.24
Employment Agreement between Jack Remondi and The Company,
incorporated by reference to Exhibit 10.31 of the
Companys Quarterly Report on
Form 10-Q
filed on August 6, 2008.
10
.25
Sallie Mae Deferred Compensation Plan for Key Employees
Restatement Effective January 1, 2009, filed with this
Form 10-K.
10
.26
Sallie Mae Supplemental 401(k) Savings Plan, filed with this
Form 10-K.
10
.27
Sallie Mae Supplemental Cash Account Retirement Plan, filed with
this
Form 10-K.
10
.28
Amendment to the Note of Purchase and Security Agreement between
Phoenix Funding I, Sallie Mae, Bank of NY
Trust Company, Deutsche Bank Trust Company Americas,
UBS Real Estate Securities, UBS Securities LLC, incorporated by
reference to the Companys Quarterly Report on
Form 10-Q
filed on May 9, 2008; filed with this
Form 10-K.
10
.29
Amendment to the Note of Purchase and Security Agreement between
Rendezvous Funding I, Bank of America, JPMorgan Chase, Bank
of America Securities LLC, JP Morgan Securities, Barclays Bank
PLC, Royal Bank of Scotland, Deutsche Bank Securities, Credit
Suisse, Bank of NY Trust Co., Sallie Mae, incorporated by
reference to the Companys Quarterly Report on
Form 10-Q
filed on May 9, 2008; filed with this
Form 10-K.
10
.30
Amendment to the Note of Purchase and Security Agreement between
Bluemont Funding I, Bank of America, JPMorgan Chase, Bank
of America Securities LLC, JP Morgan Securities, Barclays Bank
PLC, Royal Bank of Scotland, Deutsche Bank Securities, Credit
Suisse, Bank of NY Trust Co., Sallie Mae, incorporated by
reference to the Companys Quarterly Report on
Form 10-Q
filed on May 9, 2008; filed with this
Form 10-K.
10
.31
Amendment to Schedule of Contracts Substantially Identical to
Exhibit 10.34 of the Companys Quarterly Report on
Form 10-Q
filed on May 9, 2008; filed with this
Form 10-K.
10
.32
SLM Corporation Incentive Stock Plan Stock Option Agreement,
Net-Settled, Performance Vested Options, 2009, filed with this
Form 10-K.
10
.33
SLM Corporation Incentive Plan Performance Stock Term Sheet,
Core Earnings Net Income Target -Sustained
Performance, 2009, filed with this Form 10-K.
14
Code of Business Conduct (Filed with the Securities and Exchange
Commission with the Company Annual Report on
Form 10-K
for the year ended December 31, 2003).
23
Consent of PricewaterhouseCoopers LLP (Filed with the Securities
and Exchange Commission with this
Form 10-K).
31
.1
Certification Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2003 (Filed with the Securities and Exchange Commission
with this
Form 10-K).
31
.2
Certification Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2003 (Filed with the Securities and Exchange Commission
with this
Form 10-K).
32
.1
Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2003 (Filed with the Securities and Exchange Commission with
this
Form 10-K).
32
.2
Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2003 (Filed with the Securities and Exchange Commission with
this
Form 10-K).
Management Contract or Compensatory
Plan or Arrangement
Table of Contents
By:
Vice Chairman and Chief Executive Officer (Principal Executive
Officer)
March 2, 2009
Vice Chairman and Chief Financial Officer (Principal Financial
and Accounting Officer)
March 2, 2009
Chairman of the Board of Directors
March 2, 2009
Director
March 2, 2009
Director
March 2, 2009
Director
March 2, 2009
Director
March 2, 2009
Director
March 2, 2009
Director
March 2, 2009
Director
March 2, 2009
118
Table of Contents
Director
March 2, 2009
Director
March 2, 2009
Director
March 2, 2009
Director
March 2, 2009
Director
March 2, 2009
Director
March 2, 2009
Director
March 2, 2009
119
Table of Contents
INDEX
Page
F-2
F-3
F-4
F-5
F-6
F-8
F-9
F-1
Table of Contents
F-2
Table of Contents
F-3
Table of Contents
December 31,
|
December 31,
|
|||||||
2008 | 2007 | |||||||
Assets
|
||||||||
FFELP Stafford and Other Student Loans (net of allowance for
losses of $90,906 and $47,518, respectively)
|
$ | 44,025,361 | $ | 35,726,062 | ||||
FFELP Stafford Loans Held-for-Sale
|
8,450,976 | | ||||||
FFELP Consolidation Loans (net of allowance for losses of
$46,637 and $41,211, respectively)
|
71,743,435 | 73,609,187 | ||||||
Private Education Loans (net of allowance for losses of
$1,308,043 and $1,003,963, respectively, as corrected)
|
20,582,298 | 14,817,725 | ||||||
Other loans (net of allowance for losses of $58,395 and $43,558,
respectively)
|
729,380 | 1,173,666 | ||||||
Investments
|
||||||||
Available-for-sale
|
861,008 | 2,871,340 | ||||||
Other
|
180,397 | 93,040 | ||||||
Total investments
|
1,041,405 | 2,964,380 | ||||||
Cash and cash equivalents
|
4,070,002 | 7,582,031 | ||||||
Restricted cash and investments
|
3,535,286 | 4,600,106 | ||||||
Retained Interest in off-balance sheet securitized loans
|
2,200,298 | 3,044,038 | ||||||
Goodwill and acquired intangible assets, net
|
1,249,219 | 1,300,689 | ||||||
Other assets
|
11,140,777 | 10,747,107 | ||||||
Total assets
|
$ | 168,768,437 | $ | 155,564,991 | ||||
Liabilities
|
||||||||
ED Participation Program
|
$ | 7,364,969 | $ | | ||||
Term bank deposits
|
1,147,825 | 254,029 | ||||||
Other short-term borrowings
|
33,420,249 | 35,693,378 | ||||||
Total short-term borrowings
|
41,933,043 | 35,947,407 | ||||||
Long-term borrowings
|
118,224,794 | 111,098,144 | ||||||
Other liabilities
|
3,604,260 | 3,284,545 | ||||||
Total liabilities
|
163,762,097 | 150,330,096 | ||||||
Commitments and contingencies
|
||||||||
Minority interest in subsidiaries
|
7,270 | 11,360 | ||||||
Stockholders equity
|
||||||||
Preferred stock, par value $.20 per share, 20,000 shares
authorized
|
||||||||
Series A: 3,300 and 3,300 shares issued, respectively,
at stated value of $50 per share
|
165,000 | 165,000 | ||||||
Series B: 4,000 and 4,000 shares issued, respectively,
at stated value of $100 per share
|
400,000 | 400,000 | ||||||
Series C, 7.25% mandatory convertible preferred stock;
1,150 and 1,000 shares, respectively, issued at liquidation
preference of $1,000 per share
|
1,149,770 | 1,000,000 | ||||||
Common stock, par value $.20 per share, 1,125,000 shares
authorized: 534,411 and 532,493 shares issued, respectively
|
106,883 | 106,499 | ||||||
Additional paid-in capital
|
4,684,112 | 4,590,174 | ||||||
Accumulated other comprehensive income (loss) (net of tax
benefit of $43,202 and expense of $124,468, respectively)
|
(76,476 | ) | 236,364 | |||||
Retained earnings
|
426,175 | 557,204 | ||||||
Stockholders equity before treasury stock
|
6,855,464 | 7,055,241 | ||||||
Common stock held in treasury at cost: 66,958 and
65,951 shares, respectively
|
1,856,394 | 1,831,706 | ||||||
Total stockholders equity
|
4,999,070 | 5,223,535 | ||||||
Total liabilities and stockholders equity
|
$ | 168,768,437 | $ | 155,564,991 | ||||
F-4
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Interest income:
|
||||||||||||
FFELP Stafford and Other Student Loans
|
$ | 1,994,394 | $ | 2,060,993 | $ | 1,408,938 | ||||||
FFELP Consolidation Loans
|
3,178,692 | 4,343,138 | 3,545,857 | |||||||||
Private Education Loans
|
1,737,554 | 1,456,471 | 1,021,221 | |||||||||
Other loans
|
82,734 | 105,843 | 97,954 | |||||||||
Cash and investments
|
276,264 | 707,577 | 503,002 | |||||||||
Total interest income
|
7,269,638 | 8,674,022 | 6,576,972 | |||||||||
Total interest expense
|
5,905,418 | 7,085,772 | 5,122,855 | |||||||||
Net interest income
|
1,364,220 | 1,588,250 | 1,454,117 | |||||||||
Less: provisions for loan losses
|
719,650 | 1,015,308 | 286,962 | |||||||||
Net interest income after provisions for loan losses
|
644,570 | 572,942 | 1,167,155 | |||||||||
Other income:
|
||||||||||||
Gains on student loan securitizations
|
| 367,300 | 902,417 | |||||||||
Servicing and securitization revenue
|
261,819 | 437,097 | 553,541 | |||||||||
Losses on sales of loans and securities, net
|
(186,155 | ) | (95,492 | ) | (49,357 | ) | ||||||
Gains (losses) on derivative and hedging activities, net
|
(445,413 | ) | (1,360,584 | ) | (339,396 | ) | ||||||
Contingency fee revenue
|
340,140 | 335,737 | 396,830 | |||||||||
Collections revenue (loss)
|
(64,038 | ) | 271,547 | 239,829 | ||||||||
Guarantor servicing fees
|
121,363 | 156,429 | 132,100 | |||||||||
Other
|
392,076 | 385,075 | 338,307 | |||||||||
Total other income
|
419,792 | 497,109 | 2,174,271 | |||||||||
Operating expenses:
|
||||||||||||
Salaries and benefits
|
610,020 | 734,777 | 703,210 | |||||||||
Other operating expenses
|
746,835 | 794,565 | 642,942 | |||||||||
Restructuring expenses
|
83,775 | 22,505 | | |||||||||
Total expenses
|
1,440,630 | 1,551,847 | 1,346,152 | |||||||||
Income (loss) before income taxes and minority interest in net
earnings of subsidiaries
|
(376,268 | ) | (481,796 | ) | 1,995,274 | |||||||
Income tax expense (benefit)
|
(167,574 | ) | 412,283 | 834,311 | ||||||||
Income (loss) before minority interest in net earnings of
subsidiaries
|
(208,694 | ) | (894,079 | ) | 1,160,963 | |||||||
Minority interest in net earnings of subsidiaries
|
3,932 | 2,315 | 4,007 | |||||||||
Net income (loss)
|
(212,626 | ) | (896,394 | ) | 1,156,956 | |||||||
Preferred stock dividends
|
111,206 | 37,145 | 35,567 | |||||||||
Net income (loss) attributable to common stock
|
$ | (323,832 | ) | $ | (933,539 | ) | $ | 1,121,389 | ||||
Basic earnings (loss) per common share
|
$ | (.69 | ) | $ | (2.26 | ) | $ | 2.73 | ||||
Average common shares outstanding
|
466,642 | 412,233 | 410,805 | |||||||||
Diluted earnings (loss) per common share
|
$ | (.69 | ) | $ | (2.26 | ) | $ | 2.63 | ||||
Average common and common equivalent shares outstanding
|
466,642 | 412,233 | 451,170 | |||||||||
Dividends per common share
|
$ | | $ | .25 | $ | .97 | ||||||
F-5
Accumulated
|
||||||||||||||||||||||||||||||||||||||||||||
Preferred
|
Additional
|
Other
|
Total
|
|||||||||||||||||||||||||||||||||||||||||
Stock
|
Common Stock Shares |
Preferred
|
Common
|
Paid-In
|
Comprehensive
|
Retained
|
Treasury
|
Stockholders
|
||||||||||||||||||||||||||||||||||||
Shares | Issued | Treasury | Outstanding | Stock | Stock | Capital | Income (Loss) | Earnings | Stock | Equity | ||||||||||||||||||||||||||||||||||
Balance at December 31, 2005
|
7,300,000 | 426,483,527 | (13,346,717 | ) | 413,136,810 | $565,000 | $ | 85,297 | $ | 2,233,647 | $ | 367,910 | $ | 1,111,743 | $ | (572,172 | ) | $ | 3,791,425 | |||||||||||||||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||||||||||||||||||||||
Net income
|
1,156,956 | 1,156,956 | ||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income:
|
||||||||||||||||||||||||||||||||||||||||||||
Change in unrealized gains (losses) on investments, net of tax
|
(41,953 | ) | (41,953 | ) | ||||||||||||||||||||||||||||||||||||||||
Change in unrealized gains (losses) on derivatives, net of tax
|
4,990 | 4,990 | ||||||||||||||||||||||||||||||||||||||||||
Minimum pension liability adjustment, net of tax
|
(569 | ) | (569 | ) | ||||||||||||||||||||||||||||||||||||||||
Comprehensive income
|
1,119,424 | |||||||||||||||||||||||||||||||||||||||||||
Adjustment to initially apply SFAS No. 158, net of tax
|
18,733 | 18,733 | ||||||||||||||||||||||||||||||||||||||||||
Cash dividends:
|
||||||||||||||||||||||||||||||||||||||||||||
Common stock ($.97 per share)
|
(398,414 | ) | (398,414 | ) | ||||||||||||||||||||||||||||||||||||||||
Preferred stock, Series A ($3.48 per share)
|
(11,500 | ) | (11,500 | ) | ||||||||||||||||||||||||||||||||||||||||
Preferred stock, Series B ($5.82 per share)
|
(23,420 | ) | (23,420 | ) | ||||||||||||||||||||||||||||||||||||||||
Issuance of common shares
|
6,629,455 | 64,141 | 6,693,596 | 1,326 | 204,996 | 3,499 | 209,821 | |||||||||||||||||||||||||||||||||||||
Issuance of preferred shares
|
647 | (647 | ) | | ||||||||||||||||||||||||||||||||||||||||
Tax benefit related to employee stock option and purchase plans
|
54,522 | 54,522 | ||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation cost
|
71,399 | 71,399 | ||||||||||||||||||||||||||||||||||||||||||
Repurchase of common shares:
|
||||||||||||||||||||||||||||||||||||||||||||
Open market repurchases
|
(2,159,827 | ) | (2,159,827 | ) | (100,000 | ) | (100,000 | ) | ||||||||||||||||||||||||||||||||||||
Equity forwards:
|
||||||||||||||||||||||||||||||||||||||||||||
Settlement cost, cash
|
(5,395,979 | ) | (5,395,979 | ) | (295,376 | ) | (295,376 | ) | ||||||||||||||||||||||||||||||||||||
(Gain)/loss on settlement
|
| | 10,907 | 10,907 | ||||||||||||||||||||||||||||||||||||||||
Benefit plans
|
(1,657,788 | ) | (1,657,788 | ) | (87,479 | ) | (87,479 | ) | ||||||||||||||||||||||||||||||||||||
Balance at December 31, 2006
|
7,300,000 | 433,112,982 | (22,496,170 | ) | 410,616,812 | $565,000 | $ | 86,623 | $ | 2,565,211 | $ | 349,111 | $ | 1,834,718 | $ | (1,040,621 | ) | $ | 4,360,042 | |||||||||||||||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||||||||||||||||||||||
Net income (loss)
|
(896,394 | ) | (896,394 | ) | ||||||||||||||||||||||||||||||||||||||||
Other comprehensive income:
|
||||||||||||||||||||||||||||||||||||||||||||
Change in unrealized gains (losses) on investments, net of tax
|
(101,591 | ) | (101,591 | ) | ||||||||||||||||||||||||||||||||||||||||
Change in unrealized gains (losses) on derivatives, net of tax
|
(15,004 | ) | (15,004 | ) | ||||||||||||||||||||||||||||||||||||||||
Defined benefit pension plans adjustment
|
3,848 | 3,848 | ||||||||||||||||||||||||||||||||||||||||||
Comprehensive income
|
(1,009,141 | ) | ||||||||||||||||||||||||||||||||||||||||||
Cash dividends:
|
||||||||||||||||||||||||||||||||||||||||||||
Common stock ($.25 per share)
|
(102,658 | ) | (102,658 | ) | ||||||||||||||||||||||||||||||||||||||||
Preferred stock, Series A ($3.49 per share)
|
(11,500 | ) | (11,500 | ) | ||||||||||||||||||||||||||||||||||||||||
Preferred stock, Series B ($6.25 per share)
|
(24,796 | ) | (24,796 | ) | ||||||||||||||||||||||||||||||||||||||||
Preferred stock, Series C ($.20 per share)
|
(201 | ) | (201 | ) | ||||||||||||||||||||||||||||||||||||||||
Restricted stock dividend
|
(8 | ) | (8 | ) | ||||||||||||||||||||||||||||||||||||||||
Issuance of common shares
|
99,380,099 | 9,816,534 | 109,196,633 | 19,876 | 1,940,708 | (235,548 | ) | 423,446 | 2,148,482 | |||||||||||||||||||||||||||||||||||
Issuance of preferred shares
|
1,000,000 | 1,000,000 | (30,678 | ) | (648 | ) | 968,674 | |||||||||||||||||||||||||||||||||||||
Tax benefit related to employee stock option and purchase plans
|
49,016 | 49,016 | ||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation cost
|
65,917 | 65,917 | ||||||||||||||||||||||||||||||||||||||||||
Cumulative effect of accounting change
|
(5,761 | ) | (5,761 | ) | ||||||||||||||||||||||||||||||||||||||||
Repurchase of common shares:
|
||||||||||||||||||||||||||||||||||||||||||||
Open market repurchases
|
(1,809,700 | ) | (1,809,700 | ) | (65,018 | ) | (65,018 | ) | ||||||||||||||||||||||||||||||||||||
Equity forward settlement:
|
||||||||||||||||||||||||||||||||||||||||||||
Settlement cost, cash
|
(4,110,929 | ) | (4,110,929 | ) | (164,437 | ) | (164,437 | ) | ||||||||||||||||||||||||||||||||||||
(Gain)/loss on settlement
|
| | 54,716 | 54,716 | ||||||||||||||||||||||||||||||||||||||||
Equity forwards agreed to be settled:
|
||||||||||||||||||||||||||||||||||||||||||||
Settlement cost, cash
|
(44,039,890 | ) | (44,039,890 | ) | (1,992,938 | ) | (1,992,938 | ) | ||||||||||||||||||||||||||||||||||||
(Gain)/loss on settlement
|
| | 1,105,975 | 1,105,975 | ||||||||||||||||||||||||||||||||||||||||
Benefit plans
|
(3,311,239 | ) | (3,311,239 | ) | (152,829 | ) | (152,829 | ) | ||||||||||||||||||||||||||||||||||||
Balance at December 31, 2007
|
8,300,000 | 532,493,081 | (65,951,394 | ) | 466,541,687 | $1,565,000 | $ | 106,499 | $ | 4,590,174 | $ | 236,364 | $ | 557,204 | $ | (1,831,706 | ) | $ | 5,223,535 |
F-6
Accumulated
|
||||||||||||||||||||||||||||||||||||||||||||
Preferred
|
Additional
|
Other
|
Total
|
|||||||||||||||||||||||||||||||||||||||||
Stock
|
Common Stock Shares |
Preferred
|
Common
|
Paid-In
|
Comprehensive
|
Retained
|
Treasury
|
Stockholders
|
||||||||||||||||||||||||||||||||||||
Shares | Issued | Treasury | Outstanding | Stock | Stock | Capital | Income (Loss) | Earnings | Stock | Equity | ||||||||||||||||||||||||||||||||||
Balance at December 31, 2007
|
8,300,000 | 532,493,081 | (65,951,394 | ) | 466,541,687 | $ | 1,565,000 | $ | 106,499 | $ | 4,590,174 | $ | 236,364 | $ | 557,204 | $ | (1,831,706 | ) | $ | 5,223,535 | ||||||||||||||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||||||||||||||||||||||
Net income (loss)
|
(212,626 | ) | (212,626 | ) | ||||||||||||||||||||||||||||||||||||||||
Other comprehensive income:
|
||||||||||||||||||||||||||||||||||||||||||||
Change in unrealized gains (losses) on investments, net of tax
|
(45,360 | ) | (45,360 | ) | ||||||||||||||||||||||||||||||||||||||||
Change in unrealized gains (losses) on derivatives, net of tax
|
(71,412 | ) | (71,412 | ) | ||||||||||||||||||||||||||||||||||||||||
Defined benefit pension plans adjustment
|
(1,413 | ) | (1,413 | ) | ||||||||||||||||||||||||||||||||||||||||
Comprehensive income
|
(330,811 | ) | ||||||||||||||||||||||||||||||||||||||||||
Cash dividends:
|
||||||||||||||||||||||||||||||||||||||||||||
Preferred stock, Series A ($3.49 per share)
|
(11,501 | ) | (11,501 | ) | ||||||||||||||||||||||||||||||||||||||||
Preferred stock, Series B ($4.09 per share)
|
(15,927 | ) | (15,927 | ) | ||||||||||||||||||||||||||||||||||||||||
Preferred stock, Series C ($69.48 per share)
|
(83,128 | ) | (83,128 | ) | ||||||||||||||||||||||||||||||||||||||||
Restricted stock dividend
|
(1,852 | ) | (1,852 | ) | ||||||||||||||||||||||||||||||||||||||||
Issuance of common shares
|
1,908,595 | 3,667 | 1,912,262 | 382 | 38,575 | 79 | 39,036 | |||||||||||||||||||||||||||||||||||||
Issuance of preferred shares
|
150,000 | 150,000 | (4,005 | ) | (650 | ) | 145,345 | |||||||||||||||||||||||||||||||||||||
Conversion of preferred shares
|
(230 | ) | 9,595 | 9,595 | (230 | ) | 2 | 228 | | |||||||||||||||||||||||||||||||||||
Tax benefit related to employee stock option and purchase plans
|
(16,981 | ) | (16,981 | ) | ||||||||||||||||||||||||||||||||||||||||
Stock-based compensation cost
|
76,121 | 76,121 | ||||||||||||||||||||||||||||||||||||||||||
Cumulative effect of accounting change
|
(194,655 | ) | 194,655 | | ||||||||||||||||||||||||||||||||||||||||
Repurchase of common shares:
|
||||||||||||||||||||||||||||||||||||||||||||
Benefit plans
|
(1,010,673 | ) | (1,010,673 | ) | (24,767 | ) | (24,767 | ) | ||||||||||||||||||||||||||||||||||||
Balance at December 31, 2008
|
8,449,770 | 534,411,271 | (66,958,400 | ) | 467,452,871 | $ | 1,714,770 | $ | 106,883 | $ | 4,684,112 | $ | (76,476 | ) | $ | 426,175 | $ | (1,856,394 | ) | $ | 4,999,070 | |||||||||||||||||||||||
F-7
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Operating activities
|
||||||||||||
Net income (loss)
|
$ | (212,626 | ) | $ | (896,394 | ) | $ | 1,156,956 | ||||
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
|
||||||||||||
Gains on student loan securitizations
|
| (367,300 | ) | (902,417 | ) | |||||||
Losses on loans and securities, net
|
186,155 | 95,492 | 49,357 | |||||||||
Stock-based compensation cost
|
86,271 | 74,621 | 81,163 | |||||||||
Unrealized (gains)/losses on derivative and hedging activities,
excluding equity forwards
|
559,895 | (214,963 | ) | (128,529 | ) | |||||||
Unrealized (gains)/losses on derivative and hedging
activities equity forwards
|
| 1,558,025 | 359,193 | |||||||||
Provisions for loan losses
|
719,650 | 1,015,308 | 286,962 | |||||||||
Minority interest, net
|
(2,674 | ) | (779 | ) | (2,461 | ) | ||||||
Mortgage loans originated
|
(60,927 | ) | (546,773 | ) | (1,291,782 | ) | ||||||
Proceeds from sales of mortgage loans
|
66,396 | 615,274 | 1,364,448 | |||||||||
Decrease (increase) in purchased paper-mortgages, net
|
301,234 | (618,117 | ) | (214,916 | ) | |||||||
(Increase) in student loans held-for-sale
|
(7,787,869 | ) | | | ||||||||
Decrease (increase) in restricted cash other
|
96,617 | (84,537 | ) | 71,312 | ||||||||
(Increase) in accrued interest receivable
|
(279,082 | ) | (1,046,124 | ) | (970,580 | ) | ||||||
(Decrease) increase in accrued interest payable
|
(200,501 | ) | 214,401 | 277,617 | ||||||||
Adjustment for non-cash (income)/loss related to Retained
Interest
|
425,462 | 279,246 | 157,715 | |||||||||
Decrease in other assets, goodwill and acquired intangible
assets, net
|
559,417 | 761,787 | 730,221 | |||||||||
(Decrease) in other liabilities
|
(155,768 | ) | (890,464 | ) | (215,838 | ) | ||||||
Total adjustments
|
(5,485,724 | ) | 845,097 | (348,535 | ) | |||||||
Net cash (used in) provided by operating activities
|
(5,698,350 | ) | (51,297 | ) | 808,421 | |||||||
Investing activities
|
||||||||||||
Student loans acquired
|
(23,337,946 | ) | (39,303,005 | ) | (36,364,686 | ) | ||||||
Loans purchased from securitized trusts (primarily loan
consolidations)
|
(1,243,671 | ) | (4,448,766 | ) | (7,443,157 | ) | ||||||
Reduction of student loans:
|
||||||||||||
Installment payments, claims and other
|
10,333,901 | 11,413,044 | 10,617,867 | |||||||||
Proceeds from securitization of student loans treated as sales
|
| 1,976,599 | 19,521,365 | |||||||||
Proceeds from sales of student loans
|
496,183 | 1,013,295 | 101,212 | |||||||||
Other loans originated
|
(1,138,355 | ) | (3,396,501 | ) | (2,082,670 | ) | ||||||
Other loans repaid
|
1,542,307 | 3,420,187 | 1,834,471 | |||||||||
Other investing activities, net
|
(135,041 | ) | (358,209 | ) | (210,969 | ) | ||||||
Purchases of available-for-sale securities
|
(101,140,587 | ) | (90,087,504 | ) | (85,189,100 | ) | ||||||
Proceeds from sales of available-for-sale securities
|
328,530 | 73,217 | 25,941 | |||||||||
Proceeds from maturities of available-for-sale securities
|
102,436,912 | 89,353,103 | 85,015,345 | |||||||||
Purchases of held-to-maturity and other securities
|
(500,255 | ) | (330,450 | ) | (1,066,290 | ) | ||||||
Proceeds from maturities of held-to-maturity securities and
other securities
|
407,180 | 435,468 | 1,278,897 | |||||||||
Decrease (increase) in restricted cash on-balance
sheet trusts
|
918,403 | (1,293,846 | ) | (304,749 | ) | |||||||
Return of investment from Retained Interest
|
403,020 | 276,996 | 140,435 | |||||||||
Purchase of subsidiaries, net of cash acquired
|
(37,868 | ) | | (339,836 | ) | |||||||
Net cash used in investing activities
|
(10,667,287 | ) | (31,256,372 | ) | (14,465,924 | ) | ||||||
Financing activities
|
||||||||||||
Borrowings collateralized by loans in trust issued
|
17,986,955 | 23,943,837 | 12,984,937 | |||||||||
Borrowings collateralized by loans in trust repaid
|
(6,299,483 | ) | (6,429,648 | ) | (5,578,268 | ) | ||||||
Asset-backed commercial paper conduits net activity
|
(1,649,287 | ) | 21,073,857 | (6,173 | ) | |||||||
ED Participation Program
|
7,364,969 | | | |||||||||
Other short-term borrowings issued
|
2,592,429 | 594,434 | 15,374,178 | |||||||||
Other short-term borrowings repaid
|
(1,512,031 | ) | (2,342,953 | ) | (15,434,264 | ) | ||||||
Other long-term borrowings issued
|
3,563,003 | 1,567,602 | 11,739,249 | |||||||||
Other long-term borrowings repaid
|
(9,518,655 | ) | (3,188,249 | ) | (4,744,432 | ) | ||||||
Other financing activities, net
|
284,659 | 901,263 | 202,452 | |||||||||
Excess tax benefit from the exercise of stock-based awards
|
281 | 30,316 | 32,985 | |||||||||
Common stock issued
|
5,979 | 2,125,111 | 192,520 | |||||||||
Net settlements on equity forward contracts
|
| (614,217 | ) | (66,925 | ) | |||||||
Common stock repurchased
|
| (2,222,394 | ) | (482,855 | ) | |||||||
Common dividends paid
|
| (102,658 | ) | (398,414 | ) | |||||||
Preferred stock issued
|
145,345 | 968,674 | | |||||||||
Preferred dividends paid
|
(110,556 | ) | (36,497 | ) | (34,920 | ) | ||||||
Net cash provided by financing activities
|
12,853,608 | 36,268,478 | 13,780,070 | |||||||||
Net (decrease) increase in cash and cash equivalents
|
(3,512,029 | ) | 4,960,809 | 122,567 | ||||||||
Cash and cash equivalents at beginning of year
|
7,582,031 | 2,621,222 | 2,498,655 | |||||||||
Cash and cash equivalents at end of year
|
$ | 4,070,002 | $ | 7,582,031 | $ | 2,621,222 | ||||||
Cash disbursements made for:
|
||||||||||||
Interest
|
$ | 5,721,408 | $ | 6,897,773 | $ | 4,512,737 | ||||||
Income taxes
|
$ | 699,364 | $ | 1,097,340 | $ | 770,004 | ||||||
F-8
1. | Organization and Business |
F-9
1. | Organization and Business (Continued) |
2. | Significant Accounting Policies |
F-10
2. | Significant Accounting Policies (Continued) |
F-11
2. | Significant Accounting Policies (Continued) |
F-12
2. | Significant Accounting Policies (Continued) |
F-13
2. | Significant Accounting Policies (Continued) |
F-14
2. | Significant Accounting Policies (Continued) |
| It is demonstrably distinct from the Company and cannot be unilaterally dissolved by the Company and at least 10 percent of the fair value of its interests is held by independent third parties. | |
| The permitted activities in which the trust can participate are significantly limited. These activities must be entirely specified in the legal documents at the inception of the QSPE. | |
| There are limits to the assets the QSPE can hold; specifically, it can hold only financial assets transferred to it that are passive in nature, passive derivative instruments pertaining to the beneficial interests held by independent third parties, servicing rights, temporary investments pending distribution to security holders, and cash. | |
| It can only dispose of its assets in automatic response to the occurrence of an event specified in the applicable legal documents and must be outside the control of the Company. |
| Owning the equity certificates of the trust. | |
| The servicing of the student loan assets within the securitization trusts, on both a pre- and post-default basis. | |
| The Companys role as the administrator for the securitization transactions it sponsored, which includes remarketing certain bonds at future dates. | |
| The Companys responsibilities relative to representation and warranty violations and the reimbursement of borrower benefits. | |
| Certain back-to-back derivatives entered into by the Company contemporaneously with the execution of derivatives by certain Private Education Loan securitization trusts. | |
| The option held by the Company to buy certain delinquent loans from certain Private Education Loan securitization trusts. | |
| The option to exercise the clean-up call and purchase the student loans from the trust when the asset balance is 10 percent or less of the original loan balance. | |
| The option (in certain trusts) to call rate reset notes in instances where the remarketing process has failed. |
F-15
2. | Significant Accounting Policies (Continued) |
| representation and warranty violations requiring the buybacks of loans; | |
| the reimbursement to the trust of borrower benefits afforded the borrowers of student loans that have been securitized; or | |
| funding specific cash accounts within certain trusts related to the remarketing of certain bonds. |
F-16
2. | Significant Accounting Policies (Continued) |
F-17
2. | Significant Accounting Policies (Continued) |
F-18
2. | Significant Accounting Policies (Continued) |
F-19
2. | Significant Accounting Policies (Continued) |
| Management, having the authority to approve the action, commits to a plan of termination; | |
| The plan of termination identifies the number of employees to be terminated, their job classifications or functions and their locations and the expected completion date; | |
| The plan of termination establishes the terms of the benefit arrangement, including the benefits that employees will receive upon termination, in sufficient detail to enable employees to determine the type and amount of benefits they will receive if they are involuntarily terminated; and | |
| Actions required to complete the plan of termination indicate that it is unlikely that significant changes to the plan of termination will be made or that the plan of termination will be withdrawn. |
F-20
2. | Significant Accounting Policies (Continued) |
F-21
2. | Significant Accounting Policies (Continued) |
F-22
2. | Significant Accounting Policies (Continued) |
F-23
2. | Significant Accounting Policies (Continued) |
F-24
2. | Significant Accounting Policies (Continued) |
F-25
2. | Significant Accounting Policies (Continued) |
3. | Student Loans |
F-26
3. | Student Loans (Continued) |
F-27
3. | Student Loans (Continued) |
December 31,
|
Year Ended
|
|||||||||||||||
2008 | December 31, 2008 | |||||||||||||||
Average
|
||||||||||||||||
Effective
|
||||||||||||||||
Ending
|
% of
|
Average
|
Interest
|
|||||||||||||
Balance | Balance | Balance | Rate | |||||||||||||
FFELP Stafford and Other Student Loans,
net
(1)
|
$ | 52,476,337 | 36 | % | $ | 44,290,909 | 4.50 | % | ||||||||
FFELP Consolidation Loans, net
|
71,743,435 | 50 | 73,091,087 | 4.35 | ||||||||||||
Private Education Loans, net
|
20,582,298 | 14 | 19,276,067 | 9.01 | ||||||||||||
Total student loans,
net
(2)
|
$ | 144,802,070 | 100 | % | $ | 136,658,063 | 5.06 | % | ||||||||
December 31,
|
Year Ended
|
|||||||||||||||
2007 | December 31, 2007 | |||||||||||||||
Average
|
||||||||||||||||
Effective
|
||||||||||||||||
Ending
|
% of
|
Average
|
Interest
|
|||||||||||||
Balance | Balance | Balance | Rate | |||||||||||||
FFELP Stafford and Other Student Loans,
net
(1)
|
$ | 35,726,062 | 29 | % | $ | 31,293,956 | 6.59 | % | ||||||||
FFELP Consolidation Loans, net
|
73,609,187 | 59 | 67,918,046 | 6.39 | ||||||||||||
Private Education Loans, net
|
14,817,725 | 12 | 12,506,662 | 11.65 | ||||||||||||
Total student loans,
net
(2)
|
$ | 124,152,974 | 100 | % | $ | 111,718,664 | 7.04 | % | ||||||||
(1) | The FFELP category is primarily Stafford loans, but also includes federally insured PLUS and HEAL loans and $8.5 billion of Stafford loans held-for-sale at December 31, 2008. | |
(2) | The total student loan ending balance includes net unamortized premiums/discounts of $1,895,220 and $1,791,153 as of December 31, 2008 and 2007, respectively. |
4. | Allowance for Loan Losses |
F-28
4. | Allowance for Loan Losses (Continued) |
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Private Education Loans
|
$ | 586,169 | $ | 883,474 | $ | 257,983 | ||||||
FFELP Stafford and Other Student Loans
|
105,568 | 89,083 | 13,907 | |||||||||
Mortgage and consumer loans
|
27,913 | 42,751 | 15,072 | |||||||||
Total provisions for loan losses
|
$ | 719,650 | $ | 1,015,308 | $ | 286,962 | ||||||
F-29
4. | Allowance for Loan Losses (Continued) |
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Allowance at beginning of year
|
$ | 885,931 | $ | 308,346 | $ | 204,112 | ||||||
Total provision
|
586,169 | 883,474 | 257,983 | |||||||||
Charge-offs
|
(460,214 | ) | (332,188 | ) | (159,560 | ) | ||||||
Recoveries
|
35,643 | 32,079 | 22,599 | |||||||||
Net charge-offs
|
(424,571 | ) | (300,109 | ) | (136,961 | ) | ||||||
Reclassification of interest
reserve
(1)
|
38,151 | | | |||||||||
Balance before securitization of Private Education Loans
|
1,085,680 | 891,711 | 325,134 | |||||||||
Reduction for securitization of Private Education Loans
|
| (5,780 | ) | (16,788 | ) | |||||||
Allowance at end of year
|
$ | 1,085,680 | $ | 885,931 | $ | 308,346 | ||||||
Net charge-offs as a percentage of average loans in repayment
|
4.98 | % | 5.04 | % | 3.22 | % | ||||||
Net charge-offs as a percentage of average loans in repayment
and forbearance
|
4.39 | % | 4.54 | % | 2.99 | % | ||||||
Allowance as a percentage of the ending total loans, gross
|
4.89 | % | 5.48 | % | 2.96 | % | ||||||
Allowance as a percentage of the ending loans in repayment
|
9.71 | % | 12.57 | % | 6.36 | % | ||||||
Allowance coverage of net charge-offs
|
2.56 | 2.95 | 2.25 | |||||||||
Ending total loans, gross
|
$ | 22,203,277 | $ | 16,171,752 | $ | 10,428,066 | ||||||
Average loans in repayment
|
$ | 8,533,356 | $ | 5,949,007 | $ | 4,256,780 | ||||||
Ending loans in repayment
|
$ | 11,182,053 | $ | 7,046,709 | $ | 4,851,305 |
(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 loans principal balance. Prior to 2008, the interest provision was reversed in interest income and then provided for through provision within the allowance for loan loss. For the years ended December 31, 2007 and 2006, this amount was $21 million and $12 million, respectively. |
F-30
4. | Allowance for Loan Losses (Continued) |
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Allowance at beginning of year
|
$ | 1,003,963 | $ | 372,612 | $ | 250,250 | ||||||
Total provision
|
586,169 | 883,474 | 257,983 | |||||||||
Charge-offs
|
(320,240 | ) | (246,343 | ) | (118,833 | ) | ||||||
Reclassification of interest
reserve
(1)
|
38,151 | | | |||||||||
Balance before securitization of Private Education Loans
|
1,308,043 | 1,009,743 | 389,400 | |||||||||
Reduction for securitization of Private Education Loans
|
| (5,780 | ) | (16,788 | ) | |||||||
Allowance at end of year
|
$ | 1,308,043 | $ | 1,003,963 | $ | 372,612 | ||||||
Charge-offs as a percentage of average loans in repayment
|
3.75 | % | 4.14 | % | 2.79 | % | ||||||
Charge-offs as a percentage of average loans in repayment and
forbearance
|
3.31 | % | 3.72 | % | 2.59 | % | ||||||
Allowance as a percentage of the ending total loan
balance
(2)
|
5.83 | % | 6.16 | % | 3.55 | % | ||||||
Allowance as a percentage of the ending loans in repayment
|
11.70 | % | 14.25 | % | 7.68 | % | ||||||
Allowance coverage of charge-offs
|
4.08 | 4.08 | 3.14 | |||||||||
Ending total
loans
(2)
|
$ | 22,425,640 | $ | 16,289,784 | $ | 10,492,332 | ||||||
Average loans in repayment
|
$ | 8,533,356 | $ | 5,949,007 | $ | 4,256,780 | ||||||
Ending loans in repayment
|
$ | 11,182,053 | $ | 7,046,709 | $ | 4,851,305 |
(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 loans principal balance. Prior to 2008, the interest provision was reversed in interest income and then provided for through provision within the allowance for loan loss. For the years ended December 31, 2007 and 2006, this amount was $21 million and $12 million, respectively. |
(2) | Ending total loans represents gross Private Education Loans, plus the receivable for partially charged-off loans. |
F-31
4. | Allowance for Loan Losses (Continued) |
December 31, | ||||||||||||||||||||||||
2008 | 2007 | 2006 | ||||||||||||||||||||||
Balance | % | Balance | % | Balance | % | |||||||||||||||||||
(Dollars in millions)
|
||||||||||||||||||||||||
Loans
in-school/grace/deferment
(1)
|
$ | 10,159 | $ | 8,151 | $ | 5,218 | ||||||||||||||||||
Loans in
forbearance
(2)
|
862 | 974 | 359 | |||||||||||||||||||||
Loans in repayment and percentage of each status:
|
||||||||||||||||||||||||
Loans current
|
9,748 | 87.2 | % | 6,236 | 88.5 | % | 4,214 | 86.9 | % | |||||||||||||||
Loans delinquent
31-60 days
(3)
|
551 | 4.9 | 306 | 4.3 | 250 | 5.1 | ||||||||||||||||||
Loans delinquent
61-90 days
|
296 | 2.6 | 176 | 2.5 | 132 | 2.7 | ||||||||||||||||||
Loans delinquent greater than 90 days
|
587 | 5.3 | 329 | 4.7 | 255 | 5.3 | ||||||||||||||||||
Total Private Education Loans in repayment
|
11,182 | 100 | % | 7,047 | 100 | % | 4,851 | 100 | % | |||||||||||||||
Total Private Education Loans, gross
|
22,203 | 16,172 | 10,428 | |||||||||||||||||||||
Private Education Loan unamortized discount
|
(535 | ) | (468 | ) | (365 | ) | ||||||||||||||||||
Total Private Education Loans
|
21,668 | 15,704 | 10,063 | |||||||||||||||||||||
Private Education Loan receivable for partially charged-off loans
|
222 | 118 | 64 | |||||||||||||||||||||
Private Education Loan allowance for losses
|
(1,308 | ) | (1,004 | ) | (372 | ) | ||||||||||||||||||
Private Education Loans, net
|
$ | 20,582 | $ | 14,818 | $ | 9,755 | ||||||||||||||||||
Percentage of Private Education Loans in repayment
|
50.4 | % | 43.6 | % | 46.5 | % | ||||||||||||||||||
Delinquencies as a percentage of Private Education Loans in
repayment
|
12.8 | % | 11.5 | % | 13.1 | % | ||||||||||||||||||
Loans in forbearance as a percentage of loans in repayment and
forbearance
|
7.2 | % | 12.1 | % | 6.9 | % | ||||||||||||||||||
(1) | Loans for borrowers who still may 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 full payments due to hardship or other factors, consistent with the established loan program servicing procedures and policies. | |
(3) | The period of delinquency is based on the number of days scheduled payments are contractually past due. |
F-32
4. | Allowance for Loan Losses (Continued) |
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Allowance at beginning of year
|
$ | 88,729 | $ | 20,315 | $ | 14,950 | ||||||
Provisions for student loan losses
|
105,568 | 89,083 | 13,907 | |||||||||
Charge-offs
|
(57,510 | ) | (21,235 | ) | (5,040 | ) | ||||||
Increase/decrease for student loan sales and securitizations
|
756 | 566 | (3,502 | ) | ||||||||
Allowance at end of year
|
$ | 137,543 | $ | 88,729 | $ | 20,315 | ||||||
Charge-offs as a percentage of average loans in repayment
|
.09 | % | .04 | % | .01 | % | ||||||
Charge-offs as a percentage of average loans in repayment and
forbearance
|
.07 | % | .03 | % | .01 | % | ||||||
Allowance as a percentage of the ending total loans, gross
|
.11 | % | .08 | % | .02 | % | ||||||
Allowance as a percentage of the ending loans in repayment
|
.20 | % | .14 | % | .04 | % | ||||||
Allowance coverage of charge-offs
|
2.39 | 4.18 | 4.03 | |||||||||
Ending total loans, gross
|
$ | 121,926,798 | $ | 107,164,729 | $ | 84,621,952 | ||||||
Average loans in repayment
|
$ | 66,392,120 | $ | 58,999,119 | $ | 47,154,923 | ||||||
Ending loans in repayment
|
$ | 70,174,192 | $ | 65,289,865 | $ | 53,125,823 |
F-33
4. | Allowance for Loan Losses (Continued) |
December 31, | ||||||||||||||||||||||||
2008 | 2007 | 2006 | ||||||||||||||||||||||
Balance | % | Balance | % | Balance | % | |||||||||||||||||||
(Dollars in millions)
|
||||||||||||||||||||||||
Loans
in-school/grace/deferment
(1)
|
$ | 39,270 | $ | 31,200 | $ | 23,171 | ||||||||||||||||||
Loans in
forbearance
(2)
|
12,483 | 10,675 | 8,325 | |||||||||||||||||||||
Loans in repayment and percentage of each status:
|
||||||||||||||||||||||||
Loans current
|
58,811 | 83.8 | % | 55,128 | 84.4 | % | 45,664 | 86.0 | % | |||||||||||||||
Loans delinquent
31-60 days
(3)
|
4,044 | 5.8 | 3,650 | 5.6 | 2,787 | 5.2 | ||||||||||||||||||
Loans delinquent
61-90 days
|
2,064 | 2.9 | 1,841 | 2.8 | 1,468 | 2.8 | ||||||||||||||||||
Loans delinquent greater than 90 days
|
5,255 | 7.5 | 4,671 | 7.2 | 3,207 | 6.0 | ||||||||||||||||||
Total FFELP loans in repayment
|
70,174 | 100 | % | 65,290 | 100 | % | 53,126 | 100 | % | |||||||||||||||
Total FFELP loans, gross
|
121,927 | 107,165 | 84,622 | |||||||||||||||||||||
FFELP loan unamortized premium
|
2,431 | 2,259 | 1,563 | |||||||||||||||||||||
Total FFELP loans
|
124,358 | 109,424 | 86,185 | |||||||||||||||||||||
FFELP loan allowance for losses
|
(138 | ) | (89 | ) | (20 | ) | ||||||||||||||||||
FFELP loans, net
|
$ | 124,220 | $ | 109,335 | $ | 86,165 | ||||||||||||||||||
Percentage of FFELP loans in repayment
|
57.6 | % | 60.9 | % | 62.8 | % | ||||||||||||||||||
Delinquencies as a percentage of FFELP loans in repayment
|
16.2 | % | 15.6 | % | 14.0 | % | ||||||||||||||||||
FFELP loans in forbearance as a percentage of loans in repayment
and forbearance
|
15.1 | % | 14.1 | % | 13.5 | % | ||||||||||||||||||
(1) | Loans for borrowers who still may 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 or who have temporarily ceased making full payments due to hardship or other factors. | |
(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 full 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. |
F-34
5. | Investments |
December 31, 2008 | ||||||||||||||||
Gross
|
Gross
|
|||||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
Fair
|
|||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
Investments
|
||||||||||||||||
Available-for-sale
|
||||||||||||||||
U.S. Treasury and other U.S. government agency obligations:
|
||||||||||||||||
U.S. Treasury securities and other U.S. government agency
obligations
|
$ | 8,908 | $ | 195 | $ | | $ | 9,103 | ||||||||
Other securities:
|
||||||||||||||||
Asset-backed securities
|
40,907 | 13 | (4,299 | ) | 36,621 | |||||||||||
Commercial paper and asset-backed commercial paper
|
801,169 | | | 801,169 | ||||||||||||
Municipal bonds
|
10,883 | 1,924 | | 12,807 | ||||||||||||
Other
|
1,673 | | (365 | ) | 1,308 | |||||||||||
Total investment securities
available-for-sale
|
$ | 863,540 | $ | 2,132 | $ | (4,664 | ) | $ | 861,008 | |||||||
Restricted Investments
|
||||||||||||||||
Available-for sale
|
||||||||||||||||
Guaranteed investment contracts
|
$ | 31,914 | $ | | $ | | $ | 31,914 | ||||||||
Total restricted investments
available-for-sale
|
$ | 31,914 | $ | | $ | | $ | 31,914 | ||||||||
Held-to-maturity
|
||||||||||||||||
Guaranteed investment contracts
|
$ | 5,500 | $ | | $ | | $ | 5,500 | ||||||||
Other
|
215 | | | 215 | ||||||||||||
Total restricted investments
held-to-maturity
|
$ | 5,715 | $ | | $ | | $ | 5,715 | ||||||||
F-35
5. | Investments (Continued) |
December 31, 2007 | ||||||||||||||||
Gross
|
Gross
|
|||||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
Fair
|
|||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
Investments
|
||||||||||||||||
Available-for-sale
|
||||||||||||||||
U.S. Treasury and other U.S. government agency obligations:
|
||||||||||||||||
U.S. Treasury backed securities
|
$ | 772,905 | $ | 66,400 | $ | | $ | 839,305 | ||||||||
U.S. Treasury securities and other U.S. government agency
obligations
|
45,173 | | (31 | ) | 45,142 | |||||||||||
Other securities:
|
||||||||||||||||
Certificates of Deposit
|
600,000 | | | 600,000 | ||||||||||||
Asset-backed securities
|
35,994 | | (146 | ) | 35,848 | |||||||||||
Commercial paper and asset-backed commercial paper
|
1,349,367 | | | 1,349,367 | ||||||||||||
Other
|
1,574 | 104 | | 1,678 | ||||||||||||
Total investment securities
available-for-sale
|
$ | 2,805,013 | $ | 66,504 | (1) | $ | (177 | ) | $ | 2,871,340 | ||||||
Restricted Investments
|
||||||||||||||||
Available-for-sale
|
||||||||||||||||
Guaranteed investment contracts
|
$ | 76,734 | | | $ | 76,734 | ||||||||||
Other
|
27,321 | | | 27,321 | ||||||||||||
Total restricted investments
available-for-sale
|
$ | 104,055 | $ | | $ | | $ | 104,055 | ||||||||
Held-to-maturity
|
||||||||||||||||
Guaranteed investment contracts
|
$ | 5,500 | $ | | $ | | $ | 5,500 | ||||||||
Other securities
|
215 | | | 215 | ||||||||||||
Total restricted investments
held-to-maturity
|
$ | 5,715 | $ | | $ | | $ | 5,715 | ||||||||
(1) | Includes unrealized gains totaling $10 million for the investments designated as the hedged items in a SFAS No. 133 fair value hedge. These gains have been recorded in the gains (losses) on derivative hedging activities, net line in the consolidated statements of income along with the gain (loss) related to the derivatives hedging such investments. |
F-36
5. | Investments (Continued) |
December 31, 2008 | ||||||||||||
Held-to-
|
Available-for-
|
|||||||||||
Maturity | Sale (1) | Other | ||||||||||
Year of Maturity
|
||||||||||||
2009
|
$ | | $ | 811,815 | $ | 98,368 | ||||||
2010
|
215 | | 9,694 | |||||||||
2011
|
| | 5,522 | |||||||||
2012
|
| | 5,718 | |||||||||
2013
|
| | | |||||||||
2014-2018
|
| 12,572 | 33,194 | |||||||||
After 2018
|
5,500 | 68,535 | 27,901 | |||||||||
Total
|
$ | 5,715 | $ | 892,922 | $ | 180,397 | ||||||
(1) | Available-for-sale securities are stated at fair value. |
F-37
6. | Goodwill and Acquired Intangible Assets |
As of December 31, | ||||||||
(Dollars in millions)
|
2008 | 2007 | ||||||
Lending
|
$ | 388 | $ | 388 | ||||
Asset Performance Group
|
401 | 377 | ||||||
Guarantor services
|
62 | 62 | ||||||
Upromise
|
140 | 137 | ||||||
Other
|
| 1 | ||||||
Total
|
$ | 991 | $ | 965 | ||||
F-38
6. | Goodwill and Acquired Intangible Assets (Continued) |
F-39
6. | Goodwill and Acquired Intangible Assets (Continued) |
December 31,
|
Acquisitions/
|
December 31,
|
||||||||||
(Dollars in millions)
|
2007 | Other | 2008 | |||||||||
Lending
|
$ | 388 | $ | | $ | 388 | ||||||
Asset Performance Group
|
377 | 24 | 401 | |||||||||
Corporate and Other
|
200 | 2 | 202 | |||||||||
Total
|
$ | 965 | $ | 26 | $ | 991 | ||||||
December 31,
|
Acquisitions/
|
December 31,
|
||||||||||
(Dollars in millions)
|
2006 | Other | 2007 | |||||||||
Lending
|
$ | 406 | $ | (18 | ) | $ | 388 | |||||
Asset Performance Group
|
349 | 28 | 377 | |||||||||
Corporate and Other
|
215 | (15 | ) | 200 | ||||||||
Total
|
$ | 970 | $ | (5 | ) | $ | 965 | |||||
F-40
6. | Goodwill and Acquired Intangible Assets (Continued) |
Average
|
As of December 31, 2008 | |||||||||||||
Amortization
|
Accumulated
|
|||||||||||||
(Dollars in millions)
|
Period | Gross | Amortization | Net | ||||||||||
Intangible assets subject to amortization:
|
||||||||||||||
Customer, services, and lending relationships
|
13 years | $ | 332 | $ | (173 | ) | $ | 159 | ||||||
Software and technology
|
7 years | 93 | (85 | ) | 8 | |||||||||
Non-compete agreements
|
2 years | 11 | (10 | ) | 1 | |||||||||
Total
|
436 | (268 | ) | 168 | ||||||||||
Intangible assets not subject to amortization:
|
||||||||||||||
Trade name and trademark
|
Indefinite | 91 | | 91 | ||||||||||
Total acquired intangible assets
|
$ | 527 | $ | (268 | ) | $ | 259 | |||||||
Average
|
As of December 31, 2007 | |||||||||||||
Amortization
|
Accumulated
|
|||||||||||||
(Dollars in millions)
|
Period | Gross | Amortization | Net | ||||||||||
Intangible assets subject to amortization:
|
||||||||||||||
Customer, services, and lending relationships
|
13 years | $ | 366 | $ | (160 | ) | $ | 206 | ||||||
Software and technology
|
7 years | 95 | (77 | ) | 18 | |||||||||
Non-compete agreements
|
2 years | 12 | (10 | ) | 2 | |||||||||
Total
|
473 | (247 | ) | 226 | ||||||||||
Intangible assets not subject to amortization:
|
||||||||||||||
Trade name and trademark
|
Indefinite | 110 | | 110 | ||||||||||
Total acquired intangible assets
|
$ | 583 | $ | (247 | ) | $ | 336 | |||||||
F-41
6. | Goodwill and Acquired Intangible Assets (Continued) |
7. | Borrowings |
Year Ended
|
||||||||||||||||
December 31, 2008 | December 31, 2008 | |||||||||||||||
Weighted Average
|
Weighted Average
|
|||||||||||||||
Ending Balance | Interest Rate | Average Balance | Interest Rate | |||||||||||||
Term bank deposits
|
$ | 1,147,825 | 3.34 | % | $ | 696,442 | 3.67 | % | ||||||||
ABCP borrowings
|
24,767,825 | 3.05 | 24,692,143 | 3.16 | ||||||||||||
ED Participation Program Facility
|
7,364,969 | 3.37 | 1,726,751 | 3.41 | ||||||||||||
Short-term portion of long-term borrowings
|
6,821,846 | 3.60 | 6,879,459 | 3.69 | ||||||||||||
Other interest bearing liabilities
|
1,830,578 | 0.55 | 2,064,547 | 2.35 | ||||||||||||
Total short-term borrowings
|
$ | 41,933,043 | 3.09 | % | $ | 36,059,342 | 3.24 | % | ||||||||
Maximum outstanding at any month end
|
$ | 41,933,043 | ||||||||||||||
F-42
7. | Borrowings (Continued) |
Year Ended
|
||||||||||||||||
December 31, 2007 | December 31, 2007 | |||||||||||||||
Weighted Average
|
Weighted Average
|
|||||||||||||||
Ending Balance | Interest Rate | Average Balance | Interest Rate | |||||||||||||
Term bank deposits
|
$ | 254,029 | 4.77 | % | $ | 166,013 | 4.94 | % | ||||||||
ABCP borrowings
|
25,960,348 | 5.32 | 10,604,570 | 3.29 | ||||||||||||
Short-term portion of long-term borrowings
|
8,451,163 | 4.86 | 4,975,380 | 4.86 | ||||||||||||
Other interest bearing liabilities
|
1,281,867 | 3.06 | 638,927 | 4.85 | ||||||||||||
Total short-term borrowings
|
$ | 35,947,407 | 5.13 | % | $ | 16,384,890 | 3.84 | % | ||||||||
Maximum outstanding at any month end
|
$ | 36,980,307 | ||||||||||||||
F-43
7. | Borrowings (Continued) |
December 31, 2008 |
Year Ended
|
|||||||||||
Weighted
|
December 31,
|
|||||||||||
Average
|
2008 | |||||||||||
Ending
|
Interest
|
Average
|
||||||||||
Balance (1) | Rate (2) | Balance | ||||||||||
Floating rate notes:
|
||||||||||||
U.S. dollar-denominated:
|
||||||||||||
Interest bearing, due
2010-2047
|
$ | 79,212,638 | 4.12 | % | $ | 76,604,044 | ||||||
Non-U.S. dollar-denominated:
|
||||||||||||
Australian dollar-denominated, due
2010-2011
|
462,022 | 7.45 | 523,837 | |||||||||
Euro-denominated, due
2010-2041
|
8,713,084 | 4.40 | 8,876,737 | |||||||||
Singapore dollar-denominated
|
| | 4,508 | |||||||||
Sterling-denominated, due
2010-2039
|
975,851 | 5.72 | 975,808 | |||||||||
Japanese yen-denominated
|
| | 8,687 | |||||||||
Hong Kong dollar-denominated, due 2011
|
113,691 | 5.06 | 113,666 | |||||||||
Swedish krona-denominated, due
2010-2011
|
154,780 | 4.35 | 252,540 | |||||||||
Canadian dollar-denominated, due 2011
|
229,885 | 4.57 | 229,885 | |||||||||
Total floating rate notes
|
89,861,951 | 4.19 | 87,589,712 | |||||||||
Fixed rate notes:
|
||||||||||||
U.S. dollar-denominated:
|
||||||||||||
Interest bearing, due
2010-2043
|
14,749,681 | 5.08 | 12,473,864 | |||||||||
Non-U.S.-dollar denominated:
|
||||||||||||
Australian dollar-denominated, due
2010-2012
|
247,928 | 7.37 | 407,308 | |||||||||
Canadian dollar-denominated, due
2010-2011
|
635,274 | 4.49 | 972,215 | |||||||||
Euro-denominated, due
2010-2039
|
6,874,043 | 2.86 | 4,807,924 | |||||||||
Hong Kong dollar-denominated, due
2010-2016
|
189,860 | 4.14 | 167,518 | |||||||||
Japanese yen-denominated, due
2010-2035
|
1,087,652 | 1.34 | 929,419 | |||||||||
Singapore dollar-denominated, due 2014
|
80,576 | 2.95 | 58,884 | |||||||||
Sterling-denominated, due
2010-2039
|
2,873,765 | 6.28 | 3,441,142 | |||||||||
Swiss franc-denominated, due 2011
|
219,687 | 2.02 | 246,749 | |||||||||
New Zealand dollar-denominated, due 2010
|
179,934 | 7.71 | 213,316 | |||||||||
Mexican peso-denominated, due 2016
|
72,730 | 11.05 | 91,548 | |||||||||
Swedish krona-denominated, due 2011
|
43,066 | 6.33 | 68,110 | |||||||||
Total fixed rate notes
|
27,254,196 | 4.51 | 23,877,997 | |||||||||
Term bank deposits U.S. dollar-denominated, due
2010-2013
|
1,108,647 | 4.36 | 157,268 | |||||||||
Total long-term borrowings
|
$ | 118,224,794 | 4.26 | % | $ | 111,624,977 | ||||||
(1) | Ending balance expressed in U.S. dollars at December 31, 2008 spot currency exchange rate. | |
(2) | Weighted average interest rate is stated rate relative to currency denomination of note. |
F-44
7. | Borrowings (Continued) |
December 31, 2007 |
Year Ended
|
|||||||||||
Weighted
|
December 31,
|
|||||||||||
Average
|
2007
|
|||||||||||
Ending
|
Interest
|
Average
|
||||||||||
Balance (1) | Rate (2) | Balance | ||||||||||
Floating rate notes:
|
||||||||||||
U.S. dollar-denominated:
|
||||||||||||
Interest bearing, due
2009-2047
|
$ | 71,650,528 | 5.25 | % | $ | 73,683,228 | ||||||
Non-U.S. dollar-denominated:
|
||||||||||||
Australian dollar-denominated, due
2009-2011
|
626,030 | 7.23 | 625,870 | |||||||||
Euro-denominated, due
2009-2041
|
9,073,835 | 3.72 | 8,900,473 | |||||||||
Singapore dollar-denominated, due 2009
|
30,000 | 2.69 | 30,000 | |||||||||
Sterling-denominated, due
2009-2039
|
975,746 | 5.73 | 975,618 | |||||||||
Japanese yen-denominated, due 2009
|
42,391 | 0.19 | 42,391 | |||||||||
Hong Kong dollar-denominated, due 2011
|
113,641 | 4.38 | 113,616 | |||||||||
Swedish krona-denominated, due
2009-2011
|
293,459 | 3.49 | 293,450 | |||||||||
Canadian dollar-denominated, due 2011
|
229,885 | 5.32 | 229,885 | |||||||||
Total floating rate notes
|
83,035,515 | 5.09 | 84,894,531 | |||||||||
Fixed rate notes:
|
||||||||||||
U.S. dollar-denominated:
|
||||||||||||
Interest bearing, due
2009-2043
|
12,683,074 | 4.89 | 12,999,204 | |||||||||
Non-U.S. dollar-denominated:
|
||||||||||||
Australian dollar-denominated, due
2009-2012
|
749,514 | 4.80 | 577,015 | |||||||||
Canadian dollar-denominated, due
2009-2011
|
1,179,132 | 3.66 | 987,145 | |||||||||
Euro-denominated, due
2009-2039
|
7,313,381 | 2.70 | 5,132,707 | |||||||||
Hong Kong dollar-denominated, due
2010-2016
|
171,689 | 4.57 | 167,519 | |||||||||
Japanese yen-denominated, due
2009-2035
|
1,036,625 | 1.63 | 1,052,326 | |||||||||
Singapore dollar-denominated, due 2014
|
76,631 | 3.10 | 58,863 | |||||||||
Sterling-denominated, due
2009-2039
|
4,084,309 | 4.42 | 3,439,887 | |||||||||
Swiss franc-denominated, due
2009-2011
|
349,326 | 2.48 | 302,704 | |||||||||
New Zealand dollar-denominated, due 2010
|
219,282 | 6.32 | 213,017 | |||||||||
Mexican peso-denominated, due 2016
|
90,057 | 8.92 | 91,504 | |||||||||
Swedish krona-denominated, due 2011
|
109,609 | 2.48 | 68,050 | |||||||||
Total fixed rate notes
|
28,062,629 | 4.05 | 25,089,941 | |||||||||
Total long-term borrowings
|
$ | 111,098,144 | 4.83 | % | $ | 109,984,472 | ||||||
(1) | Ending balance expressed in U.S. dollars at December 31, 2007 spot currency exchange rate. | |
(2) | Weighted average interest rate is stated rate relative to currency denomination of note. |
F-45
7. | Borrowings (Continued) |
December 31, 2008 | ||||||||||||||||||||||||||||||||
Stated Maturity (1) | Maturity to Call Date (1) | |||||||||||||||||||||||||||||||
Unsecured
|
Term Bank
|
Secured
|
Unsecured
|
Term Bank
|
Secured
|
|||||||||||||||||||||||||||
Borrowings | Deposits | Borrowings | Total | Borrowings | Deposits | Borrowings | Total | |||||||||||||||||||||||||
Year of Maturity
|
||||||||||||||||||||||||||||||||
2009
|
$ | | $ | | $ | 6,721,874 | $ | 6,721,874 | $ | 1,322,460 | $ | | $ | 8,111,522 | $ | 9,433,982 | ||||||||||||||||
2010
|
7,091,836 | 624,248 | 7,130,332 | 14,846,416 | 7,205,102 | 624,248 | 7,066,784 | 14,896,134 | ||||||||||||||||||||||||
2011
|
7,091,335 | 103,023 | 7,259,977 | 14,454,335 | 7,244,961 | 103,023 | 7,259,977 | 14,607,961 | ||||||||||||||||||||||||
2012
|
2,329,048 | 82,599 | 6,765,332 | 9,176,979 | 2,374,496 | 82,599 | 6,765,332 | 9,222,427 | ||||||||||||||||||||||||
2013
|
2,995,195 | 298,777 | 6,496,422 | 9,790,394 | 2,968,748 | 298,777 | 6,496,422 | 9,763,947 | ||||||||||||||||||||||||
2014
|
5,360,369 | | 6,287,831 | 11,648,200 | 5,457,677 | | 6,287,831 | 11,745,508 | ||||||||||||||||||||||||
2015-2047
|
6,313,716 | | 41,910,911 | 48,224,627 | 4,608,055 | | 40,584,811 | 45,192,866 | ||||||||||||||||||||||||
31,181,499 | 1,108,647 | 82,572,679 | 114,862,825 | 31,181,499 | 1,108,647 | 82,572,679 | 114,862,825 | |||||||||||||||||||||||||
SFAS No. 133 (gains) losses on derivative hedging
activities
|
2,489,764 | | 872,205 | 3,361,969 | 2,489,764 | | 872,205 | 3,361,969 | ||||||||||||||||||||||||
Total
|
$ | 33,671,263 | $ | 1,108,647 | $ | 83,444,884 | $ | 118,224,794 | $ | 33,671,263 | $ | 1,108,647 | $ | 83,444,884 | $ | 118,224,794 | ||||||||||||||||
(1) | The Company views its on-balance sheet securitization trust debt as long-term based on the contractual maturity dates and projects the expected principal paydowns based on the Companys current estimates regarding loan prepayment speeds. The projected principal paydowns of $6.7 billion shown in year 2009 relate to the on-balance sheet securitization trust debt. |
F-46
7. | Borrowings (Continued) |
December 31, 2008 | ||||||||||||||||||||||||||||
(Dollars in millions)
|
Debt Outstanding | Carrying Amount of Assets Securing Debt Outstanding | ||||||||||||||||||||||||||
Short
|
Long
|
|||||||||||||||||||||||||||
Secured Borrowings: | Term | Term | Total | Loans | Cash | Other Assets | Total | |||||||||||||||||||||
ED Participation Program
|
$ | 7,365 | $ | | $ | 7,365 | $ | 7,733 | $ | 88 | $ | 85 | $ | 7,906 | ||||||||||||||
2008 Asset-Backed Financing Facilities
|
24,768 | | 24,768 | 31,953 | 462 | 816 | 33,231 | |||||||||||||||||||||
On-balance sheet securitizations
|
| 80,601 | 80,601 | 81,547 | 2,632 | 999 | 85,178 | |||||||||||||||||||||
Indentured trusts
|
31 | 1,972 | 2,003 | 2,199 | 236 | 40 | 2,475 | |||||||||||||||||||||
32,164 | 82,573 | 114,737 | 123,432 | 3,418 | 1,940 | 128,790 | ||||||||||||||||||||||
SFAS No. 133 fair value adjustment
|
| 872 | 872 | | | | | |||||||||||||||||||||
Total
|
$ | 32,164 | $ | 83,445 | $ | 115,609 | $ | 123,432 | $ | 3,418 | $ | 1,940 | $ | 128,790 | ||||||||||||||
F-47
7. | Borrowings (Continued) |
F-48
7. | Borrowings (Continued) |
F-49
8. | Student Loan Securitization |
Years Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||
2008 | 2007 | 2006 | ||||||||||||||||||||||||||||||||||||||||||||||
Loan
|
Pre-
|
Loan
|
Pre-
|
Loan
|
Pre-
|
|||||||||||||||||||||||||||||||||||||||||||
No. of
|
Amount
|
Tax
|
Gain
|
No. of
|
Amount
|
Tax
|
Gain
|
No. of
|
Amount
|
Tax
|
Gain
|
|||||||||||||||||||||||||||||||||||||
(Dollars in millions)
|
Transactions | Securitized | Gain | % | Transactions | Securitized | Gain | % | Transactions | Securitized | Gain | % | ||||||||||||||||||||||||||||||||||||
Securitizations sales:
|
||||||||||||||||||||||||||||||||||||||||||||||||
FFELP Stafford/PLUS loans
|
| $ | | $ | | | % | | $ | | $ | | | % | 2 | $ | 5,004 | $ | 17 | .3 | % | |||||||||||||||||||||||||||
FFELP Consolidation Loans
|
| | | | | | | | 4 | 9,503 | 55 | .6 | ||||||||||||||||||||||||||||||||||||
Private Education Loans
|
| | | | 1 | 2,001 | 367 | 18.4 | 3 | 5,088 | 830 | 16.3 | ||||||||||||||||||||||||||||||||||||
Total securitizations sales
|
| | $ | | | % | 1 | 2,001 | $ | 367 | 18.4 | % | 9 | 19,595 | $ | 902 | 4.6 | % | ||||||||||||||||||||||||||||||
Securitizations financings:
|
||||||||||||||||||||||||||||||||||||||||||||||||
FFELP Stafford/PLUS
loans
(1)
|
9 | 18,546 | 3 | 8,955 | | | ||||||||||||||||||||||||||||||||||||||||||
FFELP Consolidation
Loans
(1)
|
| | 5 | 14,476 | 4 | 12,506 | ||||||||||||||||||||||||||||||||||||||||||
Total securitizations financings
|
9 | 18,546 | 8 | 23,431 | 4 | 12,506 | ||||||||||||||||||||||||||||||||||||||||||
Total securitizations
|
9 | $ | 18,546 | 9 | $ | 25,432 | 13 | $ | 32,101 | |||||||||||||||||||||||||||||||||||||||
(1) | In certain securitizations there are terms within the deal structure that result in such securitizations not qualifying for sale treatment and accordingly, they are accounted for on-balance sheet as VIEs. Terms that prevent sale treatment include: (1) allowing the Company to hold certain rights that can affect the remarketing of certain bonds, (2) allowing the trust to enter into interest rate cap agreements after initial settlement of the securitization, which do not relate to the reissuance of third-party beneficial interests or (3) allowing the Company to hold an unconditional call option related to a certain percentage of the securitized assets. |
F-50
8. | Student Loan Securitization (Continued) |
Years Ended December 31, | ||||||||||||||||||||||||||||||||||||
2008 | 2007 | 2006 | ||||||||||||||||||||||||||||||||||
FFELP
|
||||||||||||||||||||||||||||||||||||
Stafford
|
FFELP
|
Private
|
FFELP
|
FFELP
|
Private
|
FFELP
|
FFELP
|
Private
|
||||||||||||||||||||||||||||
and
|
Consolidation
|
Education
|
Stafford
|
Consolidation
|
Education
|
Stafford
|
Consolidation
|
Education
|
||||||||||||||||||||||||||||
PLUS (1) | Loans (1) | Loans (1) | and PLUS (1) | Loans (1) | Loans | and PLUS | Loans | Loans | ||||||||||||||||||||||||||||
Prepayment speed (annual
rate)
(2)
|
| | | | | | * | 6 | % | 4 | % | |||||||||||||||||||||||||
Interim status
|
| | | | | 0 | % | | | | ||||||||||||||||||||||||||
Repayment status
|
| | | | | 4-7 | % | | | | ||||||||||||||||||||||||||
Life of loan repayment status
|
| | | | | 6 | % | | | | ||||||||||||||||||||||||||
Weighted average life
|
| | | | | 9.4 y | rs. | 3.7 y | rs. | 8.2 yrs. | 9.4 y | rs. | ||||||||||||||||||||||||
Expected credit losses (% of principal securitized)
|
| | | | | 4.69 | % | .15 | % | .19 | % | 4.79 | % | |||||||||||||||||||||||
Residual cash flows discounted at (weighted average)
|
| | | | | 12.5 | % | 12.4 | % | 10.8 | % | 12.9 | % |
(1) | No securitizations qualified for sale treatment in the period. | |
(2) | Effective December 31, 2006, the Company implemented Constant Prepayment Rates (CPR) curves for Residual Interest valuations that are based on the number of months since entering repayment that better reflect the CPR as the loan seasons. Under this methodology, a different CPR is applied to each year of a loans seasoning. Previously, the Company applied a CPR that was based on a static life of loan assumption, irrespective of seasoning or, in the case of FFELP Stafford and PLUS loans, the Company used a vector approach in applying the CPR. The repayment status CPR used is based on the number of months since first entering repayment (seasoning). Life of loan CPR is related to repayment status only and does not include the impact of the loan while in interim status. The CPR assumption used for all periods includes the impact of projected defaults. | |
* | CPR of 20 percent for 2006, 15 percent for 2007, and 10 percent thereafter. |
F-51
8. | Student Loan Securitization (Continued) |
Years Ended December 31, | ||||||||||||
(Dollars in millions)
|
2008 | 2007 | 2006 | |||||||||
Net proceeds from new securitizations completed during the period
|
$ | | $ | 1,977 | $ | 19,521 | ||||||
Cash distributions from trusts related to Residual Interests
|
909 | 782 | 598 | |||||||||
Servicing fees
received
(1)
|
246 | 286 | 327 | |||||||||
Purchases of previously transferred financial assets for
representation and warranty violations
|
(37 | ) | (33 | ) | (45 | ) | ||||||
Reimbursements of borrower
benefits
(2)
|
(29 | ) | (22 | ) | (24 | ) | ||||||
Purchases of delinquent Private Education Loans from
securitization trusts using delinquent loan call option
|
(172 | ) | (162 | ) | (72 | ) | ||||||
Purchases of loans using clean-up call option
|
(697 | ) | (1,500 | ) | (1,122 | ) |
(1) | The Company receives annual servicing fees of 90 basis points, 50 basis points and 70 basis points of the outstanding securitized loan balance related to its FFELP Stafford, FFELP Consolidation Loan and Private Education Loan securitizations, respectively. | |
(2) | Under the terms of the securitizations, the transaction documents require that the Company reimburse the trusts for any borrower benefits afforded the borrowers of the underlying securitized loans. |
F-52
8. | Student Loan Securitization (Continued) |
As of December 31, 2008 | ||||||||||||||||
FFELP
|
Consolidation
|
Private
|
||||||||||||||
Stafford and
|
Loan
|
Education
|
||||||||||||||
(Dollars in millions)
|
PLUS | Trusts (1) | Loan Trusts | Total | ||||||||||||
Fair value of Residual
Interests
(2)
|
$ | 250 | $ | 918 | $ | 1,032 | $ | 2,200 | ||||||||
Underlying securitized loan balance
|
7,057 | 15,077 | 13,690 | 35,824 | ||||||||||||
Weighted average life
|
3.0 yrs. | 8.1 yrs. | 6.4 yrs. | |||||||||||||
Prepayment speed (annual
rate)
(3)
|
||||||||||||||||
Interim status
|
0 | % | N/A | 0 | % | |||||||||||
Repayment status
|
2-19 | % | 1-6 | % | 2-15 | % | ||||||||||
Life of loan repayment status
|
12 | % | 4 | % | 6 | % | ||||||||||
Expected credit losses (% of student loan
principal)
(4)
|
.11 | % | .23 | % | 5.22 | % | ||||||||||
Residual cash flows discount rate
|
13.1 | % | 11.9 | % | 26.3 | % |
As of December 31, 2007 | ||||||||||||||||
FFELP
|
Consolidation
|
Private
|
||||||||||||||
Stafford and
|
Loan
|
Education
|
||||||||||||||
(Dollars in millions)
|
PLUS | Trusts (1) | Loan Trusts | Total | ||||||||||||
Fair value of Residual
Interests
(2)
|
$ | 390 | $ | 730 | $ | 1,924 | $ | 3,044 | ||||||||
Underlying securitized loan balance
|
9,338 | 15,968 | 14,199 | 39,505 | ||||||||||||
Weighted average life
|
2.7 yrs. | 7.4 yrs. | 7.0 yrs. | |||||||||||||
Prepayment speed (annual
rate)
(3)
|
||||||||||||||||
Interim status
|
0 | % | N/A | 0 | % | |||||||||||
Repayment status
|
0-37 | % | 3-8 | % | 1-30 | % | ||||||||||
Life of loan repayment status
|
21 | % | 6 | % | 9 | % | ||||||||||
Expected credit losses (% of student loan
principal)
(4)
|
.11 | % | .21 | % | 5.28 | % | ||||||||||
Residual cash flows discount rate
|
12.0 | % | 9.8 | % | 12.9 | % |
(1) | Includes $762 million and $283 million related to the fair value of the Embedded Floor Income as of December 31, 2008 and 2007, respectively. Changes in the fair value of the Embedded Floor Income are primarily due to changes in the interest rates and the paydown of the underlying loans. | |
(2) | At December 31, 2007, the Company had unrealized gains (pre-tax) in accumulated other comprehensive income of $301 million that related to the Retained Interests. There were no such gains at December 31, 2008. | |
(3) | The Company uses CPR curves for Residual Interest valuations that are based on seasoning (the number of months since entering repayment). Under this methodology, a different CPR is applied to each year of a loans seasoning. The repayment status CPR used is based on the number of months since first entering repayment (seasoning). Life of loan CPR is related to repayment status only and does not include the impact of the loan while in interim status. The CPR assumption used for all periods includes the impact of projected defaults. | |
(4) | Remaining expected credit losses as of the respective balance sheet date. |
F-53
8. | Student Loan Securitization (Continued) |
| Prepayment speed assumptions were decreased for all three asset types primarily as a result of a significant reduction in prepayment activity experienced which is expected to continue into the foreseeable future. The decrease in prepayment speeds is primarily due to a reduction in third-party consolidation activity as a result of the CCRAA (for FFELP only) and the current U.S. economic and credit environment. This resulted in a $114 million unrealized mark-to-market gain. | |
| Life of loan default rate assumptions for Private Education loans were increased as a result of the continued weakening of the U.S. economy. This resulted in a $79 million unrealized mark-to-market loss. | |
| Cost of funds assumptions related to the underlying auction rate securities bonds ($2.3 billion face amount of bonds) within FFELP loan ($1.7 billion face amount of bonds) and Private Education Loan ($0.6 billion face amount of bonds) trusts were increased to take into account the expectations these auction rate securities will continue to reset at higher rates for an extended period of time. This resulted in a $116 million unrealized mark-to-market loss. | |
| The discount rate assumption related to the Private Education Loan and FFELP Residual Interests was increased. The Company assessed the appropriateness of the current risk premium, which is added to the risk free rate for the purpose of arriving at a discount rate, in light of the current economic and credit uncertainty that exists in the market as of December 31, 2008. This discount rate is applied to the projected cash flows to arrive at a fair value representative of the current economic conditions. The Company increased the risk premium by 1,550 basis points and 390 basis points for Private Education and FFELP, respectively, to take into account the current level of cash flow uncertainty and lack of liquidity that exists with the Residual Interests. This resulted in a $904 million unrealized mark-to-market loss. |
F-54
8. | Student Loan Securitization (Continued) |
Year Ended December 31, 2008 | ||||||||||||
FFELP
|
FFELP
|
|||||||||||
Stafford/PLUS
|
Consolidation
|
Private Education
|
||||||||||
(Dollars in millions)
|
Loan Trusts (5) | Loan Trusts (5) | Loan Trusts (5) | |||||||||
Fair value of Residual Interest
|
$ | 250 | $ | 918 | (1) | $ | 1,032 | |||||
Weighted-average life
|
3.0 yrs. | 8.1 yrs. | 6.4 yrs. | |||||||||
Prepayment speed
assumptions
(2)
|
||||||||||||
Interim status
|
0 | % | N/A | 0 | % | |||||||
Repayment status
|
2-19 | % | 1-6 | % | 2-15 | % | ||||||
Life of loan repayment status
|
12 | % | 4 | % | 6 | % | ||||||
Impact on fair value of 5% absolute increase
|
$ | (23 | ) | $ | (151 | ) | $ | (158 | ) | |||
Impact on fair value of 10% absolute increase
|
$ | (41 | ) | $ | (265 | ) | $ | (282 | ) | |||
Expected credit losses (as a % of student loan principal)
|
.11 | % | .23 | % | 5.22 | % (3) | ||||||
Impact on fair value of 5% absolute increase in default rate
|
$ | (5 | ) | $ | (7 | ) | $ | (207 | ) | |||
Impact on fair value of 10% absolute increase in default rate
|
$ | (10 | ) | $ | (14 | ) | $ | (413 | ) | |||
Residual cash flows discount rate
|
13.1 | % | 11.9 | % | 26.3 | % | ||||||
Impact on fair value of 5% absolute increase
|
$ | (27 | ) | $ | (158 | ) | $ | (132 | ) | |||
Impact on fair value of 10% absolute increase
|
$ | (49 | ) | $ | (275 | ) | $ | (235 | ) | |||
3 month LIBOR forward
curve
at December 31, 2008 plus contracted spreads |
||||||||||||
Difference between Asset and Funding underlying
indices
(4)
|
||||||||||||
Impact on fair value of 0.25% absolute increase in funding index
compared to asset index
|
$ | (46 | ) | $ | (173 | ) | $ | (3 | ) | |||
Impact on fair value of 0.50% absolute increase in funding index
compared to asset index
|
$ | (92 | ) | $ | (346 | ) | $ | (6 | ) |
(1) | Certain consolidation trusts have $3.3 billion of non-U.S. dollar (Euro denominated) bonds outstanding. To convert these non-U.S. dollar denominated bonds into U.S. dollar liabilities, the trusts have entered into foreign-currency swaps with certain counterparties. Additionally, certain Private Education Loan trusts contain interest rate swaps that hedge the basis and reset risk between the Prime indexed assets and LIBOR index notes. As of December 31, 2008, these swaps are in a $959 million gain position (in the aggregate) and the trusts had $716 million of exposure to counterparties (gain position less collateral posted) primarily as a result of the decline in the exchange rates between the U.S. dollar and the Euro. This unrealized market value gain is not part of the fair value of the Residual Interest in the table above. Not all derivatives within the trusts require the swap counterparties to post collateral to the respective trust for changes in market value, unless the trusts swap counterpartys credit rating has been withdrawn or has been downgraded below a certain level. If the swap counterparty does not post the required collateral or is downgraded further, the counterparty must find a suitable replacement counterparty or provide the trust with a letter of credit or a guaranty from an entity that has the required credit ratings. Ultimately, the Companys exposure related to a swap counterparty failing to make its payments is limited to the fair value of the related trusts Residual Interest which was $613 million as of December 31, 2008. | |
(2) | See previous table for details on CPR. Impact on fair value due to increase in prepayment speeds only increases the repayment status speeds. Interim status CPR remains 0%. | |
(3) | Expected credit losses are used to project future cash flows related to the Private Education Loan securitizations Residual Interest. However, until the fourth quarter of 2008 when it ceased this activity for all trusts settling prior to September 30, 2005, the Company purchased loans at par when the loans reach 180 days delinquent prior to default under a contingent call option, resulting in no credit losses at the trust nor related to the Companys Residual Interest. When the Company exercises its contingent call option and purchases the loan from the trust at par, the Company records a loss related to these loans that are now on the Companys balance sheet. The Company recorded losses of $141 million, $123 million and $48 million for the years ended December 31, 2008, 2007 and 2006, respectively, related to this activity and specialty claims. For all trusts settling after October 1, 2005, the Company does not hold this contingent call option. | |
(4) | Student loan assets are primarily indexed to a Treasury bill, commercial paper or a prime index. Funding within the trust is primarily indexed to a LIBOR index. Sensitivity analysis increases funding indexes as indicated while keeping asset underlying indexes fixed. | |
(6) | In addition to the assumptions in the table above, the Company also projects the reduction in distributions that will result from the various benefit programs that exist related to consecutive on-time payments by borrowers. Related to the entire $2.2 billion Residual Interest, there is $221 million (present value) of benefits projected which reduce the fair value. |
F-55
8. | Student Loan Securitization (Continued) |
Off-Balance Sheet Private Education Loan Delinquencies | ||||||||||||||||
December 31,
|
December 31,
|
|||||||||||||||
2008 | 2007 | |||||||||||||||
(Dollars in millions)
|
Balance | % | Balance | % | ||||||||||||
Loans
in-school/grace/deferment
(1)
|
$ | 3,461 | $ | 4,963 | ||||||||||||
Loans in
forbearance
(2)
|
700 | 1,417 | ||||||||||||||
Loans in repayment and percentage of each status:
|
||||||||||||||||
Loans current
|
8,843 | 92.8 | % | 7,403 | 94.7 | % | ||||||||||
Loans delinquent
31-60 days
(3)
|
315 | 3.3 | 202 | 2.6 | ||||||||||||
Loans delinquent
61-90 days
|
121 | 1.3 | 84 | 1.1 | ||||||||||||
Loans delinquent greater than 90 days
|
251 | 2.6 | 130 | 1.6 | ||||||||||||
Total off-balance sheet Private Education Loans in repayment
|
9,530 | 100 | % | 7,819 | 100 | % | ||||||||||
Total off-balance sheet Private Education Loans, gross
|
$ | 13,691 | $ | 14,199 | ||||||||||||
(1) | Loans for borrowers who still may 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 full payments due to hardship or other factors, consistent with the 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. |
Years Ended December 31, | ||||||||||||
(Dollars in millions)
|
2008 | 2007 | 2006 | |||||||||
Charge-offs
|
$ | (226 | ) | $ | (107 | ) | $ | (24 | ) | |||
Recoveries
|
9 | | | |||||||||
Net charge-offs
|
(217 | ) | (107 | ) | (24 | ) | ||||||
Net charge-offs as a percentage of average loans in repayment
|
2.68 | % | 1.46 | % | .43 | % | ||||||
Net charge-offs as a percentage of average loans in repayment
and forbearance
|
2.31 | % | 1.27 | % | .38 | % | ||||||
Ending off-balance sheet total Private Education Loans, gross
|
$ | 13,691 | $ | 14,199 | $ | 13,222 | ||||||
Average off-balance sheet Private Education Loans in repayment
|
$ | 8,088 | $ | 7,305 | $ | 5,721 | ||||||
Ending off-balance sheet Private Education Loans in repayment
|
$ | 9,530 | $ | 7,819 | $ | 6,792 |
F-56
8. | Student Loan Securitization (Continued) |
Years Ended December 31, | ||||||||||||
(Dollars in millions)
|
2008 | 2007 | 2006 | |||||||||
Charge-offs
|
(153 | ) | (79 | ) | (24 | ) | ||||||
Charge-offs as a percentage of average loans in repayment
|
1.90 | % | 1.09 | % | .43 | % | ||||||
Charge-offs as a percentage of average loans in repayment and
forbearance
|
1.64 | % | .94 | % | .38 | % | ||||||
Ending off-balance sheet total Private Education
Loans
(1)
|
$ | 13,782 | $ | 14,227 | $ | 13,222 | ||||||
Average off-balance sheet Private Education Loans in repayment
|
$ | 8,088 | $ | 7,305 | $ | 5,721 | ||||||
Ending off-balance sheet Private Education Loans in repayment
|
$ | 9,530 | $ | 7,819 | $ | 6,792 |
(1) | Ending total loans represents gross Private Education Loans, plus the receivable for partially charged-off loans. |
9. | Derivative Financial Instruments |
F-57
9. | Derivative Financial Instruments (Continued) |
F-58
9. | Derivative Financial Instruments (Continued) |
(Dollars in millions)
|
December 31, 2008 | December 31, 2007 | ||||||
Collateral held:
|
||||||||
Cash (obligation to return cash collateral is recorded in
short-term borrowings)
|
$ | 1,624 | $ | 1,306 | ||||
Securities at fair value corporate derivatives (not
recorded in financial
statements)
(1)
|
689 | | ||||||
Securities at fair value on-balance sheet
securitization derivatives (not recorded in financial
statements)
(2)
|
688 | 310 | ||||||
Total collateral held
|
$ | 3,001 | $ | 1,616 | ||||
Derivative asset at fair value including accrued interest and
premium receivable
|
$ | 3,741 | $ | 3,812 | ||||
Collateral pledged to others:
|
||||||||
Cash (right to receive return of cash collateral is recorded in
investments)
|
$ | | $ | 25 | ||||
Securities at fair value (recorded in
investments)
(3)
|
26 | 196 | ||||||
Securities at fair value re-pledged (not recorded in financial
statements)
(4)(5)
|
191 | | ||||||
Total collateral pledged
|
$ | 217 | $ | 221 | ||||
Derivative liability at fair value including accrued interest
and premium receivable
|
$ | 677 | $ | 201 | ||||
(1) | In general, the Company has the ability to sell or re-pledge securities it holds as collateral. | |
(2) | The trusts do not have the ability to sell or re-pledge securities they hold as collateral. | |
(3) | Counterparty does not have the right to sell or re-pledge securities. | |
(4) | Counterparty has the right to sell or re-pledge securities. | |
(5) | Represents securities the Company holds as collateral that have been pledged to other counterparties. |
F-59
9. | Derivative Financial Instruments (Continued) |
F-60
9. | Derivative Financial Instruments (Continued) |
December 31, | ||||||||||||||||||||||||||||||||
Cash Flow | Fair Value | Trading | Total | |||||||||||||||||||||||||||||
2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | |||||||||||||||||||||||||
Fair
Values
(1)
(Dollars in millions) |
||||||||||||||||||||||||||||||||
Interest rate swaps
|
$ | (146 | ) | $ | (34 | ) | $ | 1,529 | $ | 102 | $ | (9 | ) | $ | 252 | $ | 1,374 | $ | 320 | |||||||||||||
Floor/Cap contracts
|
| | | | (1,466 | ) | (442 | ) | (1,466 | ) | (442 | ) | ||||||||||||||||||||
Futures
|
| | | | (3 | ) | | (3 | ) | | ||||||||||||||||||||||
Cross currency interest rate swaps
|
| | 2,103 | 3,640 | 13 | 3 | 2,116 | 3,643 | ||||||||||||||||||||||||
Total
|
$ | (146 | ) | $ | (34 | ) | $ | 3,632 | $ | 3,742 | $ | (1,465 | ) | $ | (187 | ) | $ | 2,021 | $ | 3,521 | ||||||||||||
Notional Value
(Dollars in billions) |
||||||||||||||||||||||||||||||||
Interest rate swaps
|
$ | 4.8 | $ | 3.1 | $ | 13.4 | $ | 14.7 | $ | 159.3 | $ | 199.5 | $ | 177.5 | $ | 217.3 | ||||||||||||||||
Floor/Cap contracts
|
| | | | 32.4 | 38.9 | 32.4 | 38.9 | ||||||||||||||||||||||||
Futures
|
| | | | .2 | .6 | .2 | .6 | ||||||||||||||||||||||||
Cross currency interest rate swaps
|
| | 23.1 | 23.8 | .1 | .1 | 23.2 | 23.9 | ||||||||||||||||||||||||
Other
(2)
|
| | | | .7 | .7 | .7 | .7 | ||||||||||||||||||||||||
Total
|
$ | 4.8 | $ | 3.1 | $ | 36.5 | $ | 38.5 | $ | 192.7 | $ | 239.8 | $ | 234.0 | $ | 281.4 | ||||||||||||||||
(1) | Fair values reported are exclusive of collateral held and/or pledged and accrued interest. | |
(2) | Other includes embedded derivatives bifurcated from newly issued on-balance sheet securitization debt, as a result of adopting SFAS No. 155 (see Note 2, Significant Accounting Policies Recently Issued Accounting Pronouncements Accounting for Certain Hybrid Financial Instruments). |
F-61
9. | Derivative Financial Instruments (Continued) |
Years Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||
Cash Flow | Fair Value | Trading | Total | |||||||||||||||||||||||||||||||||||||||||||||
(Dollars in millions)
|
2008 | 2007 | 2006 | 2008 | 2007 | 2006 | 2008 | 2007 | 2006 | 2008 | 2007 | 2006 | ||||||||||||||||||||||||||||||||||||
Change in fair value of cash flow hedges
|
$ | (71 | ) | $ | (16 | ) | $ | (7 | ) | $ | | $ | | $ | | $ | | $ | | $ | | $ | (71 | ) | $ | (16 | ) | $ | (7 | ) | ||||||||||||||||||
Amortization of effective
hedges
(1)
|
| 1 | 12 | | | | | | | | 1 | 12 | ||||||||||||||||||||||||||||||||||||
Discontinued hedges
|
| | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||
Change in accumulated other comprehensive income, net
|
$ | (71 | ) | $ | (15 | ) | $ | 5 | $ | | $ | | $ | | $ | | $ | | $ | | $ | (71 | ) | $ | (15 | ) | $ | 5 | ||||||||||||||||||||
Earnings Summary
|
||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of closed futures contracts gains/losses in
interest
expense
(2)
|
$ | | $ | (2 | ) | $ | (19 | ) | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | (2 | ) | $ | (19 | ) | ||||||||||||||||||||
Gains (losses) on derivative and hedging activities
Realized
(3)
|
| | | | | | 115 | (18 | ) | (109 | ) | 115 | (18 | ) | (109 | ) | ||||||||||||||||||||||||||||||||
Gains (losses) on derivative and hedging activities
Unrealized
|
| | | 222 | (4) | 60 | (4) | (13 | ) (4) | (782 | ) | (1,403 | ) | (243 | ) | (560 | ) | (1,343 | ) | (230 | ) | |||||||||||||||||||||||||||
Total earnings impact
|
$ | | $ | (2 | ) | $ | (19 | ) | $ | 222 | $ | 60 | $ | (13 | ) | $ | (667 | ) | $ | (1,421 | ) | $ | (352 | ) | $ | (445 | ) | $ | (1,363 | ) | $ | (358 | ) | |||||||||||||||
(1) | The Company expects to amortize $.1 million of after-tax net losses from accumulated other comprehensive income to earnings during the next 12 months related to closed futures contracts that were hedging the forecasted issuance of debt instruments that are outstanding as of December 31, 2008. | |
(2) | For futures contracts that qualify as SFAS No. 133 hedges where the hedged transaction occurs. | |
(3) | Includes net settlement income/expense related to trading derivatives and realized gains and losses related to derivative dispositions. | |
(4) | The change in fair value of cash flow and fair value hedges represents amounts related to ineffectiveness. |
10. | Other Assets |
December 31, 2008 | December 31, 2007 | |||||||||||||||
Ending
|
% of
|
Ending
|
% of
|
|||||||||||||
Balance | Balance | Balance | Balance | |||||||||||||
Derivatives at fair
value
(1)
|
$ | 3,013,644 | 27 | % | $ | 3,744,611 | 35 | % | ||||||||
Accrued interest receivable
|
3,466,404 | 31 | 3,180,590 | 30 | ||||||||||||
Federal income tax asset
|
1,661,039 | 15 | | | ||||||||||||
APG purchased paper related receivables and Real Estate Owned
|
1,222,345 | 11 | 1,758,871 | 16 | ||||||||||||
Accounts receivable collateral posted
|
| | 867,427 | 8 | ||||||||||||
Benefit-related investments
|
472,899 | 4 | 467,379 | 4 | ||||||||||||
Fixed assets, net
|
313,059 | 3 | 315,260 | 3 | ||||||||||||
Accounts receivable general
|
712,854 | 6 | 305,118 | 2 | ||||||||||||
Other
|
278,533 | 3 | 107,851 | 2 | ||||||||||||
Total
|
$ | 11,140,777 | 100 | % | $ | 10,747,107 | 100 | % | ||||||||
(1) | The derivative asset at fair value net of cash collateral held at December 31, 2008 and 2007 is $1.4 billion and $2.4 billion, respectively. |
F-62
10. | Other Assets (Continued) |
11. | Stockholders Equity |
F-63
11. | Stockholders Equity (Continued) |
F-64
11. | Stockholders Equity (Continued) |
Years Ended December 31, | ||||||||||||
(Shares in millions)
|
2008 | 2007 | 2006 | |||||||||
Common shares repurchased:
|
||||||||||||
Open market
|
| 1.8 | 2.2 | |||||||||
Equity forward contracts
|
| 4.2 | 5.4 | |||||||||
Equity forward contracts agreed to be
settled
(1)
|
| 44.0 | | |||||||||
Benefit
plans
(2)
|
1.0 | 3.3 | 1.6 | |||||||||
Total shares repurchased
|
1.0 | 53.3 | 9.2 | |||||||||
Average purchase price per share
|
$ | 24.51 | $ | 44.59 | $ | 52.41 | ||||||
Common shares issued
|
1.9 | 109.2 | 6.7 | |||||||||
Equity forward contracts:
|
||||||||||||
Outstanding at beginning of period
|
| 48.2 | 42.7 | |||||||||
New contracts
|
| | 10.9 | |||||||||
Settlements
|
| (4.2 | ) | (5.4 | ) | |||||||
Agreed to be
settled
(1)
|
| (44.0 | ) | | ||||||||
Outstanding at end of period
|
| | 48.2 | |||||||||
Authority remaining at end of period for repurchases
|
38.8 | 38.8 | 15.7 | |||||||||
(1) | On December 31, 2007, the Company and Citibank agreed to physically settle the contract as detailed above. Consequently, the common shares outstanding and shareholders equity on the Companys year-end balance sheet reflect the physical settlement of the equity forward contract. At December 31, 2007, the 44 million shares under this equity forward contract were reflected in treasury stock. | |
(2) | 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. |
F-65
11. | Stockholders Equity (Continued) |
December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Net unrealized gains (losses) on
investments
(1)
|
$ | (1,243 | ) | $ | 238,772 | $ | 340,363 | |||||
Net unrealized (losses) on
derivatives
(2)
|
(93,986 | ) | (22,574 | ) | (7,570 | ) | ||||||
Defined benefit pension plans:
|
||||||||||||
Net prior service cost
|
| | (24 | ) | ||||||||
Net gain
|
18,753 | 20,166 | 16,342 | |||||||||
Total defined benefit pension
plans
(3)
|
18,753 | 20,166 | 16,318 | |||||||||
Total accumulated other comprehensive income
|
$ | (76,476 | ) | $ | 236,364 | $ | 349,111 | |||||
(1) | Net of tax benefit of $750 as of December 31, 2008 and a tax expense of $125,473 and $179,244 as of December 31, 2007 and 2006, respectively. | |
(2) | Net of tax benefit of $53,419, $12,682 and $4,347 as of December 31, 2008, 2007 and 2006, respectively. | |
(3) | Net of tax expense of $10,967, $11,677 and $8,787 as of December 31, 2008, 2007 and 2006, respectively. |
F-66
12. | Earnings (Loss) per Common Share |
Years Ended December 31 | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Numerator:
|
||||||||||||
Net income (loss) attributable to common stock
|
$ | (323,832 | ) | $ | (933,539 | ) | $ | 1,121,389 | ||||
Adjusted for dividends of convertible preferred stock
series C
(1)
|
| | | |||||||||
Adjusted for debt expense of convertible debentures
(Co-Cos),
net of
taxes
(2)
|
| | 67,274 | |||||||||
Adjusted for non-taxable unrealized gains on equity
forwards
(3)
|
| | (3,528 | ) | ||||||||
Net income (loss) attributable to common stock, adjusted
|
$ | (323,832 | ) | $ | (933,539 | ) | $ | 1,185,135 | ||||
Denominator
(shares in thousands):
|
||||||||||||
Weighted average shares used to compute basic EPS
|
466,642 | 412,233 | 410,805 | |||||||||
Effect of dilutive securities:
|
||||||||||||
Dilutive effect of convertible preferred stock series C
|
| | | |||||||||
Dilutive effect of Co-Cos
|
| | 30,312 | |||||||||
Dilutive effect of stock options, non-vested deferred
compensation, non-vested restricted stock, restricted stock
units, Employee Stock Purchase Plan (ESPP) and
equity
forwards
(4)
|
| | 10,053 | |||||||||
Dilutive potential common
shares
(5)
|
| | 40,365 | |||||||||
Weighted average shares used to compute diluted EPS
|
466,642 | 412,233 | 451,170 | |||||||||
Net earnings (loss) per share:
|
||||||||||||
Basic earnings (loss) per common share
|
$ | (.69 | ) | $ | (2.26 | ) | $ | 2.73 | ||||
Dilutive effect of convertible preferred stock series C
|
| | | |||||||||
Dilutive effect of Co-Cos
|
| | (.03 | ) | ||||||||
Dilutive effect of equity forwards
|
| | (.01 | ) | ||||||||
Dilutive effect of stock options, non-vested deferred
compensation, non-vested restricted stock, restricted stock
units, and ESPP
|
| | (.06 | ) | ||||||||
Diluted earnings (loss) per common share
|
$ | (.69 | ) | $ | (2.26 | ) | $ | 2.63 | ||||
(1) | The Companys 7.25 percent mandatory convertible preferred stock series C was issued on December 31, 2007. The mandatory convertible preferred stock will automatically convert on December 15, 2010, into between 48 million and 59 million shares of common stock, depending upon the Companys stock price at that time. | |
(2) | Emerging Issues Task Force (EITF) Issue No. 04-8, The Effect of Contingently Convertible Debt on Diluted Earnings per Share, requires the shares underlying Co-Cos to be included in diluted EPS computations regardless of whether the market price trigger or the conversion price has been met, using the if-converted method. These Co-Cos were called at par on July 25, 2007. | |
(3) | SFAS No. 128, Earnings per Share, and the additional guidance provided by EITF Topic No. D-72, Effect of Contracts That May Be Settled in Stock or Cash on the Computation of Diluted Earnings per Share, require both the denominator and the numerator to be adjusted in calculating the potential impact of the Companys equity forward contracts on diluted EPS. Under this guidance, when certain conditions are satisfied, the impact can be dilutive when (1) the average price during the period is lower than the respective strike prices on the Companys equity forward contracts, and (2) the Company recorded an unrealized gain or loss on derivative and hedging activities related to its equity forward contracts. | |
(4) | Includes the potential dilutive effect of additional common shares that are issuable upon exercise of outstanding stock options, non-vested deferred compensation, non-vested restricted stock, restricted stock units, and the outstanding commitment to issue shares under the ESPP, determined by the treasury stock method, and equity forward contracts determined by the reverse treasury stock method. The Company settled all of its outstanding equity forward contracts in January 2008. | |
(5) | For the years ended December 31, 2008 and 2007, stock options covering approximately 38 million and 37 million shares, respectively, were outstanding but not included in the computation of diluted earnings per share because they were anti-dilutive due to the Companys net loss. For the year ended December 31, 2006, stock options and equity forwards covering approximately 57 million shares were outstanding but not included in the computation of diluted earnings per share because they were anti-dilutive. |
F-67
13. | Stock-Based Compensation Plans and Arrangements |
F-68
13. | Stock-Based Compensation Plans and Arrangements (Continued) |
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Risk-free interest rate
|
2.50 | % | 4.88 | % | 4.75 | % | ||||||
Expected volatility
|
44.05 | % | 21.10 | % | 20.22 | % | ||||||
Expected dividend rate
|
0.00 | % | 2.20 | % | 1.72 | % | ||||||
Expected life of the option
|
3 years | 3 years | 3 years |
Weighted
|
Weighted
|
|||||||||||||||
Average
|
Average
|
|||||||||||||||
Exercise
|
Remaining
|
Aggregate
|
||||||||||||||
Number of
|
Price per
|
Contractual
|
Intrinsic
|
|||||||||||||
Options | Share | Term | Value | |||||||||||||
Outstanding at December 31, 2007
|
36,658,764 | $ | 39.92 | |||||||||||||
Granted
|
14,664,550 | 20.55 | ||||||||||||||
Exercised
|
(293,186 | ) | 17.87 | |||||||||||||
Canceled
|
(12,225,424 | ) | 36.34 | |||||||||||||
Outstanding at December 31,
2008
(1)
|
38,804,704 | $ | 33.90 | 6.40 yrs | $ | | ||||||||||
Exercisable at December 31, 2008
|
22,179,634 | $ | 37.42 | 4.86 yrs | $ | | ||||||||||
(1) | Includes gross number of net-settled options awarded. Options granted in 2008 were granted as net-settled options. Upon exercise of a net-settled option, employees are entitled to receive the after-tax spread shares only. The spread shares equal the gross number of options granted less shares for the option cost. Shares for the option cost equal the option price multiplied by the number of gross options exercised divided by the fair market value of SLM common stock at the time of exercise. |
F-69
13. | Stock-Based Compensation Plans and Arrangements (Continued) |
Weighted
|
||||||||
Average Grant
|
||||||||
Number of
|
Date
|
|||||||
Shares | Fair Value | |||||||
Non-vested at December 31, 2007
|
419,151 | $ | 48.02 | |||||
Granted
|
639,500 | 20.39 | ||||||
Vested
|
(234,689 | ) | 44.92 | |||||
Canceled
|
(69,416 | ) | 32.54 | |||||
Non-vested at December 31, 2008
|
754,546 | $ | 26.99 | |||||
Weighted
|
||||||||
Average Grant
|
||||||||
Number of
|
Date
|
|||||||
RSUs | Fair Value | |||||||
Outstanding at December 31, 2007
|
650,000 | $ | 39.54 | |||||
Granted
|
15,500 | 11.58 | ||||||
Canceled
|
| | ||||||
Converted to common stock
|
(650,000 | ) | 39.54 | |||||
Outstanding at December 31, 2008
|
15,500 | $ | 11.58 | |||||
Vested
|
| $ | | |||||
F-70
13. | Stock-Based Compensation Plans and Arrangements (Continued) |
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Risk-free interest rate
|
1.91 | % | 4.97 | % | 4.75 | % | ||||||
Expected volatility
|
57.59 | % | 22.67 | % | 20.41 | % | ||||||
Expected dividend rate
|
0.00 | % | 2.19 | % | 1.92 | % | ||||||
Expected life of the option
|
1 year | 2 years | 2 years |
F-71
13. | Stock-Based Compensation Plans and Arrangements (Continued) |
Number of
|
||||||||||||||||||||
Number of
|
Average
|
Securities Remaining
|
||||||||||||||||||
Securities to be
|
Weighted Average
|
Remaining Life
|
Available for Future
|
|||||||||||||||||
Issued Upon Exercise
|
Exercise Price
|
(Years) of
|
Issuance Under
|
Types of
|
||||||||||||||||
of Outstanding
|
of Outstanding
|
Options
|
Equity Compensation
|
Awards
|
||||||||||||||||
Plan Category
|
Options and Rights | Options and Rights | Outstanding | Plans | Issuable (1) | |||||||||||||||
Equity compensation plans approved by security holders:
|
||||||||||||||||||||
Directors Stock Plan
|
NQ,ST | |||||||||||||||||||
Traditional options
|
2,644,862 | $ | 33.61 | 4.2 | ||||||||||||||||
Net-settled options
|
| 17.83 | 9.0 | |||||||||||||||||
Total Directors Stock Plan
|
2,644,862 | 31.10 | 5.0 | | ||||||||||||||||
SLM Corporation Incentive
Plan
(2)(3)
|
NQ,ISO,RES, RSU | |||||||||||||||||||
Traditional options
|
1,544,043 | 44.81 | 5.9 | |||||||||||||||||
Net-settled options
|
2,764 | 35.10 | 8.1 | |||||||||||||||||
RSUs
|
15,500 | | | |||||||||||||||||
Total SLM Corporation Incentive Plan
|
1,562,307 | 35.73 | 8.0 | |||||||||||||||||
Expired
Plans
(5)
|
NQ,ISO,RES | |||||||||||||||||||
Traditional options
|
7,584,832 | 32.40 | 3.7 | |||||||||||||||||
Total expired plans
|
7,584,832 | 32.40 | 3.7 | | ||||||||||||||||
Total approved by security holders
|
11,792,001 | 34.58 | 6.8 | 12,969,458 | (4) | |||||||||||||||
Equity compensation plans not approved by security holders:
|
||||||||||||||||||||
Assumed
shares
(6)
|
| | | 502,934 | NQ,ISO,RES, RSU | |||||||||||||||
Compensation
arrangements
(7)
|
| | | | NQ | |||||||||||||||
Employee Stock Purchase
Plan
(8)
|
| | | 1,082,739 | ||||||||||||||||
Expired
Plan
(9)
|
4,098,196 | 28.08 | 3.2 | | NQ,RES | |||||||||||||||
Total not approved by security holders
|
4,098,196 | 28.08 | 3.2 | 1,585,673 | ||||||||||||||||
Total
|
15,890,197 | $ | 33.90 | 6.4 | 14,555,131 | |||||||||||||||
(1) | NQ (Non-Qualified Stock Option), ISO (Incentive Stock Option), RES (Restricted/Performance Stock), RSU (Restricted Stock Unit), ST (Stock Grant). | |
(2) | Options granted in 2006, 2007 and 2008 were granted as net-settled options. Also, certain traditional options outstanding at April 29, 2006 were converted to net-settled options in 2006. Upon exercise of a net-settled option, employees are entitled to receive the after-tax spread shares only. The spread shares equal the gross number of options granted less shares for the option cost. Shares for the option cost equal the option price multiplied by the number of gross options exercised divided by the fair market value of the Companys common stock at the time of exercise. At December 31, 2008, the option price for the vast majority of net-settled options was higher than the market price. Accordingly, the Company was obligated to issue only 2,764 shares upon the exercise of all net-settled options at December 31, 2008. | |
(3) | The SLM Corporation Incentive Plan is subject to an aggregate limit of 2,502,934 shares that may be issued as restricted stock or RSUs. As of December 31, 2008, 1,166,698 shares are remaining from this authority. | |
(4) | Securities remain available for issuance under the SLM Corporation Incentive Plan based on net-settlement of options. | |
(5) | Expired plans for which unexercised options remain outstanding are the Management Incentive Plan and Board of Directors Stock Option Plan. | |
(6) | The SLM Corporation Incentive Plan assumed 502,934 shares from The Upromise Stock Plan in October 2006 upon the Companys acquisition of Upromise. These assumed shares were not approved by securities holders as permitted by the rules of the NYSE. | |
(7) | One million net-settled options were awarded on January 8, 2008, to John F. Remondi as an employment inducement award under NYSE rules. At December 31, 2008, the option price of the award was higher than the market price; therefore, the Company was not obligated to issue any securities under the award. | |
(8) | Number of shares available for issuance under the ESPP. | |
(9) | Expired plan for which unexercised options remain outstanding is the Employee Stock Option Plan. |
F-72
14. | Other Income |
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Late fees and forbearance fees
|
$ | 142,958 | $ | 135,627 | $ | 120,651 | ||||||
Asset servicing and other transaction fees
|
108,292 | 110,215 | 42,053 | |||||||||
Loan servicing fees
|
26,458 | 26,094 | 47,708 | |||||||||
Gains on sales of mortgages and other loan fees
|
2,832 | 10,737 | 15,325 | |||||||||
Other
|
111,536 | 102,402 | 112,570 | |||||||||
Total other income
|
$ | 392,076 | $ | 385,075 | $ | 338,307 | ||||||
15. | Restructuring Activities |
F-73
15. | Restructuring Activities (Continued) |
Cumulative
|
||||||||||||
Years Ended
|
Expense as of
|
|||||||||||
December 31, |
December 31,
|
|||||||||||
2008 | 2007 | 2008 | ||||||||||
Severance costs
|
$ | 62,858 | $ | 22,505 | $ | 85,363 | ||||||
Lease and other contract termination costs
|
9,081 | | 9,081 | |||||||||
Exit and other costs
|
11,834 | | 11,834 | |||||||||
Total
(1)(2)
|
$ | 83,773 | $ | 22,505 | $ | 106,278 | ||||||
(1) | Aggregate restructuring expenses incurred across the Companys reportable segments during the years ended December 31, 2008 and 2007 totaled $49 million and $19 million, respectively, in the Companys Lending reportable segment, $12 million and $2 million, respectively, in the Companys APG reportable segment, and $23 million and $2 million, respectively, in the Companys Corporate and Other reportable segment. | |
(2) | As of December 31, 2008, the Company estimates an additional $8 million of restructuring expenses associated with its current cost reduction efforts will be incurred in future periods primarily related to position eliminations and resulting employee terminations in its Lending business segment. |
Lease and
|
||||||||||||||||
Other
|
||||||||||||||||
Contract
|
||||||||||||||||
Severance
|
Termination
|
Exit and
|
||||||||||||||
Costs | Costs | Other Costs | Total | |||||||||||||
Balance at December 31, 2007
|
$ | 18,329 | $ | | $ | | $ | 18,329 | ||||||||
Net accruals
|
62,858 | 9,081 | 11,834 | 83,773 | ||||||||||||
Cash paid
|
(66,063 | ) | (6,283 | ) | (11,774 | ) | (84,120 | ) | ||||||||
Balance at December 31, 2008
|
$ | 15,124 | $ | 2,798 | $ | 60 | $ | 17,982 | ||||||||
16. | Fair Values of Financial Instruments |
| In the consolidated balance sheet with changes in fair value recorded in the consolidated statement of income; |
| In the consolidated balance sheet with changes in fair value recorded in the other comprehensive income section of stockholders equity; |
F-74
16. | Fair Values of Financial Instruments (Continued) |
| In the consolidated balance sheet for instruments carried at lower of cost or fair value with impairment charges recorded in the consolidated statement of income; and | |
| In the notes to the financial statements as required by SFAS No. 107, Disclosures about Fair Value of Financial Instruments. |
| Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. The types of financial instruments included in level 1 are highly liquid instruments with quoted prices; | |
| Level 2 Inputs from active markets, other than quoted prices for identical instruments, are used to model fair value. Significant inputs are directly observable from active markets for substantially the full term of the asset or liability being valued; and | |
| Level 3 Pricing inputs significant to the valuation are unobservable. Inputs are developed based on the best information available; however, significant judgment is required by management in developing the inputs. |
F-75
16. | Fair Values of Financial Instruments (Continued) |
F-76
16. | Fair Values of Financial Instruments (Continued) |
F-77
16. | Fair Values of Financial Instruments (Continued) |
Fair Value Measurements on a Recurring
|
||||||||||||||||||||||||
Basis as of December 31, 2008 | ||||||||||||||||||||||||
Cash
|
||||||||||||||||||||||||
(Dollars in millions)
|
Level 1 | Level 2 | Level 3 | Total | Collateral | Net | ||||||||||||||||||
Assets
|
||||||||||||||||||||||||
Available for sale investments
|
$ | | $ | 861 | $ | | $ | 861 | $ | | $ | 861 | ||||||||||||
Retained Interest in off-balance sheet securitized loans
|
| | 2,200 | 2,200 | | 2,200 | ||||||||||||||||||
Derivative
instruments
(1)(2)
|
| 3,014 | | 3,014 | (1,624 | ) | 1,390 | |||||||||||||||||
Total Assets
|
$ | | $ | 3,875 | $ | 2,200 | $ | 6,075 | $ | (1,624 | ) | $ | 4,451 | |||||||||||
Liabilities
(3)
|
||||||||||||||||||||||||
Derivative
instruments
(1)(2)
|
$ | (3 | ) | $ | (648 | ) | $ | (341 | ) | $ | (992 | ) | $ | | $ | (992 | ) | |||||||
Total Liabilities
|
$ | (3 | ) | $ | (648 | ) | $ | (341 | ) | $ | (992 | ) | $ | | $ | (992 | ) | |||||||
(1) | Fair value of derivative instruments is comprised of market value less accrued interest and excludes collateral. | |
(2) | Level 1 derivatives include euro-dollar futures contracts. Level 2 derivatives include derivatives indexed to interest rate indices and currencies that are considered liquid. Level 3 derivatives include derivatives indexed to illiquid interest rate indices and derivatives for which significant adjustments were made to observable inputs. | |
(3) | 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. |
(1) | Recorded in servicing and securitization revenue. | |
(2) | Recorded in gains (losses) on derivative and hedging activities, net. |
F-78
16. | Fair Values of Financial Instruments (Continued) |
Fair Value Measurements on a Non-Recurring
|
||||||||||||||||
Basis as of December 31, 2008 | ||||||||||||||||
(Dollars in millions)
|
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
FFELP Stafford Loans
Held-for-Sale
(1)
|
$ | 462 | $ | | $ | | $ | 462 | ||||||||
Total
|
$ | 462 | $ | | $ | | $ | 462 | ||||||||
(1) | Level 1 valuations reflect FFELP Stafford Loans Held-for-Sale under the various ED loan purchase programs. |
December 31, 2008 | December 31, 2007 | |||||||||||||||||||||||
Fair
|
Carrying
|
Fair
|
Carrying
|
|||||||||||||||||||||
(Dollars in millions)
|
Value | Value | Difference | Value | Value | Difference | ||||||||||||||||||
Earning assets
|
||||||||||||||||||||||||
FFELP loans
|
$ | 107,319 | $ | 124,220 | $ | (16,901 | ) | $ | 111,552 | $ | 109,335 | $ | 2,217 | |||||||||||
Private Education Loans
|
14,141 | 20,582 | (6,441 | ) | 17,289 | 14,818 | 2,471 | |||||||||||||||||
Other loans
|
619 | 729 | (110 | ) | 1,175 | 1,173 | 2 | |||||||||||||||||
Cash and investments
|
8,646 | 8,646 | | 15,146 | 15,146 | | ||||||||||||||||||
Total earning assets
|
130,725 | 154,177 | (23,452 | ) | 145,162 | 140,472 | 4,690 | |||||||||||||||||
Interest-bearing liabilities
|
||||||||||||||||||||||||
Short-term borrowings
|
41,608 | 41,933 | 325 | 35,828 | 35,947 | 119 | ||||||||||||||||||
Long-term borrowings
|
93,462 | 118,225 | 24,763 | 105,227 | 111,099 | 5,872 | ||||||||||||||||||
Total interest-bearing liabilities
|
135,070 | 160,158 | 25,088 | 141,055 | 147,046 | 5,991 | ||||||||||||||||||
Derivative financial instruments
|
||||||||||||||||||||||||
Floor Income/Cap contracts
|
(1,466 | ) | (1,466 | ) | | (442 | ) | (442 | ) | | ||||||||||||||
Interest rate swaps
|
1,374 | 1,374 | | 320 | 320 | | ||||||||||||||||||
Cross currency interest rate swaps
|
2,116 | 2,116 | | 3,643 | 3,643 | | ||||||||||||||||||
Futures contracts
|
(3 | ) | (3 | ) | | | | | ||||||||||||||||
Other
|
||||||||||||||||||||||||
Residual interest in securitized assets
|
2,200 | 2,200 | | 3,044 | 3,044 | | ||||||||||||||||||
Excess of net asset fair value over carrying value
|
$ | 1,636 | $ | 10,681 | ||||||||||||||||||||
F-79
17. | Commitments, Contingencies and Guarantees |
December 31, | ||||||||
2008 | 2007 | |||||||
Lines of credit
|
$ | 1,021,398 | $ | 2,035,638 | ||||
Lines of
|
||||
Credit | ||||
2009
|
$ | 221,398 | ||
2010
|
800,000 | |||
Total
|
$ | 1,021,398 | ||
F-80
17. | Commitments, Contingencies and Guarantees (Continued) |
F-81
17. | Commitments, Contingencies and Guarantees (Continued) |
18. | Benefit Plans |
F-82
18. | Benefit Plans (Continued) |
December 31, | ||||||||
2008 | 2007 | |||||||
Change in Benefit Obligation
|
||||||||
Projected benefit obligation at beginning of year
|
$ | 227,651 | $ | 222,606 | ||||
Service cost
|
6,566 | 7,100 | ||||||
Interest cost
|
12,908 | 12,337 | ||||||
Actuarial (gain)/loss
|
(4,204 | ) | (1,777 | ) | ||||
Plan curtailment
|
114 | | ||||||
Plan settlement
|
| (2,615 | ) | |||||
Special termination benefits
|
| 912 | ||||||
Benefits paid
|
(36,148 | ) | (10,912 | ) | ||||
Benefit obligation at end of year
|
$ | 206,887 | $ | 227,651 | ||||
Change in Plan Assets
|
||||||||
Fair value of plan assets at beginning of year
|
$ | 230,698 | $ | 218,369 | ||||
Actual return on plan assets
|
12,681 | 23,850 | ||||||
Employer contribution
|
5,326 | 3,466 | ||||||
Settlement loss
|
| (2,615 | ) | |||||
Benefits paid
|
(36,148 | ) | (10,912 | ) | ||||
Administrative payments
|
(777 | ) | (1,460 | ) | ||||
Fair value of plan assets at end of year
|
$ | 211,780 | $ | 230,698 | ||||
Funded status at end of year
|
$ | 4,893 | $ | 3,047 | ||||
Amounts recognized in the statement of financial position
consist of:
|
||||||||
Noncurrent assets
|
$ | 27,402 | $ | 30,322 | ||||
Current liabilities
|
(2,895 | ) | (6,227 | ) | ||||
Noncurrent liabilities
|
(19,614 | ) | (21,048 | ) | ||||
Net amount recognized in statement of financial position under
SFAS No. 158
|
$ | 4,893 | $ | 3,047 | ||||
Amounts not yet recognized in net periodic pension cost and
included in accumulated other comprehensive income:
|
||||||||
Prior service cost
|
$ | | $ | | ||||
Accumulated gain
|
29,720 | 31,843 | ||||||
Accumulated other comprehensive income
|
$ | 29,720 | $ | 31,843 | ||||
Amounts expected to be reflected in net periodic pension cost
during the next fiscal year:
|
||||||||
Prior service cost
|
$ | | $ | | ||||
Accumulated gain
|
1,366 | 1,450 | ||||||
Accumulated other comprehensive income
|
$ | 1,366 | $ | 1,450 | ||||
Additional year-end information for plans with accumulated
benefit obligations in excess of plan assets:
|
||||||||
Projected benefit obligation
|
$ | 22,509 | $ | 27,275 | ||||
Accumulated benefit obligation
|
22,448 | 26,592 | ||||||
Fair value of plan assets
|
| |
F-83
18. | Benefit Plans (Continued) |
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Service cost benefits earned during the period
|
$ | 6,566 | $ | 7,100 | $ | 8,291 | ||||||
Interest cost on project benefit obligations
|
12,908 | 12,337 | 11,445 | |||||||||
Expected return on plan assets
|
(11,709 | ) | (17,975 | ) | (16,277 | ) | ||||||
Curtailment loss
|
114 | | | |||||||||
Settlement (gain)/loss
|
(5,074 | ) | 1,265 | | ||||||||
Special termination benefits
|
| 912 | | |||||||||
Net amortization and deferral
|
(1,447 | ) | (719 | ) | 494 | |||||||
Net periodic pension cost (benefit)
|
$ | 1,358 | $ | 2,920 | $ | 3,953 | ||||||
December 31, | ||||||||
2008 | 2007 | |||||||
Discount rate
|
6.25 | % | 6.00 | % | ||||
Expected return on plan assets
|
5.25 | % | 8.50 | % | ||||
Rate of compensation increase
|
4.00 | % | 4.00 | % |
F-84
18. | Benefit Plans (Continued) |
December 31, | ||||||||
2008 | 2007 | |||||||
Discount rate
|
6.00 | % | 5.75 | % | ||||
Expected return on plan assets
|
5.25 | % | 8.50 | % | ||||
Rate of compensation increase
|
4.00 | % | 4.00 | % |
Plan Assets
|
||||||||
December 31, | ||||||||
2008 | 2007 | |||||||
Asset Category
|
||||||||
Equity securities
|
| % | | % | ||||
Fixed income securities
|
73 | 62 | ||||||
Cash equivalents
|
27 | 38 | ||||||
Total
|
100 | % | 100 | % | ||||
F-85
18. | Benefit Plans (Continued) |
2009
|
$ | 18,350 | ||
2010
|
16,228 | |||
2011
|
16,490 | |||
2012
|
15,199 | |||
2013
|
14,533 | |||
2014 2018
|
73,904 |
F-86
19. | Income Taxes |
Years Ended
|
||||||||||||
December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Statutory rate
|
35.0 | % | 35.0 | % | 35.0 | % | ||||||
Equity forward contracts
|
| (113.2 | ) | 6.3 | ||||||||
State tax, net of federal benefit
|
4.5 | (3.7 | ) | 1.1 | ||||||||
Capitalized transaction costs
|
3.3 | (2.6 | ) | | ||||||||
Other, net
|
1.7 | (1.1 | ) | (.6 | ) | |||||||
Effective tax rate
|
44.5 | % | (85.6 | )% | 41.8 | % | ||||||
December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Current provision:
|
||||||||||||
Federal
|
$ | 401,409 | $ | 1,027,087 | $ | 747,573 | ||||||
State
|
32,736 | 53,865 | 49,399 | |||||||||
Foreign
|
678 | 1,045 | 97 | |||||||||
Total current provision
|
434,823 | 1,081,997 | 797,069 | |||||||||
Deferred provision/(benefit):
|
||||||||||||
Federal
|
(543,151 | ) | (642,393 | ) | 52,866 | |||||||
State
|
(58,900 | ) | (26,840 | ) | (15,617 | ) | ||||||
Foreign
|
(346 | ) | (481 | ) | (7 | ) | ||||||
Total deferred provision/(benefit)
|
(602,397 | ) | (669,714 | ) | 37,242 | |||||||
Provision for income tax expense/(benefit)
|
$ | (167,574 | ) | $ | 412,283 | $ | 834,311 | |||||
F-87
19. | Income Taxes (Continued) |
December 31, | ||||||||
2008 | 2007 | |||||||
Deferred tax assets:
|
||||||||
Loan reserves
|
$ | 1,212,653 | $ | 867,840 | ||||
Market value adjustments on student loans, investments and
derivatives
|
174,276 | 322,001 | ||||||
Purchased paper impairments
|
111,924 | 6,272 | ||||||
Deferred revenue
|
70,172 | 61,780 | ||||||
Stock-based compensation plans
|
62,325 | 54,137 | ||||||
Unrealized investment losses
|
42,838 | | ||||||
Accrued expenses not currently deductible
|
38,330 | 60,821 | ||||||
Operating loss and credit carryovers
|
28,293 | 43,600 | ||||||
Warrants issuance
|
27,160 | 34,105 | ||||||
Partnership income
|
21,844 | 15,433 | ||||||
Sale of international non-mortgage purchased paper business
|
20,887 | | ||||||
In-substance defeasance transactions
|
16,037 | 18,074 | ||||||
Other
|
29,186 | 31,688 | ||||||
Total deferred tax assets
|
1,855,925 | 1,515,751 | ||||||
Deferred tax liabilities:
|
||||||||
Securitization transactions
|
302,049 | 370,378 | ||||||
Unrealized investment gains recorded to other comprehensive
income
|
| 124,459 | ||||||
Leases
|
73,570 | 83,286 | ||||||
Depreciation/amortization
|
| 23,031 | ||||||
Other
|
12,883 | 7,247 | ||||||
Total deferred tax liabilities
|
388,502 | 608,401 | ||||||
Net deferred tax assets
|
$ | 1,467,423 | $ | 907,350 | ||||
F-88
19. | Income Taxes (Continued) |
December 31, | ||||||||
(Dollars in millions)
|
2008 | 2007 | ||||||
Unrecognized tax benefits at beginning of year
|
$ | 174.8 | $ | 113.3 | ||||
Increases resulting from tax positions taken during a prior
period
|
11.3 | 86.5 | ||||||
Decreases resulting from tax positions taken during a prior
period
|
(132.2 | ) | (30.0 | ) | ||||
Increases/(decreases) resulting from tax positions taken during
the current period
|
36.2 | .3 | ||||||
Decreases related to settlements with taxing authorities
|
(.1 | ) | (30.0 | ) | ||||
Increases related to settlements with taxing authorities
|
| 42.3 | ||||||
Reductions related to the lapse of statute of limitations
|
(3.6 | ) | (7.6 | ) | ||||
Unrecognized tax benefits at end of year
|
$ | 86.4 | $ | 174.8 | ||||
F-89
19. | Income Taxes (Continued) |
State
|
Year audited through | |||
Florida
|
2000 | |||
Indiana
|
2000 | |||
Pennsylvania
|
2000 | |||
California
|
2002 | |||
Missouri
|
2003 | |||
New York
|
2004 | |||
North Carolina
|
2005 | |||
Texas
|
2004 |
20. | Segment Reporting |
F-90
20. | Segment Reporting (Continued) |
F-91
20. | Segment Reporting (Continued) |
F-92
20. | Segment Reporting (Continued) |
Year Ended December 31, 2008 | ||||||||||||||||||||||||
Corporate
|
Total Core
|
Total
|
||||||||||||||||||||||
Lending | APG | and Other | Earnings | Adjustments (2) | GAAP | |||||||||||||||||||
(Dollars in millions)
|
||||||||||||||||||||||||
Interest income:
|
||||||||||||||||||||||||
FFELP Stafford and Other Student Loans
|
$ | 2,216 | $ | | $ | | $ | 2,216 | $ | (221 | ) | $ | 1,995 | |||||||||||
FFELP Consolidation Loans
|
3,748 | | | 3,748 | (569 | ) | 3,179 | |||||||||||||||||
Private Education Loans
|
2,752 | | | 2,752 | (1,015 | ) | 1,737 | |||||||||||||||||
Other loans
|
83 | | | 83 | | 83 | ||||||||||||||||||
Cash and investments
|
304 | | 25 | 329 | (53 | ) | 276 | |||||||||||||||||
Total interest income
|
9,103 | | 25 | 9,128 | (1,858 | ) | 7,270 | |||||||||||||||||
Total interest expense
|
6,665 | 25 | 19 | 6,709 | (804 | ) | 5,905 | |||||||||||||||||
Net interest income (loss)
|
2,438 | (25 | ) | 6 | 2,419 | (1,054 | ) | 1,365 | ||||||||||||||||
Less: provisions for loan losses
|
1,029 | | | 1,029 | (309 | ) | 720 | |||||||||||||||||
Net interest income (loss) after provisions for loan losses
|
1,409 | (25 | ) | 6 | 1,390 | (745 | ) | 645 | ||||||||||||||||
Contingency fee revenue
|
| 340 | | 340 | | 340 | ||||||||||||||||||
Collections revenue
|
| (63 | ) | | (63 | ) | (1 | ) | (64 | ) | ||||||||||||||
Guarantor servicing fees
|
| | 121 | 121 | | 121 | ||||||||||||||||||
Other income
|
180 | | 199 | 379 | (356 | ) | 23 | |||||||||||||||||
Total other income
|
180 | 277 | 320 | 777 | (357 | ) | 420 | |||||||||||||||||
Restructuring expenses
|
49 | 12 | 23 | 84 | | 84 | ||||||||||||||||||
Operating expenses
|
589 | 398 | 277 | 1,264 | 93 | 1,357 | ||||||||||||||||||
Total expenses
|
638 | 410 | 300 | 1,348 | 93 | 1,441 | ||||||||||||||||||
Income before income taxes and minority interest in net earnings
of subsidiaries
|
951 | (158 | ) | 26 | 819 | (1,195 | ) | (376 | ) | |||||||||||||||
Income tax
expense
(1)
|
336 | (56 | ) | 9 | 289 | (456 | ) | (167 | ) | |||||||||||||||
Minority interest in net earnings of subsidiaries
|
| 4 | | 4 | | 4 | ||||||||||||||||||
Net income (loss)
|
$ | 615 | $ | (106 | ) | $ | 17 | $ | 526 | $ | (739 | ) | $ | (213 | ) | |||||||||
(1) | Income taxes are based on a percentage of net income before tax for the individual reportable segment. | |
(2) | Core Earnings adjustments to GAAP: |
Year Ended December 31, 2008 | ||||||||||||||||||||
Net Impact
|
Net Impact
|
Net Impact
|
||||||||||||||||||
of
|
of
|
Net Impact
|
of
|
|||||||||||||||||
Securitization
|
Derivative
|
of
|
Acquired
|
|||||||||||||||||
(Dollars in millions)
|
Accounting | Accounting | Floor Income | Intangibles | Total | |||||||||||||||
Net interest income (loss)
|
$ | (837 | ) | $ | (115 | ) | $ | (102 | ) | $ | | $ | (1,054 | ) | ||||||
Less: provisions for loan losses
|
(309 | ) | | | | (309 | ) | |||||||||||||
Net interest income (loss) after provisions for loan losses
|
(528 | ) | (115 | ) | (102 | ) | | (745 | ) | |||||||||||
Contingency fee revenue
|
| | | | | |||||||||||||||
Collections revenue
|
(1 | ) | | | | (1 | ) | |||||||||||||
Guarantor servicing fees
|
| | | | | |||||||||||||||
Other income
|
89 | (445 | ) | | | (356 | ) | |||||||||||||
Total other income (loss)
|
88 | (445 | ) | | | (357 | ) | |||||||||||||
Restructuring expenses
|
| | | | | |||||||||||||||
Operating expenses
|
2 | | | 91 | 93 | |||||||||||||||
Total expenses
|
2 | | | 91 | 93 | |||||||||||||||
Total pre-tax Core Earnings adjustments to GAAP
|
$ | (442 | ) | $ | (560 | ) | $ | (102 | ) | $ | (91 | ) | (1,195 | ) | ||||||
Income tax expense
|
(456 | ) | ||||||||||||||||||
Minority interest in net earnings of subsidiaries
|
| |||||||||||||||||||
Total Core Earnings adjustments to GAAP
|
$ | (739 | ) | |||||||||||||||||
F-93
20. | Segment Reporting (Continued) |
Year Ended December 31, 2007 | ||||||||||||||||||||||||
Corporate
|
Total Core
|
Total
|
||||||||||||||||||||||
Lending | APG | and Other | Earnings | Adjustments (2) | GAAP | |||||||||||||||||||
(Dollars in millions)
|
||||||||||||||||||||||||
Interest income:
|
||||||||||||||||||||||||
FFELP Stafford and Other Student Loans
|
$ | 2,848 | $ | | $ | | $ | 2,848 | $ | (787 | ) | $ | 2,061 | |||||||||||
FFELP Consolidation Loans
|
5,522 | | | 5,522 | (1,179 | ) | 4,343 | |||||||||||||||||
Private Education Loans
|
2,835 | | | 2,835 | (1,379 | ) | 1,456 | |||||||||||||||||
Other loans
|
106 | | | 106 | | 106 | ||||||||||||||||||
Cash and investments
|
868 | | 21 | 889 | (181 | ) | 708 | |||||||||||||||||
Total interest income
|
12,179 | | 21 | 12,200 | (3,526 | ) | 8,674 | |||||||||||||||||
Total interest expense
|
9,597 | 27 | 21 | 9,645 | (2,559 | ) | 7,086 | |||||||||||||||||
Net interest income (loss)
|
2,582 | (27 | ) | | 2,555 | (967 | ) | 1,588 | ||||||||||||||||
Less: provisions for loan losses
|
1,394 | | 1 | 1,395 | (380 | ) | 1,015 | |||||||||||||||||
Net interest income (loss) after provisions for loan losses
|
1,188 | (27 | ) | (1 | ) | 1,160 | (587 | ) | 573 | |||||||||||||||
Contingency fee revenue
|
| 336 | | 336 | | 336 | ||||||||||||||||||
Collections revenue
|
| 269 | | 269 | 3 | 272 | ||||||||||||||||||
Guarantor servicing fees
|
| | 156 | 156 | | 156 | ||||||||||||||||||
Other income
|
194 | | 218 | 412 | (679 | ) | (267 | ) | ||||||||||||||||
Total other income
|
194 | 605 | 374 | 1,173 | (676 | ) | 497 | |||||||||||||||||
Restructuring expenses
|
19 | 2 | 2 | 23 | | 23 | ||||||||||||||||||
Operating expenses
|
690 | 388 | 339 | 1,417 | 112 | 1,529 | ||||||||||||||||||
Total expenses
|
709 | 390 | 341 | 1,440 | 112 | 1,552 | ||||||||||||||||||
Income before income taxes and minority interest in net earnings
of subsidiaries
|
673 | 188 | 32 | 893 | (1,375 | ) | (482 | ) | ||||||||||||||||
Income tax
expense
(1)
|
249 | 70 | 12 | 331 | 81 | 412 | ||||||||||||||||||
Minority interest in net earnings of subsidiaries
|
| 2 | | 2 | | 2 | ||||||||||||||||||
Net income (loss)
|
$ | 424 | $ | 116 | $ | 20 | $ | 560 | $ | (1,456 | ) | $ | (896 | ) | ||||||||||
(1) | Income taxes are based on a percentage of net income before tax for the individual reportable segment. | |
(2) | Core Earnings adjustments to GAAP: |
Year Ended December 31, 2007 | ||||||||||||||||||||
Net Impact
|
Net Impact
|
Net Impact
|
||||||||||||||||||
of
|
of
|
Net Impact
|
of
|
|||||||||||||||||
Securitization
|
Derivative
|
of
|
Acquired
|
|||||||||||||||||
(Dollars in millions)
|
Accounting | Accounting | Floor Income | Intangibles | Total | |||||||||||||||
Net interest income (loss)
|
$ | (816 | ) | $ | 18 | $ | (169 | ) | $ | | $ | (967 | ) | |||||||
Less: provisions for loan losses
|
(380 | ) | | | | (380 | ) | |||||||||||||
Net interest income (loss) after provisions for loan losses
|
(436 | ) | 18 | (169 | ) | | (587 | ) | ||||||||||||
Contingency fee revenue
|
| | | | | |||||||||||||||
Collections revenue
|
| | | | | |||||||||||||||
Guarantor servicing fees
|
| | | | | |||||||||||||||
Other income
|
683 | (1,359 | ) | | | (676 | ) | |||||||||||||
Total other income (loss)
|
683 | (1,359 | ) | | | (676 | ) | |||||||||||||
Restructuring expenses
|
| | | | | |||||||||||||||
Operating expenses
|
| | | 112 | 112 | |||||||||||||||
Total expenses
|
| | | 112 | 112 | |||||||||||||||
Total pre-tax Core Earnings adjustments to GAAP
|
$ | 247 | $ | (1,341 | ) | $ | (169 | ) | $ | (112 | ) | (1,375 | ) | |||||||
Income tax expense
|
81 | |||||||||||||||||||
Minority interest in net earnings of subsidiaries
|
| |||||||||||||||||||
Total Core Earnings adjustments to GAAP
|
$ | (1,456 | ) | |||||||||||||||||
F-94
20. | Segment Reporting (Continued) |
Year Ended December 31, 2006 | ||||||||||||||||||||||||
Corporate
|
Total Core
|
Total
|
||||||||||||||||||||||
Lending | APG | and Other | Earnings | Adjustments (2) | GAAP | |||||||||||||||||||
(Dollars in millions)
|
||||||||||||||||||||||||
Interest income:
|
||||||||||||||||||||||||
FFELP Stafford and Other Student Loans
|
$ | 2,771 | $ | | $ | | $ | 2,771 | $ | (1,362 | ) | $ | 1,409 | |||||||||||
FFELP Consolidation Loans
|
4,690 | | | 4,690 | (1,144 | ) | 3,546 | |||||||||||||||||
Private Education Loans
|
2,092 | | | 2,092 | (1,071 | ) | 1,021 | |||||||||||||||||
Other loans
|
98 | | | 98 | | 98 | ||||||||||||||||||
Cash and investments
|
705 | | 7 | 712 | (209 | ) | 503 | |||||||||||||||||
Total interest income
|
10,356 | | 7 | 10,363 | (3,786 | ) | 6,577 | |||||||||||||||||
Total interest expense
|
7,877 | 23 | 12 | 7,912 | (2,789 | ) | 5,123 | |||||||||||||||||
Net interest income (loss)
|
2,479 | (23 | ) | (5 | ) | 2,451 | (997 | ) | 1,454 | |||||||||||||||
Less: provisions for loan losses
|
303 | | | 303 | (16 | ) | 287 | |||||||||||||||||
Net interest income (loss) after provisions for loan losses
|
2,176 | (23 | ) | (5 | ) | 2,148 | (981 | ) | 1,167 | |||||||||||||||
Contingency fee revenue
|
| 397 | | 397 | | 397 | ||||||||||||||||||
Collections revenue
|
| 239 | | 239 | 1 | 240 | ||||||||||||||||||
Guarantor servicing fees
|
| | 132 | 132 | | 132 | ||||||||||||||||||
Other income
|
177 | | 155 | 332 | 1,073 | 1,405 | ||||||||||||||||||
Total other income
|
177 | 636 | 287 | 1,100 | 1,074 | 2,174 | ||||||||||||||||||
Operating expenses
|
645 | 358 | 250 | 1,253 | 93 | 1,346 | ||||||||||||||||||
Income before income taxes and minority interest in net earnings
of subsidiaries
|
1,708 | 255 | 32 | 1,995 | | 1,995 | ||||||||||||||||||
Income tax
expense
(1)
|
632 | 94 | 12 | 738 | 96 | 834 | ||||||||||||||||||
Minority interest in net earnings of subsidiaries
|
| 4 | | 4 | | 4 | ||||||||||||||||||
Net income
|
$ | 1,076 | $ | 157 | $ | 20 | $ | 1,253 | $ | (96 | ) | $ | 1,157 | |||||||||||
(1) | Income taxes are based on a percentage of net income before tax for the individual reportable segment. | |
(2) | Core Earnings adjustments to GAAP: |
Year Ended December 31, 2006 | ||||||||||||||||||||
Net
|
||||||||||||||||||||
Net Impact of
|
Net Impact of
|
Net
|
Impact
|
|||||||||||||||||
Securitization
|
Derivative
|
Impact of
|
of Acquired
|
|||||||||||||||||
(Dollars in millions)
|
Accounting | Accounting | Floor Income | Intangibles | Total | |||||||||||||||
Net interest income (loss)
|
$ | (897 | ) | $ | 109 | $ | (209 | ) | $ | | $ | (997 | ) | |||||||
Less: provisions for loan losses
|
(16 | ) | | | | (16 | ) | |||||||||||||
Net interest income (loss) after provisions for loan losses
|
(881 | ) | 109 | (209 | ) | | (981 | ) | ||||||||||||
Contingency fee revenue
|
| | | | | |||||||||||||||
Collections revenue
|
1 | | | | 1 | |||||||||||||||
Guarantor servicing fees
|
| | | | | |||||||||||||||
Other income
|
1,411 | (338 | ) | | | 1,073 | ||||||||||||||
Total other income (loss)
|
1,412 | (338 | ) | | | 1,074 | ||||||||||||||
Operating expenses
|
(1 | ) | | | 94 | 93 | ||||||||||||||
Total pre-tax Core Earnings adjustments to GAAP
|
$ | 532 | $ | (229 | ) | $ | (209 | ) | $ | (94 | ) | | ||||||||
Income tax expense
|
96 | |||||||||||||||||||
Minority interest in net earnings of subsidiaries
|
| |||||||||||||||||||
Total Core Earnings adjustments to GAAP
|
$ | (96 | ) | |||||||||||||||||
F-95
20. | Segment Reporting (Continued) |
Years Ended December 31, | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(Dollars in millions)
|
||||||||||||
Core Earnings adjustments to GAAP:
|
||||||||||||
Net impact of securitization
accounting
(1)
|
$ | (442 | ) | $ | 247 | $ | 532 | |||||
Net impact of derivative
accounting
(2)
|
(560 | ) | (1,341 | ) | (229 | ) | ||||||
Net impact of Floor
Income
(3)
|
(102 | ) | (169 | ) | (209 | ) | ||||||
Net impact of acquired
intangibles
(4)
|
(91 | ) | (112 | ) | (94 | ) | ||||||
Net tax
effect
(5)
|
456 | (81 | ) | (96 | ) | |||||||
Total Core Earnings adjustments to GAAP
|
$ | (739 | ) | $ | (1,456 | ) | $ | (96 | ) | |||
(1) | Securitization accounting: Under GAAP, certain securitization transactions in the Companys Lending operating segment are accounted for as sales of assets. Under the Companys Core Earnings presentation for the Lending operating segment, the Company presents all securitization transactions on a Core Earnings basis as long-term non-recourse financings. The upfront gains on sale from securitization transactions as well as ongoing servicing and securitization revenue presented in accordance with GAAP are excluded from the Core Earnings net income and replaced by the interest income, provisions for loan losses, and interest expense as they are earned or incurred on the securitization loans. The Company also excludes transactions with its off-balance sheet trusts from Core Earnings net income as they are considered intercompany transactions on a Core Earnings basis. | |
(2) | Derivative accounting: Core Earnings net income excludes periodic unrealized gains and losses arising primarily in the Companys Lending operating segment, and to a lesser degree in its Corporate and Other reportable segment, that are caused primarily by the one-sided mark-to-market derivative valuations prescribed by SFAS No. 133 on derivatives that do not qualify for hedge treatment under GAAP. Under the Companys Core Earnings presentation, the Company recognizes the economic effect of these hedges, which generally results in any cash paid or received being recognized ratably as an expense or revenue over the hedged items life. Core Earnings net income also excludes the gain or loss on equity forward contracts that under SFAS No. 133, are required to be accounted for as derivatives and are marked-to-market through GAAP net income. | |
(3) | Floor Income: The timing and amount (if any) of Floor Income earned in the Companys Lending operating segment is uncertain and in excess of expected spreads. Therefore, the Company excludes such income from Core Earnings net income when it is not economically hedged. The Company employs derivatives, primarily Floor Income Contracts and futures, to economically hedge Floor Income. As discussed above in Derivative Accounting, these derivatives do not qualify as effective accounting hedges and therefore under GAAP are marked-to-market through the gains (losses) on derivative and hedging activities, net line in the consolidated statements of income with no offsetting gain or loss recorded for the economically hedged items. For Core Earnings net income, the Company reverses the fair value adjustments on the Floor Income Contracts and futures economically hedging Floor Income and includes the amortization of net premiums received (net of Eurodollar futures contracts realized gains or losses) in income. | |
(4) | Acquired Intangibles: The Company excludes goodwill and intangible impairment and amortization of acquired intangibles. | |
(5) | Net Tax Effect: Such tax effect is based upon the Companys Core Earnings effective tax rate for the year. The net tax effect for the years ended December 31, 2007 and 2006 includes the impact of the exclusion of the permanent income tax impact of the equity forward contracts. The Company settled all of its equity forward contracts in January 2008. |
F-96
21. | Quarterly Financial Information (unaudited) |
2008 | ||||||||||||||||
First
|
Second
|
Third
|
Fourth
|
|||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||
Net interest income
|
$ | 276,369 | $ | 402,543 | $ | 474,749 | $ | 210,559 | ||||||||
Less: provisions for loan losses
|
137,311 | 143,015 | 186,909 | 252,415 | ||||||||||||
Net interest income (loss) after provisions for loan losses
|
139,058 | 259,528 | 287,840 | (41,856 | ) | |||||||||||
Gains (losses) on derivative and hedging activities, net
|
(272,796 | ) | 362,043 | (241,757 | ) | (292,903 | ) | |||||||||
Other income
|
343,707 | 200,593 | 69,761 | 251,144 | ||||||||||||
Restructuring expenses
|
20,678 | 46,740 | 10,508 | 5,849 | ||||||||||||
Operating expenses
|
355,648 | 353,688 | 367,152 | 280,367 | ||||||||||||
Income tax expense (benefit)
|
(62,488 | ) | 153,074 | (103,819 | ) | (154,341 | ) | |||||||||
Minority interest in net earnings of subsidiaries
|
(65 | ) | 2,926 | 544 | 527 | |||||||||||
Net income (loss)
|
(103,804 | ) | 265,736 | (158,541 | ) | (216,017 | ) | |||||||||
Preferred stock dividends
|
29,025 | 27,391 | 27,474 | 27,316 | ||||||||||||
Net income (loss) attributable to common stock
|
$ | (132,829 | ) | $ | 238,345 | $ | (186,015 | ) | $ | (243,333 | ) | |||||
Basic earnings (loss) per common share
|
$ | (.28 | ) | $ | .51 | $ | (.40 | ) | $ | (.52 | ) | |||||
Diluted earnings (loss) per common share
|
$ | (.28 | ) | $ | .50 | $ | (.40 | ) | $ | (.52 | ) | |||||
2007 | ||||||||||||||||
First
|
Second
|
Third
|
Fourth
|
|||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||
Net interest income
|
$ | 413,816 | $ | 398,653 | $ | 441,310 | $ | 334,471 | ||||||||
Less: provisions for loan losses
|
150,330 | 148,200 | 142,600 | 574,178 | ||||||||||||
Net interest income (loss) after provisions for loan losses
|
263,486 | 250,453 | 298,710 | (239,707 | ) | |||||||||||
Gains (losses) on derivative and hedging activities, net
|
(356,969 | ) | 821,566 | (487,478 | ) | (1,337,703 | ) | |||||||||
Other income
|
876,829 | 398,672 | 285,433 | 296,759 | ||||||||||||
Restructuring expenses
|
| | | 22,505 | ||||||||||||
Operating expenses
|
356,174 | 398,800 | 355,899 | 418,469 | ||||||||||||
Income tax expense (benefit)
|
310,014 | 104,724 | 84,449 | (86,904 | ) | |||||||||||
Minority interest in net earnings of subsidiaries
|
1,005 | 696 | 77 | 537 | ||||||||||||
Net income (loss)
|
116,153 | 966,471 | (343,760 | ) | (1,635,258 | ) | ||||||||||
Preferred stock dividends
|
9,093 | 9,156 | 9,274 | 9,622 | ||||||||||||
Net income (loss) attributable to common stock
|
$ | 107,060 | $ | 957,315 | $ | (353,034 | ) | $ | (1,644,880 | ) | ||||||
Basic earnings (loss) per common share
|
$ | .26 | $ | 2.32 | $ | (.85 | ) | $ | (3.98 | ) | ||||||
Diluted earnings (loss) per common share
|
$ | .26 | $ | 1.03 | $ | (.85 | ) | $ | (3.98 | ) | ||||||
F-97
21. | Quarterly Financial Information (unaudited) (Continued) |
2008 | ||||||||||||||||
First
|
Second
|
Third
|
Fourth
|
|||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||
Prior Presentation
|
||||||||||||||||
Allowance for Private Education Loan Losses
|
$ | 938,409 | $ | 970,150 | $ | 1,012,838 | $ | 1,085,680 | ||||||||
Net charge-offs for Private Education Loan Losses
|
$ | (74,227 | ) | $ | (96,191 | ) | $ | (101,518 | ) | $ | (152,635 | ) | ||||
Corrected Presentation
|
||||||||||||||||
Allowance for Private Education Loan Losses
|
$ | 1,073,317 | $ | 1,129,000 | $ | 1,196,894 | $ | 1,308,043 | ||||||||
Charge-offs for Private Education Loan Losses
|
$ | (57,352 | ) | $ | (72,248 | ) | $ | (76,312 | ) | $ | (114,328 | ) | ||||
2007 | ||||||||||||||||
First
|
Second
|
Third
|
Fourth
|
|||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||
Prior Presentation
|
||||||||||||||||
Allowance for Private Education Loan Losses
|
$ | 369,072 | $ | 427,904 | $ | 454,100 | $ | 885,931 | ||||||||
Net charge-offs for Private Education Loan Losses
|
$ | (75,121 | ) | $ | (79,947 | ) | $ | (73,491 | ) | $ | (71,550 | ) | ||||
Corrected Presentation
|
||||||||||||||||
Allowance for Private Education Loan Losses
|
$ | 444,569 | $ | 519,361 | $ | 559,142 | $ | 1,003,963 | ||||||||
Charge-offs for Private Education Loan Losses
|
$ | (63,891 | ) | $ | (63,987 | ) | $ | (59,906 | ) | $ | (58,559 | ) | ||||
F-98
| default of the borrower; | |
| the death, bankruptcy or permanent, total disability of the borrower; | |
| closing of the students school prior to the end of the academic period; | |
| false certification of the borrowers eligibility for the loan by the school; and | |
| an unpaid school refund. |
| Subsidized Federal Stafford Loans to students who demonstrate requisite financial need; | |
| Unsubsidized Federal Stafford Loans to students who either do not demonstrate financial need or require additional loans to supplement their Subsidized Stafford Loans; | |
| Federal PLUS Loans to graduate or professional students (effective July 1, 2006) or parents of dependent students whose estimated costs of attending school exceed other available financial aid; and | |
| FFELP Consolidation Loans, which consolidate into a single loan a borrowers obligations under various federally authorized student loan programs. |
A-1
| Change to a fixed 6.8 percent interest rate for Stafford loans. | |
| Increases the scheduled change to a fixed PLUS interest rate from 7.9 percent to 8.5 percent. | |
| Permanently modifies the minimum special allowance calculation for loans made with proceeds of tax-exempt obligations. | |
| Requires submission of floor income to the government on loans made on or after April 1, 2006. |
A-2
| Repeals limitations on special allowance for PLUS loans made on and after January 1, 2000. | |
| Increases first and second year Stafford loan limits from $2,625 and $3,500 to $3,500 and $4,500 respectively (effective July 1, 2007). | |
| Increases graduate and professional student unsubsidized Stafford loan limits from $10,000 to $12,000 (effective July 1, 2007). | |
| Authorizes graduate and professional students to borrow PLUS loans. | |
| Reduces insurance from 98 percent to 97 percent for new loans beginning July 1, 2006. | |
| Phases out the Stafford loan origination fee by 2010. | |
| Reduces insurance for Exceptional Performers from 100 percent to 99 percent. | |
| Repeals in-school consolidation, spousal consolidation, reconsolidation, and aligns loan consolidation terms in the FFELP and FDLP. | |
| Mandates the deposit of a one percent federal default fee into a guaranty agencys Federal Fund, which may be deducted from loan proceeds. | |
| Repeals the guaranty agency Account Maintenance Fee cap (effective FY 2007). | |
| Reduces guarantor retention of collection fees on defaulted FFELP Consolidation Loans from 18.5 percent to 10 percent (effective October 1, 2006). | |
| Provides a discharge for loans that are falsely certified as a result of identity theft. | |
| Provides 100 percent insurance on ineligible loans due to false or erroneous information on loans made on or after July 1, 2006. | |
| Allows for a 3-year military deferment for a borrowers loans made on or after July 1, 2001. | |
| Reduces the monthly payment remittance needed to rehabilitate defaulted loans from 12 to 9. | |
| Increases from 10 percent to 15 percent the amount of disposable pay a guaranty agency may garnish without borrower consent. | |
| Streamlines mandatory forbearances to accommodate verbal requests. |
| Restrictions on the use of eligible lender trustees by schools that make FFELP loans; | |
| New discharge provisions for Title IV loans for the survivors of eligible public servants and certain other eligible victims of the terrorist attacks on the United States on September 11, 2001; and | |
| A technical modification to the HEA provision governing account maintenance fees that are paid to guaranty agencies in the FFELP. |
| Reduces special allowance payments to for-profit lenders and not-for-profit lenders for both Stafford and Consolidation Loans disbursed on or after October 1, 2007 by 0.55 percentage points and 0.40 percentage points, respectively; | |
| Reduces special allowance payments to for-profit lenders and not-for-profit lenders for PLUS loans disbursed on or after October 1, 2007 by 0.85 percentage points and 0.70 percentage points, respectively; | |
| Reduces fixed interest rates on subsidized Stafford loans to undergraduates from the current 6.8% to 6.0% for loans disbursed beginning July 1, 2008, to 5.6% for loans disbursed beginning July 1, 2009, to 4.5% for loans disbursed beginning July 1, 2010, and to 3.4% for loans disbursed between July 1, |
A-3
2011 and June 30, 2012. Absent any other legislative changes, the rates would revert to 6.8% for loans disbursed on or after July 1, 2012; |
| Increases the lender loan fees on all loan types, from 0.5 percent to 1.0 percent; | |
| Reduces default insurance to 95 percent of the unpaid principal and accrued interest for loans first disbursed on or after October 1, 2012; | |
| Eliminates Exceptional Performer designation (and the monetary benefit associated with it) effective October 1, 2007. | |
| Reduces default collections retention by guaranty agencies from 23 percent to 16 percent. | |
| Reduces the guaranty agency account maintenance fee from 0.10 percent to 0.06 percent. | |
| Requires ED to develop and implement a pilot auction for participation in the FFELP Parent PLUS loan program, by state, effective July 1, 2009. | |
| Provides loan forgiveness for all FDLP borrowers, and FFELP borrowers that consolidate in the FDLP, in certain public service jobs who make 120 monthly payments. | |
| Expands the deferment authority for borrowers due to an economic hardship and military service. | |
| Establishes a new income-based repayment program starting July 1, 2009 for all loans except for parent PLUS loans or Consolidation loans that discharged such loans which includes the potential for loan forgiveness after 25 years. |
| Increases Unsubsidized Stafford loan limits for undergraduate students for loans first disbursed on or after July 1, 2008 |
| by $2,000 for the annual limit | |
| and to $31,000 and $57,500 as the aggregate limits for dependent students and independent students respectively. |
| Requires, effective for loans first disbursed on or after July 1, 2008, that repayment of a parent PLUS loan begin no later than 60 days after the final disbursement with interest accrued prior to the beginning of repayment added to the loan principal, or the day after 6 months from the date the dependent student is no longer enrolled at least half time, in which case interest accrued prior to the beginning of repayment may be paid monthly or quarterly, or capitalized no more frequently than quarterly, if agreed by the borrower and lender. | |
| Removes specification that the repayment period of a PLUS loan begins on the date of the final disbursement and excludes deferment and forbearance periods for loans first disbursed on or after July 1, 2008. | |
| Allows extenuating circumstances for credit requirement purposes for a PLUS loan if the applicant is up to 180 days delinquent on mortgage or medical bill payments or not more than 89 days delinquent on any other debt during the period January 1, 2007, through December 31, 2009. | |
| Broadens lender of last resort (LLR) provisions so they include subsidized and unsubsidized Stafford loans and PLUS loans, prohibits LLR loans with terms and conditions more favorable than those for non-LLR loans, and subjects lenders and guarantors serving as LLRs to prohibitions on inducements and to prohibitions regarding advertising, marketing or promoting LLR loans. | |
| Gives the Secretary authority until July 1, 2009 (subsequently extended to July 1, 2010 by Public Law 110-350 enacted October 7, 2008), if there is inadequate loan capital, to purchase or enter into forward purchase commitments for Stafford and PLUS loans first disbursed on or after October 1, 2003 and before July 1, 2009, and makes funds available. Any purchase must be without a net cost to the federal government (including the cost of servicing purchased loans), and funds paid to a lender must be used |
A-4
for the lenders continued FFELP participations and making of FFELP loans. Authorizes the Secretary to contract for the servicing of purchased FFELP loans, including with selling lenders, as long as the cost is not more than it would be otherwise. |
| Clarifies the repayment period and the terms for commencement of repayment of PLUS loans made on or after July 1, 2008, (superseding ECASLA provisions) and makes available in-school deferment to parent borrowers when the student beneficiary is enrolled and a 6-month post-enrollment deferment to all PLUS borrowers following any period of enrollment of the borrower or the student beneficiary. | |
| Makes Section 207 of the Servicemembers Civil Relief Act applicable to FFELP loans, upon borrower request, reducing the interest rate on such loans to 6% (which encompasses certain fees and other charges), and establishes that as the applicable rate for calculating special allowance payments (for loans made on or after July 1, 2008). | |
| Expands the criteria for disability discharge, including qualifying borrowers with a permanent disability rating from the Veterans Administration. | |
| Requires a lender to provide information on the impact of interest capitalization when granting deferment on for an unsubsidized Stafford loan or forbearance for any FFELP loan and, for forbearance, to provide the borrower with specific information about interest and capitalization at least every 180 days during the forbearance. | |
| Adds items that the lender must disclose before disbursement and items that the lender must disclose before repayment. | |
| Requires a lender to provide a bill or statement that corresponds to each payment installment time period and include specific disclosures (for loans with a first payment due on or after July 1, 2009). | |
| Requires a lender to provide specified information to borrowers who notify the lender of difficulty in paying (for loans with a first payment due on or after July 1, 2009) and to borrowers who become 60 days delinquent (for loans that become delinquent on or after July 1, 2009). | |
| Eliminates guarantor and Department obligations for insurance and reinsurance in instances of nondisclosure. | |
| Adds income-based repayment to plans the lender must offer (except for parent PLUS loans or Consolidation loans that discharged such loans) and adds income-based repayment for FFELP borrowers to repay defaulted loans to ED. | |
| Permits borrower eligibility for in-school deferment to be based on National Student Loan Data System information. | |
| Adds prohibited inducements that can subject lenders and guarantors to disqualification from the program and clarifies that both lenders and guarantors may provide technical assistance comparable to that provided to schools by the Department. | |
| Allows FFELP borrowers to consolidate directly into the FDLP program to use the zero interest feature available to servicemembers. | |
| Requires a consolidation lender to provide disclosures regarding any loss of benefits, availability of repayment plans, and certain other information. | |
| Requires the guarantor to notify a borrower twice of options to remove a loan from default. | |
| Limits a borrower to loan rehabilitation once and, upon successful rehabilitation, provides for financial and economic education materials to be available to the borrower and for removal of the default from the borrowers credit report. |
A-5
| Mandates that both the transferor and transferee notify the borrower of certain transfer information when a loan transfer changes the party with which the borrower needs to communicate or send payments. | |
| Introduces a forgiveness program to repay FFELP loans and to cancel FDLP (except no parent PLUS loans) at $2000 per year up to an aggregate of $10,000, for non-defaulted borrowers employed full time in areas of national need (replacing the Child Care Loan Forgiveness Program). Subject to appropriations. | |
| Authorizes repayment of FFELP loans (except parent PLUS loans) at $6,000 per year up to an aggregate of $40,000 for attorneys employed full time as civil legal assistance attorneys. Subject to appropriations. | |
| Requires reporting to consumer reporting agencies to indicate that a loan is an education loan and to provide information on repayment status. | |
| Requires guarantors to develop educational programs for budgeting and financial management. | |
| Raises to 30% the school cohort default rate for ineligibility effective in 2012. | |
| Increases to 15% the maximum cohort default rate for exempting loans from rules that would otherwise require multiple disbursement or delayed disbursement. |
| is a United States citizen, national or permanent resident; | |
| has been accepted for enrollment or is enrolled and maintaining satisfactory academic progress at a participating educational institution; and | |
| is carrying at least one-half of the normal full-time academic workload for the course of study the student is pursuing. |
A-6
Date of First Disbursement
|
Special Allowance Margin
|
|
Before 10/17/86
|
3.50% | |
From 10/17/86 through 09/30/92
|
3.25% | |
From 10/01/92 through 06/30/95
|
3.10% | |
From 07/01/95 through 06/30/98
|
2.50% for Stafford Loans that are in In-School, Grace or Deferment 3.10% for Stafford Loans that are in Repayment and all other loans | |
From 07/01/98 through 12/31/99
|
2.20% for Stafford Loans that are in In-School, Grace or Deferment 2.80% for Stafford Loans that are in Repayment 3.10% for PLUS, SLS and FFELP Consolidation Loans |
A-7
Date of First Disbursement
|
Special Allowance Margin
|
|
From 01/01/00 through 09/30/07
|
1.74% for Stafford Loans that are in In-School, Grace or Deferment | |
2.34% for Stafford Loans that are in Repayment | ||
2.64% for PLUS and FFELP Consolidation Loans | ||
From 10/01/07 and after
|
1.19% for Stafford Loans that are in In-School, Grace or Deferment | |
1.79% for Stafford Loans that are in Repayment and PLUS | ||
2.09% for FFELP Consolidation Loans | ||
Note: The margins for loans held by an eligible not-for-profit holder is higher by 15 basis points. |
| Special Allowance Payments are available on variable rate PLUS Loans and SLS Loans only if the variable rate, which is reset annually, exceeds the applicable maximum borrower rate. Effective July 1, 2006, this limitation on special allowance for PLUS loans made on and after January 1, 2000 is repealed. The variable rate is based on the weekly average one-year constant maturity Treasury yield for loans made before July 1, 1998 and based on the 91-day Treasury bill for loans made on or after July 1, 1998. The maximum borrower rate for these loans is between 9 percent and 12 percent. |
Date of First Disbursement
|
Maximum Origination Fee | |||
Before 07/01/06
|
3 | % | ||
From 7/01/06 through 06/30/07
|
2 | % | ||
From 7/01/07 through 06/30/08
|
1.5 | % | ||
From 7/01/08 through 06/30/09
|
1 | % | ||
From 7/01/09 through 06/30/10
|
.5 | % | ||
From 7/01/10 and after
|
0 | % |
| federal reinsurance of Stafford Loans made by eligible lenders to qualified students; |
A-8
| federal interest subsidy payments on Subsidized Stafford Loans paid by ED to holders of the loans in lieu of the borrowers making interest payments during in-school, grace and deferment periods; and | |
| special allowance payments representing an additional subsidy paid by ED to the holders of eligible Stafford Loans. |
Maximum
|
||||||
Trigger Date
|
Borrower Rate | Borrower Rate | Interest Rate Margin | |||
Before 01/01/81
|
7% | 7% | N/A | |||
From 01/01/81 through 09/12/83
|
9% | 9% | N/A | |||
From 09/13/83 through 06/30/88
|
8% | 8% | N/A | |||
From 07/01/88 through 09/30/92
|
8% for 48 months; thereafter, 91-day Treasury + Interest Rate Margin | 8% for 48 months, then 10% | 3.25% for loans made before 7/23/92 and for loans made on or before 10/1/92 to new student borrowers; 3.10% for loans made after 7/23/92 and before 7/1/94 to borrowers with outstanding FFELP loans | |||
From 10/01/92 through 06/30/94
|
91-day Treasury + Interest Rate Margin | 9% | 3.10% | |||
From 07/01/94 through 06/30/95
|
91-day Treasury + Interest Rate Margin | 8.25% | 3.10% | |||
From 07/01/95 through 06/30/98
|
91-day Treasury + Interest Rate Margin | 8.25% | 2.50% (In-School, Grace or Deferment); 3.10% (Repayment) | |||
From 07/01/98 through 06/30/06
|
91-day Treasury + Interest Rate Margin | 8.25% | 1.70% (In-School, Grace or Deferment); 2.30% (Repayment) | |||
From 07/01/06 through 06/30/08
|
6.8% | 6.8% | N/A | |||
From 07/01/08 through 06/30/09
|
6.0% for undergraduate subsidized loans; and 6.8% for unsubsidized loans and graduate subsidized loans. | 6.0%, 6.8% | N/A | |||
From 07/01/09 through 06/30/10
|
5.6% for undergraduate subsidized loans; and 6.8% for unsubsidized loans and graduate subsidized loans. | 5.6%, 6.8% | N/A | |||
From 07/01/10 through 06/30/11
|
4.5% for undergraduate subsidized loans; and 6.8% for unsubsidized loans and graduate subsidized loans. | 4.5%, 6.8% | N/A | |||
From 07/01/11 through 06/30/12
|
3.4% for undergraduate subsidized loans; and 6.8% for unsubsidized loans and graduate subsidized loans. | 3.4%, 6.8% | N/A | |||
From 07/01/12 and after
|
6.8% | 6.8% | N/A |
A-9
| while the borrower is a qualified student, | |
| during the grace period, and | |
| during prescribed deferral periods. |
Dependent Student | Independent Student | |||||||||||||||||||||||
Maximum
|
Maximum
|
|||||||||||||||||||||||
Subsidized and
|
Additional
|
Annual Total
|
Subsidized and
|
Additional
|
Annual Total
|
|||||||||||||||||||
Borrower Academic Level
|
Unsubsidized | Unsubsidized | Amount | Unsubsidized | Unsubsidized | Amount | ||||||||||||||||||
Undergraduate (per year)
|
||||||||||||||||||||||||
1
st
year
|
$ | 3,500 | $ | 2,000 | $ | 5,500 | $ | 3,500 | $ | 6,000 | $ | 9,500 | ||||||||||||
2
nd
year
|
$ | 4,500 | $ | 2,000 | $ | 6,500 | $ | 4,500 | $ | 6,000 | $ | 10,500 | ||||||||||||
3
rd
year
and above
|
$ | 5,500 | $ | 2,000 | $ | 7,500 | $ | 5,500 | $ | 7,000 | $ | 12,500 | ||||||||||||
Aggregate Limit
|
$ | 23,000 | $ | 8,000 | $ | 31,000 | $ | 23,000 | $ | 34,500 | $ | 57,500 | ||||||||||||
Graduate (per year)
|
N/A | N/A | N/A | $ | 8,500 | $ | 12,000 | $ | 20,500 | |||||||||||||||
Aggregate Limit (includes undergraduate)
|
N/A | N/A | N/A | $ | 65,500 | $ | 73,000 | $ | 138,500 |
Dependent Student
|
Independent Student | |||||||||||||||
Subsidized and
|
Subsidized and
|
Additional
|
||||||||||||||
Unsubsidized
|
Unsubsidized
|
Unsubsidized
|
||||||||||||||
On or After
|
On or After
|
On or After
|
Maximum Annual
|
|||||||||||||
Borrower Academic Level
|
07/1/07 | 07/1/07 | 07/1/07 | Total Amount | ||||||||||||
Undergraduate (per year)
|
||||||||||||||||
1
st
year
|
$ | 3,500 | $ | 3,500 | $ | 4,000 | $ | 7,500 | ||||||||
2
nd
year
|
$ | 4,500 | $ | 4,500 | $ | 4,000 | $ | 8,500 | ||||||||
3
rd
year
and above
|
$ | 5,500 | $ | 5,500 | $ | 5,000 | $ | 10,500 | ||||||||
Aggregate Limit
|
$ | 23,000 | $ | 23,000 | $ | 23,000 | $ | 46,000 | ||||||||
Graduate (per year)
|
N/A | $ | 8,500 | $ | 12,000 | $ | 20,500 | |||||||||
Aggregate Limit (includes undergraduate)
|
N/A | $ | 65,500 | $ | 73,000 | $ | 138,500 |
A-10
Independent Students | ||||||||||||||||||||
All Students
|
Additional
|
|||||||||||||||||||
Borrowers Academic Level Base
|
Subsidized
|
Subsidized and
|
Unsubsidized
|
|||||||||||||||||
Amount Subsidized and Unsubsidized
|
On or After
|
Unsubsidized On
|
Only On or
|
Maximum Annual
|
||||||||||||||||
On or After 10/1/93
|
1/1/87 | or After 10/1/93 | After 7/1/94 | Total Amount | ||||||||||||||||
Undergraduate (per year):
|
||||||||||||||||||||
1st year
|
$ | 2,625 | $ | 2,625 | $ | 4,000 | $ | 6,625 | ||||||||||||
2nd year
|
$ | 2,625 | $ | 3,500 | $ | 4,000 | $ | 7,500 | ||||||||||||
3rd year and above
|
$ | 4,000 | $ | 5,500 | $ | 5,000 | $ | 10,500 | ||||||||||||
Graduate (per year)
|
$ | 7,500 | $ | 8,500 | $ | 10,000 | $ | 18,500 | ||||||||||||
Aggregate Limit:
|
||||||||||||||||||||
Undergraduate
|
$ | 17,250 | $ | 23,000 | $ | 23,000 | $ | 46,000 | ||||||||||||
Graduate (including undergraduate)
|
$ | 54,750 | $ | 65,500 | $ | 73,000 | $ | 138,500 |
| The loan limits include both FFELP and FDLP loans. | |
| The amounts in the columns labeled Subsidized and Unsubsidized represent the combined maximum loan amount per year between Subsidized and Unsubsidized Stafford Loans. Accordingly, the maximum amount that a student may borrow under an Unsubsidized Stafford Loan is the difference between the combined maximum loan amount and the amount the student received in the form of a Subsidized Stafford Loan. |
| Students attending certain medical schools are eligible for higher annual and aggregate loan limits. | |
| The annual loan limits are sometimes reduced when the student is enrolled in a program of less than one academic year or has less than a full academic year remaining in his program. |
A-11
| enrolled in an approved graduate fellowship program or rehabilitation program; or | |
| seeking, but unable to find, full-time employment (subject to a maximum deferment of 3 years); or | |
| having an economic hardship, as defined in the Act (subject to a maximum deferment of 3 years); or | |
| serving on active duty during a war or other military operation or national emergency, or performing qualifying National Guard duty during a war or other military operation or national emergency (subject to a maximum deferment of 3 years, and effective July 1, 2006 on loans made on or after July 1, 2001). |
A-12
Interest
|
||||||||
Maximum
|
Rate
|
|||||||
Trigger Date
|
Borrower Rate
|
Borrower Rate
|
Margin | |||||
Before 10/01/81
|
9% | 9% | N/A | |||||
From 10/01/81 through 10/30/82
|
14% | 14% | N/A | |||||
From 11/01/82 through 06/30/87
|
12% | 12% | N/A | |||||
From 07/01/87 through 09/30/92
|
1-year Index + Interest Rate Margin | 12% | 3.25 | % | ||||
From 10/01/92 through 06/30/94
|
1-year Index + Interest Rate Margin | PLUS 10%, SLS 11% | 3.10 | % | ||||
From 07/01/94 through 06/30/98
|
1-year Index + Interest Rate Margin | 9% | 3.10 | % | ||||
From 6/30/98 through 06/30/06
|
91-day Treasury + Interest Rate Margin | 9% | 3.10 | % | ||||
From 07/01/06 and after
|
8.5% | 8.5% | N/A |
| the borrower rate is set at the maximum borrower rate and | |
| the sum of the average of the bond equivalent rates of 3-month Treasury bills auctioned during that quarter and the applicable interest rate margin exceeds the maximum borrower rate. |
A-13
A-14
Claims Paid Date
|
Maximum | 5% Trigger | 9% Trigger | |||||||||
Before October 1, 1993
|
100% | 90% | 80% | |||||||||
October 1, 1993 September 30, 1998
|
98% | 88% | 78% | |||||||||
On or after October 1, 1998
|
95% | 85% | 75% |
A-15
Source
|
Basis
|
|
Insurance Premium (Changed to Federal Default Fee July 1,
2006)
|
Up to 1% of the principal amount guaranteed, withheld from the proceeds of each loan disbursement. | |
Loan Processing and Issuance Fee
|
.4% of the principal amount guaranteed in each fiscal year, paid by ED | |
Account Maintenance Fee
|
.10% (reduced to .06% on October 1, 2007) of the original principal amount of loans outstanding, paid by ED. | |
Default Aversion Fee
|
1% of the outstanding amount of loans submitted by a lender for default aversion assistance, minus 1% of the unpaid principal and interest paid on default claims, which is, paid once per loan by transfers out of the Student Loan Reserve Fund. | |
Collection Retention
|
23% (reduced to 16% on October 1, 2007) of the amount collected on loans on which reinsurance has been paid (18.5% collected for a defaulted loan that is purchased by a lender for rehabilitation or consolidation), withheld from gross receipts. Guarantor retention of collection fees on defaulted FFELP Consolidation Loans is reduced from 18.5% to 10% (effective October 1, 2006), and reduced to zero beginning October 1, 2009 on default consolidations that exceed 45 percent of an agencys total collections on defaulted loans. |
A-16
G-1
G-2
Fixed Borrower Rate
|
7.25 | % | ||
SAP Spread over Commercial Paper Rate
|
(2.64 | )% | ||
Floor Strike
Rate
(1)
|
4.61 | % | ||
(1) | The interest rate at which the underlying index (Treasury bill or commercial paper) plus the fixed SAP spread equals the fixed borrower rate. Floor Income is earned anytime the interest rate of the underlying index declines below this rate. |
G-3
G-4
G-5
G-6
1
2
3
4
5
6
7
8
9
10
11
12
(1) |
The specific reason or reasons for such denial:
|
||
(2) |
The specific reference to pertinent provisions
of this Agreement on which such denial is based;
|
||
(3) |
A description of any additional material or information necessary for
the Claimant to perfect his claim and an explanation why such material or
such information is necessary; and
|
||
(4) |
Appropriate information as to the steps to be taken if the Claimant
wishes to submit the claim for review.
|
13
14
15
2
3
4
5
6
(i) | the lump sum that is Actuarial Equivalent of the Participants accrued benefit under the Cash Account Plan determined without regard to the limitations imposed by Code section 415 or the provisions of the Cash Account Plan that implement Code section 415, over | ||
(ii) | the lump sum that is the Actuarial Equivalent of the Participants accrued benefit under the Cash Account Plan determined after taking into account the limitations imposed by Code section 415 and the provisions of the Cash Account Plan that implement Code section 415, |
(i) | a Participants Cash Account Plan Pay, plus any amounts deferred under a nonqualified deferred compensation plan maintained by the Corporation (such amount to be included in the calendar year the deferred amount would have been paid absent the deferral) and determined without regard to any limitation imposed by Code section 401(a)(17) or the provisions of the Cash Account Plan that implement Code section 401(a)(17), over |
(ii) | the Participants Cash Account Plan Pay. |
(i) | his Supplemental Initial Account Balance, as determined in accordance with Subsection (f) below; | ||
(ii) | his Supplemental Pay Credits for all calendar years and or portions thereof after September 30, 1999, during which he was a Participant in the Plan up to and including the Determination Date; | ||
(iii) | Supplemental Interest Credits credited up to and including the Determination Date, and | ||
(iv) | his Section 415 Excess Benefit, if any, as of the Determination Date, less the amount paid from the Cash Account Plan. |
(i) | The Supplemental Cash Account of a Participant who was employed by the Corporation and a participant in the Prior Plan on September 30, 1999, and who became a Participant on October 1, 1999, shall be credited, as of October 1, 1999, with an opening account balance in an amount equal to the |
actuarial present value of the Participants accrued benefit as of September 30, 1999, under the Prior Plan determined in accordance with Section 4.1 thereof, except that (A) for purposes of determining the accrued benefit of a Participant employed by the Corporation before 1999, the Participants bonus compensation for calendar years 1997 and 1998 shall not be limited as otherwise required under section 2.10 of the Prior Plan; and (B) for purposes of determining the accrued benefit of a Participant hired in 1999, the Participants bonus compensation for 1999 shall not be limited as otherwise required by section 2.10 of the Prior Plan and the Participants salary compensation shall be the Participants base salary rate for calendar year 1999 and not the definition of salary compensation under section 2.8 of the Prior Plan. The actuarial present value shall be determined as of September 30, 1999, in accordance with Section A1.2 of the Cash Account Plan. | |||
(ii) | The Supplemental Cash Account of a Participant who was not employed by the Corporation on September 30, 1999, but who had an accrued benefit under the Prior Plan and who became a Participant after October 1, 1999, shall be credited, as of the date on which the Participant becomes a Participant, with an opening account balance in an amount equal to the actuarial present value of Participants accrued benefit as of September 30, 1999, under the Prior Plan determined in accordance with Section 4.1 thereof. The actuarial present value shall be determined as of the date on which the Participant becomes a Participant in accordance with Section A1.2 of the Cash Account Plan. | ||
(iii) | Amounts credited to a Participants Supplemental Cash Account in accordance with this subsection (f) shall be credited with Supplemental Interest Credits in accordance with subsection (d), above. |
(a) | To make and enforce such rules and regulations as it shall deem necessary or proper for the efficient administration of the Plan; | ||
(b) | To interpret the Plan and to decide any and all matters arising hereunder, including the right to remedy possible ambiguities, inconsistencies, or omissions; | ||
(c) | To compute the amount of benefits that shall be payable to any Participant, former Participant, or Beneficiary in accordance with the provisions of the Plan, and in the event that the Committee determines that excessive benefits have been paid to any person, the Committee may suspend payment of future benefits to such person or his beneficiary or reduce the amount of such future benefits until the |
excessive benefits and any interest thereon determined by the Committee have been recovered; | |||
(d) | To appoint other persons to carry out such ministerial responsibilities under the Plan as it may determine; and | ||
(e) | To employ one or more persons to render advice with respect to any of its responsibilities under the Plan. |
2
3
4
5
1
2
3
4
2
3
4
2
3
4
2
3
4
A. | Option Grant . Net-Settled Stock Options (the Options) to purchase a total of ___ shares of Common Stock, par value $.20, of SLM Corporation (the Corporation) are hereby granted to ___subject in all respects to the terms and provisions of the SLM Corporation Incentive Plan (the Plan), which is incorporated herein by reference, and this Stock Option Agreement (the Agreement). Certain capitalized terms not otherwise defined herein are defined in the Plan. In the event of any conflict between the provisions of this Agreement and the provisions of the Plan, the terms of the Plan control, except as expressly stated otherwise herein. The Options are non-qualified stock options and are not intended to qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended, and will be interpreted accordingly. | |
B. | Option Price . The purchase price per share is $11.21 dollars (the Option Price). | |
C. | Grant Date . The date of grant of these Options is January 29, 2009 (the Grant Date). | |
D. | Vesting; Exercisability . The Options are not vested as of the Grant Date. One-third of the Options will vest upon the later of the first anniversary of the Grant Date and the date that the Corporation announces its 2009 fiscal year results, based on the extent to which the core earnings net income target established under the 2009 business plan is achieved, using the vesting schedule set forth below; one-third of the Options will vest upon the later of the second anniversary of the Grant Date and the date that the Corporation announces its 2010 fiscal year results, based on the extent to which the core earnings net income target established under the 2010 business plan is achieved, using the vesting schedule set forth below; and one-third of the Options will vest upon the later of the third anniversary of the Grant Date and the date that the Corporation announces its 2011 fiscal year results, based on the extent to which the core earnings net income target established under the 2011 business plan is achieved, using the vesting schedule set forth below. After each annual determination of the level of achievement of the core earnings net income target and the extent of vesting of each one-third of the Options, any remaining unvested Options of the one-third of Options eligible for vesting in that year will be forfeited and cancelled. | |
Vesting schedule for each year as follows: |
Achievement of | ||||
Plan | ||||
"Core Earnings" | ||||
Net Income | Vesting | |||
75%+
|
100 | % | ||
70%
|
95 | % | ||
65%
|
90 | % | ||
60%
|
85 | % | ||
55%
|
80 | % | ||
50%
|
75 | % | ||
45%
|
70 | % | ||
40%
|
65 | % | ||
35%
|
60 | % | ||
30%
|
55 | % | ||
25%
|
50 | % | ||
<25%
|
0 | % |
| Upon termination of employment for any reason, other than death, Disability or Involuntary Termination, or as provided in the SLM Corporation Change in Control Severance Plan for Senior Officers any unvested Options will not vest and will be canceled. | ||
| Upon termination of employment for Misconduct, any Options, vested or unvested, are forfeited. | ||
| Upon termination for death or Disability, vested Options (taking into account any vesting acceleration set forth above) are exercisable until the earlier of: (1) the Expiration Date; or (2) one year from the date of termination. | ||
| Upon termination of employment for all reasons except death or Disability, vested Options (taking into account any vesting acceleration set forth above) are exercisable until the earlier of: (1) the Expiration Date; or (2) three months from the date of termination. |
E. | Expiration . These Options expire ten years from the Grant Date (the Expiration Date), subject to the provisions of the Plan and this Agreement, which may provide for earlier expiration in certain instances, including Optionees termination of employment. | |
D. | Non-Transferable; Binding Effect . These Options may not be transferred except as provided for in the Plan, and may be exercised during the lifetime of the Optionee only by him or her. The terms of these Options shall be binding upon the executors, administrators, heirs, and successors of the Optionee. | |
E. | Net-Settlement upon Option Exercise; Taxes . These Options shall be exercised only in accordance with the terms of this Agreement. Each exercise must be for no fewer than fifty (50) Options, other than an exercise for all remaining Options. Upon |
Page 1of 4
exercise of all or part of the Options, the Optionee shall receive from the Corporation the number of shares of Common Stock resulting from the following formula: the total number of Options exercised less the sum of Shares for the Option Cost and Shares for Taxes, rounded up to the nearest whole share. Shares for the Option Cost equals the Option Price multiplied by the number of Options exercised divided by the fair market value of SLM common stock at the time of exercise. Shares for Taxes equals the tax liability (the statutory withholding maximum) divided by the fair market value of SLM common stock at the time of exercise. Optionee shall receive cash for any resulting fractional share amount. As a condition to the issuance of shares of Common Stock of the Corporation pursuant to these Options, the Optionee agrees to remit to the Corporation (through the procedure described in this paragraph) at the time of any exercise of these Options any taxes required to be withheld by the Corporation under federal, state, or local law as a result of the exercise of these Options. | ||
H. | Vesting Upon Change In Control . Notwithstanding anything to the contrary in this Agreement, in the event of a Change of Control Transaction involving a merger, consolidation or reorganization and in which the Corporation is not the Surviving Corporation, if the terms of such transaction do not provide for the Surviving Corporation to adopt and assume the Options (with any appropriate adjustment to the number and type of shares subject to such Options), the Options shall become 100 percent vested and (if applicable) exercisable and shall be settled and (if applicable) exercised in full as of the time immediately prior to the consummation of such Change of Control Transaction. | |
In the event that, as a result of the Options becoming exercisable in connection with a Change in Control, any state, local or federal taxing authority imposes any taxes on the Optionee that would not be imposed but for the occurrence of a Change in Control, including any excise tax under Section 4999 of the Internal Revenue Code and any successor or comparable provision, then the Corporation (including any successor to the Corporation) shall pay to the Optionee at the time any such tax becomes payable an amount equal to the amount of any such tax imposed on the Optionee (the amount of any such payment, the Parachute Tax Reimbursement). In addition, the Corporation (including any successor to the Corporation) shall gross up such Parachute Tax Reimbursement by paying to the Optionee at the time any such tax becomes payable an additional amount equal to the aggregate amount of any additional taxes (whether income taxes, excise taxes, special taxes, employment taxes or otherwise) that are payable by the Optionee as a result of the Parachute Tax Reimbursement being payable to the Optionee and/or as a result of the additional amounts payable to the Optionee pursuant to this sentence, such that after payment of such additional taxes the Optionee shall have been paid on an after-tax basis an amount equal to the Parachute Tax Reimbursement. | ||
I. | Clawback Provision. If the Board of Directors of the Corporation, or an appropriate committee thereof, determines that any fraud or intentional misconduct by an officer at the level of Senior Vice President or above (the Officer) was a significant contributing factor to the Corporation having to restate all or a portion of its financial statement(s), the Board or committee shall, to the extent permitted by governing law, require reimbursement of any compensation (spread) resulting from the exercise of the Options by the Officer: 1) if such exercise occurred during the 12-month period following the first public disclosure of the incorrect financial statement; and 2) in the Board or committees judgment, to the extent that the filing of the false financial statement negatively impacted the Corporations share price. | |
Additionally, if the Board of Directors of the Corporation, or an appropriate committee thereof, determines that any material misstatement of financial results or a performance metric criteria or any material violation of corporate policy, including compliance and risk policies, occurs, the Board or committee shall, to the extent permitted by governing law, require reimbursement of any compensation resulting from the vesting and exercise of Options and the cancellation of any outstanding Options. | ||
J. | Board Interpretation . The Optionee hereby agrees to accept as binding, conclusive, and final all decisions and interpretations of the Board of Directors of the Corporation and, where applicable, the Compensation and Personnel Committee of the Board of Directors (the Committee) concerning any questions arising under this Agreement or the Plan. | |
K. | Stockholder Rights . The Optionee shall not be deemed a stockholder of the Corporation with respect to any of the shares of Common Stock subject to the Options, except to the extent that such shares shall have been purchased and transferred to the Optionee. The Corporation shall not be required to issue or transfer any shares of Common Stock purchased upon exercise of the Options until all applicable requirements of law have been complied with and such shares shall have been duly listed on any securities exchange on which the Common Stock may then be listed. | |
L. | No Right to Continued Employment . Nothing in the Plan, in this Agreement or any other instrument executed pursuant thereto or hereto shall confer upon the Optionee any right to continued employment with the Corporation or any of its subsidiaries or affiliates. | |
M. | Amendments for Accounting Charges: The Committee reserves the right to unilaterally amend this Agreement to reflect any changes in applicable law or financial accounting standards. | |
N. | Securities Law Compliance; Restrictions on Resales of Option Shares . The Corporation may impose such restrictions, conditions or limitations as it determines appropriate as to the timing and manner of any exercise of the Option and/or any |
Page 2of 4
resales by the Optionee or other subsequent transfers by the Optionee of any shares of Common Stock issued as a result of the exercise of the Option, including without limitation (a) restrictions under an insider trading policy, (b) restrictions that may be necessary in the absence of an effective registration statement under the Securities Act of 1933, as amended, covering the Option and/or the Common Stock underlying the Option and (c) restrictions as to the use of a specified brokerage firm or other agent for exercising the Option and/or for such resales or other transfers. The sale of the shares underlying the Option must also comply with other applicable laws and regulations governing the sale of such shares. | ||
O. | Data Privacy . As an essential term of this Option, the Optionee consents to the collection, use and transfer, in electronic or other form, of personal data as described in this Option Agreement for the exclusive purpose of implementing, administering and managing Optionees participation in the Plan. By entering into this Agreement and accepting the Option, the Optionee acknowledges that the Corporation holds certain personal information about the Optionee, including, but not limited to, name, home address and telephone number, date of birth, social security number or other identification number, salary, tax rates and amounts, nationality, job title, any shares of stock held in the Corporation, details of all options or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding, for the purpose of implementing, administering and managing the Plan (Data). Optionee acknowledges that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in jurisdictions that may have different data privacy laws and protections, and Optionee authorizes the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the Plan, including any requisite transfer of such Data as may be required to a broker or other third party with whom the Optionee or the Corporation may elect to deposit any shares of Common Stock acquired upon exercise of the Option. Optionee acknowledges that Data may be held only as long as is necessary to implement, administer and manage the Optionees participation in the Plan as determined by the Corporation, and that Optionee may request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, provided however, that refusing or withdrawing Optionees consent may adversely affect Optionees ability to participate in the Plan. | |
P. | Electronic Delivery . The Corporation may, in its sole discretion, decide to deliver any documents related to any options granted under the Plan by electronic means or to request Optionees consent to participate in the Plan by electronic means. Optionee hereby consents to receive such documents by electronic delivery and, if requested, to agree to participate in the Plan through an on-line or electronic system established and maintained by the Corporation or another third party designated by the Corporation, and such consent shall remain in effect throughout Optionees term of service with the Corporation and thereafter until withdrawn in writing by Optionee. | |
Q. | Governing Law. This Agreement shall be governed by and construed in accordance with the laws of Delaware, without giving effect to principles of conflicts of law. | |
R. | Notices . All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given if personally delivered, telefaxed or telecopied to, or, if mailed, when received by, the other party at the following addresses: | |
If to the Corporation to: |
If to the Optionee, to (i) the last address maintained in the Corporations Human Resources files for the Optionee or (ii) the Optionees mail delivery code or place of work at the Corporation. | ||
S. | Entire Agreement . This Agreement and the Plan together set forth the entire agreement and understanding between the parties as to the subject matter hereof and supersede all prior oral and written and all contemporaneous or subsequent oral discussions, agreements and understandings of any kind or nature. | |
T. | Miscellaneous . In the event that any provision of this Agreement is declared to be illegal, invalid or otherwise unenforceable by a court of competent jurisdiction, such provision shall be reformed, if possible, to the extent necessary to render it legal, valid and enforceable, or otherwise deleted, and the remainder of this Agreement shall not be affected except to the extent necessary to reform or delete such illegal, invalid or unenforceable provision. The headings in this Agreement are solely for convenience of reference, and shall not constitute a part of this Agreement, nor shall they affect its meaning, construction or effect. The Optionee shall cooperate and take such actions as may be reasonably requested by the Corporation in order to carry out the provisions and purposes of the Agreement. The Optionee is responsible for complying with all laws applicable to Optionee, including federal and state securities reporting laws. |
Page 3of 4
SLM CORPORATION
|
||||
BY: | /s/ Albert L. Lord | |||
Albert L. Lord | ||||
Chief Executive Officer | ||||
Accepted by:
|
|
|
«First» «Last»
|
|
|
Date
|
Page 4of 4
| One-third (___ shares) of the Performance Stock award will vest upon the later of the first anniversary of the Grant Date and the date that the Corporation announces its 2009 fiscal year results, based on the extent to which the core earnings net income target established under the 2009 business plan is achieved using the vesting schedule set forth below; one-third (___ shares) of the Performance Stock award will vest upon the later of the second anniversary of the Grant Date and the date that the Corporation announces its 2010 fiscal year results, based on the extent to which the core earnings net income target established under the 2010 business plan is achieved using the vesting schedule set forth below; and one-third ( ___ shares) of the Performance Stock award will vest upon the later of the third anniversary of the Grant Date and the date that the Corporation announces its 2011 fiscal year results, based on the extent to which the core earnings net income target established under the 2011 business plan is achieved using the vesting schedule set forth below. After each annual determination of the level of achievement of the core earnings net income target and the extent of vesting of each one-third of Performance Stock, any remaining unvested shares of the one-third of Performance Stock eligible for vesting in that year will be forfeited and cancelled. | ||
| Vesting schedule for each year: |
Achievement of | ||||
Plan | ||||
"Core Earnings" | ||||
Net Income | Vesting | |||
75%+
|
100 | % | ||
70%
|
95 | % | ||
65%
|
90 | % | ||
60%
|
85 | % | ||
55%
|
80 | % | ||
50%
|
75 | % | ||
45%
|
70 | % | ||
40%
|
65 | % | ||
35%
|
60 | % | ||
30%
|
55 | % | ||
25%
|
50 | % | ||
<25%
|
0 | % |
| Except as provided below, if the Grantee ceases to be an employee of the Corporation (or one of its subsidiaries) for any reason, he/she shall forfeit any shares of Performance Stock that have not vested as of the date of such termination of employment. | |
| Unless previously vested pursuant to the foregoing provisions, the Performance Stock will vest upon Involuntary Termination due to Job Abolishment/Layoff, death, or Disability, or as provided for in the SLM Corporation Change in Control Severance Plan for Senior Officers. | |
| If the Grantee becomes a covered employee within the meaning of Section 162(m) of the Internal Revenue Code, this provision regarding acceleration of vesting of Performance Stock shall not apply. All shares of Performance Stock, whether vested or unvested, shall be forfeited upon termination of employment due to Misconduct, as defined in the IP. |
| In the event that, as a result of the Performance Stock becoming vested in connection with a Change in Control, any state, local or federal taxing authority imposes any taxes on the Grantee that would not be imposed but for the occurrence of a Change in Control, including any excise tax under Section 4999 of the Internal Revenue Code and any successor or comparable provision, then the Corporation (including any successor to the Corporation) shall pay to the Grantee at the time any such tax becomes payable an amount equal to the amount of any such tax imposed on the Grantee (the amount of any such payment, the Parachute Tax Reimbursement). In addition, the Corporation (including any successor to the Corporation) shall gross up such Parachute Tax Reimbursement by paying to the Grantee at the time any such tax becomes payable an additional amount equal to the aggregate amount of any additional taxes (whether income taxes, excise taxes, special taxes, employment taxes or otherwise) that are payable by the Grantee as a result of the Parachute Tax Reimbursement being payable to the Grantee and/or as a result of the additional amounts payable to the Grantee pursuant to this sentence, such that after payment of such additional taxes the Grantee shall have been paid on an after-tax basis an amount equal to the Parachute Tax Reimbursement | ||
|
The Grantee of the Performance Stock shall transfer a sufficient number of shares of the
Corporations stock to satisfy the income and employment tax withholding requirements that
accrue upon the Performance Stock becoming vested and transferable and the Compensation and
Personnel Committee hereby approves the transfer of such shares to the Corporation for
purposes of SEC
Rule 16b-3. |
||
| Dividends declared on unvested shares of Performance Stock will not be paid currently. Instead, amounts equal to such dividends will be credited to an account established on behalf of the Grantee and such amounts will be deemed to be invested in additional shares of SLM common stock (Dividend Equivalents). Such Dividend Equivalents will be subject to the same vesting schedule to which the Performance Stock is subject. At the time that the underlying Performance Stock vests, the amount of Dividend Equivalents allocable to such Performance Stock (and any fractional share amount) will also vest and will be payable to the Grantee in shares of SLM common stock. Dividend Equivalents are not subject to income tax until vesting, at which time they are taxed as ordinary income. | ||
| If compensation paid to the Grantee of the Performance Stock might be subject to the tax deduction limitations of section 162(m) of the Internal Revenue Code, actual vesting of the Performance Stock will occur upon certification by the Compensation and Personnel Committee that applicable performance targets have been met. | ||
| If the Board of Directors of the Corporation, or an appropriate committee thereof, determines that any fraud or intentional misconduct by an officer at the level of Senior Vice President or above (the Officer) was a significant contributing factor to the Corporation having to restate all or a portion of its financial statement(s), the Board or committee shall, to the extent permitted by governing law, require reimbursement of any compensation resulting from the vesting of Performance Stock: 1) if the vesting of such Performance Stock occurred during the 12-month period following the first public disclosure of the incorrect financial statement; 2) if the vesting of the Performance Stock was based on the achievement of financial results that were subsequently determined to be less favorable to the calculation made to vest the Performance Stock; and 3) in the Board or Committees judgment, to the extent that the filing of the false financial statement negatively impacted the Corporations stock price. | ||
| Additionally, if the Board of Directors of the Corporation, or an appropriate committee thereof, determines that any material misstatement of financial results or a performance metric criteria or any material violation of corporate policy, including compliance and risk policies occurs, the Board or committee shall, to the extent permitted by governing law, require reimbursement of any compensation resulting from the vesting of Performance Stock and the cancellation of any outstanding shares of Performance Stock. | ||
| Capitalized terms not otherwise defined herein are defined in the Plan. |
1. | I have reviewed this annual report on Form 10-K of SLM Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
/s/ Albert L. Lord | ||||
Albert L. Lord | ||||
Vice Chairman and Chief Executive Officer
(Principal Executive Officer)
March 2, 2009 |
1. | I have reviewed this annual report on Form 10-K of SLM Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
/s/ John F. Remondi | ||||
John F. Remondi | ||||
Vice Chairman and Chief Financial Officer
(Principal Financial and Accounting Officer)
March 2, 2009 |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
/s/ Albert L. Lord | |||||||
Albert L. Lord | |||||||
Vice Chairman and Chief Executive Officer
(Principal Executive Officer)
March 2, 2009 |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
/s/ John F. Remondi | ||||
John F. Remondi | ||||
Vice Chairman and Chief Financial
Officer
(Principal Financial and Accounting Officer) March 2, 2009 |
||||