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Document and Company Information - USD ($) $ in Billions	12 Months Ended
Document and Company Information - USD ($) $ in Billions	Dec. 31, 2009	Jan. 31, 2010	Jun. 30, 2009
Document and Company Information [Abstract]
Entity Registrant Name	SLM CORP
Entity Central Index Key	0001032033
Document Type	10-K
Document Period End Date	Dec. 31, 2009
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float			$ 4.8
Entity Common Stock, Shares Outstanding (actual number)		484,912,370

Consolidated Balance Sheets - USD ($) $ in Thousands	12 Months Ended
Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2009	Dec. 31, 2008
Assets
FFELP Stafford and Other Student Loans (net of allowance for losses of $104,219 and $90,906, respectively)	$ 42,978,874	$ 44,025,361
FFELP Stafford Loans Held-for-Sale	9,695,714	8,450,976
FFELP Consolidation Loans (net of allowance for losses of $56,949 and $46,637, respectively)	68,378,560	71,743,435
Private Education Loans (net of allowance for losses of $1,443,440 and $1,308,043, respectively)	22,753,462	20,582,298
Other loans (net of allowance for losses of $73,985 and $58,395, respectively)	420,233	729,380
Investments
Available-for-sale	1,273,275	861,008
Other	740,553	180,397
Total investments	2,013,828	1,041,405
Cash and cash equivalents	6,070,013	4,070,002
Restricted cash and investments	5,168,871	3,535,286
Retained Interest in off-balance sheet securitized loans	1,828,075	2,200,298
Goodwill and acquired intangible assets, net	1,177,310	1,249,219
Other assets	9,500,358	11,140,777
Total assets	169,985,298	168,768,437
Liabilities
Short-term borrowings	30,896,811	41,933,043
Long-term borrowings	130,546,272	118,224,794
Other liabilities	3,263,593	3,604,260
Total liabilities	$ 164,706,676	$ 163,762,097
Commitments and contingencies
Preferred stock, par value $.20 per share, 20,000 shares authorized
Common stock, par value $.20 per share, 1,125,000 shares authorized: 552,220 and 534,411 shares issued, respectively	$ 110,444	$ 106,883
Additional paid-in capital	5,090,891	4,684,112
Accumulated other comprehensive loss (net of tax benefit of $23,448 and $43,202, respectively)	(40,825)	(76,476)
Retained earnings	604,467	426,175
Total SLM Corporation stockholders' equity before treasury stock	7,140,347	6,855,464
Common stock held in treasury at cost: 67,222 and 66,958 shares, respectively	1,861,738	1,856,394
Total SLM Corporation stockholders' equity	5,278,609	4,999,070
Noncontrolling interest	13	7,270
Total equity	5,278,622	5,006,340
Total liabilities and stockholders' equity	169,985,298	168,768,437
Preferred stock
Preferred stock, par value $.20 per share, 20,000 shares authorized
Total equity	1,375,370	1,714,770
Preferred stock, series A
Preferred stock, par value $.20 per share, 20,000 shares authorized
Preferred stock	165,000	165,000
Preferred stock, series B
Preferred stock, par value $.20 per share, 20,000 shares authorized
Preferred stock	400,000	400,000
Preferred stock, series C
Preferred stock, par value $.20 per share, 20,000 shares authorized
Preferred stock	$ 810,370	$ 1,149,770

Consolidated Balance Sheets (Parenthetical) - USD ($) shares in Thousands	Dec. 31, 2009	Dec. 31, 2008
Assets
Allowance for other student loans losses	$ 104,219,000	$ 90,906,000
Allowance for consolidation loans losses	56,949,000	46,637,000
Allowance for private education loans losses	1,443,440,000	1,308,043,000
Allowance for other loans losses	73,985,000	58,395,000
Preferred stock, par value $.20 per share, 20,000 shares authorized
Preferred stock, par value	$ 0.2	$ 0.2
Preferred stock, shares authorized	20,000	20,000
Common stock, par value	$ 0.2	$ 0.2
Common stock, shares authorized	1,125,000	1,125,000
Common stock, shares issued	552,220	534,411
Tax effect for accumulated other comprehensive loss	$ 23,448,000	$ 43,202,000
Common stock held in treasury	67,222	66,958
Preferred stock, series A
Preferred stock, par value $.20 per share, 20,000 shares authorized
Preferred stock, par value	$ 50	$ 50
Preferred stock, shares issued	3,300	3,300
Preferred stock, series B
Preferred stock, par value $.20 per share, 20,000 shares authorized
Preferred stock, par value	$ 100	$ 100
Preferred stock, shares issued	4,000	4,000
Preferred stock, series C
Preferred stock, par value $.20 per share, 20,000 shares authorized
Preferred stock series C, par value	$ 810	$ 1,150
Preferred stock, shares issued	1,000	1,000
Mandatory convertible preferred stock, dividend rate	7.25%	7.25%

Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2009	Dec. 31, 2008	Dec. 31, 2007
Interest income:
FFELP Stafford and Other Student Loans	$ 1,211,587	$ 1,994,394	$ 2,060,993
FFELP Consolidation Loans	1,882,195	3,178,692	4,343,138
Private Education Loans	1,582,514	1,737,554	1,456,471
Other loans	56,005	82,734	105,843
Cash and investments	26,064	276,264	707,577
Total interest income	4,758,365	7,269,638	8,674,022
Total interest expense	3,035,639	5,905,418	7,085,772
Net interest income	1,722,726	1,364,220	1,588,250
Less: provisions for loan losses	1,118,960	719,650	1,015,308
Net interest income after provisions for loan losses	603,766	644,570	572,942
Other income (loss) :
Gains on student loan securitizations	0	0	367,300
Servicing and securitization revenue	295,297	261,819	437,097
Gains (losses) on sales of loans and securities, net	283,836	(186,155)	(95,492)
Gains (losses) on derivative and hedging activities, net	(604,535)	(445,413)	(1,360,584)
Contingency fee revenue	295,883	340,140	335,737
Collections revenue	51,152	127,823	219,683
Guarantor servicing fees	135,562	121,363	156,429
Other	929,151	392,076	385,303
Total other income	1,386,346	611,653	445,473
Expenses:
Salaries and benefits	549,137	602,868	728,095
Other operating expenses	706,169	712,083	759,895
Restructuring expenses	13,767	83,516	22,505
Total expenses	1,269,073	1,398,467	1,510,495
Income (loss) from continuing operations, before income tax expense (benefit)	721,039	(142,244)	(492,080)
Income tax expense (benefit)	238,364	(76,769)	408,275
Net income (loss) from continuing operations	482,675	(65,475)	(900,355)
Income (loss) from discontinued operations, net of tax benefit	(157,690)	(143,219)	6,276
Net income (loss)	324,985	(208,694)	(894,079)
Less: net income attributable to noncontrolling interest	847	3,932	2,315
Net income (loss) attributable to SLM Corporation	324,138	(212,626)	(896,394)
Preferred stock dividends	145,836	111,206	37,145
Net income (loss) attributable to SLM Corporation common stock	178,302	(323,832)	(933,539)
Net income (loss) attributable to SLM Corporation:
Continuing operations, net of tax	481,828	(69,407)	(902,670)
Discontinued operations, net of tax	(157,690)	(143,219)	6,276
Net income (loss) attributable to SLM Corporation	$ 324,138	$ (212,626)	$ (896,394)
Basic earnings (loss) per common share attributable to SLM Corporation common shareholders:
Continuing operations	$ 0.71	$ (0.39)	$ (2.28)
Discontinued operations	(0.33)	(0.3)	0.02
Total	$ 0.38	$ (0.69)	$ (2.26)
Average common shares outstanding	470,858	466,642	412,233
Diluted earnings (loss) per common share attributable to SLM Corporation common shareholders:
Continuing operations	$ 0.71	$ (0.39)	$ (2.28)
Discontinued operations	(0.33)	(0.3)	0.02
Total	$ 0.38	$ (0.69)	$ (2.26)
Average common and common equivalent shares outstanding	471,584	466,642	412,233
Dividends per common share attributable to SLM Corporation common shareholders	$ 0	$ 0	$ 0.25

Consolidated Statements of Changes in Stockholders Equity - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2009	Dec. 31, 2008	Dec. 31, 2007
Statement [Line Items]
Beginning Balance	$ 5,006,340	$ 5,234,895	$ 4,369,157
Comprehensive income:
Net income (loss)	324,985	(208,694)	(894,079)
Other comprehensive income, net of tax:
Change in unrealized gains (losses) on investments, net of tax	2,872	(45,360)	(101,591)
Change in unrealized gains (losses) on derivatives, net of tax	40,087	(71,412)	(15,004)
Defined benefit pension plans adjustment	(7,308)	(1,413)	3,848
Comprehensive income	360,636	(326,879)	(1,006,826)
Cash dividends:
Common stock dividends			(102,658)
Restricted stock dividend	(10)	(1,852)	(8)
Issuance of common shares	3,298	39,036	2,148,482
Issuance of preferred shares		145,345	968,674
Conversion of preferred shares		0
Tax benefit related to employee stock option and purchase plans	(9,710)	(16,981)	49,016
Stock-based compensation cost	47,296	76,121	65,917
Cumulative effect of accounting change			(5,761)
Repurchase of common shares:
Open market repurchases			(65,018)
Equity forward settlement:
Settlement cost, cash			(164,437)
(Gain) loss on settlement			54,716
Equity forwards agreed to be settled:
Settlement cost, cash			(1,992,938)
(Gain) loss on settlement			1,105,975
Benefit plans	(5,349)	(24,767)	(152,829)
Contributions			2,947
Acquisition of noncontrolling interest in Purchased Paper business		(4,355)
Sale of international Purchased Paper - Non-Mortgage business	(7,257)
Noncontrolling interest - other	(847)	(3,667)	(3,017)
Ending Balance	5,278,622	5,006,340	5,234,895
Preferred stock
Statement [Line Items]
Beginning Balance	$ 1,714,770	$ 1,565,000	$ 565,000
Beginning Balance, shares	8,449,770	8,300,000	7,300,000
Cash dividends:
Issuance of preferred shares		$ 150,000	$ 1,000,000
Issuance of preferred shares, shares		150,000	1,000,000
Conversion of preferred shares	$ (339,400)	$ (230)
Conversion of preferred shares, shares	(339,400)	(230)
Equity forwards agreed to be settled:
Ending Balance	$ 1,375,370	$ 1,714,770	$ 1,565,000
Ending Balance, shares	8,110,370	8,449,770	8,300,000
Preferred stock, series A
Cash dividends:
Preferred stock	$ (11,500)	$ (11,501)	$ (11,500)
Preferred stock, series B
Cash dividends:
Preferred stock	(6,752)	(15,927)	(24,796)
Preferred stock, series C
Cash dividends:
Preferred stock	(97,523)	(83,128)	(201)
Total Stockholders' Equity
Statement [Line Items]
Beginning Balance	4,999,070	5,223,535	4,360,042
Comprehensive income:
Net income (loss)	324,138	(212,626)	(896,394)
Other comprehensive income, net of tax:
Change in unrealized gains (losses) on investments, net of tax	2,872	(45,360)	(101,591)
Change in unrealized gains (losses) on derivatives, net of tax	40,087	(71,412)	(15,004)
Defined benefit pension plans adjustment	(7,308)	(1,413)	3,848
Comprehensive income	359,789	(330,811)	(1,009,141)
Cash dividends:
Common stock dividends			(102,658)
Restricted stock dividend	(10)	(1,852)	(8)
Issuance of common shares	3,298	39,036	2,148,482
Issuance of preferred shares		145,345	968,674
Conversion of preferred shares		0
Tax benefit related to employee stock option and purchase plans	(9,710)	(16,981)	49,016
Stock-based compensation cost	47,296	76,121	65,917
Cumulative effect of accounting change			(5,761)
Repurchase of common shares:
Open market repurchases			(65,018)
Equity forward settlement:
Settlement cost, cash			(164,437)
(Gain) loss on settlement			54,716
Equity forwards agreed to be settled:
Settlement cost, cash			(1,992,938)
(Gain) loss on settlement			1,105,975
Benefit plans	(5,349)	(24,767)	(152,829)
Ending Balance	5,278,609	4,999,070	5,223,535
Total Stockholders' Equity \| Preferred stock, series A
Cash dividends:
Preferred stock	(11,500)	(11,501)	(11,500)
Total Stockholders' Equity \| Preferred stock, series B
Cash dividends:
Preferred stock	(6,752)	(15,927)	(24,796)
Total Stockholders' Equity \| Preferred stock, series C
Cash dividends:
Preferred stock	(97,523)	(83,128)	(201)
Common Stock
Statement [Line Items]
Beginning Balance	$ 106,883	$ 106,499	$ 86,623
Beginning Balance, shares	534,411,271	532,493,081	433,112,982
Cash dividends:
Issuance of common shares	$ 107	$ 382	$ 19,876
Issuance of common shares, shares	536,036	1,908,595	99,380,099
Conversion of preferred shares	$ 3,454	$ 2
Conversion of preferred shares, shares	17,272,269	9,595
Equity forwards agreed to be settled:
Ending Balance	$ 110,444	$ 106,883	$ 106,499
Ending Balance, shares	552,219,576	534,411,271	532,493,081
Common Stock Share s Outstanding
Statement [Line Items]
Beginning Balance, shares	467,452,871	466,541,687	410,616,812
Cash dividends:
Issuance of common shares, shares	536,134	1,912,262	109,196,633
Conversion of preferred shares, shares	17,272,269	9,595
Repurchase of common shares:
Open market repurchases, shares			(1,809,700)
Equity forward settlement:
Settlement cost, shares			(4,110,929)
Equity forwards agreed to be settled:
Settlement cost, shares			(44,039,890)
Benefit plans, shares	(263,640)	(1,010,673)	(3,311,239)
Ending Balance, shares	484,997,634	467,452,871	466,541,687
Additional Paid-In Capital
Statement [Line Items]
Beginning Balance	$ 4,684,112	$ 4,590,174	$ 2,565,211
Cash dividends:
Issuance of common shares	3,186	38,575	1,940,708
Issuance of preferred shares	650	(4,005)	(30,678)
Conversion of preferred shares	365,357	228
Tax benefit related to employee stock option and purchase plans	(9,710)	(16,981)	49,016
Stock-based compensation cost	47,296	76,121	65,917
Equity forwards agreed to be settled:
Ending Balance	5,090,891	4,684,112	4,590,174
Accumulated Other Comprehensive Income (Loss)
Statement [Line Items]
Beginning Balance	(76,476)	236,364	349,111
Other comprehensive income, net of tax:
Change in unrealized gains (losses) on investments, net of tax	2,872	(45,360)	(101,591)
Change in unrealized gains (losses) on derivatives, net of tax	40,087	(71,412)	(15,004)
Defined benefit pension plans adjustment	(7,308)	(1,413)	3,848
Cash dividends:
Cumulative effect of accounting change		(194,655)
Equity forwards agreed to be settled:
Ending Balance	(40,825)	(76,476)	236,364
Retained Earnings
Statement [Line Items]
Beginning Balance	426,175	557,204	1,834,718
Comprehensive income:
Net income (loss)	324,138	(212,626)	(896,394)
Cash dividends:
Common stock dividends			(102,658)
Restricted stock dividend	(10)	(1,852)	(8)
Issuance of common shares			(235,548)
Issuance of preferred shares	(650)	(650)	(648)
Conversion of preferred shares	(29,411)
Cumulative effect of accounting change		194,655	(5,761)
Equity forwards agreed to be settled:
Ending Balance	604,467	426,175	557,204
Retained Earnings \| Preferred stock, series A
Cash dividends:
Preferred stock	(11,500)	(11,501)	(11,500)
Retained Earnings \| Preferred stock, series B
Cash dividends:
Preferred stock	(6,752)	(15,927)	(24,796)
Retained Earnings \| Preferred stock, series C
Cash dividends:
Preferred stock	(97,523)	(83,128)	(201)
Treasury Stock
Statement [Line Items]
Beginning Balance	$ (1,856,394)	$ (1,831,706)	$ (1,040,621)
Beginning Balance, shares	(66,958,400)	(65,951,394)	(22,496,170)
Cash dividends:
Issuance of common shares	$ 5	$ 79	$ 423,446
Issuance of common shares, shares	98	3,667	9,816,534
Repurchase of common shares:
Open market repurchases			$ (65,018)
Open market repurchases, shares			(1,809,700)
Equity forward settlement:
Settlement cost, cash			$ (164,437)
Settlement cost, shares			(4,110,929)
(Gain) loss on settlement			$ 54,716
Equity forwards agreed to be settled:
Settlement cost, cash			$ (1,992,938)
Settlement cost, shares			(44,039,890)
(Gain) loss on settlement			$ 1,105,975
Benefit plans	$ (5,349)	$ (24,767)	$ (152,829)
Benefit plans, shares	(263,640)	(1,010,673)	(3,311,239)
Ending Balance	$ (1,861,738)	$ (1,856,394)	$ (1,831,706)
Ending Balance, shares	(67,221,942)	(66,958,400)	(65,951,394)
Noncontrolling Interest
Statement [Line Items]
Beginning Balance	$ 7,270	$ 11,360	$ 9,115
Comprehensive income:
Net income (loss)	847	3,932	2,315
Other comprehensive income, net of tax:
Comprehensive income	847	3,932	2,315
Equity forwards agreed to be settled:
Contributions			2,947
Acquisition of noncontrolling interest in Purchased Paper business		(4,355)
Sale of international Purchased Paper - Non-Mortgage business	(7,257)
Noncontrolling interest - other	(847)	(3,667)	(3,017)
Ending Balance	$ 13	$ 7,270	$ 11,360

Consolidated Statements of Changes in Stockholders Equity (Parenthetical) - $ / shares	12 Months Ended
	Dec. 31, 2009	Dec. 31, 2008	Dec. 31, 2007
Cash dividends:
Common stock, Dividends per common share attributable to SLM Corporation common shareholders	$ 0	$ 0	$ 0.25
Preferred stock, series A
Cash dividends:
Preferred stock, Dividends per preferred share	3.49	3.49	3.49
Preferred stock, series B
Cash dividends:
Preferred stock, Dividends per preferred share	1.76	4.09	6.25
Preferred stock, series C
Cash dividends:
Preferred stock, Dividends per preferred share	72.5	69.48	0.2
Total Stockholders' Equity
Cash dividends:
Common stock, Dividends per common share attributable to SLM Corporation common shareholders			$ 0.25
Total Stockholders' Equity \| Preferred stock, series A
Cash dividends:
Preferred stock, Dividends per preferred share	3.49	3.49	3.49
Total Stockholders' Equity \| Preferred stock, series B
Cash dividends:
Preferred stock, Dividends per preferred share	1.76	4.09	6.25
Total Stockholders' Equity \| Preferred stock, series C
Cash dividends:
Preferred stock, Dividends per preferred share	72.5	69.48	0.2
Retained Earnings
Cash dividends:
Common stock, Dividends per common share attributable to SLM Corporation common shareholders			$ 0.25
Retained Earnings \| Preferred stock, series A
Cash dividends:
Preferred stock, Dividends per preferred share	3.49	3.49	3.49
Retained Earnings \| Preferred stock, series B
Cash dividends:
Preferred stock, Dividends per preferred share	1.76	4.09	6.25
Retained Earnings \| Preferred stock, series C
Cash dividends:
Preferred stock, Dividends per preferred share	72.5	69.48	0.2

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2009	Dec. 31, 2008	Dec. 31, 2007
Operating activities
Net income (loss)	$ 324,985	$ (208,694)	$ (894,079)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Loss (income) from discontinued operations, net of tax	157,690	143,219	(6,276)
Gains on student loan securitizations	0	0	(367,300)
Gains (losses) on sales of loans and securities, net	580	186,155	95,492
Stock-based compensation cost	51,065	86,271	74,621
Unrealized (gains)/losses on derivative and hedging activities, excluding equity forwards	324,443	559,895	(214,963)
Unrealized (gains)/losses on derivative and hedging activities - equity forwards	0	0	1,558,025
Provisions for loan losses	1,118,960	719,650	1,015,308
Student loans originated for sale	(19,099,583)	(7,787,869)	0
Decrease (increase) in restricted cash - other	40,051	96,617	(84,537)
Decrease (increase) in accrued interest receivable	893,516	(279,082)	(1,046,124)
(Decrease) increase in accrued interest payable	(517,401)	(200,501)	214,401
Adjustment for non-cash (income)/loss related to Retained Interest	329,953	425,462	279,246
(Increase) decrease in other assets, goodwill and acquired intangible assets, net	(23,405)	421,667	836,564
(Decrease) in other liabilities	(29,276)	(155,768)	(890,464)
Cash (used in) provided by operating activities - continuing operations	(16,753,407)	(5,784,284)	1,463,993
Cash provided by (used in) operating activities - discontinued operations	514,713	301,234	(618,117)
Total net cash (used in) operating activities	(15,913,709)	(5,691,744)	(48,203)
Investing activities
Student loans acquired	(9,403,093)	(23,337,946)	(39,303,005)
Loans purchased from securitized trusts	(5,978)	(1,243,671)	(4,448,766)
Reduction of student loans:
Installment payments, claims and other	10,749,227	10,333,901	11,413,044
Proceeds from securitization of student loans treated as sales	0	0	1,976,599
Proceeds from sales of student loans	788,221	496,183	1,013,295
Other loans - originated	(2,823)	(1,138,355)	(3,396,501)
Other loans - repaid	261,491	1,542,307	3,420,187
Other investing activities, net	(573,251)	(135,041)	(358,209)
Purchases of available-for-sale securities	(128,478,198)	(101,140,587)	(90,087,504)
Proceeds from sales of available-for-sale securities	100,056	328,530	73,217
Proceeds from maturities of available-for-sale securities	127,951,879	102,436,912	89,353,103
Purchases of held-to-maturity and other securities	(889)	(500,255)	(330,450)
Proceeds from maturities of held-to-maturity securities and other securities	79,171	407,180	435,468
(Increase) decrease in restricted cash - on-balance sheet trusts	(1,181,275)	918,403	(1,293,846)
Return of investment from Retained Interest	26,513	403,020	276,996
Purchase of subsidiaries, net of cash acquired	0	(37,868)	0
Net cash provided by (used in) investing activities	311,051	(10,667,287)	(31,256,372)
Financing activities
Borrowings collateralized by loans in trust - issued	12,997,915	17,986,955	23,943,837
Borrowings collateralized by loans in trust - repaid	(5,689,713)	(6,299,483)	(6,429,648)
Asset-backed commercial paper conduits, net	(16,138,186)	(1,649,287)	21,073,857
ED Participation Program, net	19,301,929	7,364,969	0
ED Conduit Program facility, net	14,313,837	0	0
Other short-term borrowings issued	298,294	2,592,429	594,434
Other short-term borrowings repaid	(1,434,538)	(1,512,031)	(2,342,953)
Other long-term borrowings issued	4,333,181	3,563,003	1,567,602
Other long-term borrowings repaid	(9,504,267)	(9,518,655)	(3,188,249)
Other financing activities, net	(751,087)	284,659	901,263
Excess tax benefit from the exercise of stock-based awards	0	281	30,316
Common stock issued	664	5,979	2,125,111
Net settlements on equity forward contracts	0	0	(614,217)
Common stock repurchased	0	0	(2,222,394)
Common dividends paid	0	0	(102,658)
Preferred stock issued	0	145,345	968,674
Preferred dividends paid	(115,775)	(110,556)	(36,497)
Noncontrolling interest, net	(9,585)	(6,606)	(3,094)
Net cash provided by financing activities	17,602,669	12,847,002	36,265,384
Net increase (decrease) in cash and cash equivalents	2,000,011	(3,512,029)	4,960,809
Cash and cash equivalents at beginning of year	4,070,002	7,582,031	2,621,222
Cash and cash equivalents at end of year	6,070,013	4,070,002	7,582,031
Cash disbursements made for:
Interest	3,656,545	6,157,096	6,897,773
Income taxes	$ 298,285	$ 699,364	$ 1,097,340

Organization and Business

12 Months Ended

Dec. 31, 2009

Organization and Business [Abstract]

Organization and Business


1.	Organization and Business

SLM Corporation (the “Company”) is a holding company that operates through a number of subsidiaries. The Company was formed 37 years ago as the Student Loan Marketing Association, a federally chartered government-sponsored enterprise (the “GSE”), with the goal of furthering access to higher education by acting as a secondary market for student loans. In 2004, the Company completed its transformation to a private company through its wind-down of the GSE. The GSE’s outstanding obligations were placed into a Master Defeasance Trust Agreement as of December 29, 2004, which was fully collateralized by direct, noncallable obligations of the United States.

The Company’s primary business is to originate and hold student loans by providing funding, delivery and servicing support for education loans in the United States through its participation in the Federal Family Education Loan Program (“FFELP”) and through offering non-federally guaranteed Private Education Loans. The Company primarily markets its FFELP Stafford and Private Education Loans through on-campus financial aid offices.

The Company has expanded into a number of fee-based businesses, most notably its Asset Performance Group (“APG”), which is presented as a distinct segment in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 280, “Segment Reporting.” The Company’s APG business segment provides a wide range of accounts receivable and collections services including student loan default aversion services, defaulted student loan portfolio management services, contingency collections services for student loans and other asset classes, and accounts receivable management and collection for purchased portfolios of receivables that are delinquent or have been charged off by their original creditors as well as sub-performing and non-performing mortgage loans. In 2008, the Company concluded that its APG purchased paper business no longer produced a mutual strategic fit. The Company sold its international Purchased Paper— Non-Mortgage business in the first quarter of 2009. The Company sold all of its assets in the Purchased-Paper—Mortgage/Properties business in the fourth quarter of 2009. The Company continues to wind down the domestic side of its Purchased Paper—Non-Mortgage business.

The Company also earns fees for a number of services, including student loan and guarantee servicing, and for providing processing capabilities and information technology to educational institutions as well as 529 college savings plan program management, transfer and servicing agent services, and administration services through Upromise Investments, Inc. (“UII”) and Upromise Investment Advisors, LLC (“UIA”). The Company also operates a consumer savings network through Upromise, Inc. (“Upromise”). References in this Annual Report to “Upromise” refer to Upromise and its subsidiaries, UII and UIA.

On April 16, 2007, the Company announced that a buyer group (“Buyer Group”) led by J.C. Flowers & Co. (“J.C. Flowers”), Bank of America, N.A. and JPMorgan Chase, N.A. had signed a definitive agreement (“Merger Agreement”) to acquire the Company (the “Proposed Merger”) for approximately $25.3 billion or $60.00 per share of common stock. On January 25, 2008, the Company, Mustang Holding Company Inc. (“Mustang Holding”), Mustang Merger Sub, Inc. (“Mustang Sub”), J.C. Flowers, Bank of America, N.A. and JPMorgan Chase Bank, N.A. entered into a Settlement, Termination and Release Agreement (the “Agreement”). Under the Agreement, the lawsuit filed by the Company on October 8, 2007, related to the Proposed Merger, as well as all counterclaims, was dismissed and the Merger Agreement dated April 15, 2007, among the Company, Mustang Holding and Mustang Sub was terminated on January 25, 2008.

On February 26, 2009, the Obama Administration (the “Administration”) issued their 2010 fiscal year budget request to Congress which included provisions that called for the elimination of the FFELP program and which would require all new federal loans to be made through the Direct Student Loan Program (“DSLP”). On September 17, 2009 the House of Representatives passed H.R. 3221, the Student Aid and Fiscal Responsibility act (“SAFRA”), which was consistent with the Administration’s 2010 budget request to Congress. If it became law SAFRA would eliminate the FFELP and require that, after July 1, 2010, all new federal loans be made through the DSLP. The Administration’s 2011 fiscal year budget continued these requests.

The Senate has not yet introduced legislation on this issue. The Company, together with other members of the student loan community, has been working with members of Congress to enhance SAFRA to allow students and schools to continue to choose their loan originator and to require servicers to share in the risk of loan default. This proposal is referred to as the “Community Proposal” because it has the widespread support of the student lending community, which includes lenders, Guarantors, financial aid advisors and others. The Company believes that maintaining competition in the student loan programs and requiring participants to assume a portion of the risk inherent in the program, two of the major tenets of the Community Proposal, would result in a more efficient and cost effective program that better serves students, schools, ED and taxpayers.

Significant Accounting Policies

12 Months Ended

Dec. 31, 2009

Significant Accounting Policies [Abstract]

Significant Accounting Policies


2.	Significant Accounting Policies

Consolidation

The consolidated financial statements include the accounts of SLM Corporation and its majority-owned and controlled subsidiaries and those Variable Interest Entities (“VIEs”) for which SLM Corporation is the primary beneficiary, after eliminating the effects of intercompany accounts and transactions.

ASC 810, “Consolidation,” requires VIEs to be consolidated by their primary beneficiaries. A VIE exists when either the total equity investment at risk is not sufficient to permit the entity to finance its activities by itself, or the equity investors lack one of three characteristics associated with owning a controlling financial interest. Those characteristics are the direct or indirect ability to make decisions about an entity’s activities that have a significant impact on the success of the entity, the obligation to absorb the expected losses of an entity, and the rights to receive the expected residual returns of the entity.

As further discussed in Note 8, “Student Loan Securitization,” the Company does not consolidate any qualifying special purpose entities (“QSPEs”) created for securitization purposes in accordance with ASC 860, “Transfers and Servicing.” All of the Company’s off-balance sheet securitizations meet the definition of a QSPE and are not consolidated. The Company’s accounting treatment for its on-balance sheet securitizations, which are not QSPEs, are governed by ASC 810 and are consolidated in the accompanying financial statements as the Company is the primary beneficiary.

Use of Estimates

The Company’s financial reporting and accounting policies conform to generally accepted accounting principles in the United States of America (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Key accounting policies that include significant judgments and estimates include valuation and income recognition related to allowance for loan losses, loan effective interest rate method (student loan premiums and discounts), fair value measurements, securitization activities (gain on sale and the related Retained Interest), and derivative accounting.

Fair Value Measurement

The Company uses estimates of fair value in applying various accounting standards for its financial statements. Under GAAP, fair value measurements are used in one of four ways:


	•	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 accumulated other comprehensive income section of the consolidated statement of changes in stockholders’ equity;

	•	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.

Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction between willing and able market participants. In general, the Company’s policy in estimating fair values is to first look at observable market prices for identical assets and liabilities in active markets, where available. When these are not available, other inputs are used to model fair value such as prices of similar instruments, yield curves, volatilities, prepayment speeds, default rates and credit spreads (including for the Company’s liabilities), relying first on observable data from active markets. Additional adjustments may be made for factors including liquidity, credit, bid/offer spreads, etc., depending on current market conditions. Transaction costs are not included in the determination of fair value. When possible, the Company seeks to validate the model’s output to market transactions. Depending on the availability of observable inputs and prices, different valuation models could produce materially different fair value estimates. The values presented may not represent future fair values and may not be realizable.

The Company categorizes its fair value estimates based on a hierarchical framework associated with three levels of price transparency utilized in measuring financial instruments at fair value. Classification is based on the lowest level of input that is significant to the fair value of the instrument. The three levels are as follows:


	•	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 determine fair value. Significant inputs are directly observable from active markets for substantially the full term of the asset or liability being valued.

	•	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.

Loans

Loans, consisting of federally insured student loans, Private Education Loans, student loan participations, lines of credit, academic facilities financings, and other consumer and mortgage loans that the Company has the ability and intent to hold for the foreseeable future are classified as held for investment and are carried at amortized cost. Amortized cost includes the unamortized premiums, discounts, and capitalized origination costs and fees, all of which are amortized to interest income as further discussed below. Loans which are held-for-investment also have an allowance for loan loss as needed. Any loans the Company has the ability and intent to sell are classified as held for sale, and carried at the lower of cost or fair value. Loans which are held-for-sale do not have the associated premium, discount, and capitalized origination costs and fees amortized into interest income. In addition, once a loan is classified as held-for-sale, there is no further adjustment to the loan’s allowance for loan loss that existed immediately prior to the reclassification to held-for-sale.

As market conditions permit, the Company actively securitizes loans but securitization is viewed as one of many different sources of financing. At the time of a funding need, the most advantageous funding source is identified and, if that source is the securitization program, loans are selected based on the required characteristics to structure the desired transaction (e.g., type of loan, mix of interim vs. repayment status, credit rating, maturity dates, etc.). The Company structures securitizations to obtain the most favorable financing terms. Due to some of the structuring terms, certain transactions qualify for sale treatment under ASC 860 while others do not qualify for sale treatment and are recorded as financings. All student loans are initially categorized as held for investment until there is certainty as to each specific loan’s ultimate financing because the Company does not securitize all loans and not all securitizations qualify as sales. It is only when the Company has selected the loans to securitize and that securitization transaction qualifies as a sale under ASC 860 does the Company make the decision to sell such loans. At that time, the loans selected are transferred into the held-for-sale classification and carried at the lower of cost or fair value. If the Company anticipates recognizing a gain related to the impending securitization, then the fair value of the loans is higher than their respective cost basis and no valuation allowance is needed.

Under The Ensuring Continued Access to Student Loans Act of 2008 (“ECASLA”), ED has implemented the Loan Purchase Commitment Program (“Purchase Program”). Under the Purchase Program, ED will purchase eligible FFELP loans at a set price by September 30, 2010 at the option of the Company. The Company is classifying all loans eligible to be sold to ED under the Purchase Program as held-for-sale. The Company currently has the ability and intent to sell such loans to ED under the Purchase Program due to the current environment in the capital markets. These loans are included in the “FFELP Stafford Held-for-Sale Loans” line on the consolidated balance sheets.

Student Loan Income

The Company recognizes student loan interest income as earned, adjusted for the amortization of premiums and capitalized direct origination costs, accretion of discounts, and borrower benefits for timely payment (“Repayment Borrower Benefits”). These adjustments are made in accordance with ASC 310, “Receivables,” which requires income to be recognized based upon the expected yield of the loan over its life after giving effect to prepayments and extensions, and to estimates related to Repayment Borrower Benefits. As a result, for loans that are held for investment, premiums, discounts, and capitalized direct origination costs and fees are amortized over the estimated life of the loan, which includes an estimate of prepayment speeds. The estimate of the prepayment speed must consider the effect of consolidations, voluntary prepayments and student loan defaults, all of which shorten the life of loan. Prepayment speed estimates must also consider the utilization of deferment and forbearance, which lengthen the life of loan, coupled with management’s expectation of future activity. For Repayment Borrower Benefits, the estimates of their effect on student loan yield are based on analyses of historical payment behavior of borrowers who are eligible for the incentives and its effect on the ultimate qualification rate for these incentives. The Company regularly evaluates the assumptions used to estimate its loan life and the qualification rates used for Repayment Borrower Benefits. In instances where there are changes to the assumptions, amortization is adjusted on a cumulative basis to reflect the change since the acquisition of the loan. The Company pays an annual 105 basis point Consolidation Loan Rebate Fee on FFELP Consolidation Loans which is netted against student loan income. Additionally, interest earned on student loans reflects potential non-payment adjustments in accordance with the Company’s non-accrual policy as discussed further in “Allowance for Student Loan Losses” below.

The Company recognizes certain fee income (primarily late fees and forbearance fees) on student loans according to the contractual provisions of the promissory notes, as well as the Company’s expectation of collectability. Student loan fee income is recorded when earned in “other income” in the consolidated statements of income.

Allowance for Student Loan Losses

The Company maintains an allowance for loan losses at an amount sufficient to absorb losses incurred in its FFELP loan and Private Education Loan portfolios at the reporting date based on a projection of estimated probable credit losses incurred in the portfolio. The Company analyzes those portfolios to determine the effects that the various stages of delinquency and forbearance have on borrower default behavior and ultimate charge-off. The Company estimates the allowance for loan losses for its loan portfolio using a migration analysis of delinquent and current accounts. A migration analysis is a technique used to estimate the likelihood that a loan receivable may progress through the various delinquency stages and ultimately charge off, and is a widely used reserving methodology in the consumer finance industry. The Company also uses the migration analysis to estimate the amount of uncollectible accrued interest on Private Education Loans and write-off that amount against current period interest income. The evaluation of the allowance for loan losses is inherently subjective, as it requires material estimates that may be susceptible to significant changes. The Company’s default estimates are based on a loss confirmation period of generally two years (i.e., the Company’s allowance for loan loss covers the next two years of expected losses). The two-year estimate of the allowance for loan losses is subject to a number of assumptions. If actual future performance in delinquency, charge-offs and recoveries are significantly different than estimated, this could materially affect the Company’s estimate of the allowance for loan losses and the related provision for loan losses on the Company’s income statement. The Company believes that the Private Education Loan and FFELP allowance for loan losses are appropriate to cover probable losses incurred in the student loan portfolio.

When calculating the allowance for loan losses on Private Education Loans, the Company divides the portfolio into categories of similar risk characteristics based on loan program type, loan status (in-school, grace, forbearance, repayment, and delinquency), underwriting criteria (FICO scores), and existence or absence of a cosigner. As noted above, the Company uses historical experience of borrower default behavior and charge-offs to estimate the probable credit losses incurred in the loan portfolio at the reporting date. Also, the Company uses historical borrower payment behavior to estimate the timing and amount of future recoveries on charged off loans. The Company then applies the default and collection rate projections to each category of loans. Once the quantitative calculation is performed, management reviews the adequacy of the allowance for loan losses and determines if qualitative adjustments need to be considered. One technique for making this determination is through projection modeling, which is used to determine if the allowance for loan losses is sufficient to absorb credit losses anticipated during the loss confirmation period. Projection modeling is a forward-looking projection of charge-offs. Assumptions that are utilized in the projection modeling include (but are not limited to) historical experience, recent changes in collection policies and procedures, collection performance, and macroeconomic indicators. Additionally, management considers changes in laws and regulations that could potentially impact the allowance for loan losses.

The current and future economic environment is taken into account by the Company when calculating the allowance for loan loss. The Company analyzes key economic statistics and the impact they will have on future charge offs. Key economic statistics analyzed as part of the allowance for loan loss are unemployment rates (total and specific to college graduates), consumer confidence and other asset type delinquency rates (credit cards, mortgages). As a result of the economy, provision expense has remained elevated since the fourth quarter of 2008. If the economy weakens beyond the Company’s expectations, the expected losses resulting from its default and collection estimates embedded in the allowance could be higher than currently projected.

As part of concluding on the adequacy of the allowance for loan loss, the Company also reviews key allowance and loan metrics. The most relevant of these metrics considered are the allowance coverage of charge-offs ratio; the allowance as a percentage of total loans and of loans in repayment; and delinquency and forbearance percentages.

In 2009, the Company implemented a program which offers loan modifications to borrowers who qualify. Temporary interest rate concessions are granted to borrowers experiencing financial difficulties and who meet other criteria. The allowance on these loans is calculated based on the present value of the expected cash flows (including estimates of future defaults) discounted at the loan’s effective interest rate. This calculation contains estimates which are inherently subjective and are evaluated on a periodic basis.

The majority of the Company’s Private Education Loan programs do not require that borrowers begin repayment until six months after they have graduated or otherwise left school. Consequently, the Company’s loss estimates for these programs are generally low while the borrower is in school. At December 31, 2009, 37 percent of the principal balance in the higher education Private Education Loan portfolio was related to borrowers who are in in-school or grace status and not required to make payments. As the current portfolio ages, an increasing percentage of the borrowers will leave school and be required to begin payments on their loans. The allowance for losses will change accordingly.

Similar to the rules governing FFELP payment requirements, the Company’s collection policies allow for periods of nonpayment for borrowers requesting additional payment grace periods upon leaving school or experiencing temporary difficulty meeting payment obligations. This is referred to as forbearance status and is considered separately in the Company’s allowance for loan losses. The loss confirmation period is in alignment with the Company’s typical collection cycle and takes into account these periods of nonpayment.

In general, Private Education Loan principal is charged off against the allowance when the loan exceeds 212 days delinquency. The charge-off amount equals the estimated loss of the defaulted loan balance. Actual recoveries, as they are received, are applied against the remaining loan balance that was not charged-off. If periodic recoveries are less than originally expected, the difference results in immediate additional provision expense and charge-off of such amount.

FFELP loans are guaranteed as to their principal and accrued interest in the event of default subject to a Risk Sharing level set based on the date of loan disbursement. For loans disbursed after October 1, 1993, and before July 1, 2006, the Company receives 98 percent reimbursement on all qualifying default claims. For loans disbursed on or after July 1, 2006, the Company receives 97 percent reimbursement. The College Cost Reduction and Access Act of 2007 (“CCRAA”) reduces the Risk Sharing level for loans disbursed on or after October 1, 2012 to 95 percent reimbursement, which will impact the allowance for loan losses in the future.

Similar to the allowance for Private Education Loan losses, the allowance for FFELP loan losses uses historical experience of borrower default behavior and a two year loss confirmation period to estimate the credit losses incurred in the loan portfolio at the reporting date. The Company divides the portfolio into categories of similar risk characteristics based on loan program type, school type and loan status. The Company then applies the default rate projections, net of applicable Risk Sharing, to each category for the current period to perform its quantitative calculation. Once the quantitative calculation is performed, management reviews the adequacy of the allowance for loan losses and determines if qualitative adjustments need to be considered.

Previously, when Private Education Loans in the Company’s off-balance sheet securitized trusts settling before September 30, 2005 become 180 days delinquent, the Company exercised its contingent call option (the Company does not hold the contingent call option for any trusts settling after September 30, 2005) to repurchase these loans at par value and record a loss for the difference in the par value paid and the fair market value of the loan at the time of purchase, in accordance with ASC 310. Beginning in October 2008, the Company decided to no longer exercise its contingent call option. The losses recorded upon repurchase of loans under the contingent call option, for the years ended December 31, 2009, 2008, and 2007 were $0, $141 million, and $123 million, respectively, and were recorded in the “Gains (losses) on sales of loans and securities, net” line item in the consolidated statements of income. Subsequent to buyback, the Company accounts for these loans under ASC 310 in the same manner as discussed under “Collections Revenue” for the Company’s purchased paper portfolio. The initial valuation at buyback uses a discount rate similar to that used in valuing the Private Education Loan Residual Interests as that rate takes into account the credit and liquidity risks inherent in the loans being repurchased. Interest income recognized is recorded as part of student loan interest income.

Cash and Cash Equivalents

Cash and cash equivalents includes term federal funds, Eurodollar deposits, money market funds and bank deposits with original terms to maturity of less than three months.

Restricted Cash and Investments

Restricted cash primarily includes amounts for on-balance sheet student loan securitizations and other secured borrowings. This cash must be used to make payments related to trust obligations. Amounts on deposit in these accounts are primarily the result of timing differences between when principal and interest is collected on the trust assets and when principal and interest is paid on trust liabilities.

In connection with the Company’s tuition payment plan product, the Company receives cash from students and parents that in turn is owed to schools. This cash, a majority of which has been deposited at Sallie Mae Bank, is held in escrow for the beneficial owners. In addition, the cash rebates that Upromise members earn from qualifying purchases from Upromise’s participating companies are held in trust for the benefit of the members. This cash is held pursuant to a trust document until distributed in accordance with the Upromise member’s request and the terms of the Upromise service. Upromise, which acts as the trustee for the trust, has deposited a majority of the cash with Sallie Mae Bank pursuant to a money market deposit account agreement between Sallie Mae Bank and Upromise as trustee of the trust. Subject to capital requirements and other laws, regulations and restrictions applicable to Utah industrial banks, the cash that is deposited with Sallie Mae Bank in connection with the tuition payment plan and the Upromise rebates described above is not restricted and, accordingly, is not included in restricted cash and investments in the Company’s consolidated financial statements, as there is no restriction surrounding the use of funds by the Company.

Securities pledged as collateral related to the Company’s derivative portfolio where the counterparty has rights of rehypothecation, are classified as restricted. When the counterparty does not have these rights, the security is recorded in investments and disclosed as pledged collateral in the notes. Additionally, certain counterparties require cash collateral pledged to the Company to be segregated and held in restricted cash accounts per the terms of their International Swaps and Derivatives Association, Inc. (“ISDA”) Credit Support Annexes (“CSAs”). Cash balances that the Company’s indentured trusts deposit in guaranteed investment contracts that are held in trust for the related note holders are classified as restricted investments. Finally, cash received from lending institutions that is invested pending disbursement for student loans is restricted and cannot be disbursed for any other purpose.

Investments

Investments are held to provide liquidity and to serve as a source of income. The majority of the Company’s investments are classified as available-for-sale and such securities are carried at fair value, with the temporary changes in fair value carried as a separate component of stockholders’ equity. Changes in fair value for available-for-sale securities that have been designated as the hedged item in an ASC 815, “Derivatives and Hedging,” fair value hedge (as it relates to the hedged risks) are recorded in the “gains (losses) on derivative and hedging activities, net” line in the consolidated statements of income offsetting changes in fair value of the derivative which is hedging such investment. Temporary changes in fair value of the security as it relates to non-hedged risks are carried as a separate component of stockholders’ equity. The amortized cost of debt securities in this category is adjusted for amortization of premiums and accretion of discounts, which are amortized using the effective interest rate method. Other-than-temporary impairment is evaluated by considering several factors including the length of time and extent to which the fair value has been less than the amortized cost basis, the financial condition and near-term prospects of the security (considering factors such as adverse conditions specific to the security and ratings agency actions), and the intent and ability to retain the investment in order to allow for an anticipated recovery in fair value. Other-than-temporary impairment is recorded in earnings if the fair value is less than the amortized cost and the Company intends to sell the security or it is more likely than not that the Company will be required to sell the security before recovery of the loss. If the impairment is not other-than-temporary, the portion of the impairment related to credit losses is recorded in earnings and the impairment related to other factors is recorded in other comprehensive income. Securities classified as trading are accounted for at fair value with unrealized gains and losses included in investment income. Securities that the Company has the intent and ability to hold to maturity are classified as held-to-maturity and are accounted for at amortized cost unless the security is determined to have an other-than-temporary impairment. In this case it is accounted for in the same manner described above.

The Company also has other investments, including a receivable for cash collateral posted to derivative counterparties, the Company’s remaining investment in The Reserve Primary Fund and leveraged leases, primarily with U.S. commercial airlines. These investments are accounted for at amortized cost net of impairments in other investments. Insurance-related investments are carried in other assets.

Interest Expense

Interest expense is based upon contractual interest rates adjusted for the amortization of debt issuance costs and premiums and the accretion of discounts. The Company’s interest expense may also be adjusted for net payments/receipts related to interest rate and foreign currency swap agreements and interest rate futures contracts that qualify and are designated as hedges under GAAP. Interest expense also includes the amortization of deferred gains and losses on closed hedge transactions that qualified as cash flow hedges. Amortization of debt issue costs, premiums, discounts and terminated hedge basis adjustments are recognized using the effective interest rate method.

Transfer of Financial Assets

The Company accounts for the transfer of financial assets under ASC 860. The primary activity which falls under ASC 860 for the Company is securitization and other secured borrowing accounting which is further discussed below. The company’s indentured trust debt, ABCP borrowings, Ed Conduit and ED Participation Program facility were accounted for as on-balance sheet secured borrowings under ASC 860 as the trusts were either not QSPEs and/or the Company controlled the transferred assets. See “Securitization Accounting” below for further discussion on the criteria assessed under ASC 860 to determine whether a transfer of financial assets is a sale or a secured borrowing.

Securitization Accounting

To meet the sale criteria of ASC 860 the Company’s securitizations use a two-step structure with a QSPE that legally isolates the transferred assets from the Company, even in the event of bankruptcy. Transactions receiving sale treatment are also structured to ensure that the holders of the beneficial interests issued by the QSPE are not constrained from pledging or exchanging their interests, and that the Company does not maintain effective control over the transferred assets. If these criteria are not met, then the transaction is accounted for as an on-balance sheet secured borrowing under ASC 810, “Consolidation,” as the Company is the primary beneficiary of the VIE. In all cases, irrespective of whether they qualify as sales under ASC 860, the Company’s securitizations are structured such that legally they are sales of assets that isolate the transferred assets from the Company.

The Company assesses the financial structure of each securitization to determine whether the trust or other securitization vehicle meets the sale criteria as defined in ASC 860 and accounts for the transaction accordingly. To be a QSPE, the trust must meet all of the following conditions:


	•	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 either 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, or 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.

In certain securitizations there are certain terms present within the deal structure that result in such securitizations not qualifying for sale treatment by failing to meet the criteria required for the securitization entity (trust) to be a QSPE, or by failing other criteria for the securitization to qualify as a sale. Accordingly, these securitization trusts are accounted for as VIEs. Because the Company is considered the primary beneficiary in such VIEs, the transfer is deemed a financing and the trust is consolidated in the financial statements. The terms present in these structures that prevent sale treatment are: (1) the Company holds rights that can affect the remarketing of specific trust bonds that are not significantly limited in nature, (2) the trust has the right to enter into interest rate cap agreements after its settlement date that do not relate to the reissuance of third-party beneficial interests or (3) the Company holds an unconditional call option related to a certain percentage of trust assets.

Irrespective of whether a securitization receives sale treatment or not, the Company’s continuing involvement with its securitization trusts is generally limited to:


	•	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 Company acting as administrator for the securitization transactions it sponsored, which includes remarketing certain bonds at future dates.

	•	The Company’s 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.

	•	The option (in certain trusts that were TALF eligible in 2009) to call the outstanding bonds at a discount to par at a future date

The investors of the securitization trusts have no recourse to the Company’s other assets should there be a failure of the trusts to pay when due. Generally, the only arrangements under which the Company has to provide financial support to the trusts are:


	•	representation and warranty violations requiring the buyback 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.

Under the terms of the transaction documents of certain trusts, the Company has, from time to time, exercised its options to purchase delinquent loans from Private Education Loan trusts, to purchase the remaining loans from trusts once the loan balance falls below 10 percent of the original amount, or to call rate reset notes. The Company has not provided any financial support to the securitization trusts that it was not contractually required to provide in the past. Certain trusts maintain financial arrangements with third parties also typical of securitization transactions, such as derivative contracts (swaps) and bond insurance policies that, in the case of a counterparty failure, could adversely impact the value of the Company’s Residual Interest.

Retained Interest

The Company securitizes its student loan assets, and for transactions qualifying as sales, retains Residual Interests and servicing rights (as the Company retains the servicing responsibilities), all of which are referred to as the Company’s Retained Interest in off-balance sheet securitized loans. The Residual Interest is the right to receive cash flows from the student loans and reserve accounts in excess of the amounts needed to pay servicing, derivative costs (if any), other fees, and the principal and interest on the bonds backed by the student loans.

When the Company qualifies for sale treatment on its securitizations, it recognizes the resulting gain on student loan securitizations in the consolidated statements of income. This gain is based upon the difference between the allocated cost basis of the assets sold and the relative fair value of the assets received. The component in determining the fair value of the assets received that involves the most judgment is the valuation of the Residual Interest. The Company estimates the fair value of the Residual Interest, both initially and each subsequent quarter, based on the present value of future expected cash flows using management’s best estimates of the following key assumptions — credit losses, prepayment speeds and discount rates commensurate with the risks involved. Quoted market prices are not available. The Company adopted ASC 825, “Financial Instruments,” effective January 1, 2008, whereby the Company elected to carry all Residual Interests at fair value with subsequent changes in fair value recorded in earnings. The Company chose this election in order to simplify the accounting for Residual Interests under one accounting model.

The fair value of the Fixed Rate Embedded Floor Income is a component of the Residual Interest and is determined both initially at the time of the sale of the student loans and each subsequent quarter. This estimate is based on an option valuation and a discounted cash flow calculation that considers the current borrower rate, Special Allowance Payment (“SAP”) spreads and the term for which the loan is eligible to earn Floor Income as well as time value, forward interest rate curve and volatility factors. Variable Rate Floor Income received is recorded as earned in securitization income.

The Company also receives income for servicing the loans in its securitization trusts which is recognized as earned. The Company assesses the amounts received as compensation for these activities at inception and on an ongoing basis to determine if the amounts received are adequate compensation as defined in ASC 860. To the extent such compensation is determined to be no more or less than adequate compensation, no servicing asset or obligation is recorded at the time of securitization. Servicing rights are subsequently carried at the lower of cost or market. At December 31, 2009 and 2008, the Company did not have servicing assets or liabilities recorded on the balance sheet.

Derivative Accounting

The Company accounts for its derivatives, which include interest rate swaps, cross-currency interest rate swaps, interest rate futures contracts, interest rate cap contracts, Floor Income Contracts and equity forward contracts in accordance with ASC 815, “Derivatives and Hedging,” which requires that every derivative instrument, including certain derivative instruments embedded in other contracts, be recorded at fair value on the balance sheet as either an asset or liability. Derivative positions are recorded as net positions by counterparty based on master netting arrangements (see Note 9, “Derivative Instruments,” under Risk Management Strategy) exclusive of accrued interest and cash collateral held or pledged. The Company determines the fair value for its derivative contracts primarily using pricing models that consider current market conditions and the contractual terms of the derivative contract. These factors include interest rates, time value, forward interest rate curve, volatility factors, forward foreign exchange rates, and the closing price of the Company’s stock (related to its equity forward contracts). Inputs are generally from active financial markets; however, adjustments are made to derivative valuations for inputs from illiquid markets, and for credit for both when the Company has an exposure to the counterparty net of collateral held and when the counterparty has exposure to the Company net of collateral pledged. The fair values of some derivatives are determined using counterparty valuations. Pricing models and their underlying assumptions impact the amount and timing of unrealized gains and losses recognized with regard to derivatives, and the use of different pricing models or assumptions could produce different financial results. As a matter of policy, the Company compares the fair values of its derivatives that it calculates to those provided by its counterparties. Any significant differences are identified and resolved appropriately.

Many of the Company’s derivatives, mainly interest rate swaps hedging the fair value of fixed-rate assets and liabilities, cross-currency interest rate swaps, and certain Eurodollar futures contracts, qualify as effective hedges under ASC 815. For these derivatives, the relationship between the hedging instrument and the hedged items (including the hedged risk and method for assessing effectiveness), as well as the risk management objective and strategy for undertaking various hedge transactions at the inception of the hedging relationship, is documented. Each derivative is designated to either a specific (or pool of) asset(s) or liability(ies) on the balance sheet or expected future cash flows, and designated as either a “fair value” or a “cash flow” hedge. Fair value hedges are designed to hedge the Company’s exposure to changes in fair value of a fixed rate or foreign denominated asset or liability, while cash flow hedges are designed to hedge the Company’s exposure to variability of either a floating rate asset’s or liability’s cash flows or an expected fixed rate debt issuance. For effective fair value hedges, both the hedge and the hedged item (for the risk being hedged) are marked-to-market with any difference reflecting ineffectiveness and recorded immediately in the statement of income. For effective cash flow hedges, the change in the fair value of the derivative is recorded in other comprehensive income, net of tax, and recognized in earnings in the same period as the earnings effects of the hedged item. The ineffective portion of a cash flow hedge is recorded immediately through earnings. The assessment of the hedge’s effectiveness is performed at inception and on an ongoing basis, generally using regression testing. For hedges of a pool of assets or liabilities, tests are performed to demonstrate the similarity of individual instruments of the pool. When it is determined that a derivative is not currently an effective hedge, ineffectiveness is recognized for the full change in value of the derivative with no offsetting mark-to-market of the hedged item for the current period. If it is also determined the hedge will not be effective in the future, the Company discontinues the hedge accounting prospectively, ceases recording changes in the fair value of the hedged item, and begins amortization of any basis adjustments that exist related to the hedged item.

The Company also has a number of derivatives, primarily Floor Income Contracts and certain basis swaps, that the Company believes are effective economic hedges but are not considered hedges under ASC 815. These derivatives are classified as “trading” for GAAP purposes and as a result they are marked-to-market through GAAP earnings with no consideration for the price fluctuation of the economically hedged item.

Under ASC 450, “Distinguishing Liabilities from Equity,” equity forward contracts that allow a net settlement option either in cash or the Company’s stock are required to be accounted for in accordance with ASC 815 as derivatives. Prior to 2008, the Company used these contracts to lock-in the purchase price of the Company’s stock related to share repurchases. As a result, the Company marks its equity forward contracts to market through earnings in the “gains (losses) on derivative and hedging activities, net” line item in the consolidated statements of income along with the net settlement expense on the contracts. The Company has not had any outstanding contracts since January 2008.

The “gains (losses) on derivative and hedging activities, net” line item in the consolidated statements of income includes the unrealized changes in the fair value of the Company’s derivatives (except effective cash flow hedges which are recorded in other comprehensive income), the unrealized changes in fair value of hedged items in qualifying fair value hedges, as well as the realized changes in fair value related to derivative net settlements and dispositions that do not qualify for hedge accounting. Net settlement income/expense on derivatives that qualify as hedges under ASC 815 are included with the income or expense of the hedged item (mainly interest expense).

Goodwill and Acquired Intangible Assets

The Company accounts for goodwill and acquired intangible assets in accordance with ASC 350, “Intangibles—Goodwill and Other,” pursuant to which goodwill is not amortized. Goodwill is tested for impairment annually as of September 30 at the reporting unit level, which is the same as or one level below an operating segment as defined in ASC 280, “Segment Reporting.” Goodwill is also tested at interim periods if an event occurs or circumstances change that would indicate the carrying amount may be impaired.

In accordance with ASC 350, Step 1 of the goodwill impairment analysis consists of a comparison of the fair value of the reporting unit to its carrying value, including goodwill. If the carrying value of the reporting unit exceeds the fair value, Step 2 in the goodwill impairment analysis is performed to measure the amount of impairment loss, if any. Step 2 of the goodwill impairment analysis compares the implied fair value of the reporting unit’s goodwill to the carrying value of the reporting unit’s goodwill. The implied fair value of goodwill is determined in a manner consistent with determining goodwill in a business combination. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of the goodwill, an impairment loss is recognized in an amount equal to that excess.

Other acquired intangible assets, which include but are not limited to tradenames, customer and other relationships, and non-compete agreements, are also accounted for in accordance with ASC 350. Acquired intangible assets with definite or finite lives are amortized over their estimated useful lives in proportion to their estimated economic benefit. Finite-lived acquired intangible assets are reviewed for impairment using an undiscounted cash flow analysis when an event occurs or circumstances change indicating the carrying amount of a finite-lived asset or asset group may not be recoverable. An impairment loss would be recognized if the carrying amount of the asset (or asset group) exceeds the estimated undiscounted cash flows used to determine the fair value of the asset or asset group. The impairment loss recognized would be the difference between the carrying amount and fair value. Indefinite-life acquired intangible assets are not amortized. They are tested for impairment annually as of September 30 or at interim periods if an event occurs or circumstances change that would indicate the carrying value of these assets may be impaired. The annual or interim impairment test of indefinite-lived acquired intangible assets is based primarily on a discounted cash flow analysis.

Guarantor Servicing Fees

The Company provides a full complement of administrative services to FFELP Guarantors including guarantee issuance, process, account maintenance, and guarantee fulfillment services for Guarantor agencies, the U.S. Department of Education (“ED”), educational institutions and financial institutions. The fees associated with these services are recognized as earned based on contractually determined rates. The Company is party to a Guarantor Servicing contract with United Student Aid Funds, Inc. (“USA Funds”), which accounted for 86 percent, 85 percent and 86 percent of guarantor servicing fees for the years ended December 31, 2009, 2008, and 2007, respectively.

Contingency Fee Revenue

The Company receives fees for collections of delinquent debt on behalf of clients performed on a contingency basis. Revenue is earned and recognized upon receipt of the borrower funds.

The Company also receives fees from Guarantor agencies for performing default aversion services on delinquent loans prior to default. The fee is received when the loan is initially placed with the Company and the Company is obligated to provide such services for the remaining life of the loan for no additional fee. In the event that the loan defaults, the Company is obligated to rebate a portion of the fee to the Guarantor agency in proportion to the principal and interest outstanding when the loan defaults. The Company recognizes fees received, net of actual rebates for defaults, over the service period which is estimated to be the life of the loan.

Collections Revenue

The Company has purchased delinquent and charged-off receivables on various types of consumer debt with a primary emphasis on charged-off credit card receivables, and sub-performing and non-performing mortgage loans. The Company accounts for its investments in charged-off receivables and sub-performing and non-performing mortgage loans in accordance with ASC 310. Under ASC 310, the Company establishes static pools of each quarter’s purchases and aggregates them based on common risk characteristics. The pools when formed are initially recorded at fair value, based on each pool’s estimated future cash flows and internal rate of return. The Company recognizes income each month based on each static pool’s effective interest rate. The static pools are tested quarterly for impairment by re-estimating the future cash flows to be received from the pools. If the new estimated cash flows result in a pool’s effective interest rate increasing, then this new yield is used prospectively over the remaining life of the static pool. If the new estimated cash flows result in a pool’s effective interest rate decreasing, the pool is impaired and written down through a valuation allowance to maintain the effective interest rate. The Company recognized $79 million and $111 million of impairments for the years ended December 31, 2009 and 2008, respectively, as discussed in Note 20, “Segment Reporting.”

Net interest income earned, less any impairments recognized, on the purchased portfolios is recorded as collection revenue in the consolidated statements of income. When mortgage loans default and the Company forecloses and owns the underlying real estate, the Company carries such real estate at the lower of cost or fair value. There is approximately $285 million on the balance sheet as of December 31, 2009 related to purchased paper assets.

Restructuring Activities

From time to time, the Company implements plans to restructure its business. In conjunction with these restructuring plans, one-time, involuntary benefit arrangements, disposal costs (including contract termination costs and other exit costs), as well as certain other costs that are incremental and incurred as a direct result of the Company’s restructuring plans, are accounted for in accordance with ASC 420, “Exit or Disposal Cost Obligations,” and are classified as restructuring expenses in the accompanying consolidated statements of income.

In conjunction with its restructuring plans, the Company has entered into one-time benefit arrangements with employees, primarily senior executives, who have been involuntarily terminated. The Company recognizes a liability when all of the following conditions have been met and the benefit arrangement has been communicated to the employees:


	•	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.

Severance costs under such one-time termination benefit arrangements may include all or some combination of severance pay, medical and dental benefits, outplacement services, and certain other costs.

Contract termination costs are expensed at the earlier of (1) the contract termination date or (2) the cease use date under the contract. Other exit costs are expensed as incurred and classified as restructuring expenses if (1) the cost is incremental to and incurred as a direct result of planned restructuring activities, and (2) the cost is not associated with or incurred to generate revenues subsequent to the Company’s consummation of the related restructuring activities.

In addition to one-time involuntary benefit arrangements, the Company sponsors the SLM Corporation Employee Severance Plan, which provides severance benefits in the event of termination of the Company’s and its subsidiaries’ full-time employees (with the exception of certain specified levels of management and employees of the Company’s APG subsidiaries) and part-time employees who work at least 24 hours per week. The Company also sponsors the DMO Employee Severance Plan, which provides severance benefits to certain specified levels of full-time management and full-time employees in the Company’s APG subsidiaries. The Employee Severance Plan and the DMO Employee Severance Plan (collectively, the “Severance Plan”) establishes specified benefits based on base salary, job level immediately preceding termination and years of service upon termination of employment due to Involuntary Termination or a Job Abolishment, as defined in the Severance Plan. The benefits payable under the Severance Plan relate to past service and they accumulate and vest. Accordingly, the Company recognizes severance costs to be paid pursuant to the Severance Plan in accordance with ASC 712, “Compensation—Nonretirement Postemployment Benefits,” when payment of such benefits is probable and reasonably estimable. Such benefits, including severance pay calculated based on the Severance Plan, outplacement services and continuation pay, have been incurred during the years ended December 31, 2009 and 2008, and the fourth quarter of 2007 as a direct result of the Company’s restructuring initiatives. Accordingly, such costs are classified as restructuring expenses in the accompanying consolidated statements of income. See Note 15, “Restructuring Activities,” for further information regarding the Company’s restructuring activities.

Software Development Costs

Certain direct development costs associated with internal-use software are capitalized, including external direct costs of services and payroll costs for employees devoting time to the software projects. These costs are included in other assets and are amortized over a period not to exceed five years beginning when the asset is technologically feasible and substantially ready for use. Maintenance costs and research and development costs relating to software to be sold or leased are expensed as incurred.

During the years ended December 31, 2009, 2008 and 2007, the Company capitalized $16 million, $23 million and $19 million, respectively, in costs related to software development, and expensed $138 million, $120 million and $126 million, respectively, related to routine maintenance, betterments and amortization. At December 31, 2009 and 2008, the unamortized balance of capitalized internally developed software included in other assets was $53 million and $56 million, respectively. The Company amortizes software development costs over three to five years.

Accounting for Stock-Based Compensation

On January 1, 2006, the Company adopted the provisions of ASC 718, “Compensation-Stock Compensation,” which includes a revision of SFAS No. 123, “Accounting for Stock-Based Compensation,” and began recognizing stock-based compensation cost in its consolidated statements of income using the fair value based method. Prior to 2006, the Company accounted for its stock option plans using the intrinsic value method of accounting provided and no compensation cost related to its stock option grants was recognized in its consolidated statements of income.

ASC 718 requires that the excess tax benefits from tax deductions on the exercise of share-based payments exceeding the deferred tax assets from the cumulative compensation cost previously recognized be classified as cash inflows from financing activities in the consolidated statement of cash flows. Prior to the adoption of ASC 718, the Company presented all excess tax benefits resulting from the exercise of share-based payments as operating cash flows. The excess tax benefit for the year ended December 31, 2009 was $0.

Income Taxes

Income taxes are recorded in accordance with ASC 740, “Income Taxes.” The asset and liability approach underlying ASC 740 requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and tax basis of the Company’s assets and liabilities. To the extent tax laws change, deferred tax assets and liabilities are adjusted in the period that the tax change is enacted.

“Income tax expense/(benefit)” includes (i) deferred tax expense/(benefit), which represents the net change in the deferred tax asset or liability balance during the year plus any change in a valuation allowance, and (ii) current tax expense/(benefit), which represents the amount of tax currently payable to or receivable from a tax authority plus amounts accrued for unrecognized tax benefits. Income tax expense/(benefit) excludes the tax effects related to adjustments recorded in equity.

New provisions under ASC 740, pertaining to the accounting of uncertainty in income taxes, were adopted on January 1, 2007. Under ASC 740, an uncertain tax position is recognized only if it is more likely than not to be sustained upon examination based on the technical merits of the position. The amount of tax benefit recognized in the financial statements is the largest amount of benefit that is more than fifty percent likely of being sustained upon ultimate settlement of the uncertain tax position. The Company recognizes interest related to unrecognized tax benefits in income tax expense/(benefit), and penalties, if any, in operating expenses.

Earnings (Loss) per Common Share

The Company computes earnings (loss) per common share (“EPS”) in accordance with ASC 260, “Earnings per Share.” See Note 12, “Earnings (Loss) per Common Share,” for further discussion.

Discontinued Operations

A “Component” of a business comprises operations and cash flows that can be clearly distinguished operationally and for financial reporting purposes from the rest of the Company. When a Component of a business is disposed of or is classified as held for sale in accordance with ASC 360, “Property, Plant and Equipment,” such Component is presented separately as discontinued operations in accordance with ASC 205, “Presentation of Financial Statements — Discontinued Operations,” if the operations of the Component have been or will be eliminated from the ongoing operations of the Company and the Company will have no continuing involvement with the Component after the disposal transaction is complete. See Note 21, “Discontinued Operations,” for further discussion.

Foreign Currency Transactions

The Company had financial services operations in foreign countries through the first quarter of 2009. The financial statements of these foreign businesses have been translated into U.S. dollars in accordance with U.S. GAAP. The net investments of the parent in the foreign subsidiary are translated at the current exchange rate at each period-end through the “other comprehensive income” component of stockholders’ equity for net investments deemed to be long-term in nature or through net income if the net investment is short-term in nature. Income statement items are translated at the average exchange rate for the period through income. Transaction gains and losses resulting from exchange rate changes on transactions denominated in currencies other than the entity’s functional currency are included in other operating income.

Statement of Cash Flows

Included in the Company’s financial statements is the consolidated statement of cash flows. It is the policy of the Company to include all derivative net settlements, irrespective of whether the derivative is a qualifying hedge, in the same section of the statement of cash flows that the derivative is economically hedging.

As discussed above under “Restricted Cash and Investments,” the Company’s restricted cash balances primarily relate to on-balance sheet securitizations. This balance is primarily the result of timing differences between when principal and interest is collected on the trust assets and when principal and interest is paid on the trust liabilities. As such, changes in this balance are reflected in investing activities.

Reclassifications

Certain reclassifications have been made to the balances as of and for the years ended December 31, 2008 and 2007, to be consistent with classifications adopted for 2009, which had no impact on net income, total assets or total liabilities.

Recently Issued Accounting Standards

FASB Accounting Standards Codification

The Company adopted, as of July 1, 2009, the FASB’s Accounting Standards Codification (“ASC”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. The ASC does not change authoritative guidance. Accordingly, implementing the ASC did not change any of the Company’s accounting and, therefore, did not have an impact on the consolidated results of the Company. References to authoritative GAAP literature have been updated accordingly.

Transfers of Financial Assets and the Variable Interest Entity (“VIE”) Consolidation Model

In June 2009, the FASB issued topic updates to ASC 860, “Transfers and Servicing,” and to ASC 810, “Consolidation.”

The topic update to ASC 860, among other things, (1) eliminates the concept of a Qualifying Special Purpose Entity (“QSPE”), (2) changes the requirements for derecognizing financial assets, (3) changes the amount of the recognized gain/loss on a transfer accounted for as a sale when beneficial interests are received by the transferor, and (4) requires additional disclosure. The topic update to ASC 860 is effective for transactions which occur in fiscal years beginning after November 15, 2009. The impact of ASC 860 to future transactions will depend on how such transactions are structured. ASC 860 relates primarily to the Company’s secured borrowing facilities. All of the Company’s secured borrowing facilities entered into in 2008 and 2009, including securitization trusts, have been accounted for as on balance sheet financing facilities. These transactions would have been accounted for in the same manner if ASC 860 had been effective during these years.

The topic update to ASC 810 significantly changes the consolidation model for Variable Interest Entities (“VIEs”). The topic update amends ASC 810 and, among other things, (1) eliminates the exemption for QSPEs, (2) provides a new approach for determining who should consolidate a VIE that is more focused on control rather than economic interest, (3) changes when it is necessary to reassess who should consolidate a VIE and (4) requires additional disclosure. The topic update to ASC 810 is effective for the first annual reporting period beginning after November 15, 2009.

Under ASC 810, if an entity has a Variable Interest in a VIE and that entity is determined to be the Primary Beneficiary of the VIE then that entity will consolidate the VIE. The Primary Beneficiary is the entity which has both: (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (2) the obligation to absorb losses or receive benefits of the entity that could potentially be significant to the VIE. As it relates to the Company’s securitized assets, the Company is the servicer of the securitized assets and owns the Residual Interest of the securitization trusts. As a result, the Company is the Primary Beneficiary of its securitization trusts and will consolidate those trusts that are off-balance sheet at their historical cost basis on January 1, 2010. The historical cost basis is the basis that would exist if these securitization trusts had remained on balance sheet since they settled. ASC 810 did not change the accounting of any other VIEs the Company has a variable interest in as of January 1, 2010. These new accounting rules will also apply to new transactions entered into from January 1, 2010 forward.

On January 1, 2010, upon adopting ASC 810, the Company removed the $1.8 billion of Residual Interests associated with these trusts from the consolidated balance sheet and the Company consolidated $35.0 billion of assets ($32.6 billion of which are student loans, net of a $550 million allowance for loan loss) and $34.4 billion of liabilities (primarily trust debt), which resulted in an approximate $0.7 billion after-tax reduction of stockholders’ equity (through retained earnings). After adoption of ASC 810, with respect to the securitization trusts that were consolidated on January 1, 2010, the Company’s results of operations will no longer reflect servicing and securitization income related to these securitization trusts, but will instead report interest income, provisions for loan losses associated with the securitized assets and interest expense associated with the debt issued from the securitization trusts to third parties. This presentation will be identical to the Company’s accounting treatment of prior on-balance securitization trusts. The Company has not had a securitization that was treated as a sale since 2007.

Management allocates capital on a Managed Basis. This change will not impact management’s view of capital adequacy for the Company. The Company’s unsecured revolving credit facilities contains two principal financial covenants related to tangible net worth and net revenue. The tangible net worth covenant requires the Company to maintain consolidated tangible net worth of at least $1.38 billion at all times. Consolidated tangible net worth as calculated for purposes of this covenant was $3.5 billion as of December 31, 2009. Upon adoption of ASC 810 on January 1, 2010, consolidated tangible net worth as calculated for this covenant was $2.7 billion. Because the transition adjustment upon adoption of ASC 810 is recorded through retained earnings, the net revenue covenant was not impacted by the adoption of ASC 810. The ongoing net revenue covenant will not be affected by ASC 810’s impact on the Company’s securitization trusts as the net revenue covenant treated all off-balance sheet trusts as on-balance sheet for purposes of calculating net revenue.

Subsequent Events

In May 2009, the FASB issued a topic update on ASC 855, “Subsequent Events.” This topic update is intended to establish general standards of accounting for, and disclosure of, events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Specifically, this topic update sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. The topic update to ASC 855 is effective for fiscal years and interim periods ending after June 15, 2009. The Company adopted this topic update effective June 15, 2009 and has evaluated any events subsequent to December 31, 2009, and their impact on the reported results and disclosures.

Fair Value Measurements

In January 2010, the FASB issued a topic update to ASC 820, “Fair Value Measurements and Disclosures.” The update improves reporting by requiring separate disclosures of the amounts of significant transfers in and out of Level 1 and 2 of fair value measurements and a description of the reasons for the transfers. In addition, a reporting unit should report separately information about purchases, sales, issuances, and settlements within the reconciliation of activity in Level 3 fair value measurements. Finally, the update clarifies existing disclosure requirements regarding the level of disaggregation in reporting classes of assets and liabilities and discussion of the inputs and valuation techniques used for level 2 and 3 fair values. This topic update is effective for annual and interim periods beginning January 1, 2010, except for disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for annual and interim periods beginning January 1, 2011.

In August 2009, the FASB issued another topic update to ASC 820. The update provides clarification for the valuation of liabilities when a quoted price in an active market for the liability does not exist and clarifies that a quoted price for the liability when traded as an asset (when no adjustments are required) is a Level 1 fair value measurement. In addition, it also clarifies that an entity is not required to adjust the value of a liability for the existence of a restriction that prevents the transfer of the liability. This topic update was effective for the Company beginning October 1, 2009 and was not material to the Company.

On April 9, 2009, the FASB issued three ASC topic updates regarding fair value measurements and impairment. Under ASC 320, “Investments — Debt and Equity Securities,” impairment must be recorded within the consolidated statements of income for debt securities if there exists a fair value loss and the entity intends to sell the security or it is more likely than not the entity will be required to sell the security before recovery of the loss. Additionally, expected credit losses must be recorded through income regardless of the impairment determination above. Remaining fair value losses are recorded to other comprehensive income. ASC 825, “Financial Instruments,” requires interim disclosures of the fair value of financial instruments that were previously only required annually. Finally, the topic update to ASC 820 provides guidance for determining when a significant decrease in market activity has occurred and when a transaction is not orderly. It further reiterates that prices from inactive markets or disorderly transactions should carry less weight, if any, to the determination of fair value. These topic updates were effective for the Company beginning April 1, 2009. The adoption of these topic updates was not material to the Company.

Business Combinations

In December 2007, the FASB issued a topic update to ASC 805, “Business Combinations.” The update requires the acquiring entity in a business combination to recognize the entire acquisition-date fair value of assets acquired and liabilities assumed in both full and partial acquisitions; changes the recognition of assets acquired and liabilities assumed related to contingencies; changes the recognition and measurement of contingent consideration; requires expensing of most transaction and restructuring costs; and requires additional disclosures to enable the users of the financial statements to evaluate and understand the nature and financial effect of the business combination. The ASC 805 topic update applies to all transactions or other events in which the Company obtains control of one or more businesses. The ASC topic update applies prospectively to business combinations for which the acquisition date is on or after the beginning of the reporting period beginning on or after December 15, 2008, which for the Company was January 1, 2009. The adoption of this topic update on January 1, 2009 did not have a material effect on the Company’s results of operations or financial position.

In February 2009, the FASB issued another topic update to ASC 805. This additional update amends the provisions related to the initial recognition and measurement, subsequent measurement and disclosure of assets and liabilities arising from contingencies in a business combination under ASC 805. The ASC topic update had the same effective date as the topic update to ASC 805 referenced above. The adoption of this topic update did not have a material effect on the Company’s results of operations or financial position.

Noncontrolling Interests in Consolidated Financial Statements

In December 2007, the FASB issued a topic update to ASC 810, “Consolidation.” This update requires reporting entities to present noncontrolling (minority) interests as equity (as opposed to presentation as a liability or mezzanine equity) and provides guidance on the accounting for transactions between an entity and noncontrolling interests. On January 1, 2009, the Company adopted this ASC topic update, the provisions of which, among other things, require that minority interests be renamed “noncontrolling interests” and that a company present a consolidated net income (loss) measure that includes the amount attributable to such “noncontrolling interests” for all periods presented. The topic update to ASC 810 applies prospectively for reporting periods beginning on or after December 15, 2008, except for the presentation and disclosure requirements which are applied retrospectively for all periods presented. The Company has reclassified financial statement line items within its consolidated balance sheets, statements of income, statements of changes in stockholders’ equity and statements of cash flows for the prior periods to conform to this topic update. Other than the change in presentation of noncontrolling interests, the adoption of this topic update had no impact on the consolidated financial statements.

Disclosures about Derivative Investments and Hedging Activities

In March 2008, the FASB updated ASC 815, “Derivatives and Hedging.” This topic update requires enhanced disclosures about an entity’s derivative and hedging activities, including (1) how and why an entity uses derivative instruments, (2) how derivative instruments and related hedged items are accounted for under ASC 815 and its related interpretations, and (3) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. To meet those objectives, the topic update requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. This ASC topic update is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company adopted this topic update on January 1, 2009.

Student Loans

12 Months Ended

Dec. 31, 2009

Student Loans [Abstract]

Student Loans


3.	Student Loans

The FFELP is subject to comprehensive reauthorization every five years and to frequent statutory and regulatory changes. The most recent reauthorization of the student loan programs was the Higher Education Reconciliation Act of 2005 (the “Reconciliation Legislation”).

There are three principal categories of FFELP loans: Stafford, PLUS, and FFELP Consolidation Loans. Generally, Stafford and PLUS Loans have repayment periods of between five and ten years. FFELP Consolidation Loans have repayment periods of twelve to thirty years. FFELP loans do not require repayment, or have modified repayment plans, while the borrower is in-school and during the grace period immediately upon leaving school. The borrower may also be granted a deferment or forbearance for a period of time based on need, during which time the borrower is not considered to be in repayment. Interest continues to accrue on loans in the in-school, deferment and forbearance period. FFELP loans obligate the borrower to pay interest at a stated fixed rate or a variable rate reset annually (subject to a cap) on July 1 of each year depending on when the loan was originated and the loan type. The Company earns interest at the greater of the borrower’s rate or a floating rate based on the SAP formula, with the interest earned on the floating rate that exceeds the interest earned from the borrower being paid directly by ED. In low or certain declining interest rate environments when student loans are earning at the fixed borrower rate, and the interest on the funding for the loans is variable and declining, the Company can earn additional spread income that it refers to as Floor Income. For loans disbursed after April 1, 2006, FFELP loans effectively only earn at the SAP rate, as the excess interest earned when the borrower rate exceeds the SAP rate (Floor Income) must be refunded to ED.

FFELP loans are guaranteed as to their principal and accrued interest in the event of default subject to a Risk Sharing level based on the date of loan disbursement. For loans disbursed after October 1, 1993 and before July 1, 2006, the Company receives 98 percent reimbursement on all qualifying default claims. For loans disbursed on or after July 1, 2006, the Company receives 97 percent reimbursement.

In 2009, the Company sold to ED approximately $18.5 billion face amount of loans as part of the Purchase Program (approximately $840 million face amount of this amount was sold in the third quarter of 2009, with the remainder sold in the fourth quarter of 2009). Outstanding debt of $18.5 billion was paid down related to the Loan Purchase Participation Program (“Participation Program”) pursuant to ECASLA in connection with these loan sales. These loan sales resulted in a $284 million gain. The settlement of the fourth quarter sale of loans out of the Participation Program included repaying the debt by delivering the related loans to ED in a non-cash transaction and receipt of cash from ED for $484 million, representing the reimbursement of a of one-percent payment made to ED plus a $75 fee per loan.

In December 2008, the Company sold approximately $494 million (principal and accrued interest) of FFELP loans to ED at a price of 97 percent of principal and unpaid interest pursuant to ED’s authority under ECASLA to make such purchases, and recorded a loss on the sale. Additionally, in early January 2009, the Company sold an additional $486 million (principal and accrued interest) in FFELP loans to ED under this program. The loss related to this sale in January was recognized in 2008 as the loans were classified as “held-for-sale” under GAAP. The total loss recognized on these two sales for the year ended December 31, 2008 was $53 million and was recorded in “Losses on sales of loans and securities, net” in the consolidated statements of income.

In addition to FFELP loan programs, which place statutory limits on per year and total borrowing, the Company offers a variety of Private Education Loans. Private Education Loans for post-secondary education and loans for career training can be subdivided into two main categories: loans that supplement FFELP loans primarily for higher and lifelong learning programs and loans for career training. For the majority of the Private Education Loan portfolio, the Company bears the full risk of any losses experienced and, as a result, these loans are underwritten and priced based upon standardized consumer credit scoring criteria.

Forbearance involves granting the borrower a temporary cessation of payments (or temporary acceptance of smaller than scheduled payments) for a specified period of time. Using forbearance in this manner effectively extends the original term of the loan. Forbearance does not grant any reduction in the total repayment obligation (principal or interest). While a loan is in forbearance status, interest continues to accrue and is capitalized to principal when the loan re-enters repayment status. The Company’s forbearance policies include limits on the number of forbearance months granted consecutively and the total number of forbearance months granted over the life of the loan. In some instances, the Company requires good-faith payments before granting forbearance. Exceptions to forbearance policies are permitted when such exceptions are judged to increase the likelihood of ultimate collection of the loan. Forbearance as a collection tool is used most effectively when applied based on a borrower’s unique situation, including historical information and judgments. The Company combines borrower information with a risk-based segmentation model to assist in its decision making as to who will be granted forbearance based on the Company’s expectations as to a borrower’s ability and willingness to repay their obligation. This strategy is aimed at mitigating the overall risk of the portfolio as well as encouraging cash resolution of delinquent loans.

Forbearance may be granted to borrowers who are exiting their grace period to provide additional time to obtain employment and income to support their obligations, or to current borrowers who are faced with a hardship and request forbearance time to provide temporary payment relief. In these circumstances, a borrower’s loan is placed into a forbearance status in limited monthly increments and is reflected in the forbearance status at month-end during this time. At the end of their granted forbearance period, the borrower will enter repayment status as current and is expected to begin making their scheduled monthly payments on a go-forward basis.

Forbearance may also be granted to borrowers who are delinquent in their payments. In these circumstances, the forbearance cures the delinquency and the borrower is returned to a current repayment status. In more limited instances, delinquent borrowers will also be granted additional forbearance time. As the Company has obtained further experience about the effectiveness of forbearance, the Company has reduced the amount of time a loan will spend in forbearance, thereby increasing the Company’s ongoing contact with the borrower to encourage consistent repayment behavior once the loan is returned to a current repayment status.

During the second quarter of 2009, the Company instituted an interest rate reduction program to assist customers in repaying their Private Education Loans through reduced payments, while continuing to reduce their outstanding principal balance. This program is offered in situations where the potential for principal recovery, through a modification of the monthly payment amount, is better than other alternatives currently available. Along with the ability and willingness to pay, the customer must make three consecutive monthly payments at the reduced rate in order to qualify for the program. Once the customer has made the initial three payments, the loans status is returned to current and the interest rate is reduced for the successive twelve month period. At December 31, 2009, approximately $181 million face amount had qualified for the program and are currently receiving a reduction in their interest rate.

The Company may charge the borrower fees on certain Private Education Loans, either at origination, when the loan enters repayment, or both. Such fees are deferred and recognized into income as a component of interest over the estimated average life of the related pool of loans.

As of December 31, 2009 and 2008, 59 percent and 56 percent, respectively, of the Company’s on-balance sheet student loan portfolio was in repayment.

The estimated weighted average life of student loans in the Company’s portfolio was approximately 7.9 years and 7.8 years at December 31, 2009 and 2008, respectively. The following table reflects the distribution of the Company’s student loan portfolio by program.


	December 31,					Year Ended
	2009					December 31, 2009
								Average
								Effective
	Ending		% of			Average		Interest
	Balance		Balance			Balance		Rate

FFELP Stafford and Other Student Loans, net⁽¹⁾	$	52,674,588		37	%	$	58,491,748		2.07	%
FFELP Consolidation Loans, net		68,378,560		47			70,045,863		2.69
Private Education Loans, net		22,753,462		16			23,153,975		6.83

Total student loans, net⁽²⁾	$	143,806,610		100	%	$	151,691,586		3.08	%


	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	%


⁽¹⁾		The FFELP category is primarily Stafford Loans, but also includes federally guaranteed PLUS and HEAL Loans along with $9.7 billion and $8.5 billion of Stafford Loans held-for-sale at December 31, 2009 and 2008, respectively.

⁽²⁾		The total student loan ending balance includes net unamortized premiums/discounts of $1,628,693 and $1,895,220 as of December 31, 2009 and 2008, respectively.

Allowance for Loan Losses

12 Months Ended

Dec. 31, 2009

Allowance for Loan Losses [Abstract]

Allowance for Loan Losses


4.	Allowance for Loan Losses

The Company’s provisions for loan losses represent the periodic expense of maintaining an allowance sufficient to absorb incurred losses, net of recoveries, in the held-for-investment loan portfolios. The evaluation of the provisions for student loan losses is inherently subjective as it requires material estimates that may be susceptible to significant changes. The Company believes that the allowance for student loan losses is appropriate to cover probable losses incurred in the loan portfolios.

The following tables summarize the total loan loss provisions for the years ended December 31, 2009, 2008 and 2007.


	Years Ended December 31,
	2009		2008		2007

Private Education Loans	$	966,591	$	586,169	$	883,474
FFELP Stafford and Other Student Loans		106,221		105,568		89,083
Mortgage and consumer loans		46,148		27,913		42,751

Total provisions for loan losses	$	1,118,960	$	719,650	$	1,015,308

Allowance for Private Education Loan Losses

The following table summarizes changes in the allowance for Private Education Loan losses for the years ended December 31, 2009, 2008 and 2007.


	Years Ended December 31,
	2009			2008			2007

Allowance at beginning of year	$	1,308,043		$	1,003,963		$	372,612
Total provision		966,591			586,169			883,474
Charge-offs		(875,667	)		(320,240	)		(246,343	)
Reclassification of interest reserve⁽¹⁾		44,473			38,151			—

Balance before securitization of Private Education Loans		1,443,440			1,308,043			1,009,743
Reduction for securitization of Private Education Loans		—			—			(5,780	)

Allowance at end of year⁽²⁾	$	1,443,440		$	1,308,043		$	1,003,963

Charge-offs as a percentage of average loans in repayment		7.2	%		3.8	%		4.1	%
Charge-offs as a percentage of average loans in repayment and forbearance		6.7	%		3.3	%		3.7	%
Allowance as a percentage of the ending total loan balance⁽³⁾		5.8	%		5.8	%		6.2	%
Allowance as a percentage of the ending loans in repayment		10.0	%		11.7	%		14.3	%
Allowance coverage of charge-offs		1.6			4.1			4.1
Ending total loans⁽³⁾	$	24,755,598		$	22,425,640		$	16,289,784
Average loans in repayment	$	12,137,430		$	8,533,356		$	5,949,007
Ending loans in repayment	$	14,379,102		$	11,182,053		$	7,046,709


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

⁽²⁾		Includes $32 million in 2009 related to the loan modification program. Prior to 2009 this program was not offered. As of December 31, 2009, $181 million face amount of loans were currently receiving a reduction in their interest rate under this program.

⁽³⁾		Ending total loans represents gross Private Education Loans, plus the receivable for partially charged-off loans.

The table below shows the Company’s Private Education Loan delinquency trends as of December 31, 2009, 2008 and 2007.


	December 31,
	2009						2008						2007
	Balance			%			Balance			%			Balance			%
(Dollars in millions)

Loans in-school/grace/deferment⁽¹⁾	$	8,910					$	10,159					$	8,151
Loans in forbearance⁽²⁾		967						862						974
Loans in repayment and percentage of each status:
Loans current		12,421			86.4	%		9,748			87.2	%		6,236			88.5	%
Loans delinquent 31-60 days⁽³⁾		647			4.5			551			4.9			306			4.3
Loans delinquent 61-90 days		340			2.4			296			2.6			176			2.5
Loans delinquent greater than 90 days		971			6.7			587			5.3			329			4.7

Total Private Education Loans in repayment		14,379			100	%		11,182			100	%		7,047			100	%

Total Private Education Loans, gross		24,256						22,203						16,172
Private Education Loan unamortized discount		(559	)					(535	)					(468	)

Total Private Education Loans		23,697						21,668						15,704
Private Education Loan receivable for partially charged-off loans		499						222						118
Private Education Loan allowance for losses		(1,443	)					(1,308	)					(1,004	)

Private Education Loans, net	$	22,753					$	20,582					$	14,818

Percentage of Private Education Loans in repayment					59.3	%					50.4	%					43.6	%

Delinquencies as a percentage of Private Education Loans in repayment					13.6	%					12.8	%					11.5	%

Loans in forbearance as a percentage of loans in repayment and forbearance					6.3	%					7.2	%					12.1	%


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

⁽²⁾		Loans for borrowers who have requested extension of grace period generally during employment transition or who have temporarily ceased making 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.

Allowance for FFELP Loan Losses

The following table summarizes changes in the allowance for student loan losses for federally insured student loan portfolios for the years ended December 31, 2009, 2008, and 2007.


	Years Ended December 31,
	2009			2008			2007

Allowance at beginning of year	$	137,543		$	88,729		$	20,315
Provisions for student loan losses		106,221			105,568			89,083
Charge-offs		(78,861	)		(57,510	)		(21,235	)
Increase/decrease for student loan sales and securitizations		(3,735	)		756			566

Allowance at end of year	$	161,168		$	137,543		$	88,729

Charge-offs as a percentage of average loans in repayment		.1	%		.1	%		.04	%
Charge-offs as a percentage of average loans in repayment and forbearance		.1	%		.1	%		.03	%
Allowance as a percentage of the ending total loans, gross		.1	%		.1	%		.1	%
Allowance as a percentage of the ending loans in repayment		.2	%		.2	%		.1	%
Allowance coverage of charge-offs		2.0			2.4			4.2
Ending total loans, gross	$	119,026,931		$	121,926,798		$	107,164,729
Average loans in repayment	$	69,020,295		$	66,392,120		$	58,999,119
Ending loans in repayment	$	69,826,790		$	70,174,192		$	65,289,865

The Company maintains an allowance for Risk Sharing loan losses on its FFELP portfolio. The level of Risk Sharing has varied for the Company over the past few years with legislative changes. As of December 31, 2009, 50 percent of the on-balance sheet FFELP loan portfolio was subject to three-percent Risk Sharing, 49 percent was subject to two-percent Risk Sharing and the remaining 1 percent was not subject to any Risk Sharing.

The table below shows the Company’s FFELP loan delinquency trends as of December 31, 2009, 2008 and 2007.


	December 31,
	2009						2008						2007
	Balance			%			Balance			%			Balance			%
(Dollars in millions)

Loans in-school/grace/deferment⁽¹⁾	$	35,079					$	39,270					$	31,200
Loans in forbearance⁽²⁾		14,121						12,483						10,675
Loans in repayment and percentage of each status:
Loans current		57,528			82.4	%		58,811			83.8	%		55,128			84.4	%
Loans delinquent 31-60 days⁽³⁾		4,250			6.1			4,044			5.8			3,650			5.6
Loans delinquent 61-90 days		2,205			3.1			2,064			2.9			1,841			2.8
Loans delinquent greater than 90 days		5,844			8.4			5,255			7.5			4,671			7.2

Total FFELP loans in repayment		69,827			100	%		70,174			100	%		65,290			100	%

Total FFELP loans, gross		119,027						121,927						107,165
FFELP loan unamortized premium		2,187						2,431						2,259

Total FFELP loans		121,214						124,358						109,424
FFELP loan allowance for losses		(161	)					(138	)					(89	)

FFELP loans, net	$	121,053					$	124,220					$	109,335

Percentage of FFELP loans in repayment					58.7	%					57.6	%					60.9	%

Delinquencies as a percentage of FFELP loans in repayment					17.6	%					16.2	%					15.6	%

FFELP loans in forbearance as a percentage of loans in repayment and forbearance					16.8	%					15.1	%					14.1	%


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

Investments

12 Months Ended

Dec. 31, 2009

Investments [Abstract]

Investments


5.	Investments

A summary of investments and restricted investments as of December 31, 2009 and 2008 follows:


	December 31, 2009
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value

Investments
Available-for-sale
U.S. Treasury securities and other U.S. government agency obligations	$	272	$		$	—		$	272
Other securities:
Asset-backed securities		110,336		306		(893	)		109,749
Commercial paper and asset-backed commercial paper		1,149,981		—		—			1,149,981
Municipal bonds		9,935		1,942		—			11,877
Other		1,550		—		(154	)		1,396

Total investment securities available-for-sale	$	1,272,074	$	2,248	$	(1,047	)	$	1,273,275

Restricted Investments
Available-for sale
U.S. Treasury securities and other U.S. government agency obligations	$	25,026	$	—	$	—		$	25,026
Guaranteed investment contracts		26,951		—		—			26,951

Total restricted investments available-for-sale	$	51,977	$	—	$	—		$	51,977

Held-to-maturity
Guaranteed investment contracts	$	3,550	$	—	$	—		$	3,550
Other		215		—		—			215

Total restricted investments held-to-maturity	$	3,765	$	—	$	—		$	3,765


	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 securities		215		—		—			215

Total restricted investments held-to-maturity	$	5,715	$	—	$	—		$	5,715

In addition to the restricted investments detailed above, at December 31, 2009 and 2008, the Company had restricted cash of $5.1 billion and $3.5 billion, respectively.

As of December 31, 2009 and 2008, $1 million and $2 million of the net unrealized gain/(loss) (after tax) related to available-for-sale investments was included in accumulated other comprehensive income. As of December 31, 2009 and 2008, $50 million ($25 million of which is in restricted cash and investments on the balance sheet) and $26 million (none of which is in restricted cash and investments on the balance sheet), respectively, of available-for-sale investment securities were pledged as collateral.

The Company sold available-for-sale securities with a fair value of $100 million, $457 million and $73 million for the years ended December 31, 2009, 2008, and 2007, respectively. There were no realized gains/(losses) for the years ended December 31, 2009 and 2007. There were $14 million in realized gains (net of hedging losses totaling $4 million) for the year ended December 31, 2008. The cost basis for these securities was determined through specific identification of the securities sold.

As of December 31, 2009, the stated maturities for the investments (including restricted investments) are shown in the following table:


	December 31, 2009
	Held-to-		Available-for-
	Maturity		Sale⁽¹⁾		Other

Year of Maturity
2010	$	215	$	1,176,675	$	675,725
2011		—		—		5,162
2012		—		—		—
2013		—		751		—
2014		—		—		—
2015-2019		—		11,877		59,666
After 2019		3,550		135,949		739

Total	$	3,765	$	1,325,252	$	741,292

⁽¹⁾ Available-for-sale securities are stated at fair value.

At December 31, 2009 and 2008, the Company also had other investments of $741 million and $180 million, respectively. At December 31, 2009, other investments included a $636 million receivable for cash collateral posted to derivative counterparties. Other investments also included leveraged leases which at December 31, 2009 and 2008, totaled $66 million and $76 million, respectively, that are general obligations of American Airlines and Federal Express Corporation. At December 31, 2009 and 2008, other investments also included the Company’s remaining investment in The Reserve Primary Fund totaling $32 million and $97 million, respectively. The Company received $32 million from The Reserve Primary Fund on January 29, 2010.

Goodwill and Acquired Intangible Assets

12 Months Ended

Dec. 31, 2009

Goodwill and Acquired Intangible Assets [Abstract]

Goodwill and Acquired Intangible Assets


6.	Goodwill and Acquired Intangible Assets

Goodwill

All acquisitions must be assigned to a reporting unit or units. A reporting unit is the same as or one level below an operating segment. The following table summarizes the Company’s historical allocation of goodwill to its reporting units, accumulated impairments and net goodwill for each reporting unit.


	As of December 31,
	2009 and 2008
			Accumulated
	Gross		Impairments			Net
(Dollars in millions)

Lending	$	412	$	(24	)	$	388
APG		401		—			401
Guarantor Servicing		62		—			62
Upromise		140		—			140
Other		1		(1	)		—

Total	$	1,016	$	(25	)	$	991

Impairment Testing

The Company performs goodwill impairment testing annually in the fourth quarter as of a September 30 valuation date or more frequently if an event occurs or circumstances change such that there is a potential that the fair value of a reporting unit or reporting units may be below their respective carrying values.

On February 26, 2009, the Administration issued their 2010 fiscal year budget request to Congress which included provisions that called for the elimination of the FFELP program and which would require all new federal loans to be made through the DSLP. On September 17, 2009 the House of Representatives passed SAFRA which was consistent with the Administration’s 2010 budget request to Congress. If it became law SAFRA would eliminate the FFELP and require that, after July 1, 2010, all new federal loans be made through the DSLP. The Administration’s 2011 fiscal year budget continued these requests.

The Senate has not yet introduced legislation on this issue. The Company, together with other members of the student loan community, has been working with members of Congress to enhance SAFRA to allow students and schools to continue to choose their loan originator and to require servicers to share in the risk of loan default. The Company believes that maintaining competition in the student loan programs and requiring participants to assume a portion of the risk inherent in the program, two of the major tenets of the Community Proposal, would result in a more efficient and cost effective program better that serves students, schools, ED and taxpayers.

In light of the potential implications of the Administration’s 2010 budget proposal to the Company’s business model, as well as continued uncertainty in the economy, the tight credit markets and the Company’s decline in market capitalization during the first quarter of 2009, the Company assessed goodwill impairment as of March 31, 2009. This assessment resulted in estimated fair values of the Company’s reporting units in excess of their carrying values. Accordingly, no goodwill impairment was recorded in the first quarter as a result of this impairment assessment.

During the second and third quarters of 2009, no new unfavorable events or changes in circumstances occurred to warrant an impairment assessment as of June 30 and September 30, 2009, as SAFRA, which was passed by the House of Representatives in the third quarter, was consistent with the Administration’s 2010 budget request submitted to Congress in the first quarter of 2009.

In the fourth quarter of 2009, although no new unfavorable events or changes in circumstances occurred, the Company retained an appraisal firm to perform its annual Step 1 impairment testing as prescribed in ASC 350, “Intangibles — Goodwill and Other.” Accordingly, the Company engaged the appraisal firm to determine the fair value of each of its four reporting units to which goodwill was allocated as of September 30, 2009. The fair value of each reporting unit was determined by weighting different valuation approaches, as applicable, with the primary approach being the income approach.

The income approach measures the value of each reporting unit based on the present value of the reporting unit’s future economic benefit determined based on discounted cash flows derived from the Company’s projections for each reporting unit. These projections are generally five-year projections that reflect the future strategic operating and financial performance of each respective reporting unit, including assumptions related to applicable cost savings and planned dispositions or wind down activities. If a component of a reporting unit is winding down or is assumed to wind down, the projections extend through the anticipated wind down period. In conjunction with the Company’s September 30, 2009 annual impairment assessment, cash flow projections for the Lending, APG and Guarantor Servicing reporting units were valued assuming the proposed SAFRA legislation is passed. If the Community Proposal is passed, it would result in additional cash flows for the Lending reporting unit but no material change in cash flows for the APG or Guarantor Servicing reporting units.

Under the Company’s guidance, the appraisal firm developed both an asset rate of return and an equity rate of return (or discount rate) for each reporting unit incorporating such factors as a risk free rate, a market rate of return, a measure of volatility (Beta) and a company specific and capital markets risk premium, as appropriate, to adjust for volatility and uncertainty in the economy and to capture specific risk related to the respective reporting units. The Company considered whether an asset sale or an equity sale would be the most likely sale structure for each reporting unit and valued each reporting unit based on the more likely hypothetical scenario. Resulting discount rates and growth rates used as of September 30, 2009, for the Lending, APG, Guarantor Servicing, and Upromise reporting units were:


	Discount Rate			Growth Rate

Lending⁽¹⁾		11	%		3	%
APG⁽²⁾		10	%		4	%
Guarantor Servicing⁽²⁾		10	%		0	%
Upromise⁽²⁾		15	%		4	%


	⁽¹⁾	Assumes an equity sale; therefore, the discount rate is used to value the entire reporting unit.


	⁽²⁾	Assumes an asset sale; therefore, the discount rate is used to value the assets of the reporting unit.

The discount rates reflect market based estimates of capital costs and are adjusted for management’s assessment of a market participant’s view with respect to execution, concentration and other risks associated with the projected cash flows of individual reporting units. Accordingly, these discount rates are reflective of the long standing contractual relationships associated with these cash flows as well as the wind down nature of the cash flows for certain components of the Lending and APG reporting units and the Guarantor Servicing reporting unit as a whole. Management reviewed and approved these discount rates, including the factors incorporated to develop the discount rates for each reporting unit. For the valuation of the Lending reporting unit, which assumed an equity sale, the discount rate was applied to the reporting unit’s projected net cash flows and the residual or terminal value yielding the fair value of equity for the reporting unit. For valuations assuming an asset sale, the discount rates applicable to the individual reporting units were applied to the respective reporting units’ projected asset cash flows and residual or terminal values, as applicable, yielding the fair value of the assets for the respective reporting units. The estimated proceeds from the hypothetical asset sale were then used to payoff any liabilities of the reporting unit with the remaining cash equaling the fair value of the reporting unit’s equity.

The guideline company or market approach, as well as the publicly traded stock approach, were also considered for the Company’s reporting units, as applicable. The market approach generally measures the value of a reporting unit as compared to recent sales or offerings of comparable companies. The secondary market approach indicates value based on multiples calculated using the market value of minority interests in publicly traded comparable companies or guideline companies. Whether analyzing comparable transactions or the market value of minority interests in publicly traded guideline companies, consideration is given to the line of business and the operating performance of the comparable companies versus the reporting unit being tested. Given current market conditions, the lack of recent sales or offerings in the market and the low correlation between the operations of identified guideline companies to the Company’s reporting units, less emphasis was placed on the market approach for the APG, Guarantor Servicing and Upromise reporting units.

The Company acknowledges that its stock price (as well as that of its peers) is a consideration in determining the value of its reporting units and the Company as a whole. However, management believes the income approach is a better measure of the value of its reporting units in the current environment. During the latter half of 2008 and during 2009, the Company experienced a trend of lower and very volatile market capitalization. During 2009, the Company’s stock price fluctuated significantly from a low of $3.19 in March 2009 subsequent to the Administration’s 2010 budget proposal which would eliminate the FFELP and require all federally funded students loans to be originated through the DSLP, to a high of $12.00 in December 2009. At September 30 and December 31, 2009, the Company’s stock price was $8.72 and $11.27, respectively. Based on these share prices as of September 30 and December 31, alone, the market capitalization of the Company was greater than the carrying value of the reporting units. The Company believes the share price has been significantly reduced due to the continued downturn in the credit and economic environment as well as uncertainties surrounding the ongoing legislative process. Management believes these economic factors should not have a long-term impact. In addition, the Company will review and revise, potentially significantly, its business model based on the final form of legislation upon completion of the legislative process.

The following table illustrates the book basis of equity for each reporting unit and the estimated fair value determined in conjunction with Step 1 impairment testing as of September 30, 2009.


	Book Basis		Fair Value
	of Equity		of Equity		$ Difference		% Difference
(Dollars in millions)

Lending	$	1,474	$	3,270	$	1,796		122	%
APG		1,390		1,690		300		22
Guarantor Servicing		142		221		79		56
Upromise		297		430		133		45

The estimated fair value of the Company resulting from its step 1 impairment test was 41 percent higher than its market capitalization. The Company views this as a reasonable “control premium.” As discussed above, the Company’s stock price was at $12.00 per share during December 2009, which by itself results in a market capitalization that is greater than the carrying value of the reporting units which results in no impairment. Management reviewed and approved the valuation prepared by the appraisal firm for each reporting unit, including the valuation methods employed and the key assumptions used, such as the discount rates, growth rates and control premiums, as applicable, for each reporting unit. Management also performed stress tests of key assumptions using a range of discount rates and growth rates, as applicable. Based on the valuations performed in conjunction with Step 1 impairment testing and these stress tests, there was no indicated impairment for any reporting units at September 30, 2009.

Management acknowledges that the economic slowdown could adversely affect the operating results of the Company’s reporting units. In addition, the decrease in the market price of the Company’s common stock resulting from the market turbulence and uncertainty surrounding the ongoing legislative process has reduced its total market capitalization. Both of these factors adversely affect the fair value of the Company’s reporting units. If the forecasted performance of the Company’s reporting units is not achieved, or if the Company’s stock price remains at a depressed level or declines further resulting in continued deterioration in the Company’s total market capitalization, and depending on the final form of legislation, if any, the fair value of one or more of the reporting units could be significantly reduced, and the Company may be required to record a charge, which could be material, for an impairment of goodwill. Management believes that the turbulence in the stock market and uncertainties surrounding the legislative process has resulted in a market price for the Company’s common stock that is not indicative of the true value of the Company’s reporting units.

In addition, if SAFRA or the Community Proposal are passed, certain revenue streams in the Lending and APG reporting units and the entire revenue stream of the Guarantor Servicing reporting unit will wind down over time. As a result, as these revenue streams wind down, goodwill impairment may be triggered for the Lending and APG reporting units and will definitely be triggered for the Guarantor Servicing reporting unit due to the passage of time and depletion of projected cash flows stemming from FFELP-related contracts.

As of September 30, 2008, annual impairment testing indicated no impairment for any reporting units. As of September 30, 2007, annual impairment testing indicated no impairment for any reporting units with the exception of the mortgage and consumer lending reporting unit, due largely to the wind down of one of the Company’s mortgage operations. As a result, the Company recognized goodwill impairment of approximately $20 million in the fourth quarter of 2007.

Goodwill by Reportable Segments

A summary of changes in the Company’s goodwill by reportable segment is as follows:


	December 31,		Acquisitions/		December 31,
	2008		Other		2009
(Dollars in millions)

Lending	$	388	$	—	$	388
Asset Performance Group		401		—		401
Corporate and Other		202		—		202

Total	$	991	$	—	$	991


	December 31,		Acquisitions/		December 31,
	2007		Other		2008
(Dollars in millions)

Lending	$	388	$	—	$	388
Asset Performance Group		377		24		401
Corporate and Other		200		2		202

Total	$	965	$	26	$	991

From September 2004 through January 2008, the Company acquired a 100 percent controlling interest in AFS Holdings, LLC (“AFS”) through a series of transactions commencing with the Company’s September 2004 acquisition of a 64 percent controlling interest and annual exercise of options to purchase successive 12 percent interests in the Company from December 2005 through January 2008. AFS was a full-service accounts receivable management company that purchased charged off debt and performed third-party receivables servicing across a number of consumer asset classes. As a result of this series of transactions, the Company’s APG reportable segment and reporting unit recognized excess purchase price over the fair value of net assets acquired, or goodwill, of $226 million. The total purchase price associated with the Company’s acquisition of AFS was approximately $324 million, including cash consideration and certain acquisition costs.

Acquired Intangible Assets

Acquired intangible assets include the following:


	Average		As of December 31, 2009
	Amortization				Accumulated
	Period		Gross		Amortization			Net
(Dollars in millions)

Intangible assets subject to amortization:
Customer, services, and lending relationships		12 years	$	332	$	(208	)	$	124
Software and technology		7 years		98		(89	)		9
Non-compete agreements				11		(11	)		—

Total				441		(308	)		133
Intangible assets not subject to amortization:
Trade name and trademark		Indefinite		54		—			54

Total acquired intangible assets			$	495	$	(308	)	$	187


	Average		As of December 31, 2008
	Amortization				Accumulated
	Period		Gross		Amortization			Net
(Dollars in millions)

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

The Company recorded amortization of acquired intangible assets from continuing operations totaling $39 million, $53 million, and $63 million for the years ended December 31, 2009, 2008 and 2007, respectively. The Company recorded amortization of acquired intangible assets from discontinued operations totaling $0, $1 million, and $4 million for the years ended December 31, 2009, 2008 and 2007, respectively. The Company will continue to amortize its intangible assets with definite useful lives over their remaining estimated useful lives. The Company estimates amortization expense associated with these intangible assets will be $33 million, $27 million, $20 million, $18 million and $13 million for the years ended December 31, 2010, 2011, 2012, 2013 and 2014, respectively.

As discussed in Note 2, “Significant Accounting Policies,” the Company tests its indefinite life intangible assets annually as of September 30 or during the course of the year if an event occurs or circumstances change which indicate potential impairment of these assets. The Company also assesses quarterly whether an event or circumstance has occurred which may indicate impairment of its definite life (amortizing) intangible assets.

The Company recorded impairment of certain acquired intangible assets from continuing operations of $37 million, $32 million and $16 million, respectively, for the years ended December 31, 2009, 2008 and 2007. The Company recorded impairment of certain acquired intangible assets from discontinued operations of $0, $5 million and $10 million, respectively, for the years ended December 31, 2009, 2008 and 2007.

In the fourth quarter of 2009, the Company recognized intangible impairments of $37 million primarily related to the Company’s exclusive right to market under the USAF Guarantee. This intangible was impaired as a result of the legislative uncertainty surrounding the role of Guarantors in the future. This impairment charge was recorded to operating expense in the Corporate and Other reportable segment.

In 2008, as discussed in Note 20, “Segment Reporting,” the Company decided to wind down its purchased paper businesses. As a result, in the third quarter of 2008, the Company recorded an aggregate amount of $37 million of impairment of acquired intangible assets, of which $25 million and $3 million related to the impairment of two trade names associated with continuing operations and discontinued operations, respectively, and $7 million and $2 million related to certain banking customer relationships associated with continuing operations and discontinued operations, respectively.

In 2007, the Company recognized intangible impairments of $10 million attributed to certain banking relationships associated with its discontinued operations. The Company also recognized intangible impairments of $7 million related to certain trade names and relationships in the Lending reporting segment. The Company also recognized intangible impairments of $9 million related to certain tax exempt bonds that enabled the Company to earn a 9.5 percent SAP rate on student loans funded by those bonds in indentured trusts acquired with the Company’s acquisition of Southwest Student Services Corporation and Washington Transferee Corporation. The impairment was recognized due to changes in projected interest rates used to initially value the intangible asset and to a regulatory change that restricts the loans on which the Company is entitled to earn a 9.5 percent yield. These impairment charges were recorded to operating expense in the Lending reportable segment.

Borrowings

12 Months Ended

Dec. 31, 2009

Borrowings [Abstract]

Borrowings


7.	Borrowings

Borrowings consist of secured borrowings issued through the Company’s securitization program, borrowings through secured facilities and participation programs, unsecured notes issued by the Company, term and demand deposits at Sallie Mae Bank, and as other interest-bearing liabilities related primarily to obligations to return cash collateral held. To match the interest rate and currency characteristics of its borrowings with the interest rate and currency characteristics of its assets, the Company enters into interest rate and foreign currency swaps with independent parties. Under these agreements, the Company makes periodic payments, generally indexed to the related asset rates or rates which are highly correlated to the asset rates, in exchange for periodic payments which generally match the Company’s interest obligations on fixed or variable rate notes (see Note 9, “Derivative Financial Instruments”). Payments and receipts on the Company’s interest rate and currency swaps are not reflected in the following tables.

The following table summarizes activity related to the senior unsecured debt repurchases for the years ended December 31, 2009 and 2008. The Company began actively repurchasing its outstanding debt in the second quarter of 2008. “Gains on debt repurchases” is shown net of hedging-related gains and losses.


	Years Ended December 31,
	2009		2008

Unsecured debt principal repurchased	$	3,447,245	$	1,910,326
Cash outlay for principal repurchases		3,129,415		1,866,269
Gains on debt repurchases		536,190		64,477

In January 2010, the Company repurchased $812 million of unsecured debt through a tender offer for a gain of $45 million.

The following table summarizes the Company’s borrowings as of December 31, 2009 and 2008.


	December 31, 2009						December 31, 2008
	Short		Long				Short		Long
	Term		Term		Total		Term		Term		Total
(Dollars in millions)

Unsecured borrowings	$	5,185	$	22,797	$	27,982	$	6,794	$	31,182	$	37,976
Unsecured term bank deposits		842		4,795		5,637		1,148		1,108		2,256
ED Participation Program facility		9,006		—		9,006		7,365		—		7,365
ED Conduit Program facility		14,314		—		14,314		—		—		—
2008 Asset-Backed Financing Facilities⁽¹⁾		—		8,801		8,801		24,768		—		24,768
On-balance sheet securitizations		—		89,200		89,200		—		80,601		80,601
Indentured trusts		64		1,533		1,597		31		1,972		2,003
Other		1,472		—		1,472		1,827		—		1,827

Total before fair value adjustments		30,883		127,126		158,009		41,933		114,863		156,796
ASC 815 fair value adjustments		14		3,420		3,434		—		3,362		3,362

Total	$	30,897	$	130,546	$	161,443	$	41,933	$	118,225	$	160,158


⁽¹⁾		On December 31, 2009, ABCP borrowings were reclassified to long-term as the facility was renegotiated on January 15, 2010 resulting in the maturity date being greater than one year from December 31, 2009.

Short-term Borrowings

Short-term borrowings have a remaining term to maturity of one year or less. The following tables summarize outstanding short-term borrowings (secured and unsecured) at December 31, 2009 and 2008, the weighted average interest rates at the end of each period, and the related average balances and weighted average interest rates during the periods.


	December 31, 2009					Year Ended December 31, 2009
			Weighted Average					Weighted Average
	Ending Balance		Interest Rate			Average Balance		Interest Rate

Unsecured term bank deposits	$	842,636		3.33	%	$	929,442		3.23	%
ABCP borrowings		—		—			16,238,782		1.64
ED Participation Program Facility		9,006,053		.79			14,174,433		1.42
ED Conduit Program facility		14,313,837		.59			7,339,592		.72
Short-term portion of long-term borrowings		5,259,278		2.58			4,408,990		2.05
Other interest bearing liabilities		1,475,007		.12			1,393,280		.31

Total short-term borrowings	$	30,896,811		1.04	%	$	44,484,519		1.45	%

Maximum outstanding at any month end	$	53,406,554


	December 31, 2008					Year Ended December 31, 2008
			Weighted Average					Weighted Average
	Ending Balance		Interest Rate			Average Balance		Interest Rate

Unsecured term bank deposits	$	1,147,825		3.34	%	$	696,442		3.67	%
ABCP borrowings		24,767,825		2.74			24,692,143		3.82
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		2.91	%	$	36,059,342		3.69	%

Maximum outstanding at any month end	$	41,933,043

As of December 31, 2009, the Company had $3.5 billion in unsecured revolving credit facilities which provide liquidity support for general corporate purposes. The Company has never drawn on these facilities. These facilities include a $1.9 billion revolving credit facility maturing in October 2010 and a $1.6 billion revolving credit facility maturing in October 2011. These figures reflect the amended size of the facilities as a $215 million commitment from Aurora Bank, FSB, formerly known as Lehman Brothers Bank, FSB, a subsidiary of Lehman Brothers Holdings Inc. was removed in the fourth quarter of 2009.

On April 24, 2009, in conjunction with the extension of the 2008 ABCP Facilities (see “Asset-Backed Financing Facilities” below), a $1.4 billion revolving credit facility maturing in October 2009 was retired and the $1.9 billion revolving credit facility maturing in October 2011 was reduced to $1.6 billion. The principal financial covenants in the unsecured revolving credit facilities require the Company to maintain consolidated tangible net worth of at least $1.38 billion at all times. Consolidated tangible net worth as calculated for purposes of this covenant was $3.5 billion as of December 31, 2009. The covenants also require the Company to meet either a minimum interest coverage ratio or a minimum net adjusted revenue test based on the four preceding quarters’ adjusted “Core Earnings” financial performance. The Company was compliant with both of the minimum interest coverage ratio and the minimum net adjusted revenue tests as of the quarter ended December 31, 2009. In the past, the Company has not relied upon the Company’s unsecured revolving credit facilities as a primary source of liquidity. Even though the Company has never borrowed under these facilities, they are available to be drawn upon for general corporate purposes.

Long-term Borrowings

The following tables summarize outstanding long-term borrowings (secured and unsecured) at December 31, 2009 and 2008, the weighted average interest rates at the end of the periods, and the related average balances during the periods.


	December 31, 2009					Year Ended
			Weighted			December 31,
			Average			2009
	Ending		Interest			Average
	Balance⁽¹⁾		Rate⁽²⁾			Balance

Floating rate notes:
U.S. dollar-denominated:
Interest bearing, due 2011-2047	$	84,849,160		1.20	%	$	83,001,692
Non-U.S. dollar-denominated:
Australian dollar-denominated, due 2011		161,804		4.57			443,080
Euro-denominated, due 2011-2041		7,624,485		.91			8,411,807
Sterling-denominated, due 2011-2039		1,153,134		.88			1,273,890
Hong Kong dollar-denominated, due 2011		113,741		.41			113,716
Swedish krona-denominated, due 2011		85,353		.66			116,736
Canadian dollar-denominated, due 2011		229,885		.67			229,885

Total floating rate notes		94,217,562		1.17			93,590,806
Fixed rate notes:
U.S. dollar-denominated:
Interest bearing, due 2011-2043		12,355,688		5.55			11,556,520
Non-U.S.-dollar denominated:
Australian dollar-denominated, due 2012		165,394		4.42			278,983
Canadian dollar-denominated, due 2011		478,566		3.98			557,333
Euro-denominated, due 2011-2039		6,903,465		2.74			4,695,963
Hong Kong dollar-denominated, due 2014-2016		140,173		4.38			154,613
Japanese yen-denominated, due 2011-2035		426,551		1.99			671,595
Singapore dollar-denominated, due 2014		46,015		3.15			45,498
Sterling-denominated, due 2011-2039		1,901,094		5.33			2,913,991
Swiss franc-denominated, due 2011		182,907		2.24			160,568
New Zealand dollar-denominated		—		—			96,529
Mexican peso-denominated, due 2016		78,078		10.30			91,593
Swedish krona-denominated, due 2011		60,141		3.63			60,547

Total fixed rate notes		22,738,072		4.51			21,283,733
Unsecured term bank deposits — U.S. dollar-denominated, due 2011-2019		4,789,223		3.19			3,824,908
ABCP borrowings		8,801,415		1.55			—

Total long-term borrowings	$	130,546,272		1.84	%	$	118,699,447


⁽¹⁾		Ending balance is expressed in U.S. dollars at December 31, 2009 spot currency exchange rate. Includes fair value adjustments under ASC 815 for notes designated as the hedged item in a fair value hedge.


⁽²⁾		Weighted average interest rate is stated rate relative to currency denomination of note.


	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
Unsecured 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 is expressed in U.S. dollars at December 31, 2008 spot currency exchange rate. Includes fair value adjustments under ASC 815 for notes designated as the hedged item in a fair value hedge.


	⁽²⁾	Weighted average interest rate is stated rate relative to currency denomination of note.

At December 31, 2009, the Company had outstanding long-term borrowings with call features totaling $3.3 billion and $100 million of outstanding long-term borrowings that are putable by the investor to the Company prior to the stated maturity date. Generally, these instruments are callable and putable at the par amount. As of December 31, 2009, the stated maturities (for putable debt, the stated maturity date is the put date) and maturities if accelerated to the call dates are shown in the following table:


	December 31, 2009
	Stated Maturity⁽¹⁾									Maturity to Call Date⁽¹⁾
			Unsecured									Unsecured
	Unsecured		Term Bank			Secured				Unsecured		Term Bank			Secured
	Borrowings		Deposits			Borrowings		Total		Borrowings		Deposits			Borrowings		Total

Year of Maturity
2010	$	—	$	—		$	6,882,823	$	6,882,823	$	1,434,248	$	246,496		$	16,784,947	$	18,465,691
2011		6,372,950		1,425,425			12,923,080		20,721,455		6,526,521		1,446,423			9,121,664		17,094,608
2012		2,195,766		1,696,413			10,783,347		14,675,526		2,241,214		1,531,966			7,783,347		11,556,527
2013		2,812,148		775,155			9,149,050		12,736,353		2,785,701		758,760			7,149,050		10,693,511
2014		5,124,268		838,999			6,052,836		12,016,103		5,221,591		811,135			6,052,836		12,085,562
2015		710,055		—			5,889,838		6,599,893		798,924		—			5,889,838		6,688,762
2016-2047		5,581,984		58,788			47,852,746		53,493,518		3,788,972		—			46,752,038		50,541,010

		22,797,171		4,794,780			99,533,720		127,125,671		22,797,171		4,794,780			99,533,720		127,125,671
ASC 815 (gains) losses on derivative hedging activities		1,947,250		(5,557	)		1,478,908		3,420,601		1,947,250		(5,557	)		1,478,908		3,420,601

Total	$	24,744,421	$	4,789,223		$	101,012,628	$	130,546,272	$	24,744,421	$	4,789,223		$	101,012,628	$	130,546,272


⁽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 Company’s current estimates regarding loan prepayment speeds. The projected principal paydowns in year 2010 include $6.9 billion related to the on-balance sheet securitization trust debt.

Secured Borrowings

Variable Interest Entities (“VIEs”) are required to be consolidated by their primary beneficiaries. A VIE exists when either the total equity investment at risk is not sufficient to permit the entity to finance its activities by itself, or the equity investors lack one of three characteristics associated with owning a controlling financial interest. Those characteristics are the direct or indirect ability to make decisions about an entity’s activities that have a significant impact on the success of the entity, the obligation to absorb the expected losses of an entity, and the rights to receive the expected residual returns of the entity.

The Company currently consolidates a number of financing entities that are VIEs as a result of being the entities’ primary beneficiary. As a result, these financing VIEs are accounted for as secured borrowings. The process of identifying the primary beneficiary involves identifying all other parties that hold variable interests in the entity and determining which of the parties, including the Company, has the responsibility to absorb the majority of the entity’s expected losses or the rights to its expected residual returns. The Company is the primary beneficiary of and currently consolidates the following financing VIEs as of December 31, 2009 and 2008:


	December 31, 2009
(Dollars in millions)	Debt Outstanding
	Short		Long				Carrying Amount of Assets Securing Debt Outstanding
	Term		Term		Total		Loans		Cash		Other Assets		Total

Secured Borrowings:
ED Participation Program facility	$	9,006	$	—	$	9,006	$	9,397	$	115	$	61	$	9,573
ED Conduit Program facility		14,314		—		14,314		14,594		478		372		15,444
2008 Asset-Backed Financing Facilities		—		8,801		8,801		9,929		204		100		10,233
On-balance sheet securitizations		—		89,200		89,200		93,020		3,627		3,084		99,731
Indentured trusts		64		1,533		1,597		2,225		172		24		2,421

		23,384		99,534		122,918		129,165		4,596		3,641		137,402
ASC 815 fair value adjustment		—		1,479		1,479		—		—		—		—

Total	$	23,384	$	101,013	$	124,397	$	129,165	$	4,596	$	3,641	$	137,402


	December 31, 2008
(Dollars in millions)	Debt Outstanding
	Short		Long				Carrying Amount of Assets Securing Debt Outstanding
	Term		Term		Total		Loans		Cash		Other Assets		Total

Secured Borrowings:
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		2,521		86,700
Indentured trusts		31		1,972		2,003		2,199		236		40		2,475

		32,164		82,573		114,737		123,432		3,418		3,462		130,312
ASC 815 fair value adjustment		—		872		872		—		—		—		—

Total	$	32,164	$	83,445	$	115,609	$	123,432	$	3,418	$	3,462	$	130,312

Asset-Backed Financing Facilities

During the first quarter of 2008, the Company entered into three new asset-backed financing facilities (the “2008 Asset-Backed Financing Facilities”): (i) a $26.0 billion FFELP loan ABCP conduit facility (the “2008 FFELP ABCP Facility”); (ii) a $5.9 billion Private Education Loan ABCP conduit facility (the “2008 Private Education Loan ABCP Facility”) (collectively, the “2008 ABCP Facilities”); and (iii) a $2.0 billion secured FFELP loan facility (the “2008 Asset-Backed Loan Facility”). The initial term of the 2008 Asset-Backed Financing Facilities was 364 days. The underlying cost of borrowing under the 2008 ABCP Facilities was approximately LIBOR plus 0.68 percent for the FFELP loan facilities and LIBOR plus 1.55 percent for the Private Education Loan facility, excluding upfront and unused commitment fees. All-in pricing on the 2008 ABCP Facilities varied based on usage. For the full year 2008, the combined, all-in cost of borrowings related to the 2008 Asset-Backed Financing Facilities, including amortized upfront fees and unused commitment fees, was three-month LIBOR plus 2.47 percent. The primary use of the 2008 Asset-Backed Financing Facilities was to refinance comparable ABCP facilities incurred in connection with the Proposed Merger, with the expectation that outstanding balances under the 2008 Asset-Backed Financing Facilities would be reduced through securitization of the underlying student loan collateral in the term ABS market.

On February 2, 2009, the Company extended the maturity date of the 2008 ABCP Facilities from February 28, 2009 to April 28, 2009 for a $61 million upfront fee. The other terms of the facilities remained materially unchanged.

On February 27, 2009, the Company extended the maturity date of the 2008 Asset-Backed Loan Facility from February 28, 2009 to April 28, 2009 for a $4 million upfront fee. The other terms of this facility remained materially unchanged.

On April 24, 2009, the Company extended the maturity of $21.8 billion of the 2008 FFELP ABCP Facility for one year to April 23, 2010. The Company also extended its 2008 Asset-Backed Loan Facility in the amount of $1.5 billion. The extended 2008 Asset-Backed Loan Facility matured on June 26, 2009 and was paid in full. A total of $86 million in fees were paid related to these extensions. The 2008 Private Education Loan ABCP Facility was paid off and terminated on April 24, 2009. The stated borrowing rate of the 2008 FFELP ABCP Facility was the applicable funding rate plus 130 basis points excluding upfront fees. The applicable funding rate generally was either a LIBOR or commercial paper rate. The terms of the 2008 FFELP ABCP Facility called for an increase in the applicable funding spread to 300 basis points if the outstanding borrowing amount was not reduced to $15.2 billion and $10.9 billion as of June 30, 2009 and September 30, 2009, respectively. If the Company did not negotiate an extension or pay off all outstanding amounts of the 2008 FFELP ABCP Facility at maturity, the facility would extend by 90 days with the interest rate generally increasing from LIBOR plus 250 basis points to 550 basis points over the 90 day period. The other terms of the facilities remained materially unchanged.

The maximum amount the Company could borrow under the 2008 FFELP ABCP Facility was limited based on certain factors, including market conditions and the fair value of student loans in the facility. As of December 31, 2009, the maximum borrowing amount was approximately $10.5 billion. Funding under the 2008 FFELP ABCP Facility was subject to usual and customary conditions. The 2008 FFELP ABCP Facility was subject to termination under certain circumstances, including the Company’s failure to comply with the principal financial covenants in its unsecured revolving credit facilities.

Borrowings under the 2008 FFELP ABCP Facility were non-recourse to the Company. As of December 31, 2009, the Company had $8.8 billion outstanding in connection with the 2008 FFELP ABCP Facility. The book basis of the assets securing this facility as of December 31, 2009 was $10.2 billion.

On January 15, 2010, the Company terminated the 2008 FFELP ABCP Facility and entered into new multi-year ABCP facilities (the “2010 Facility”) which will continue to provide funding for the Company’s federally guaranteed student loans. The 2010 Facility provides for maximum funding of $10 billion for the first year, $5 billion for the second year and $2 billion for the third year. Upfront fees related to the 2010 Facility were approximately $4 million. The underlying cost of borrowing under the 2010 Facility for the first year is expected to be approximately commercial paper issuance cost plus 0.50 percent, excluding up-front commitment and unused fees.

Borrowings under the 2010 Facility are non-recourse to the Company. The maximum amount the Company may borrow under the 2010 Facility is limited based on certain factors, including market conditions and the fair value of student loans in the facility. Funding under the 2010 Facility is subject to usual and customary conditions. The 2010 Facility is subject to termination under certain circumstances, including the Company’s failure to comply with the principal financial covenants in its unsecured revolving credit facilities. Increases in the borrowing rate of up to LIBOR plus 450 basis points could occur if certain asset coverage ratio thresholds are not met. Failure to pay off the 2010 Facility on the maturity date or to reduce amounts outstanding below the annual maximum step downs will result in a 90-day extension of the 2010 Facility with the interest rate increasing from LIBOR plus 200 basis points to LIBOR plus 300 basis points, over that period. If, at the end of the 90-day extension, these required paydown amounts have not been made, the collateral can be foreclosed upon.

The Department of Education (“ED”) Funding Programs

In August 2008, ED implemented the Purchase Program and the Loan Purchase Participation Program (the “Participation Program”) pursuant to ECASLA. Under the Purchase Program, ED purchases eligible FFELP loans at a price equal to the sum of (i) par value, (ii) accrued interest, (iii) the one-percent origination fee paid to ED, and (iv) a fixed amount of $75 per loan. Under the Participation Program, ED provides short-term liquidity to FFELP lenders by purchasing participation interests in pools of FFELP loans. FFELP lenders are charged a rate equal to the preceding quarter commercial paper rate plus 0.50 percent on the principal amount of participation interests outstanding. Under the terms of the Participation Program, on September 30, 2010, AY 2009-2010 loans funded under the Participation Program must be either repurchased by the Company or sold to ED pursuant to the Participation Program, which has identical economics to the Purchase Program. Given the state of the credit markets, the Company currently expect to sell all of the loans it funds under the Participation Program to ED. Loans eligible for the Participation or Purchase Programs are limited to FFELP Stafford or PLUS Loans, first disbursed on or after May 1, 2008 but no later than July 1, 2010, with no ongoing borrower benefits other than permitted rate reductions of 0.25 percent for automatic payment processing.

As of December 31, 2009, the Company had $9.0 billion of advances outstanding under the Participation Program. Through December 31, 2009, the Company has sold to ED approximately $18.5 billion face amount of loans as part of the Purchase Program. Outstanding debt of $18.5 billion was paid down related to the Participation Program in connection with these loan sales. These loan sales resulted in a $284 million gain. The settlement of the fourth quarter sale of loans out of the Participation Program included repaying the debt by delivering the related loans to ED in a non-cash transaction and receipt of cash from ED for $484 million, representing the reimbursement of a of one-percent payment made to ED plus a $75 fee per loan.

Also pursuant to ECASLA, on January 15, 2009, ED published summary terms under which it will purchase eligible FFELP Stafford and PLUS Loans from a conduit vehicle established to provide funding for eligible student lenders (the “ED Conduit Program”). Loans eligible for the ED Conduit Program must be first disbursed on or after October 1, 2003, but not later than July 1, 2009, and fully disbursed before September 30, 2009, and meet certain other requirements, including those relating to borrower benefits. The ED Conduit Program was launched on May 11, 2009 and will accept eligible loans through July 1, 2010. The ED Conduit Program has a term of five years and will expire on January 19, 2014. Funding for the ED Conduit Program is provided by the capital markets at a cost based on market rates, with the Company being advanced 97 percent of the student loan face amount. If the conduit does not have sufficient funds to make the required payments on the notes issued by the conduit, then the notes will be repaid with funds from the Federal Financing Bank (“FFB”). The FFB will hold the notes for a short period of time and if at the end of that time the notes still cannot be paid off, the underlying FFELP loans that serve as collateral to the ED Conduit will be sold to ED through the Put Agreement at a price of 97 percent of the face amount of the loans. As of December 31, 2009, approximately $14.6 billion face amount of the Company’s Stafford and PLUS Loans were funded through the ED Conduit Program. For 2009, the average interest rate paid on this facility was approximately 0.75 percent. As of December 31, 2009, there are approximately $820 million face amount of additional FFELP Stafford and PLUS Loans (excluding loans currently in the Participation Program) that can be funded through the ED Conduit Program.

Securitizations

In 2009, the Company completed four FFELP long-term ABS transactions totaling $5.9 billion. The FFELP transactions were composed primarily of FFELP Consolidation Loans which were not eligible for the ED Conduit Program or the Term Asset-Backed Securities Loan Facility (“TALF”) discussed below.

On January 6, 2009, the Company closed a $1.5 billion 12.5 year asset-backed securities (“ABS”) based facility. This facility is used to provide up to $1.5 billion term financing for Private Education Loans. The fully-utilized cost of financing obtained under this facility is expected to be LIBOR plus 5.75 percent. In connection with this facility, the Company completed one Private Education Loan term ABS transaction totaling $1.5 billion in the first quarter of 2009. The net funding received under the asset-backed securities based facility for this issuance was $1.1 billion.

On February 6, 2009, the Federal Reserve Bank of New York published proposed terms for a program designed to facilitate renewed issuance of consumer and small business ABS at lower interest rate spreads. TALF was initiated on March 17, 2009 and currently provides investors who purchase eligible ABS with funding of up to five years. Eligible ABS include ‘AAA’ rated student loan ABS backed by FFELP and Private Education Loans first disbursed since May 1, 2007. The following $6.0 Billion of Private Education Loan securitizations were completed in 2009 and were TALF eligible:


	•	On May 5, 2009, the Company priced a $2.6 billion Private Education Loan securitization which closed on May 12, 2009. The issue bears a coupon of 1-month LIBOR plus 6.0 percent and is callable at the issuer’s option at 93 percent of the outstanding balance of the ABS between November 15, 2011 and April 16, 2012. If the issue is called on November 15, 2011, the Company expects the effective cost of the financing will be approximately 1-month LIBOR plus 3.7 percent.

	•	On July 2, 2009, the Company priced a $1.1 billion Private Education Loan securitization which closed on July 14, 2009. The issue bears a coupon of Prime plus 1.25 percent and is callable at the issuer’s option at 94 percent of the outstanding balance of the ABS between January 16, 2012 and June 15, 2012. If the issue is called on January 16, 2012, the Company expects the effective cost of the financing will be approximately Prime minus 0.71 percent.

	•	On August 5, 2009, the Company priced a $1.7 billion Private Education Loan securitization which closed on August 13, 2009. The issue bears a coupon of Prime plus 0.25 percent and is callable at the issuer’s option at 94 percent of the outstanding balance of the ABS between August 15, 2013 and July 15, 2014. If the issue is called on August 15, 2013, the Company expects the effective cost of the financing will be approximately Prime minus 0.55 percent.

	•	On December 2, 2009, the Company priced a $590 million Private Education Career Training Loan securitization which closed on December 10, 2009. The issue includes one tranche that bears a coupon of Prime minus 0.90 percent and a second tranche that bears a coupon of 1-month LIBOR plus 1.85 percent.

In certain of the Company’s securitizations, there are terms within the deal structure that result in such securitization not qualifying for sale treatment and, as a result, is accounted for as a secured borrowing. 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 the 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. These securitizations completed in 2009 are accounted for as secured borrowings.

The Company has concluded, for the Private Education Loan securitizations above which contain the ability to call the bonds in the future at a discount to par, that it is probable it will call these bonds at the call date at the respective discount. Probability is based on the Company’s assessment of whether these bonds can be refinanced at the call date at or lower than a breakeven cost of funds based on the call discount. As a result, the Company is accreting this call discount as a reduction to interest expense through the call date. If it becomes less than probable the Company will call these bonds at a future date, it will result in the Company reversing this prior accretion as a cumulative catch up adjustment. The Company has accreted approximately $59 million as a reduction of interest expense through December 31, 2009.

During 2009 and 2008, five and two, respectively, of the Company’s off-balance sheet securitization trusts were re-evaluated and it was determined that they no longer met the criteria to be considered QSPEs. These trusts were then evaluated as VIEs and it was determined that they should be consolidated and accounted for as secured borrowings as the Company is the primary beneficiary. These trusts had reached their 10 percent clean-up call levels but the call was not exercised by the Company. Because the Company can now exercise that option at its discretion going forward, the Company effectively controls the assets of the trusts. This resulted in the Company consolidating at fair value $685 million and $289 million in assets and $649 million and $278 million in liabilities related to these trusts during 2009 and 2008, respectively. This resulted in $20 million and $2 million recognized gains in 2009 and 2008, respectively.

Auction Rate Securities

At December 31, 2009, the Company had $1.0 billion of taxable and $1.1 billion of tax-exempt auction rate securities outstanding in on-balance sheet securitizations and indentured trusts, respectively. Since February 2008, problems in the auction rate securities market as a whole led to failures of the auctions pursuant to which certain of the Company’s auction rate securities’ interest rates are set. As a result, all of the Company’s auction rate securities as of December 31, 2009 bore interest at the maximum rate allowable under their terms. The maximum allowable interest rate on the Company’s $1.0 billion of taxable auction rate securities is generally LIBOR plus 1.50 percent. The maximum allowable interest rate on many of the Company’s $1.1 billion of tax-exempt auction rate securities is a formula driven rate, which produced various maximum rates up to 1.14 percent during the fourth quarter of 2009. Since December 31, 2009, certain of the Company’s taxable auction rate securities with shorter terms to maturity have had successful auctions.

Indentured Trusts

The Company has secured assets and outstanding bonds in indentured trusts resulting from the acquisition of various student loan providers in prior periods. The indentures were created and bonds issued to finance the acquisition of student loans guaranteed under the Higher Education Act. The bonds are limited obligations of the Company and are secured by and payable from payments associated with the underlying secured loans.

Federal Home Loan Bank in Des Moines

On January 15, 2010, HICA Education Loan Corporation, a subsidiary of the Company, entered into a lending agreement with the Federal Home Loan Bank of Des Moines (the “FHLB”). Under the agreement, the FHLB will provide advances backed by Federal Housing Finance Agency approved collateral including federally-guaranteed student loans. The initial borrowing of $25 million at a rate of .23 percent under this facility occurred on January 15, 2010 and matured on January 22, 2010. The amount, price and tenor of future advances will vary and will be determined at the time of each borrowing. The maximum amount that can be borrowed, as of January 15, 2010, subject to available collateral, is approximately $11 billion. The Company has provided a guarantee to the FHLB for the performance and payment of HICA’s obligations.

Student Loan Securitization

12 Months Ended

Dec. 31, 2009

Student Loan Securitization [Abstract]

Student Loan Securitization


8.	Student Loan Securitization

The Company securitizes its FFELP Stafford Loans, FFELP Consolidation Loans and Private Education Loan assets and, for transactions qualifying as sales, retains a Residual Interest and servicing rights (as the Company retains the servicing responsibilities), all of which are referred to as the Company’s Retained Interest in off-balance sheet securitized loans. The Residual Interest is the right to receive cash flows from the student loans and reserve accounts in excess of the amounts needed to pay servicing, derivative costs (if any), other fees, and the principal and interest on the bonds backed by the student loans.

Securitization Activity

The following table summarizes the Company’s securitization activity for the years ended December 31, 2009, 2008 and 2007. Those securitizations listed as sales are off-balance sheet transactions and those listed as financings remain on-balance sheet.


	Years Ended December 31,
	2009									2008									2007
			Loan		Pre-							Loan		Pre-							Loan		Pre-
	No. of		Amount		Tax		Gain			No. of		Amount		Tax		Gain			No. of		Amount		Tax		Gain
	Transactions		Securitized		Gain		%			Transactions		Securitized		Gain		%			Transactions		Securitized		Gain		%
(Dollars in millions)

Securitizations — sales:
FFELP Stafford/PLUS Loans		—	$	—	$	—		—	%		—	$	—	$	—		—	%		—	$	—	$	—		—	%
FFELP Consolidation Loans		—		—		—		—			—		—		—		—			—		—		—		—
Private Education Loans		—		—		—		—			—		—		—		—			1		2,001		367		18.4

Total securitizations — sales		—		—	$	—		—	%		—		—	$	—		—	%		1		2,001	$	367		18.4	%

Securitizations — financings:
FFELP Stafford/PLUS Loans⁽¹⁾		—		—							9		18,546							3		8,955
FFELP Consolidation Loans⁽¹⁾⁽²⁾		3		5,339							—		—							5		14,476
Private Education Loans⁽¹⁾		5		11,122							—		—							—		—

Total securitizations — financings		8		16,461							9		18,546							8		23,431

Total securitizations		8	$	16,461							9	$	18,546							9	$	25,432


⁽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 (which do not relate to the reissuance of third-party beneficial interests) after initial settlement of the securitization, or (3) allowing the Company to hold an unconditional call option related to a certain percentage of the securitized assets.

⁽²⁾		In addition to the transactions listed in the above table, the Company settled on a repackaging trust and issued new asset backed securities in the amount of $1.0 billion. The debt issued is collateralized by reset rate notes totaling $1.2 billion.

Key economic assumptions used in estimating the fair value of the Residual Interests at the date of securitization resulting from the student loan securitization sale transactions completed during the years ended December 31, 2009, 2008 and 2007 were as follows:


	Years Ended December 31,
	2009						2008						2007
	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⁽¹⁾		and PLUS⁽¹⁾		Loans⁽¹⁾		Loans

Prepayment speed (annual rate)⁽²⁾		—		—		—		—		—		—		—		—		—
Interim status		—		—		—		—		—		—		—		—		0	%
Repayment status		—		—		—		—		—		—		—		—		4-7	%
Life of loan repayment status		—		—		—		—		—		—		—		—		6	%
Weighted average life		—		—		—		—		—		—		—		—		9.4 y	rs.
Expected credit losses (% of principal securitized)		—		—		—		—		—		—		—		—		4.69	%
Residual cash flows discounted at (weighted average)		—		—		—		—		—		—		—		—		12.5	%


⁽¹⁾		No securitizations qualified for sale treatment in the period.

⁽²⁾		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 loan’s 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.

The following table summarizes cash flows received from or paid to the off-balance sheet securitization trusts during the years ended December 31, 2009, 2008 and 2007:


	Years Ended December 31,
(Dollars in millions)	2009			2008			2007

Net proceeds from new securitizations completed during the period	$	—		$	—		$	1,977
Cash distributions from trusts related to Residual Interests		477			909			782
Servicing fees received⁽¹⁾		225			246			286
Purchases of previously transferred financial assets for representation and warranty violations		(7	)		(37	)		(33	)
Reimbursements of borrower benefits⁽²⁾		(36	)		(29	)		(22	)
Purchases of delinquent Private Education Loans from securitization trusts using delinquent loan call option		—			(172	)		(162	)
Purchases of loans using clean-up call option		—			(697	)		(1,500	)


⁽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.

Residual Interest in Securitized Receivables

The following tables summarize the fair value of the Company’s Residual Interests included in the Company’s Retained Interest (and the assumptions used to value such Residual Interests), along with the underlying off-balance sheet student loans that relate to those securitizations in transactions that were treated as sales as of December 31, 2009 and 2008.


	As of December 31, 2009
	FFELP			Consolidation			Private
	Stafford and			Loan			Education
	PLUS			Trusts⁽¹⁾			Loan Trusts			Total
(Dollars in millions)

Fair value of Residual Interests	$	243		$	791		$	794		$	1,828
Underlying securitized loan balance		5,377			14,369			12,986			32,732
Weighted average life		3.3 yrs.			9.0 yrs.			6.3 yrs.
Prepayment speed (annual rate)⁽²⁾
Interim status		0	%		N/A			0	%
Repayment status		0-14	%		2-4	%		2-15	%
Life of loan — repayment status		9	%		3	%		6	%
Expected credit losses (% of student loan principal)⁽³⁾⁽⁴⁾		.10	%		.25	%		5.31	%
Residual cash flows discount rate		10.6	%		12.3	%		27.5	%


	As of December 31, 2008
	FFELP			Consolidation			Private
	Stafford and			Loan			Education
	PLUS			Trusts⁽¹⁾			Loan Trusts			Total
(Dollars in millions)

Fair value of Residual Interests	$	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)⁽²⁾
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)⁽³⁾⁽⁴⁾		.11	%		.23	%		5.22	%
Residual cash flows discount rate		13.1	%		11.9	%		26.3	%


⁽¹⁾		Includes $569 million and $762 million related to the fair value of the Embedded Floor Income as of December 31, 2009 and 2008, 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⁾		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 loan’s 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.

⁽³⁾		Remaining expected credit losses as of the respective balance sheet date.

⁽⁴⁾		For Private Education Loan trusts, estimated defaults from settlement to maturity are 12.2 percent and 9.1 percent at December 31, 2009 and 2008, respectively. These estimated defaults do not include recoveries related to defaults but do include prior purchases of loans at par by the Company when loans reached 180 days delinquency (prior to default) under a contingent call option. Although these loan purchases do not result in a realized loss to the trust, the Company has included them here. Not including these purchases in the disclosure would result in estimated defaults of 9.3 percent and 6.1 percent at December 31, 2009 and 2008, respectively.

Servicing and securitization revenue is primarily driven by the average balance of off-balance sheet student loans, the amount of and the difference in the timing of Embedded Floor Income recognition for off-balance sheet student loans, and the fair value adjustment related to those Residual Interests where the Company has elected to carry such Residual Interests at fair value through earnings under ASC 825.

The Company recorded net unrealized mark-to-market losses of $330 million, $425 million and $24 million in the years ended December 31, 2009, 2008 and 2007, respectively, related to the Residual Interest.

As of December 31, 2009, the Company changed the following significant assumptions compared to those used as of December 31, 2008, to determine the fair value of the Residual Interests:


	•	Prepayment speed assumptions on FFELP Stafford and Consolidation Loans were decreased. This change reflects the significant decrease in prepayment activity experienced since 2008. This decrease in prepayment activity, which the Company expects will continue into the foreseeable future, was primarily due to a reduction in third-party consolidation activity as a result of the CCRAA and the current U.S. economic and credit environment. This resulted in a $61 million unrealized mark-to-market gain.


	•	Life of loan default rate assumptions for Private Education Loans were increased from 9.1 percent to 12.2 percent as a result of the continued weakening of the U.S. economy. This resulted in a $426 million unrealized mark-to-market loss.

As of December 31, 2008, the Company had changed the following significant assumptions compared to those used as of December 31, 2007, to determine the fair value of the Residual Interests:


	•	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 was 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 would 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 was 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 existed in the market as of December 31, 2008. This discount rate was applied to the projected cash flows to arrive at a fair value representative of the then current economic conditions. The Company increased the risk premium by 1,550 basis points and 390 basis points for Private Education Loans and FFELP loans, respectively, to take into account the then current level of cash flow uncertainty and lack of liquidity that existed with the Residual Interests. This resulted in a $904 million unrealized mark-to-market loss.

The Company recorded impairments to the Retained Interests of $254 million for the year ended December 31, 2007. The impairment charges were the result of FFELP loans prepaying faster than projected through loan consolidations ($110 million), impairment to the Floor Income component of the Company’s Retained Interest due to increases in interest rates during the period ($24 million), and increases in prepayments, defaults, and the discount rate related to Private Education Loans ($120 million).

The following table reflects the sensitivity of the current fair value of the Residual Interests to adverse changes in the key economic assumptions used in the valuation of the Residual Interest at December 31, 2009, discussed in detail in the preceding table. The effect of a variation in a particular assumption on the fair value of the Residual Interest is calculated without changing any other assumption. In reality, changes in one factor may result in changes in another (for example, increases in market interest rates may result in lower prepayments and increased credit losses), which might magnify or counteract the sensitivities. These sensitivities are hypothetical, as the actual results could be materially different than these estimates.


	Year Ended December 31, 2009
	FFELP			FFELP
	Stafford/PLUS			Consolidation			Private Education
	Loan Trusts⁽⁵⁾			Loan Trusts⁽⁵⁾			Loan Trusts⁽⁵⁾
(Dollars in millions)

Fair value of Residual Interest	$	243		$	791	⁽¹⁾	$	794
Weighted-average life		3.3 yrs.			9.0 yrs.			6.3 yrs.
Prepayment speed assumptions⁽²⁾
Interim status		0	%		N/A			0	%
Repayment status		0-14	%		2-4	%		2-15	%
Life of loan — repayment status		9	%		3	%		6	%
Impact on fair value of 5% absolute increase	$	(26	)	$	(85	)	$	(128	)
Impact on fair value of 10% absolute increase	$	(47	)	$	(151	)	$	(229	)
Expected credit losses (as a % of student loan principal)		.10	%		.25	%		5.31	% ⁽³⁾
Impact on fair value of 5% absolute increase in default rate	$	(4	)	$	(8	)	$	(176	)
Impact on fair value of 10% absolute increase in default rate	$	(9	)	$	(17	)	$	(346	)
Residual cash flows discount rate		10.6	%		12.3	%		27.5	%
Impact on fair value of 5% absolute increase	$	(29	)	$	(136	)	$	(116	)
Impact on fair value of 10% absolute increase	$	(53	)	$	(230	)	$	(205	)
3 month LIBOR forward curve at December 31, 2009 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	$	(41	)	$	(173	)	$	(2	)
Impact on fair value of 0.50% absolute increase in funding index compared to asset index	$	(82	)	$	(345	)	$	(4	)


⁽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, 2009, these swaps are in a $910 million gain position (in the aggregate) and the trusts had $603 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 trust’s swap counterparty’s 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 Company’s exposure related to a swap counterparty failing to make its payments is limited to the fair value of the related trust’s Residual Interest, which was $1.3 billion as of December 31, 2009.
⁽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 securitization’s 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 Company’s 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 Company’s balance sheet. The Company recorded losses of $0, $141 million and $123 million for the years ended December 31, 2009, 2008 and 2007, 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 the assets underlying indexes fixed.
⁽⁵⁾		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 $1.8 billion Residual Interest, there is $214 million (present value) of benefits projected, which reduce the fair value.

The table below shows the Company’s off-balance sheet Private Education Loan delinquency trends as of December 31, 2009 and 2008.


	Off-Balance Sheet Private Education Loan
	Delinquencies
	December 31,					December 31,
	2009					2008
	Balance		%			Balance		%
(Dollars in millions)

Loans in-school/grace/deferment⁽¹⁾	$	2,546				$	3,461
Loans in forbearance⁽²⁾		453					700
Loans in repayment and percentage of each status:
Loans current		8,987		90.0	%		8,843		92.8	%
Loans delinquent 31-60 days⁽³⁾		332		3.3			315		3.3
Loans delinquent 61-90 days		151		1.5			121		1.3
Loans delinquent greater than 90 days		517		5.2			251		2.6

Total off-balance sheet Private Education Loans in repayment		9,987		100	%		9,530		100	%

Total off-balance sheet Private Education Loans, gross	$	12,986				$	13,691


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


	⁽²⁾	Loans for borrowers who have requested extension of grace period generally during employment transition or who have temporarily ceased making 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.

The following table summarizes charge-off activity for Private Education Loans in the off-balance sheet trusts for the years ended December 31, 2009, 2008 and 2007.


	Years Ended December 31,
	2009			2008			2007
(Dollars in millions)

Charge-offs		(423	)		(153	)		(79	)
Charge-offs as a percentage of average loans in repayment		4.4	%		1.9	%		1.1	%
Charge-offs as a percentage of average loans in repayment and forbearance		4.2	%		1.6	%		.9	%
Ending off-balance sheet total Private Education Loans⁽¹⁾	$	13,215		$	13,782		$	14,227
Average off-balance sheet Private Education Loans in repayment	$	9,597		$	8,088		$	7,305
Ending off-balance sheet Private Education Loans in repayment	$	9,987		$	9,530		$	7,819


	⁽¹⁾	Ending total loans represents gross Private Education Loans, plus the receivable for partially charged-off loans (see Note 4,“Allowance for Loan Losses”).

Derivative Financial Instruments

12 Months Ended

Dec. 31, 2009

Derivative Financial Instruments [Abstract]

Derivative Financial Instruments


9.	Derivative Financial Instruments

Risk Management Strategy

The Company maintains an overall interest rate risk management strategy that incorporates the use of derivative instruments to minimize the economic effect of interest rate changes. The Company’s goal is to manage interest rate sensitivity by modifying the repricing frequency and underlying index characteristics of certain balance sheet assets and liabilities (including the Residual Interest from off-balance sheet securitizations) so that the net interest margin is not, on a material basis, adversely affected by movements in interest rates. The Company does not use derivative instruments to hedge credit risk associated with debt issued by the Company. As a result of interest rate fluctuations, hedged assets and liabilities will appreciate or depreciate in market value. Income or loss on the derivative instruments that are linked to the hedged assets and liabilities will generally offset the effect of this unrealized appreciation or depreciation for the period the item is being hedged. The Company views this strategy as a prudent management of interest rate sensitivity. In addition, the Company utilizes derivative contracts to minimize the economic impact of changes in foreign currency exchange rates on certain debt obligations that are denominated in foreign currencies. As foreign currency exchange rates fluctuate, these liabilities will appreciate and depreciate in value. These fluctuations, to the extent the hedge relationship is effective, are offset by changes in the value of the cross-currency interest rate swaps executed to hedge these instruments. Management believes certain derivative transactions entered into as hedges, primarily Floor Income Contracts, basis swaps and Eurodollar futures contracts, are economically effective; however, those transactions generally do not qualify for hedge accounting under ASC 815 (as discussed below) and thus may adversely impact earnings.

Although the Company uses derivatives to offset (or minimize) the risk of interest rate and foreign currency changes, the use of derivatives does expose the Company to both market and credit risk. Market risk is the chance of financial loss resulting from changes in interest rates, foreign exchange rates and market liquidity. Credit risk is the risk that a counterparty will not perform its obligations under a contract and it is limited to the loss of the fair value gain in a derivative that the counterparty owes the Company. When the fair value of a derivative contract is negative, the Company owes the counterparty and, therefore, has no credit risk exposure to the counterparty; however, the counterparty has exposure to the Company. The Company minimizes the credit risk in derivative instruments by entering into transactions with highly rated counterparties that are reviewed regularly by the Company’s Credit Department. The Company also maintains a policy of requiring that all derivative contracts be governed by an International Swaps and Derivative Association Master Agreement. Depending on the nature of the derivative transaction, bilateral collateral arrangements generally are required as well. When the Company has more than one outstanding derivative transaction with the counterparty, and there exists legally enforceable netting provisions with the counterparty (i.e., a legal right to offset receivable and payable derivative contracts), the “net” mark-to-market exposure represents the netting of the positive and negative exposures with the same counterparty. When there is a net negative exposure, the Company considers its exposure to the counterparty to be zero. At December 31, 2009 and 2008, the Company had a net positive exposure (derivative gain positions to the Company less collateral which has been posted by counterparties to the Company) related to corporate derivatives of $246 million and $234 million, respectively.

The Company’s on-balance sheet securitization trusts have $10.4 billion of Euro and British Pound Sterling denominated bonds outstanding as of December 31, 2009. To convert these non-U.S. dollar denominated bonds into U.S. dollar liabilities, the trusts have entered into foreign-currency swaps with highly-rated counterparties. As of December 31, 2009, the net positive exposure on these swaps is $1.2 billion. As previously discussed, the Company’s corporate derivatives contain provisions which require collateral to be posted on a regular basis for changes in market values. The on-balance sheet trusts’ derivatives are structured such that swap counterparties are required to post collateral if their credit rating has been withdrawn or is 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. In addition to the credit rating requirement, trusts issued after November 2005 require the counterparty to post collateral due to a net positive exposure on cross-currency interest rate swaps, irrespective of their counterparty rating. The trusts, however, are not required to post collateral to the counterparty.

ASC 815

Derivative instruments that are used as part of the Company’s interest rate and foreign currency risk management strategy include interest rate swaps, basis swaps, cross-currency interest rate swaps, interest rate futures contracts, and interest rate floor and cap contracts with indices that relate to the pricing of specific balance sheet assets and liabilities, including the Residual Interests from off-balance sheet securitizations. In addition, prior to 2008, the Company used equity forward contracts based on the Company’s stock. The Company accounts for its derivatives under ASC 815 which requires that every derivative instrument, including certain derivative instruments embedded in other contracts, be recorded in the balance sheet as either an asset or liability measured at its fair value. As more fully described below, if certain criteria are met, derivative instruments are classified and accounted for by the Company as either fair value or cash flow hedges. If these criteria are not met, the derivative financial instruments are accounted for as trading.

Fair Value Hedges

Fair value hedges are generally used by the Company to hedge the exposure to changes in fair value of a recognized fixed rate asset or liability. The Company enters into interest rate swaps to convert fixed rate assets into variable rate assets and fixed rate debt into variable rate debt. The Company also enters into cross-currency interest rate swaps to convert foreign currency denominated fixed and floating debt to U.S. dollar denominated variable debt. For fair value hedges, the Company generally considers all components of the derivative’s gain and/or loss when assessing hedge effectiveness (in some cases the Company excludes time-value components) and generally hedges changes in fair value due to interest rates or interest rates and foreign currency exchange rates or the total change in fair value.

Cash Flow Hedges

Cash flow hedges are used by the Company to hedge the exposure to variability in cash flows for a forecasted debt issuance and for exposure to variability in cash flows of floating rate debt. This strategy is used primarily to minimize the exposure to volatility from future changes in interest rates. Gains and losses on the effective portion of a qualifying hedge are accumulated in other comprehensive income and ineffectiveness is recorded immediately to earnings. In the case of a forecasted debt issuance, gains and losses are reclassified to earnings over the period which the stated hedged transaction impacts earnings. If the stated transaction is deemed probable not to occur, gains and losses are reclassified immediately to earnings. In assessing hedge effectiveness, generally all components of each derivative’s gains or losses are included in the assessment. The Company generally hedges exposure to changes in cash flows due to changes in interest rates or total changes in cash flow.

Trading Activities

When instruments do not qualify as hedges, they are accounted for as trading where all changes in fair value of the derivatives are recorded through earnings. The Company sells interest rate floors (Floor Income Contracts) to hedge the Embedded Floor Income options in student loan assets. The Floor Income Contracts are written options which under ASC 815 have a more stringent effectiveness hurdle to meet. Therefore, these relationships do not satisfy hedging qualifications under ASC 815, but are considered economic hedges for risk management purposes. The Company uses this strategy to minimize its exposure to changes in interest rates.

The Company uses basis swaps to minimize earnings variability caused by having different reset characteristics on the Company’s interest-earning assets and interest-bearing liabilities. These swaps possess a term of up to 14 years with a pay rate indexed to 91-day Treasury bill, 3-month commercial paper, 52-week Treasury bill, LIBOR, Prime, or 1-year constant maturity Treasury rates. The specific terms and notional amounts of the swaps are determined based on management’s review of its asset/liability structure, its assessment of future interest rate relationships, and on other factors such as short-term strategic initiatives. ASC 815 requires that when using basis swaps, the change in the cash flows of the hedge effectively offset both the change in the cash flows of the asset and the change in the cash flows of the liability. The Company’s basis swaps hedge variable interest rate risk; however, they generally do not meet this effectiveness test because the index of the swap does not exactly match the index of the hedged assets as required by ASC 815. Additionally, some of the Company’s FFELP loans can earn at either a variable or a fixed interest rate depending on market interest rates. The Company also has basis swaps that do not meet the ASC 815 effectiveness test that economically hedge off-balance sheet instruments. As a result, under GAAP these swaps are recorded at fair value with changes in fair value reflected currently in the statement of income.

Prior to 2008, the Company entered into equity forward contracts (see Note 11, “Stockholders’ Equity,” for a further discussion of equity forward contracts and the settlement of all equity forward contracts in January 2008). The Company utilized the strategy to lock in the purchase price of the Company’s stock to better manage the cost of its share repurchases program. In order to qualify as a hedge under ASC 815, the hedged item must impact net income. In this case, the repurchase of the Company’s shares did not impact net income; therefore, the equity forwards did not qualify as a ASC 815 hedge. Prior to December 31, 2007, the Company’s equity forward contracts provided for physical, net share or net cash settlement options. On December 31, 2007, the terms of the contracts were changed to allow for physical settlement only. This effectively changed the characteristics of the contracts so they no longer were derivatives accounted for under ASC 815 and ASC 480 and instead were accounted for as a liability (recorded at the present value of the repurchase price) under ASC 480. The Company has not had any outstanding contracts since January 2008.

Summary of Derivative Financial Statement Impact

The following tables summarize the fair values and notional amounts or number of contracts of all derivative instruments at December 31, 2009 and 2008, and their impact on other comprehensive income and earnings for the years ended December 31, 2009, 2008 and 2007.

Impact of Derivatives on Consolidated Balance Sheet


		Cash Flow						Fair Value						Trading						Total
	Hedged Risk	Dec. 31,			Dec. 31,			Dec. 31,			Dec. 31,			Dec. 31,			Dec. 31,			Dec. 31,			Dec. 31,
(Dollars in millions)	Exposure	2009			2008			2009			2008			2009			2008			2009			2008

Fair Values⁽¹⁾
Derivative Assets
Interest rate swaps	Interest rate	$	—		$	—		$	684		$	1,529		$	133		$	323		$	817		$	1,852
Cross currency interest rate swaps	Foreign currency and interest rate		—			—			2,932			2,743			44			13			2,976			2,756

Total derivative assets⁽³⁾			—			—			3,616			4,272			177			336			3,793			4,608


Derivative Liabilities
Interest rate swaps	Interest rate		(78	)		(146	)		(6	)		—			(639	)		(332	)		(723	)		(478	)
Floor/Cap contracts	Interest rate		—			—			—			—			(1,234	)		(1,466	)		(1,234	)		(1,466	)
Futures	Interest rate		—			—			—			—			(2	)		(3	)		(2	)		(3	)
Cross currency interest rate swaps	Foreign currency and interest rate		—			—			(192	)		(640	)		(1	)		—			(193	)		(640	)
Other⁽²⁾	Interest rate		—			—			—			—			(18	)		—			(18	)		—

Total derivative liabilities⁽³⁾			(78	)		(146	)		(198	)		(640	)		(1,894	)		(1,801	)		(2,170	)		(2,587	)

Net total derivatives		$	(78	)	$	(146	)	$	3,418		$	3,632		$	(1,717	)	$	(1,465	)	$	1,623		$	2,021


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

⁽²⁾		“Other” includes the fair value of the embedded derivatives in asset-backed financings. The embedded derivatives are required to be accounted for as derivatives.

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


	Other Assets						Other Liabilities
	December 31,			December 31,			December 31,			December 31,
	2009			2008			2009			2008

Gross position	$	3,793		$	4,608		$	(2,170	)	$	(2,587	)
Impact of master netting agreements		(1,009	)		(1,594	)		1,009			1,594

Derivative values with impact of master netting agreements		2,784			3,014			(1,161	)		(993	)
Cash collateral		(1,268	)		(1,624	)		636			—

Net position	$	1,516		$	1,390		$	(525	)	$	(993	)


	Cash Flow				Fair Value				Trading				Total
	Dec. 31,		Dec. 31,		Dec. 31,		Dec. 31,		Dec. 31,		Dec. 31,		Dec. 31,		Dec. 31,
(Dollars in billions)	2009		2008		2009		2008		2009		2008		2009		2008

Notional Values
Interest rate swaps	$	1.7	$	4.8	$	12.4	$	13.4	$	148.2	$	159.3	$	162.3	$	177.5
Floor/Cap contracts		—		—		—		—		47.1		32.4		47.1		32.4
Futures		—		—		—		—		.1		.2		.1		.2
Cross currency interest rate swaps		—		—		19.3		23.1		.3		.1		19.6		23.2
Other⁽¹⁾		—		—		—		—		1.0		.7		1.0		.7

Total derivatives	$	1.7	$	4.8	$	31.7	$	36.5	$	196.7	$	192.7	$	230.1	$	234.0


⁽¹⁾		“Other” includes embedded derivatives bifurcated from on-balance sheet securitization debt, as well as embedded derivatives in the asset-backed financings discussed in footnote 2 to the table above.

Impact of Derivatives on Consolidated Statements of Income


	Unrealized Gain									Realized Gain									Unrealized Gain
	(Loss) on									(Loss) on									(Loss) on
	Derivatives⁽¹⁾⁽²⁾									Derivatives⁽³⁾									Hedged Item⁽¹⁾									Total Gain (Loss)
(Dollars in millions)	2009			2008			2007			2009			2008			2007			2009			2008			2007			2009			2008			2007

Fair Value Hedges
Interest rate swaps	$	(801	)	$	1,427		$	458		$	403		$	157		$	(155	)	$	850		$	(1,532	)	$	(468	)	$	452		$	52		$	(165	)
Cross currency interest rate swaps		692			(1,537	)		2,200			440			67			(139	)		(934	)		1,864			(2,129	)		198			394			(68	)

Total fair value derivatives		(109	)		(110	)		2,658			843			224			(294	)		(84	)		332			(2,597	)		650			446			(233	)
Cash Flow Hedges
Interest rate swaps		2			—			—			(75	)		(37	)		(1	)		—			—			—			(73	)		(37	)		(1	)

Total cash flow derivatives		2			—			—			(75	)		(37	)		(1	)		—			—			—			(73	)		(37	)		(1	)
Trading
Interest rate swaps		(526	)		(261	)		360			433			584			51			—			—			—			(93	)		323			411
Floor/Cap contracts		483			(529	)		(209	)		(717	)		(488	)		(68	)		—			—			—			(234	)		(1,017	)		(277	)
Futures		1			(3	)		—			(1	)		3			(1	)		—			—			—			—			—			(1	)
Cross currency interest rate swaps		(26	)		11			3			4			16			—			—			—			—			(22	)		27			3
Equity forward contracts		—			—			(1,558	)		—			—			—			—			—			—			—			—			(1,558	)
Other		(65	)		—			—			1			—			—			—			—			—			(64	)		—			—

Total trading derivatives		(133	)		(782	)		(1,404	)		(280	)		115			(18	)		—			—			—			(413	)		(667	)		(1,422	)

Total		(240	)		(892	)		1,254			488			302			(313	)		(84	)		332			(2,597	)		164			(258	)		(1,656	)
Less: realized gains (losses) recorded in interest expense		—			—			—			768			187			(295	)		—			—			—			768			187			(295	)

Gains (losses) on derivative and hedging activities, net	$	(240	)	$	(892	)	$	1,254		$	(280	)	$	115		$	(18	)	$	(84	)	$	332		$	(2,597	)	$	(604	)	$	(445	)	$	(1,361	)


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

⁽²⁾		Represents ineffectiveness related to cash flow hedges.

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

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


	Years Ended
	December 31,
(Dollars in millions)	2009			2008			2007

Total gains (losses) on cash flow hedges	$	(22	)	$	(95	)	$	(17	)
Realized (gains) losses recognized in interest expense^(1)(2)(3)		63			24			2
Hedge ineffectiveness reclassified to earnings⁽¹⁾⁽⁴⁾		(1	)		—			—

Total change in stockholders’ equity for unrealized gains (losses) on derivatives	$	40		$	(71	)	$	(15	)


⁽¹⁾		Amounts included in “Realized gain (loss) on derivatives” in the “Impact of Derivatives on Consolidated Statements of Income” table above.
⁽²⁾		Includes net settlement income/expense.
⁽³⁾		The Company expects to reclassify $3 million of after-tax net losses from accumulated other comprehensive income to earnings during the next 12 months related to net settlement accruals on interest rate swaps.
⁽⁴⁾		Recorded in “Gains (losses) derivatives and hedging activities, net” in the consolidated statements of income.

Collateral

Collateral held and pledged at December 31, 2009 and 2008 related to derivative exposures between the Company and its derivative counterparties are detailed in the following table:


	December 31,		December 31,
(Dollars in millions)	2009		2008

Collateral held:
Cash (obligation to return cash collateral is recorded in short-term borrowings)⁽¹⁾	$	1,268	$	1,624
Securities at fair value — corporate derivatives (not recorded in financial statements)⁽²⁾		112		689
Securities at fair value — on-balance sheet securitization derivatives (not recorded in financial statements)⁽³⁾		717		688

Total collateral held	$	2,097	$	3,001

Derivative asset at fair value including accrued interest	$	3,119	$	3,741

Collateral pledged to others:
Cash (right to receive return of cash collateral is recorded in investments)	$	636	$	—
Securities at fair value (recorded in investments)⁽⁴⁾		25		26
Securities at fair value (recorded in restricted investments)⁽⁵⁾		25		—
Securities at fair value re-pledged (not recorded in financial statements)⁽⁵⁾⁽⁶⁾		87		191

Total collateral pledged	$	773	$	217

Derivative liability at fair value including accrued interest and premium receivable	$	758	$	677


⁽¹⁾		At December 31, 2009 and 2008, $447 million and $0, respectively, was held in restricted cash accounts.

⁽²⁾		Effective with the downgrade in the Company’s unsecured credit ratings on May 13, 2009, certain counterparties do not allow the Company to sell or re-pledge securities it holds as collateral.

⁽³⁾		The trusts do not have the ability to sell or re-pledge securities they hold as collateral.

⁽⁴⁾		Counterparty does not have the right to sell or re-pledge securities.

⁽⁵⁾		Counterparty has the right to sell or re-pledge securities.

⁽⁶⁾		Represents securities the Company holds as collateral that have been pledged to other counterparties.

The Company’s corporate derivatives contain credit contingent features. At the Company’s current unsecured credit rating, it has fully collateralized its corporate derivative liability position of $1.1 billion with its counterparties. Further downgrades would not result in any additional collateral requirements, except to provide for more frequent collateral calls. Two counterparties have the right to terminate the contracts with further downgrades, however, these counterparties are currently in an asset position and would be required to deliver assets to the Company in order to terminate. Trust related derivatives do not contain credit contingent features related to the Company’s or trust’s credit ratings.

Additionally, as of December 31, 2009 and 2008, $381 million and $340 million, respectively, in collateral related to off-balance sheet trust derivatives were held by these off-balance sheet trusts. Collateral posted by third parties to the off-balance sheet trusts cannot be sold or re-pledged by the trusts.

Other Assets

12 Months Ended

Dec. 31, 2009

Other Assets [Abstract]

Other Assets


10.	Other Assets

The following table provides the detail of the Company’s other assets at December 31, 2009 and 2008.


	December 31, 2009					December 31, 2008
	Ending		% of			Ending		% of
	Balance		Balance			Balance		Balance

Derivatives at fair value	$	2,783,696		29	%	$	3,013,644		27	%
Accrued interest receivable		2,566,984		27			3,466,404		31
Income tax asset, net current and deferred		1,750,424		18			1,661,039		15
APG purchased paper related receivables and real estate owned		286,108		3			1,222,345		11
Benefit and insurance-related investments		472,079		5			472,899		4
Fixed assets, net		322,481		3			313,059		3
Accounts receivable — general		807,086		9			712,854		6
Other		511,500		6			278,533		3

Total	$	9,500,358		100	%	$	11,140,777		100	%

The “Derivatives at fair value” line in the above table represents the fair value of the Company’s derivatives in a gain position by counterparty, exclusive of accrued interest and collateral. At December 31, 2009 and 2008, these balances included $3.4 billion and $3.6 billion, respectively, of cross-currency interest rate swaps and interest rate swaps designated as fair value hedges that were offset by an increase in interest-bearing liabilities related to the hedged debt. As of December 31, 2009 and 2008, the cumulative mark-to-market adjustment to the hedged debt was $(3.4) billion and $(3.4) billion, respectively.

Stockholders' Equity

12 Months Ended

Dec. 31, 2009

Stockholders' Equity [Abstract]

Stockholders' Equity


11.	Stockholders’ Equity

Preferred Stock

At December 31, 2009, the Company had outstanding 3.3 million shares of 6.97 percent Cumulative Redeemable Preferred Stock, Series A (the “Series A Preferred Stock”) and 4.0 million shares of Floating-Rate Non-Cumulative Preferred Stock, Series B (the “Series B Preferred Stock”). Neither series has a maturity date but can be redeemed at the Company’s option beginning November 16, 2009 for Series A Preferred Stock, and on any dividend payment date on or after June 15, 2010 for Series B Preferred Stock. Redemption would include any accrued and unpaid dividends up to the redemption date. The shares have no preemptive or conversion rights and are not convertible into or exchangeable for any of the Company’s other securities or property. Dividends on both series are not mandatory and are paid quarterly, when, as, and if declared by the Board of Directors. Holders of Series A Preferred Stock are entitled to receive cumulative, quarterly cash dividends at the annual rate of $3.485 per share. Holders of Series B Preferred Stock are entitled to receive quarterly dividends based on 3-month LIBOR plus 70 basis points per annum in arrears, on and until June 15, 2011, increasing to 3-month LIBOR plus 170 basis points per annum in arrears after and including the period beginning on June 15, 2011. Upon liquidation or dissolution of the Company, holders of the Series A and Series B Preferred Stock are entitled to receive $50 and $100 per share, respectively, plus an amount equal to accrued and unpaid dividends for the then current quarterly dividend period, if any, pro rata, and before any distribution of assets are made to holders of the Company’s common stock.

On December 31, 2009, the Company had outstanding 810,000 shares of 7.25 percent Mandatory Convertible Preferred Stock, Series C (the “Series C Preferred Stock”). The Series C Preferred Stock was issued on December 31, 2007, and resulted in net proceeds of approximately $1.0 billion. An additional 150,000 shares were issued on January 9, 2008, as a result of the underwriters exercising their over-allotment option, and resulted in net proceeds of $145.5 million. Each share of Series C Preferred Stock has a $1,000 liquidation preference and is subject to mandatory conversion on December 15, 2010. On the mandatory conversion date, each share of the Series C Preferred Stock will automatically convert into shares of the Company’s common stock based on a conversion rate calculated using the average of the closing prices per share of the Company’s common stock during the 20 consecutive trading day period ending on the third trading day immediately preceding the mandatory conversion date. If the applicable market value on the mandatory conversion date is (i) greater than $23.97, the conversion rate is 41.7188 shares of the Company’s common stock per share of Series C Preferred Stock, (ii) less than $19.65, the conversion rate is 50.8906 shares of the Company’s common stock per share of Series C Preferred Stock, or (iii) equal to or less than $23.97 but greater than or equal to $19.65, the conversion rate is $1,000 divided by the applicable market value, which is between 41.7188 shares and 50.8906 shares of the Company’s common stock per share of Series C Preferred Stock. At any time prior to December 15, 2010, the holder may elect optional conversion in whole or in part at the minimum conversion rate of 41.7188 shares of the Company’s common stock per share of Series C Preferred Stock. Series C Preferred Stock is not redeemable. Dividends are not mandatory and are paid quarterly, when, as, and if declared by the Board of Directors. Holders of Series C Preferred Stock are entitled to receive cumulative, quarterly cash dividends at the annual rate of 7.25 percent per share.

During 2009, the Company converted $339 million of its Series C Preferred Stock to common stock. As part of this conversion, the Company delivered to the holders of the preferred stock: (1) approximately 17 million shares (the number of common shares they would most likely receive if the preferred stock they held mandatorily converted to common shares in the fourth quarter of 2010) plus (2) a discounted amount of the preferred stock dividends the holders of the preferred stock would have received if they held the preferred stock through the mandatory conversion date. The accounting treatment for this conversion resulted in additional expense recorded as part of preferred stock dividends for the year of approximately $53 million.

Common Stock

The Company’s shareholders have authorized the issuance of 1.1 billion shares of common stock (par value of $.20). At December 31, 2009, 485 million shares were issued and outstanding and 77 million shares were unissued but encumbered for outstanding Series C Preferred Stock, outstanding stock options for employee compensation, and remaining authority for stock-based compensation plans. The stock-based compensation plans are described in Note 13, “Stock-Based Compensation Plans and Arrangements.”

On December 31, 2007, the Company issued 101,781,170 shares of its common stock at a price of $19.65 per share. Net proceeds from the sale were approximately $1.9 billion. The Company used approximately $2.0 billion of the net proceeds from the sale of Series C Preferred Stock and the sale of its common stock to settle its outstanding equity forward contract (see “Common Stock Repurchase Program and Equity Forward Contracts” below). The remaining proceeds were used for general corporate purposes. The Company issued 9,781,170 shares of the 102 million share offering from its treasury stock. These shares were removed from treasury stock at an average cost of $43.13, resulting in a $422 million decrease to the balance of treasury stock with an offsetting $235 million decrease to retained earnings.

Common Stock Repurchase Program and Equity Forward Contracts

The Company has historically repurchased its common stock through both open market purchases and settlement of equity forward contracts. Beginning on November 29, 2007, the Company amended or closed out certain equity forward contracts. On December 19, 2007, the Company entered into a series of transactions with its equity forward counterparties and Citibank, N.A. (“Citibank”) to assign all of its remaining equity forward contracts, covering 44,039,890 shares, to Citibank. In connection with the assignment of the equity forward contracts, the Company and Citibank amended the terms of the equity forward contract to eliminate all stock price triggers (which had previously allowed the counterparty to terminate the contracts prior to their scheduled maturity date) and termination events based on the Company’s credit ratings. The strike price of the equity forward contract on December 19, 2007, was $45.25 with a maturity date of February 22, 2008. The new Citibank equity forward contract was 100 percent collateralized with cash. On December 31, 2007, the Company and Citibank agreed to physically settle the contract and the Company paid Citibank approximately $1.1 billion, the difference between the contract purchase price and the previous market closing price on the 44,039,890 shares. This effectively changed the characteristics of the contract so it no longer was a derivative accounted for under ASC 815 and instead was a liability (recorded at the present value of the repurchase price) under ASC 480. Consequently, the common shares outstanding and shareholders’ equity on the Company’s year-end balance sheet reflect the shares issued in the public offerings and 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. The Company paid Citibank the remaining balance of approximately $0.9 billion due under the contract on January 9, 2008. The Company has no outstanding equity forward positions outstanding after the contract settlement on January 9, 2008.

The following table summarizes the Company’s common share repurchases and issuances for the years ended December 31, 2009, 2008 and 2007. Equity forward activity for the year ended December 31, 2007 is also reported.


	Years Ended December 31,
(Shares in millions)	2009		2008		2007

Common shares repurchased:
Open market		—		—		1.8
Equity forward contracts		—		—		4.2
Equity forward contracts agreed to be settled⁽¹⁾		—		—		44.0
Benefit plans⁽²⁾		.3		1.0		3.3

Total shares repurchased		.3		1.0		53.3

Average purchase price per share	$	20.29	$	24.51	$	44.59

Common shares issued		17.8		1.9		109.2

Equity forward contracts:
Outstanding at beginning of period		—		—		48.2
New contracts		—		—		—
Settlements		—		—		(4.2	)
Agreed to be settled⁽¹⁾		—		—		(44.0	)

Outstanding at end of period		—		—		—

Authority remaining at end of period for repurchases		38.8		38.8		38.8


⁽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 Company’s 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.

The closing price of the Company’s common stock on December 31, 2009 was $11.27.

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) includes the after-tax change in unrealized gains and losses on investments, unrealized gains and losses on derivatives, and defined benefit pension plans. The following table presents the cumulative balances of the components of other comprehensive income for the years ended December 31, 2009, 2008 and 2007.


	December 31,
	2009			2008			2007

Net unrealized gains (losses) on investments⁽¹⁾	$	1,629		$	(1,243	)	$	238,772
Net unrealized (losses) on derivatives⁽²⁾		(53,899	)		(93,986	)		(22,574	)
Defined benefit pension plans:
Net gain		11,445			18,753			20,166

Total defined benefit pension plans⁽³⁾		11,445			18,753			20,166

Total accumulated other comprehensive income	$	(40,825	)	$	(76,476	)	$	236,364


⁽¹⁾		Net of tax expense of $901 as of December 31, 2009, tax benefit of $750 as of December 31, 2008, and tax expense of $125,473 as of December 31, 2007.

⁽²⁾		Net of tax benefit of $31,129, $53,419 and $12,682 as of December 31, 2009, 2008 and 2007, respectively.

⁽³⁾		Net of tax expense of $6,780, $10,967 and $11,677 as of December 31, 2009, 2008 and 2007, respectively.

Earnings (Loss) per Common Share

12 Months Ended

Dec. 31, 2009

Earnings (Loss) per Common Share [Abstract]

Earnings (Loss) per Common Share


12.	Earnings (Loss) per Common Share

Basic earnings (loss) per common share (“EPS”) are calculated using the weighted average number of shares of common stock outstanding during each period. A reconciliation of the numerators and denominators of the basic and diluted EPS calculations follows for the years ended December 31, 2009, 2008 and 2007.


	Years Ended December 31,
	2009			2008			2007

Numerator:
Net income (loss) from continuing operations attributable to common stock	$	335,992		$	(180,613	)	$	(939,815	)
Adjusted for dividends of Series C Preferred Stock⁽¹⁾		—			—			—

Net income (loss) from continuing operations attributable to common stock, adjusted		335,992			(180,613	)		(939,815	)
Net income (loss) from discontinued operations		(157,690	)		(143,219	)		6,276

Net income (loss) attributable to common stock	$	178,302		$	(323,832	)	$	(933,539	)

Denominator (shares in thousands):
Weighted average shares used to compute basic EPS		470,858			466,642			412,233
Effect of dilutive securities:
Dilutive effect of Series C Preferred Stock⁽¹⁾		—			—			—
Dilutive effect of stock options, non-vested deferred compensation and restricted stock, restricted stock units, Employee Stock Purchase Plan (“ESPP”) and equity forwards⁽²⁾		726			—			—

Dilutive potential common shares⁽³⁾		726			—			—

Weighted average shares used to compute diluted EPS		471,584			466,642			412,233

Basic earnings (loss) per common share:
Continuing operations	$	.71		$	(.39	)	$	(2.28	)
Discontinued operations		(.33	)		(.30	)		.02

Total	$	.38		$	(.69	)	$	(2.26	)

Diluted earnings (loss) per common share:
Continuing operations	$	.71		$	(.39	)	$	(2.28	)
Discontinued operations		(.33	)		(.30	)		.02

Total	$	.38		$	(.69	)	$	(2.26	)


⁽¹⁾		The Company’s 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 approximately 34 million and 41 million shares of common stock, depending upon the Company’s stock price at that time. These instruments were anti-dilutive for the years ended December 31, 2009, 2008 and 2007.

⁽²⁾		Includes the potential dilutive effect of additional common shares that are issuable upon exercise of outstanding stock options, non-vested deferred compensation and restricted stock, restricted stock units, and the outstanding commitment to issue shares under the ESPP, determined by the treasury stock method, and equity forward contracts determined by the reverse treasury stock method. The Company settled all of its outstanding equity forward contracts in January 2008.

⁽³⁾		For the years ended December 31, 2009, 2008 and 2007, stock options covering approximately 42 million, 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.

Stock-Based Compensation Plans and Arrangements

12 Months Ended

Dec. 31, 2009

Stock-Based Compensation Plans and Arrangements [Abstract]

Stock-Based Compensation Plans and Arrangements


13.	Stock-Based Compensation Plans and Arrangements

As of December 31, 2009, the Company has two active stock-based compensation plans that provide for grants of stock, stock options, restricted stock and restricted stock units to its employees and non-employee directors. The Company also maintains the Employee Stock Purchase Plan (the “ESPP”). Shares issued under these stock-based compensation plans may be either shares reacquired by the Company or shares that are authorized but unissued. The Company also makes grants of stock-based awards under individually negotiated arrangements.

The SLM 2009-2012 Incentive Plan was approved by shareholders on May 22, 2009, and expires on May 22, 2012. At December 31, 2009, 12.1 million shares were authorized to be issued from this plan.

The SLM Corporation Directors Equity Plan, under which stock options and restricted stock are granted to non-employee members of the board of directors, was approved on May 22, 2009, and expires on May 22, 2012. At December 31, 2009, 1 million shares were authorized to be issued from this plan. The Company’s non-employee directors are considered employees under the provisions of ASC 718.

From January 1, 2007 through May 21, 2009, the Company granted stock options and restricted stock to its employees and non-employee directors under the SLM Corporation Incentive Plan and the Directors Stock Plan.

The total stock-based compensation cost recognized in the consolidated statements of income for the years ended December 31, 2009, 2008 and 2007 was $51 million, $86 million, and $75 million, respectively. The related income tax benefit for the years ended December 31, 2009, 2008 and 2007 was $19 million, $32 million and $28 million, respectively. As of December 31, 2009, there was $36 million of total unrecognized compensation cost related to stock-based compensation programs, which is expected to be recognized over a weighted average period of 2.1 years.

Stock Options

The maximum term for stock options is 10 years and the exercise price must be equal to or greater than the market price of the Company’s common stock on the grant date. The Company has granted time-vested, price-vested and performance-vested options to its employees and non-employee directors. Time-vested options granted to non-management employees vest one-half in 18 months from grant date and the second one-half in 36 months from grant date. Time-vested options granted to management employees vest one-third per year for three years. Price-vested options granted to management employees vest upon the Company’s common stock price reaching a targeted closing price for a set number of days, with a cliff vesting on the eighth anniversary of their grant date. Price-vested options granted to non-employee directors vest upon the Company’s common stock price reaching a targeted closing price for a set number of days or the director’s election to the Board, whichever occurs later, with a cliff vesting on the fifth anniversary of their grant date. Performance-vested options granted to senior management employees vest one-third per year for three years based on earnings-related performance targets.

The fair values of the options granted in the years ended December 31, 2009, 2008 and 2007 were estimated as of the grant date using a Black-Scholes option pricing model with the following weighted average assumptions:


	Years Ended December 31,
	2009			2008			2007

Risk-free interest rate		1.51	%		2.50	%		4.88	%
Expected volatility		80	%		44	%		21	%
Expected dividend rate		0.00	%		0.00	%		2.20	%
Expected life of the option		3.5 years			3.3 years			3.2 years

The expected life of the options is based on observed historical exercise patterns. Groups of employees (including non-employee directors) that have received similar option grant terms are considered separately for valuation purposes. The expected volatility is based on implied volatility from publicly-traded options on the Company’s stock at the grant date and historical volatility of the Company’s stock consistent with the expected life of the option. The risk-free interest rate is based on the U.S. Treasury spot rate at the grant date consistent with the expected life of the option. The dividend yield is based on the projected annual dividend payment per share based on the dividend amount at the grant date, divided by the stock price at the grant date.

As of December 31, 2009, there was $32 million of unrecognized compensation cost related to stock options, which is expected to be recognized over a weighted average period of 2.1 years.

The following table summarizes stock option activity for the year ended December 31, 2009.


				Weighted		Weighted
				Average		Average
				Exercise		Remaining		Aggregate
	Number of			Price per		Contractual		Intrinsic
	Options			Share		Term		Value

Outstanding at December 31, 2008		38,804,704		$	33.90
Granted		9,312,700			10.59
Exercised		(62,600	)		10.60
Canceled		(4,760,084	)		31.47

Outstanding at December 31, 2009⁽¹⁾		43,294,720		$	28.77		6.13 yrs	$	—

Exercisable at December 31, 2009		24,225,317		$	34.60		4.59 yrs	$	—


⁽¹⁾		Includes gross number of net-settled options awarded. Options granted in 2009 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.

The weighted average fair value of options granted was $5.82, $6.93 and $7.89 for the years ended December 31, 2009, 2008 and 2007, respectively. The total intrinsic value of options exercised was $.1 million, $.8 million and $140 million for the years ended December 31, 2009, 2008 and 2007, respectively.

Cash received from option exercises was $.1 million for the year ended December 31, 2009. The actual tax benefit realized for the tax deductions from option exercises totaled $.02 million for the year ended December 31, 2009.

Restricted Stock

Restricted stock vests over a minimum of a 12-month performance period, and generally vests between one and three years based on earnings-related performance vesting criteria being met. Non-vested restricted stock granted prior to January 25, 2007 is entitled to dividend credits; non-vested restricted stock granted on or after January 25, 2007 is not.

The fair value of restricted stock awards is determined on the grant date based on the Company’s stock price and is amortized to compensation cost on a straight-line basis over the related vesting periods. As of December 31, 2009, there was $3 million of unrecognized compensation cost related to restricted stock, which is expected to be recognized over a weighted average period of 1.6 years.

The following table summarizes restricted stock activity for the year ended December 31, 2009.


				Weighted
				Average Grant
	Number of			Date
	Shares			Fair Value

Non-vested at December 31, 2008		754,546		$	26.99
Granted		425,400			7.92
Vested		(300,396	)		28.81
Canceled		(34,970	)		34.05

Non-vested at December 31, 2009		844,580		$	16.45

The total fair value of shares that vested during the years ended December 31, 2009, 2008 and 2007, was $9 million, $11 million and $8 million, respectively.

Restricted Stock Units

Restricted stock units (“RSUs”) are stock awards granted to employees that entitle the holder to shares of the Company’s common stock as the award vests. The fair value of each grant is determined on the grant date based on the Company’s stock price and is amortized to compensation cost on a straight-line basis over the related vesting periods, which are generally between one and three years based on earnings-related performance vesting criteria being met. As of December 31, 2009, there was $.3 million of unrecognized compensation cost related to RSUs, which is expected to be recognized over a weighted average period of 2.0 years.

The following table summarizes RSU activity for the year ended December 31, 2009.


				Weighted
				Average Grant
	Number of			Date
	RSUs			Fair Value

Outstanding at December 31, 2008		15,500		$	11.58
Granted		64,000			11.21
Canceled		(500	)		11.21
Vested and converted to common stock		(3,250	)		16.22

Outstanding at December 31, 2009		75,750		$	11.07

The total fair value of RSUs that vested and converted to common stock during the year ended December 31, 2009 was $.1 million. RSUs with a fair value of $26 million vested during the year ended December 31, 2007 but weren’t converted to common stock until 2008.

Employee Stock Purchase Plan

Under the ESPP, employees can purchase shares of the Company’s common stock at the end of a 12-month offering period at a price equal to the share price at the beginning of the 12-month period, less 15 percent, up to a maximum purchase price of $7,500 plus accrued interest. The purchase price for each offering is determined at the beginning of the offering period.

The fair values of the stock purchase rights of the ESPP offerings in the years ended December 31, 2009, 2008 and 2007 were calculated using a Black-Scholes option pricing model with the following weighted average assumptions.


	Years Ended December 31,
	2009			2008			2007

Risk-free interest rate		.53	%		1.91	%		4.97	%
Expected volatility		103	%		58	%		23	%
Expected dividend rate		0.00	%		0.00	%		2.19	%
Expected life of the option		1 year			1 year			2 years

The expected volatility is based on implied volatility from publicly-traded options on the Company’s stock at the grant date and historical volatility of the Company’s stock consistent with the expected life. The risk-free interest rate is based on the U.S. Treasury spot rate at the grant date consistent with the expected life. The dividend yield is based on the projected annual dividend payment per share based on the current dividend amount at the grant date divided by the stock price at the grant date.

The weighted average fair value of the stock purchase rights of the ESPP offerings for the years ended December 31, 2009, 2008 and 2007 was $4.88, $6.57 and $10.41, respectively. The fair values for 2009 and 2008 were amortized to compensation cost on a straight-line basis over a one-year vesting period. The fair value for 2007 was amortized to compensation cost on a straight-line basis over a two-year vesting period. As of December 31, 2009, there was $.1 million of unrecognized compensation cost related to the ESPP, which is expected to be recognized in January 2010.

During the year ended December 31, 2007, plan participants purchased 215,058 shares of the Company’s common stock. No shares were purchased in 2008 or 2009.

Other Income

12 Months Ended

Dec. 31, 2009

Other Income [Abstract]

Other Income


14.	Other Income

The following table summarizes the components of “other income” in the consolidated statements of income for the years ended December 31, 2009, 2008 and 2007.


	Years Ended December 31,
	2009		2008			2007

Gains on debt repurchases	$	536,190	$	64,477		$	—
Late fees and forbearance fees		146,038		142,958			135,627
Asset servicing and other transaction fees		112,162		108,292			110,215
Loan servicing fees		53,013		26,458			26,094
Foreign currency translation gains (losses), net		22,956		(30,793	)		(2,952	)
Other		58,791		80,684			116,091

Total other income	$	929,150	$	392,076		$	385,075

Gains on Debt Repurchases

The Company began actively repurchasing its outstanding debt in the second quarter of 2008. The Company repurchased $3.4 billion and $1.9 billion face amount of its senior unsecured notes for the years ended December 31, 2009 and 2008, respectively. Since the second quarter of 2008, the Company repurchased $5.3 billion face amount of its senior unsecured notes in the aggregate, with maturity dates ranging from 2008 to 2016.

Late Fees and Forbearance Fees

The Company recognizes late fees and forbearance fees on student loans when earned according to the contractual provisions of the promissory notes, as well as the Company’s expectation of collectability.

Asset Servicing and Other Transaction Fees

The Company’s Upromise subsidiary has a number of programs that encourage consumers to save for the cost of college education. Upromise has established a consumer savings network which is designed to promote college savings by consumers who are members of this program by encouraging them to purchase goods and services from the companies that participate in the program (“Participating Companies”). Participating Companies generally pay Upromise transaction fees based on member purchase volume, either online or in stores depending on the contractual arrangement with the Participating Company. Typically, a percentage of the purchase price of the consumer members’ eligible purchases with Participating Companies is set aside in an account maintained by Upromise on the behalf of its members. The Company recognizes transaction fee revenue in accordance with ASC 605, “Revenue Recognition,” as marketing services focused on increasing member purchase volume are rendered based on contractually determined rates and member purchase volumes.

Upromise, through its wholly owned subsidiaries, UII, a registered broker-dealer, and UIA, a registered investment advisor, provides program management, transfer and servicing agent services, and administration services for various 529 college-savings plans. The fees associated with the provision of these services are recognized in accordance with ASC 605 based on contractually determined rates which are a combination of fees based on the net asset value of the investments within the 529 college-savings plans and the number of accounts for which UII and UIA provide record-keeping and account servicing functions.

Restructuring Activities

12 Months Ended

Dec. 31, 2009

Restructuring Activities [Abstract]

Restructuring Activities


15.	Restructuring Activities

In response to the College Cost Reduction and Access Act of 2007 (“CCRAA”) and challenges in the capital markets, the Company initiated a restructuring plan in the fourth quarter of 2007. The plan focused on conforming the Company’s lending activities to the economic environment, exiting certain customer relationships and product lines, winding down the Company’s debt purchased paper businesses, and significantly reducing its operating expenses. The restructuring plan is essentially completed and the Company’s objectives have been met. Restructuring expenses from the fourth quarter of 2007 through the fourth quarter of 2009 totaled $129 million of which $120 million was recorded in continuing operations and $9 million was recorded in discontinued operations. The majority of these restructuring expenses were severance costs related to the completed and planned elimination of approximately 2,900 positions, or approximately 25 percent of the workforce. The Company estimates approximately $5 million of additional restructuring expenses associated with its current cost reduction efforts will be incurred. On September 17, 2009, the House passed SAFRA which, if signed into law, would eliminate the FFELP and require that, after July 1, 2010, all new federal loans be made through the Direct Loan program. The Senate has yet to take up the legislation. If this legislation is signed into law, the Company will undertake another significant restructuring to conform its infrastructure to the elimination of the FFELP and achieve additional expense reduction.

The following table summarizes the restructuring expenses incurred to date.


							Cumulative Expense
	Years Ended December 31,						as of December 31,
	2009		2008		2007		2009

Severance costs	$	11,196	$	62,599	$	22,505	$	96,300
Lease and other contract termination costs		890		9,517		—		10,407
Exit and other costs		1,681		11,400		—		13,081

Total restructuring from continuing operations⁽¹⁾		13,767		83,516		22,505		119,788
Total restructuring from discontinued operations		8,462		259		—		8,721

Total	$	22,229	$	83,775	$	22,505	$	128,509


⁽¹⁾		Aggregate restructuring expenses from continuing operations incurred across the Company’s reportable segments during the years ended December 31, 2009, 2008 and 2007 totaled $10 million, $49 million and $19 million, respectively, in the Company’s Lending reportable segment; $1 million, $11 million and $2 million, respectively, in the Company’s APG reportable segment; and $3 million, $23 million and $2 million, respectively, in the Company’s Corporate and Other reportable segment.

Since its inception in the fourth quarter of 2007 through December 31, 2009, cumulative severance costs were incurred in conjunction with aggregate completed and planned position eliminations of approximately 2,900 positions. Position eliminations were across all of the Company’s reportable segments, ranging from senior executives to servicing center personnel. Lease and other contract termination costs and exit and other costs incurred during 2009 and 2008 related primarily to terminated or abandoned facility leases and consulting costs incurred in conjunction with various cost reduction and exit strategies.

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


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

Balance at December 31, 2007	$	18,329		$	—		$	—		$	18,329
Net accruals from continuing operations		62,599			9,517			11,400			83,516
Net accruals from discontinued operations		259			—			—			259
Cash paid		(66,063	)		(6,719	)		(11,340	)		(84,122	)

Balance at December 31, 2008		15,124			2,798			60			17,982
Net accruals from continuing operations		11,196			890			1,681			13,767
Net accruals from discontinued operations		6,562			1,900			—			8,462
Cash paid		(23,687	)		(1,807	)		(1,741	)		(27,235	)

Balance at December 31, 2009	$	9,195		$	3,781		$	—		$	12,976

Fair Value Measurements

12 Months Ended

Dec. 31, 2009

Fair Value Measurements [Abstract]

Fair Value Measurements


16.	Fair Value Measurements

The Company uses estimates of fair value in applying various accounting standards for its financial statements. Under GAAP, fair value measurements are used in one of four ways:


	•	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 accumulated other comprehensive income section of the consolidated statement of changes in stockholders’ equity;

	•	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.

Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction between willing and able market participants. In general, the Company’s policy in estimating fair values is to first look at observable market prices for identical assets and liabilities in active markets, where available. When these are not available, other inputs are used to model fair value such as prices of similar instruments, yield curves, volatilities, prepayment speeds, default rates and credit spreads (including for the Company’s liabilities), relying first on observable data from active markets. Additional adjustments may be made for factors including liquidity, credit, bid/offer spreads, etc., depending on current market conditions. Transaction costs are not included in the determination of fair value. When possible, the Company seeks to validate the model’s output with market transactions. Depending on the availability of observable inputs and prices, different valuation models could produce materially different fair value estimates. The values presented may not represent future fair values and may not be realizable.


	•	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 determine fair value. Significant inputs are directly observable from active markets for substantially the full term of the asset or liability being valued.

	•	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.

Student Loans

The Company’s FFELP loans and Private Education Loans are accounted for at cost or at the lower of cost or market if the loan is held-for-sale; however, the fair value is disclosed in compliance with GAAP. FFELP loans classified as held-for-sale are those which the Company has the ability and intent to sell under various ED loan purchase programs. In these instances, the FFELP loans are valued using the committed sales price under the programs. For all other FFELP loans and Private Education Loans, fair value was determined by modeling loan 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, required return on equity, and expected Repayment Borrower Benefits to be earned. In addition, the Floor Income component of the Company’s FFELP loan portfolio is valued through discounted cash flow and option models using both observable market inputs and internally developed inputs. A number of significant inputs into the models are internally derived and not observable to market participants.

Other Loans

Facilities financings, and mortgage and consumer loans held for investment are accounted for at cost with fair values being disclosed. Mortgage loans held for sale are accounted for at lower of cost or market. Fair value was determined with discounted cash flow models using the stated terms of the loans and observable market yield curves. In addition, adjustments and assumptions were made for credit spreads, liquidity, prepayment speeds and defaults. A number of significant inputs into the models are not observable.

Cash and Investments (Including “Restricted”)

Cash and cash equivalents are carried at cost. Carrying value approximated fair value for disclosure purposes. Investments are classified as trading or available-for-sale are carried at fair value in the financial statements. Investments in U.S. Treasury securities and securities issued by U.S. government agencies that are traded in active markets were valued using observable market prices. Other investments for which observable prices from active markets are not available were valued through standard bond pricing models using observable market yield curves adjusted for credit and liquidity spreads. The fair value of investments in Commercial Paper, Asset Backed Commercial Paper, or Demand Deposits that have a remaining term of less than 90 days when purchased are estimated at cost and, when needed, adjustments for liquidity and credit spreads are made depending on market conditions and counterparty credit risks. These investments consist of mostly overnight/weekly maturity instruments with highly-rated counterparties.

Borrowings

Borrowings are accounted for at cost in the financial statements except when denominated in a foreign currency or when designated as the hedged item in a fair value hedge relationship. When the hedged risk is the benchmark interest rate and not full fair value, the cost basis is adjusted for changes in value due to benchmark interest rates only. Additionally, foreign currency denominated borrowings are re-measured at current spot rates in the financial statements. The full fair value of all borrowings is disclosed. Fair value was determined through standard bond pricing models and option models (when applicable) using the stated terms of the borrowings, observable yield curves, foreign currency exchange rates, volatilities from active markets or from quotes from broker-dealers. Credit adjustments for unsecured corporate debt are made based on indicative quotes from observable trades and spreads on credit default swaps specific to the Company. Credit adjustments for secured borrowings are based on indicative quotes from broker-dealers. These adjustments for both secured and unsecured borrowings are material to the overall valuation of these items and, currently, are based on inputs from inactive markets.

Derivative Financial Instruments

All derivatives are accounted for at fair value in the financial statements. The fair values of a majority of derivative financial instruments, including swaps and floors, were determined by standard derivative pricing and option models using the stated terms of the contracts and observable yield curves, forward foreign currency exchange rates and volatilities from active markets. In some cases, management utilized internally developed amortization streams to model the fair value for swaps whose notional amounts contractually amortizes with securitized asset balances. Complex structured derivatives or derivatives that trade in less liquid markets require significant adjustments and judgment in determining fair value that cannot be corroborated with market transactions. When determining the fair value of derivatives, the Company takes into account counterparty credit risk for positions where it is exposed to the counterparty on a net basis by assessing exposure net of collateral held. The net exposures for each counterparty are 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, the Company fully collateralizes the exposure, minimizing the adjustment necessary to the derivative valuations for the Company’s 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 counterparty’s exposure to the trusts. It is the Company’s policy to compare its derivative fair values to those received by its counterparties in order to validate the model’s outputs. The carrying value of borrowings designated as the hedged item in an ASC 815 fair value hedge are adjusted for changes in fair value due to benchmark interest rates and foreign-currency exchange rates. These valuations are determined through standard bond pricing models and option models (when applicable) using the stated terms of the borrowings, and observable yield curves, foreign currency exchange rates, and volatilities.

During 2008 and 2009, the bid/ask spread widened significantly for derivatives indexed to certain interest rate indices as a result of market inactivity. As such, significant adjustments for the bid/ask spread and unobservable inputs were used in the fair value calculation resulting in these instruments being classified as level 3 in the fair value hierarchy. Additionally, significant unobservable inputs were used to model the amortizing notional of some swaps tied to securitized asset balances and, as such, these derivatives have been classified as level 3 in the fair value hierarchy. These swaps were transferred into level 3 during the first quarter of 2009 due to a change in the assumption regarding successful remarketing and significant unobservable inputs used to model notional amortizations.

Residual Interests

The Residual Interests are carried at fair value in the financial statements. No active market exists for student loan Residual Interests; as such, the fair value is calculated using discounted cash flow models and option models. Observable inputs from active markets are used where available, including yield curves and volatilities. Significant unobservable inputs such as prepayment speeds, default rates, certain bonds’ costs of funds and discount rates are used in determining the fair value and require significant judgment. These unobservable inputs are internally determined based upon analysis of historical data and expected industry trends. On a quarterly basis the Company back tests its prepayment speed, default rates and costs of funds assumptions by comparing those assumptions to actuals experienced. Additionally, the Company uses 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 Interests. Market transactions are not available to validate the models’ results. An analysis of the impact of changes to significant inputs is addressed further in Note 8, “Student Loan Securitization.”

The following tables summarize the valuation of the Company’s financial instruments that are marked-to-market on a recurring basis in the consolidated financial statements as of December 31, 2009 and 2008.


	Fair Value Measurements on a Recurring
	Basis as of December 31, 2009
										Counterparty						Cash
(Dollars in millions)	Level 1			Level 2			Level 3			Netting			Total⁽⁴⁾			Collateral			Net

Assets
Available for sale investments	$	—		$	1,330		$	—		$	—		$	1,330		$	—		$	1,330
Retained Interest in off-balance sheet securitized loans		—			—			1,828			—			1,828			—			1,828
Derivative instruments⁽¹⁾⁽²⁾		—			2,023			1,770			(1,009	)		2,784			(1,268	)		1,516

Total assets	$	—		$	3,353		$	3,598		$	(1,009	)	$	5,942		$	(1,268	)	$	4,674

Liabilities⁽³⁾
Derivative instruments⁽¹⁾⁽²⁾	$	(2	)	$	(1,650	)	$	(518	)	$	1,009		$	(1,161	)	$	636		$	(525	)

Total liabilities	$	(2	)	$	(1,650	)	$	(518	)	$	1,009		$	(1,161	)	$	636		$	(525	)


	Fair Value Measurements on a Recurring
	Basis as of December 31, 2008
										Counterparty						Cash
(Dollars in millions)	Level 1			Level 2			Level 3			Netting			Total⁽⁴⁾			Collateral			Net

Assets
Available for sale investments	$	—		$	899		$	—		$	—		$	899		$	—		$	899
Retained Interest in off-balance sheet securitized loans		—			—			2,200			—			2,200			—			2,200
Derivative instruments⁽¹⁾⁽²⁾		—			4,372			236			(1,594	)		3,014			(1,624	)		1,390

Total assets	$	—		$	5,271		$	2,436		$	(1,594	)	$	6,113		$	(1,624	)	$	4,489

Liabilities⁽³⁾
Derivative instruments⁽¹⁾⁽²⁾	$	(3	)	$	(2,007	)	$	(577	)	$	1,594		$	(993	)	$	—		$	(993	)

Total liabilities	$	(3	)	$	(2,007	)	$	(577	)	$	1,594		$	(993	)	$	—		$	(993	)


⁽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.

⁽⁴⁾		As carried on the balance sheet.

At December 31, 2009 and 2008, the Company had $0 and $462 million (fair value), respectively, of financial instruments recorded on its balance sheet at fair value on a non-recurring basis. The 2008 amount related to FFELP Stafford Loans held-for-sale under one of the ED loan purchase programs.

The following table summarizes the change in balance sheet carrying value associated with Level 3 financial instruments carried at fair value on a recurring basis during the years ended December 31, 2009 and 2008.


	Years Ended December 31,
	2009									2008
	Residual			Derivative						Residual			Derivative
(Dollars in millions)	Interests			Instruments			Total			Interests			Instruments			Total

Balance, beginning of period	$	2,200		$	(341	)	$	1,859		$	3,044		$	(71	)	$	2,973
Total gains/(losses) (realized and unrealized):
Included in earnings⁽¹⁾		120			91			211			79			(314	)		(235	)
Included in other comprehensive income		—			—			—			—			—			—
Purchases, issuances and settlements		(492	)		434			(58	)		(923	)		35			(888	)
Transfers in and/or out of Level 3		—			1,068			1,068			—			9			9

Balance, end of period	$	1,828		$	1,252		$	3,080		$	2,200		$	(341	)	$	1,859

Change in unrealized gains/(losses) relating to instruments still held at the reporting date	$	(330	)⁽²⁾	$	439⁽³	⁾	$	109		$	(424	)⁽²⁾	$	(298	)⁽³⁾	$	(722	)


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


	Years Ended
	December 31,
(Dollars in millions)	2009			2008

Servicing and securitization revenue	$	120		$	79
Gains (losses) on derivative and hedging activities, net		298			(314	)
Interest expense		(207	)		—

Total	$	211		$	(235	)


⁽²⁾		Recorded in “servicing and securitization revenue (loss)” in the consolidated statements of income.

⁽³⁾		Recorded in “gains (losses) on derivative and hedging activities, net” in the consolidated statements of income.

The following table summarizes the fair values of the Company’s financial assets and liabilities, including derivative financial instruments, as of December 31, 2009 and 2008.


	December 31, 2009									December 31, 2008
	Fair			Carrying						Fair			Carrying
(Dollars in millions)	Value			Value			Difference			Value			Value			Difference

Earning assets
FFELP loans	$	119,747		$	121,053		$	(1,306	)	$	107,319		$	124,220		$	(16,901	)
Private Education Loans		20,278			22,753			(2,475	)		14,141			20,582			(6,441	)
Other loans		219			420			(201	)		619			729			(110	)
Cash and investments		13,253			13,253			—			8,646			8,646			—

Total earning assets		153,497			157,479			(3,982	)		130,725			154,177			(23,452	)

Interest-bearing liabilities
Short-term borrowings		30,988			30,897			(91	)		41,608			41,933			325
Long-term borrowings		123,049			130,546			7,497			93,462			118,225			24,763

Total interest-bearing liabilities		154,037			161,443			7,406			135,070			160,158			25,088

Derivative financial instruments
Floor Income/Cap contracts		(1,234	)		(1,234	)		—			(1,466	)		(1,466	)		—
Interest rate swaps		94			94			—			1,374			1,374			—
Cross currency interest rate swaps		2,783			2,783			—			2,116			2,116			—
Futures contracts		(2	)		(2	)		—			(3	)		(3	)		—
Other		(18	)		(18	)		—			—			—			—
Other
Residual interest in securitized assets		1,828			1,828			—			2,200			2,200			—

Excess of net asset fair value over carrying value							$	3,424								$	1,636

Commitments, Contingencies and Guarantees

12 Months Ended

Dec. 31, 2009

Commitments, Contingencies and Guarantees [Abstarct]

Commitments, Contingencies and Guarantees


17.	Commitments, Contingencies and Guarantees

The Company offers a line of credit to certain financial institutions and other institutions in the higher education community for the purpose of originating student loans. In connection with these agreements, the Company also enters into a participation agreement with the institution to participate in the loans as they are originated. In the event that a line of credit is drawn upon, the loan is collateralized by underlying student loans and is usually participated in on the same day. The contractual amount of these financial instruments represents the maximum possible credit risk should the counterparty draw down the commitment, the Company does not participate in the loan and the counterparty subsequently fails to perform according to the terms of its contract with the Company. At December 31, 2009 and 2008, the contractual amount of these financial obligations was $850 million and $1.0 billion, respectively. There were no outstanding draws at December 31, 2009. All outstanding commitments at December 31, 2009 mature in 2010.

In addition, the Company maintains forward contracts to purchase loans from its lending partners at contractual prices. These contracts typically have a maximum amount the Company is committed to buy, but lack a fixed or determinable amount as it ultimately is based on the lending partner’s origination activity. FFELP forward purchase contracts typically contain language relieving the Company of most of its responsibilities under the contract due to, among other things, changes in student loan legislation. These commitments are not accounted for as derivatives under ASC 815 as they do not meet the definition of a derivative due to the lack of a fixed and determinable purchase amount. At December 31, 2009, there were $1.3 billion of originated loans (FFELP and Private Education Loans) in the pipeline that the Company is committed to purchase.

Investor Litigation

On January 31, 2008, a putative class action lawsuit was filed against the Company and certain officers in the U.S. District Court for the Southern District of New York. This case and other actions arising out of the same circumstances and alleged acts have been consolidated and are now identified as In Re SLM Corporation Securities Litigation. The case purports to be brought on behalf of those who acquired common stock of the Company between January 18, 2007 and January 23, 2008 (the “Securities Class Period”). The complaint alleges that the Company and certain officers violated federal securities laws by issuing a series of materially false and misleading statements and that the statements had the effect of artificially inflating the market price for the Company’s securities. The complaint alleges that defendants caused the Company’s results for year-end 2006 and for the first quarter of 2007 to be materially misstated because the Company failed to adequately provide for loan losses, which overstated the Company’s net income, and that the Company failed to adequately disclose allegedly known trends and uncertainties with respect to its non-traditional loan portfolio. On July 23, 2008, the court appointed Westchester Capital Management (“Westchester”) Lead Plaintiff. On December 8, 2008, Lead Plaintiff filed a consolidated amended complaint. In addition to the prior allegations, the consolidated amended complaint alleges that the Company understated loan delinquencies and loan loss reserves by promoting loan forbearances. On December 19, 2008, and December 31, 2008, two rejected lead plaintiffs filed a challenge to Westchester as Lead Plaintiff. On April 1, 2009, the court named a new Lead Plaintiff, SLM Venture, and Westchester appealed to the Second Circuit Court of Appeals. On September 3, 2009, Lead Plaintiffs filed a Second Amended Consolidated Complaint on largely the same allegations as the Consolidated Amended Complaint, but dropped one of the three senior officers as a defendant. On October 1, 2009, the Second Circuit Court of Appeals denied Westchester’s Writ of Mandamus, thereby deciding the Lead Plaintiff question in favor of SLM Venture. On December 11, 2009, Defendants filed a Motion to Dismiss the Second Amended Consolidated Complaint. This Motion is pending. Lead Plaintiff seeks unspecified compensatory damages, attorneys’ fees, costs, and equitable and injunctive relief.

A similar case is pending against the Company, certain officers, retirement plan fiduciaries, and the Board of Directors, In Re SLM Corporation ERISA Litigation, also in the U.S. District Court for the Southern District of New York. The proposed class consists of participants in or beneficiaries of the Sallie Mae 401(K) Retirement Savings Plan (“401K Plan”) between January 18, 2007 and “the present” whose accounts included investments in Sallie Mae stock (“401K Class Period”). The complaint alleges breaches of fiduciary duties and prohibited transactions in violation of the Employee Retirement Income Security Act arising out of alleged false and misleading public statements regarding the Company’s business made during the 401(K) Class Period and investments in the Company’s common stock by participants in the 401(K) Plan. On December 15, 2008, Plaintiffs filed a Consolidated Class Action Complaint and a Second Consolidated Amended Complaint on September 10, 2009. On November 10, 2009, Defendants filed a Motion to Dismiss the matter on all counts. This Motion is pending. The plaintiffs seek unspecified damages, attorneys’ fees, costs, and equitable and injunctive relief.

OIG Investigation

On August 3, 2009, the Company received the final audit report of ED’s Office of the Inspector General (“OIG”) related to the Company’s billing practices for special allowance payments. Among other things, the OIG recommended that ED instruct the Company to return approximately $22 million in alleged special allowance overpayments. The Company continues to believe that its practices were consistent with longstanding ED guidance and all applicable rules and regulations and intends to continue disputing these findings. The Company provided its response to the Secretary on October 2, 2009. The OIG has audited other industry participants with regard to special allowance payments for loans funded by tax exempt obligations and, in certain cases, the Secretary of ED has disagreed with the OIG’s recommendations.

Contingencies

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

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

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

In accordance with ASC 450, “Contingencies,” the Company is required to establish reserves for litigation and regulatory matters when those matters present loss contingencies that are both probable and estimable. When loss contingencies are not both probable and estimable, the Company does not establish reserves.

Based on current knowledge, reserves have not been established for any pending litigation or regulatory matters. Based on current knowledge, management does not believe that loss contingencies, if any, arising from pending investigations, litigation or regulatory matters will have a material adverse effect on the consolidated financial position or liquidity of the Company.

Benefit Plans

12 Months Ended

Dec. 31, 2009

Benefit Plans [Abstract]

Benefit Plans


18.	Benefit Plans

Pension Plans

As of December 31, 2009, the Company’s qualified and supplemental pension plans (the “Pension Plans”) are frozen with respect to new entrants and participants with less than ten years of service on June 30, 2004. No further benefits will accrue with respect to these participants under the Pension Plans, other than interest accruals on cash balance accounts. Participants with less than five years of service as of June 30, 2004 were fully vested.

For those participants who continued to accrue benefits under the Pension Plans until July 1, 2009, benefits were credited using a cash balance formula. Under the formula, each participant has an account, for record keeping purposes only, to which credits were allocated each payroll period based on a percentage of the participant’s compensation for the current pay period. The applicable percentage was determined by the participant’s number of years of service with the Company. If an individual participated in the Company’s prior pension plan as of September 30, 1999 and met certain age and service criteria, the participant (“grandfathered participant”) will receive the greater of the benefits calculated under the prior plan, which uses a final average pay plan method, or the current plan under the cash balance formula.

The Company does not provide other postretirement benefits such as postretirement health care or postretirement life insurance benefits.

Qualified and Nonqualified Plans

The following tables provide a reconciliation of the changes in the qualified and nonqualified plan benefit obligations, fair value of assets, and other comprehensive income for the years ended December 31, 2009 and 2008, respectively, based on a December 31 measurement date:


	December 31,
	2009			2008

Change in benefit obligation
Projected benefit obligation at beginning of year	$	206,887		$	227,651
Service cost		3,231			6,566
Interest cost		12,350			12,908
Actuarial (gain)/loss		2,169			(4,204	)
Plan curtailment		—			114
Plan settlement		—			—
Special termination benefits		—			—
Benefits paid		(23,771	)		(36,148	)

Projected benefit obligation at end of year	$	200,866		$	206,887

Change in plan assets
Fair value of plan assets at beginning of year	$	211,780		$	230,698
Actual return on plan assets		4,775			12,681
Employer contribution		4,960			5,326
Settlement loss		—			—
Benefits paid		(23,771	)		(36,148	)
Administrative payments		(660	)		(777	)

Fair value of plan assets at end of year	$	197,084		$	211,780

Funded status at end of year	$	(3,782	)	$	4,893

Amounts recognized in the statement of financial position consist of:
Noncurrent assets	$	17,368		$	27,402
Current liabilities		(1,877	)		(2,895	)
Noncurrent liabilities		(19,273	)		(19,614	)

Net amount recognized in statement of financial position	$	(3,782	)	$	4,893

Amounts not yet recognized in net periodic pension cost and included in accumulated other comprehensive income:
Prior service cost	$	—		$	—
Accumulated gain		18,224			29,720

Accumulated other comprehensive income	$	18,224		$	29,720

Amounts expected to be reflected in net periodic pension cost during the next fiscal year:
Prior service cost	$	—		$	—
Accumulated gain		96			1,366

Accumulated other comprehensive income	$	96		$	1,366

Additional year-end information for plans with accumulated benefit obligations in excess of plan assets:
Projected benefit obligation	$	21,149		$	22,509
Accumulated benefit obligation		21,079			22,448
Fair value of plan assets		—			—

The accumulated benefit obligations of the qualified and nonqualified defined benefit plans were $201 million and $206 million at December 31, 2009 and 2008, respectively. There are no plan assets in the nonqualified plans due to the nature of the plans; the corporate assets used to pay these benefits are included above in employer contributions.

Components of Net Periodic Pension Cost

Net periodic pension cost included the following components:


	Years Ended December 31,
	2009			2008			2007

Service cost — benefits earned during the period	$	3,231		$	6,566		$	7,100
Interest cost on project benefit obligations		12,350			12,908			12,337
Expected return on plan assets		(10,713	)		(11,709	)		(17,975	)
Curtailment loss		—			114			—
Settlement (gain)/loss		(1,362	)		(5,074	)		1,265
Special termination benefits		—			—			912
Net amortization and deferral		(1,367	)		(1,447	)		(719	)

Net periodic pension cost (benefit)	$	2,139		$	1,358		$	2,920

Special accounting is required when lump sum payments exceed the sum of the service and interest cost components, and when the average future working lifetime of employees is significantly curtailed. This special accounting requires an accelerated recognition of unrecognized gains or losses and unrecognized prior service costs, creating adjustments to the pension expense. During the years ended December 31, 2009 and 2008, the Company recorded net settlement gains associated with lump-sum distributions from the plans. In 2008, the Company also recorded a curtailment loss for previously unrecognized losses associated with executive non-qualified benefits. During the year ended December 31, 2007, the Company recorded net settlement losses, including a portion related to employees who were involuntarily terminated in the fourth quarter, associated with lump-sum distributions from the supplemental pension plan. These amounts were recorded in accordance with ASC 715, “Compensation — Retirement Benefits,” which requires that settlement losses be recorded once prescribed payment thresholds have been reached.

Amortization of unrecognized net gains or losses are included as a component of net periodic pension cost to the extent that the unrecognized gain or loss exceeds 10 percent of the greater of the projected benefit obligation or the market value of plan assets. Gains or losses not yet includible in pension cost are amortized over the average remaining service life of active participants, which is approximately 8 years.

Assumptions

The weighted average assumptions used to determine the projected accumulated benefit obligations are as follows:


	December 31,
	2009			2008

Discount rate		5.85	%		6.25	%
Expected return on plan assets		5.25	%		5.25	%
Rate of compensation increase		N/A			4.00	%

The weighted average assumptions used to determine the net periodic pension cost are as follows:


	December 31,
	2009			2008

Discount rate		6.25	%		6.00	%
Expected return on plan assets		5.25	%		5.25	%
Rate of compensation increase		4.00	%		4.00	%

Management is assisted by third party actuaries in measuring the pension liabilities and expense through the use of various assumptions including discount rate, expected return on plan assets, salary increases, employee turnover rates and mortality assumptions.

The year-end discount rate was selected based on a modeling process intended to match expected cash flows from the plans to a yield curve constructed from a portfolio of non-callable Aa bonds with at least $250 million of outstanding issue. Bonds are eliminated if they have maturities of less than six months or are priced more than two standard errors from the market average.

The return on plan assets is based on the strategic asset allocation of the plan assets and a conservative investment policy intended to match plan liability characteristics and preserve funded status.

There is no rate of compensation assumption at December 31, 2009, for the projected accumulated benefit obligation since benefits no longer accrue to participants subsequent to July 1, 2009.

Assumption Sensitivity

Changes in the discount rate and the expected rate of return on plan assets inversely impact expense. If the discount rate increased/decreased by 50 basis points, expense would decrease/increase $.7 million from the amount recorded at December 31, 2009. If the expected long-term rate of return on plan assets increased/decreased by 50 basis points, expense would decrease/increase by $1 million.

Plan Assets

The weighted average asset allocations at December 31, 2009 and 2008, by asset category, are as follows:


	Plan Assets
	December 31,
	2009			2008

Asset Category
Fixed income securities		81			73
Cash equivalents		19			27

Total		100	%		100	%

Investment Policy and Strategy

The investment strategy was revised during 2007 with the principle objective of preserving funding status. Based on the current funded status of the plan and the ceasing of benefit accruals effective mid-year 2009, the Investment Committee recommended moving plan assets into fixed income securities with the goal of removing funded status risk with investments that better match the plan liability characteristics. At December 31, 2009, the plan is invested 81 percent in high quality bonds with an average credit rating of approximately AA and 19 percent in cash which is invested in U.S. government securities, the duration of which closely matches that of the traditional and cash balance nature of plan liabilities.

Fair Value Measurements

The Plan investments, at fair value at December 31, 2009 and 2008 are as follows:


			Based on
					Other
	Fair value at		Quoted prices in		Observable				Fair value at
	December 31,		active markets		Inputs		Unobservable		December 31,
	2009		(Level 1)		(Level 2)		Inputs (Level 3)		2008

Assets measured at fair value on a recurring basis:
Cash and cash equivalents	$	37,862,392	$	—	$	37,862,392	$	—	$	57,206,048
Mutual funds		159,221,849		—		159,221,849		—		154,573,651

Total investments	$	197,084,241	$	—	$	197,084,241	$	—	$	211,779,699

Cash Flows

The Company did not contribute to its qualified pension plan in 2009 and does not expect to contribute in 2010. There are no plan assets in the nonqualified plans due to the nature of the plans, and benefits are paid from corporate assets when due to the participant. It is estimated that approximately $2 million will be paid in 2010 for these benefits. No plan assets are expected to be returned to the employer during 2010.

Estimated Future Benefit Payments

The following qualified and nonqualified plan benefit payments, which reflect future interest credits as appropriate, are expected to be paid:


2010	$	13,007
2011		13,441
2012		14,706
2013		12,033
2014		12,308
2015 — 2019		66,168

401(k) Plans

The Company maintained two safe harbor 401(k) savings plans as defined contribution plans intended to qualify under section 401(k) of the Internal Revenue Code until they were combined December 31, 2009. The Sallie Mae 401(k) Savings Plan covers substantially all employees of the Company outside of Asset Performance Group hired before August 1, 2007. Effective October 1, 2008, the Company matches up to 100 percent on the first 3 percent of contributions and 50 percent on the next 2 percent of contributions after one year of service, and all eligible employees receive a 1 percent core employer contribution. Prior to October 1, 2008, up to 6 percent of employee contributions were matched 100 percent by the Company after one year of service and certain eligible employees received a 2 percent core employer contribution.

The Sallie Mae 401(k) Retirement Savings Plan covers substantially all employees of Asset Performance Group, and after August 1, 2007, the Retirement Savings Plan covers substantially all new hires of the Company. Effective October 1, 2008, the Company matches up to 100 percent on the first 3 percent of contributions and 50 percent on the next 2 percent of contributions after one year of service, and all eligible employees receive a 1 percent core employer contribution. Between August 1, 2007 and September 30, 2008, the match formula was up to 100 percent on the first 5 percent of contributions after one year of service.

The Company also maintains a non-qualified plan to ensure that designated participants receive benefits not available under the 401(k) Plan due to compensation limits imposed by the Internal Revenue Code.

Total expenses related to the 401(k) plans were $15 million, $21 million and $22 million in 2009, 2008 and 2007, respectively.

Income Taxes

12 Months Ended

Dec. 31, 2009

Income Taxes [Abstract]

Income Taxes


19.	Income Taxes

Reconciliations of the statutory U.S. federal income tax rates to the Company’s effective tax rate for continuing operations follow:


	Years Ended
	December 31,
	2009			2008			2007

Statutory rate		35.0	%		35.0	%		35.0	%
Equity forward contracts		—			—			(110.8	)
State tax, net of federal benefit		(.3	)		3.7			(4.1	)
Capitalized transaction costs		—			8.6			(2.5	)
Unrecognized tax benefits, U.S. federal and state, net of federal benefit		(1.3	)		6.0			(.2	)
Corporate owned life insurance		(.4	)		2.4			1.3
Other, net		.1			(1.7	)		(1.7	)

Effective tax rate		33.1	%		54.0	%		(83.0	)%

The effective tax rates for discontinued operations for the years ended December 31, 2009, 2008 and 2007 are 27.4 percent, 38.8 percent, and 39.0 percent, respectively. The effective tax rate varies from the statutory U.S. federal rate of 35 percent primarily due to the establishment of a valuation allowance against tax attributes generated as a result of the sale of the assets in its Purchased Paper — Mortgage/Properties business for the year ended December 31, 2009, and due to the impact of state taxes, net of federal benefit, for the years ended December 31, 2009, 2008 and 2007.

Income tax expense for the years ended December 31, 2009, 2008, and 2007 consists of:


	December 31,
	2009			2008			2007

Continuing operations current provision/benefit:
Federal	$	116,323		$	403,294		$	1,013,342
State		(24,527	)		33,553			50,725
Foreign		398			678			1,045

Total continuing operations current provision		92,194			437,525			1,065,112
Continuing operations deferred provision/(benefit):
Federal		141,038			(467,919	)		(632,029	)
State		5,453			(46,029	)		(24,327	)
Foreign		(321	)		(346	)		(481	)

Total continuing operations deferred provision/(benefit)		146,170			(514,294	)		(656,837	)

Continuing operations provision for income tax expense/(benefit)	$	238,364		$	(76,769	)	$	408,275

Discontinued operations current provision/(benefit):
Federal	$	(159,234	)	$	(1,885	)	$	13,744
State		(8,886	)		(817	)		3,140

Total discontinued operations current provision/(benefit)		(168,120	)		(2,702	)		16,884
Discontinued operations deferred provision/(benefit):
Federal		97,908			(75,232	)		(10,363	)
State		10,819			(12,871	)		(2,513	)

Total discontinued operations deferred provision/(benefit)		108,727			(88,103	)		(12,876	)

Discontinued operations provision for income tax expense/(benefit)	$	(59,393	)	$	(90,805	)	$	4,008

Provision for income tax expense/(benefit)	$	178,971		$	(167,574	)	$	412,283

At December 31, 2009 and 2008, the tax effect of temporary differences that give rise to deferred tax assets and liabilities include the following:


	December 31,
	2009		2008

Deferred tax assets:
Loan reserves	$	737,762	$	1,212,653
Market value adjustments on student loans, investments and derivatives		496,101		174,276
Deferred revenue		83,042		70,172
Stock-based compensation plans		70,528		62,325
Accrued expenses not currently deductible		47,249		38,330
Purchased paper impairments		42,892		111,924
Operating loss and credit carryovers		36,747		28,293
Unrealized investment losses		25,949		42,838
Warrants issuance		19,716		27,160
Other		32,717		87,954

Total deferred tax assets		1,592,703		1,855,925

Deferred tax liabilities:
Gains/(losses) on repurchased debt		187,505		—
Securitization transactions		93,254		302,049
Leases		64,246		73,570
Other		37,170		12,883

Total deferred tax liabilities		382,175		388,502

Net deferred tax assets	$	1,210,528	$	1,467,423

Included in other deferred tax assets is a valuation allowance of $25,111 and $4,901 as of December 31, 2009 and 2008, respectively, against a portion of the Company’s federal, state and international deferred tax assets. The valuation allowance is primarily attributable to deferred tax assets for federal and state capital loss carryovers and state net operating loss carryovers that management believes it is more likely than not will expire prior to being realized. The change in the valuation allowance primarily resulted from the sale of the assets in its Purchased Paper-Mortgage/Properties business. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income of the appropriate character (i.e. capital or ordinary) during the period in which the temporary differences become deductible. Management considers, among other things, the economic slowdown, any impacts if SAFRA or the Community Proposal are passed, the scheduled reversals of deferred tax liabilities, and the history of positive taxable income available for net operating loss carrybacks in evaluating the realizability of the deferred tax assets.

As of December 31, 2009, the Company has federal net operating loss carryforwards of $21,020 which begin to expire in 2022, apportioned state net operating loss carryforwards of $89,958 which begin to expire in 2010, federal and state capital loss carryovers of $44,289 which begin to expire in 2012, and federal and state credit carryovers of $1,845 which begin to expire in 2021.

Accounting for Uncertainty in Income Taxes

New provisions under ASC 740, “Income Taxes,” pertaining to the accounting of uncertainty in income taxes, were adopted on January 1, 2007. As a result of this implementation, the Company recognized a $6 million increase in its liability for unrecognized tax benefits, which was accounted for as a reduction to the January 1, 2007 balance of retained earnings. The total amount of gross unrecognized tax benefits as of January 1, 2007 was $113 million.

The following table summarizes changes in unrecognized tax benefits for the years ended December 31, 2009, 2008 and 2007:


	December 31,
(Dollars in millions)	2009			2008			2007

Unrecognized tax benefits at beginning of year	$	86.4		$	174.8		$	113.3
Increases resulting from tax positions taken during a prior period		75.2			11.3			86.5
Decreases resulting from tax positions taken during a prior period		(58.3	)		(132.2	)		(30.0	)
Increases/(decreases) resulting from tax positions taken during the current period		(22.5	)		36.2			.3
Decreases related to settlements with taxing authorities		(17.9	)		(.1	)		(30.0	)
Increases related to settlements with taxing authorities		44.7			—			42.3
Reductions related to the lapse of statute of limitations		(3.2	)		(3.6	)		(7.6	)

Unrecognized tax benefits at end of year	$	104.4		$	86.4		$	174.8

As of December 31, 2009, the gross unrecognized tax benefits are $104 million. Included in the $104 million are $17 million of unrecognized tax benefits that, if recognized, would favorably impact the effective tax rate. In addition, unrecognized tax benefits of $2 million are currently treated as a pending refund claim, reducing the balance of unrecognized tax benefits that, if recognized, would impact the effective tax rate. During 2009, the Company adjusted its unrecognized tax benefits to incorporate new issues that were identified while completing the 2008 U.S. federal income tax return, as well as adjusting the 2003-2007 unrecognized tax benefits to incorporate the net impact of IRS and state tax authority examinations of several of the Company’s income tax returns. New information was received from the IRS during the first quarter as part of the IRS examination of the Company’s 2005 and 2006 U.S. federal income tax returns, and the IRS issued a Revenue Agent’s Report (“RAR”) during the second quarter of 2009 ultimately concluding this exam. During the third quarter of 2009, the IRS concluded the examination of the 2003 and 2004 U.S. federal income tax returns of an entity in which the Company is an investor, and the Virginia taxing authority concluded the examination of the Company’s 2005 through 2007 income tax returns. Several other less significant amounts of uncertain tax benefits were also added during the year.

The Company recognizes interest costs related to unrecognized tax benefits in income tax expense, and penalties, if any, in operating expenses. The Company has accrued interest, net of tax benefit, of $7 million, $10 million and $18 million as of December 31, 2009, 2008 and 2007 respectively. The income tax expense for the year ended December 31, 2009 includes a reduction in the accrual of interest of $3 million, primarily related to the reduction of uncertain tax benefits as discussed above. The income tax expense for the year ended December 31, 2008 includes a reduction in the accrual of interest of $8 million, primarily related to the reduction of uncertain tax benefits as a result of new information received from the IRS as a part of the 2005-2006 exam cycle for several carryover issues related to the timing of certain income and deduction items. The income tax expense for the year ended December 31, 2007 includes an increase in the accrual of interest of $1 million.

Reasonably Possible Significant Increases/Decreases within Twelve Months

The IRS issued a Revenue Agent’s Report (“RAR”) during the second quarter of 2007 concluding the primary exam of the Company’s 2003 and 2004 U.S. federal tax returns. However, the exam of these years remained open until the third quarter of 2009 when the IRS concluded the examination of an entity in which the Company is an investor. In addition, during the third quarter of 2007, the Company filed an administrative-level appeal related to one unagreed item originating from the Company’s 2004 U.S. federal tax return. It is reasonably possible that there will be a decrease in the Company’s unrecognized tax benefits as a result of the resolution of this item. When considering both tax and interest amounts, the decrease could be approximately $8 million to $12 million.

The IRS began the examination of the Company’s 2007 and 2008 federal income tax returns during the second quarter of 2009. It is reasonably possible that issues that arise during the exam may create the need for an increase in unrecognized tax benefits. Until the exam proceeds further, an estimate of any such amounts cannot currently be made.

In the event that the Company is not contacted for exam by additional tax authorities by the end of 2010, it is reasonably possible that there will be a decrease in the Company’s unrecognized tax benefits as a result of the lapse of various statute of limitations periods. When considering both tax and interest amounts, the decrease could be approximately $5 million to $9 million.

Tax Years Remaining Subject to Exam

The Company or one of its subsidiaries files income tax returns at the U.S. federal level, in most U.S. states, and various foreign jurisdictions. U.S. federal income tax returns filed for years prior to 2003 and for years 2005-2006 have been audited and are now resolved. As shown in the table below, the Company’s primary operating subsidiary has been audited by the listed states through the year shown, again with all issues resolved. Other combinations of subsidiaries, tax years, and jurisdictions remain open for review, subject to statute of limitations periods (typically 3 to 4 prior years).


State	Year audited through

Florida		2000
Indiana		2000
Pennsylvania		2000
California		2002
Missouri		2003
New York		2004
North Carolina		2005
Texas		2004
Virginia		2007

Segment Reporting

12 Months Ended

Dec. 31, 2009

Segment Reporting [Abstract]

Segment Reporting


20.	Segment Reporting

The Company has two primary operating segments — the Lending operating segment and the APG, formerly known as DMO, operating segment. The Lending and APG operating segments meet the quantitative thresholds for reportable segments. Accordingly, the results of operations of the Company’s Lending and APG segments are presented below. The Company has smaller operating segments including the Guarantor Servicing, Loan Servicing, and Upromise operating segments, as well as certain other products and services provided to colleges and universities which do not meet the required quantitative thresholds. Therefore, the results of operations for these operating segments and the revenues and expenses associated with these other products and services are combined with corporate overhead and other corporate activities within the Corporate and Other reportable segment.

The management reporting process measures the performance of the Company’s operating segments based on the management structure of the Company, as well as the methodology used by management to evaluate performance and allocate resources. Management, including the Company’s chief operating decision makers, evaluates the performance of the Company’s operating segments based on their profitability. As discussed further below, management measures the profitability of the Company’s operating segments based on “Core Earnings” net income. Accordingly, information regarding the Company’s reportable segments is provided based on a “Core Earnings” basis. The Company’s “Core Earnings” performance measures are not defined terms within GAAP and may not be comparable to similarly titled measures reported by other companies. “Core Earnings” net income reflects only current period adjustments to GAAP net income as described below. Unlike financial accounting, there is no comprehensive, authoritative guidance for management reporting. The management reporting process measures the performance of the operating segments based on the management structure of the Company and is not necessarily comparable with similar information for any other financial institution. The Company’s operating segments are defined by the products and services they offer or the types of customers they serve, and they reflect the manner in which financial information is currently evaluated by management. Intersegment revenues and expenses are netted within the appropriate financial statement line items consistent with the income statement presentation provided to management. Changes in management structure or allocation methodologies and procedures may result in changes in reported segment financial information.

The Company’s principal operations are located in the United States, and its results of operations and long-lived assets in geographic regions outside of the United States are not significant. In the Lending segment, no individual customer accounted for more than 10 percent of its total revenue during the years ended December 31, 2009, 2008 and 2007. United Student Aid Funds, Inc. (“USA Funds”) is the Company’s largest customer in both the APG and Corporate and Other segments. During the years ended December 31, 2009, 2008 and 2007, USA Funds accounted for 16 percent, 46 percent and 35 percent, respectively, of the aggregate revenues generated by the Company’s APG and Corporate and Other segments. No other customers accounted for more than 10 percent of total revenues in those segments for the years mentioned.

Lending

In the Company’s Lending operating segment, the Company originates and acquires both FFELP loans and Private Education Loans. As of December 31, 2009, the Company managed $176.4 billion of student loans, of which $141.3 billion or 80 percent are federally insured, and has 10 million student and parent customers. The Company’s mortgage and other consumer loan portfolio totaled $363 million at December 31, 2009.

Private Education Loans consist of two general types: (1) those that are designed to bridge the gap between the cost of higher education and the amount financed through either capped federally insured loans or the borrowers’ resources, and (2) those that are used to meet the needs of students in alternative learning programs such as career training, distance learning and lifelong learning programs. Most higher education Private Education Loans are made in conjunction with a FFELP loan and as such are marketed through the same channel as FFELP loans by the same sales force. Unlike FFELP loans, Private Education Loans are subject to the full credit risk of the borrower. The Company manages this additional risk through historical risk-performance underwriting strategies, the addition of qualified cosigners and a combination of higher interest rates and loan origination fees that compensate the Company for the higher risk.

The following table includes asset information for the Company’s Lending business segment.


	December 31,
	2009		2008

FFELP Stafford and Other Student Loans, net	$	42,979	$	44,025
FFELP Stafford Loans Held-for-Sale		9,696		8,451
FFELP Consolidation Loans, net		68,379		71,744
Private Education Loans, net		22,753		20,582
Other loans, net		420		729
Cash and investments⁽¹⁾		12,387		8,445
Retained Interest in off-balance sheet securitized loans		1,828		2,200
Other		9,398		9,947

Total assets	$	167,840	$	166,123


⁽¹⁾		Includes restricted cash and investments.

APG

The Company’s APG operating segment provides a wide range of accounts receivable and collections services including student loan default aversion services, defaulted student loan portfolio management services, contingency collections services for student loans and other asset classes, accounts receivable management and collection for purchased portfolios of receivables that are delinquent or have been charged off by their original creditors, and sub-performing and non-performing mortgage loans. The Company’s APG operating segment serves the student loan marketplace through a broad array of default management services on a contingency fee or other pay-for-performance basis to 15 FFELP Guarantors and for campus-based programs.

In addition to collecting on its own purchased receivables and mortgage loans, the APG operating segment provides receivable management and collection services for federal agencies, credit card clients and other holders of consumer debt.

In 2008, the Company concluded that its APG purchased paper businesses were no longer a strategic fit. The Company sold its international Purchased Paper — Non-Mortgage business in the first quarter of 2009. A loss of $51 million was recognized in the fourth quarter of 2008 related to this sale as the net assets were held for sale and carried at the lower of its book basis and fair value as of December 31, 2008. The Company sold all of the assets in its Purchased Paper — Mortgage/Properties business in the fourth quarter of 2009 (which is further discussed below), which resulted in an after-tax loss of $95 million. The Company continues to wind down the domestic side of its Purchased Paper — Non-Mortgage business. The Company will continue to consider opportunities to sell this business at acceptable prices in the future.

The Company’s domestic Purchased Paper — Non-Mortgage business had certain forward purchase obligations under which the Company was committed to buy purchased paper through April 2009. The Company did not purchase any additional purchased paper in excess of these obligations. The Company recognized $79 million, $111 million and $17 million of impairments in the years ended December 31, 2009, 2008 and 2007, respectively. The impairment is primarily a result of the impact of the economy on the ability to collect on these assets. The impairment of $111 million in 2008 includes the $51 million loss on the sale of the Company’s international Purchased Paper — Non-Mortgage business discussed above. Similar to the Purchased Paper — Mortgage/Properties business discussion below, when the Purchased Paper — Non-Mortgage business either sells all of its remaining assets or completely winds down its operations, its results will be shown as discontinued operations.

Net loss attributable to SLM Corporation from discontinued operations was $157 million and $140 million for the years ended December 31, 2009 and 2008, respectively, compared to net income of $15 million for the year ended December 31, 2007. The Company sold all of the assets in its Purchased Paper — Mortgage/Properties business in the fourth quarter of 2009 for $280 million. Because of the sale, the Purchased Paper — Mortgage/Properties business is required to be presented separately as discontinued operations for all periods presented. This sale of assets in the fourth quarter of 2009 resulted in an after-tax loss of $95 million. Total after-tax impairments, including the loss on sale, for the years ended December 31, 2009, 2008 and 2007 were $154 million, $161 million and $2 million, respectively.

At December 31, 2009 and 2008, the APG business segment had total assets of $1.1 billion and $2.0 billion, respectively.

Corporate and Other

The Company’s Corporate and Other segment includes the aggregate activity of its smaller operating segments, primarily its Guarantor Servicing, Loan Servicing and Upromise operating segments. Corporate and Other also includes several smaller products and services, as well as corporate overhead.

In the Guarantor Servicing operating segment, the Company provides a full complement of administrative services to FFELP Guarantors including guarantee issuance, account maintenance, and guarantee fulfillment. In the Loan Servicing operating segment, the Company provides a full complement of activities required to service student loans on behalf of lenders who are unrelated to the Company. Such servicing activities generally commence once a loan has been fully disbursed and include sending out payment coupons to borrowers, processing borrower payments, originating and disbursing FFELP Consolidation Loans on behalf of the lender, and other administrative activities required by ED.

Upromise markets and administers a consumer savings network and also provides program management, transfer and servicing agent services, and administration services for 529 college-savings plans. The Company’s other products and services include comprehensive financing and loan delivery solutions that it provides to college financial aid offices and students to streamline the financial aid process. Corporate overhead includes all of the typical headquarter functions such as executive management, accounting and finance, human resources and marketing.

At December 31, 2009 and 2008, the Corporate and Other business segment had total assets of $1.2 million and $685 million, respectively.

Measure of Profitability

The tables below include the condensed operating results for each of the Company’s reportable segments. Management, including the chief operating decision makers, evaluates the Company on certain performance measures that the Company refers to as “Core Earnings” performance measures for each operating segment. While “Core Earnings” results are not a substitute for reported results under GAAP, the Company relies on “Core Earnings” performance measures to manage each operating segment because it believes these measures provide additional information regarding the operational and performance indicators that are most closely assessed by management.

“Core Earnings” performance measures are the primary financial performance measures used by management to develop the Company’s financial plans, track results, and establish corporate performance targets and incentive compensation. Management believes this information provides additional insight into the financial performance of the core business activities of its operating segments. Accordingly, the tables presented below reflect “Core Earnings” operating measures reviewed and utilized by management to manage the business. Reconciliation of the “Core Earnings” segment totals to the Company’s consolidated operating results in accordance with GAAP is also included in the tables below.

Segment Results and Reconciliations to GAAP


	Year Ended December 31, 2009
						Corporate		Total “Core						Total
(Dollars in millions)	Lending		APG			and Other		Earnings”			Adjustments⁽²⁾			GAAP

Interest income:
FFELP Stafford and Other Student Loans	$	1,282	$	—		$	—	$	1,282		$	(70	)	$	1,212
FFELP Consolidation Loans		1,645		—			—		1,645			237			1,882
Private Education Loans		2,254		—			—		2,254			(672	)		1,582
Other loans		56		—			—		56			—			56
Cash and investments		9		—			20		29			(3	)		26

Total interest income		5,246		—			20		5,266			(508	)		4,758
Total interest expense		2,971		19			15		3,005			30			3,035

Net interest income (loss)		2,275		(19	)		5		2,261			(538	)		1,723
Less: provisions for loan losses		1,564		—			—		1,564			(445	)		1,119

Net interest income (loss) after provisions for loan losses		711		(19	)		5		697			(93	)		604
Contingency fee revenue		—		296			—		296			—			296
Collections revenue		—		50			—		50			1			51
Guarantor servicing fees		—		—			136		136			—			136
Other income		974		—			215		1,189			(286	)		903

Total other income		974		346			351		1,671			(285	)		1,386
Restructuring expenses		10		1			3		14			—			14
Operating expenses		581		315			284		1,180			75			1,255

Total expenses		591		316			287		1,194			75			1,269

Income (loss) from continuing operations, before income tax expense (benefit)		1,094		11			69		1,174			(453	)		721
Income tax expense (benefit)⁽¹⁾		388		7			24		419			(181	)		238

Net income (loss) from continuing operations		706		4			45		755			(272	)		483
Loss from discontinued operations, net of taxes		—		(157	)		—		(157	)		(1	)		(158	)

Net income (loss)		706		(153	)		45		598			(273	)		325
Less: net income attributable to noncontrolling interest		—		1			—		1			—			1

Net income (loss) attributable to SLM Corporation	$	706	$	(154	)	$	45	$	597		$	(273	)	$	324

Economic Floor Income (net of tax) not included in “Core Earnings”	$	205	$	—		$	—	$	205


⁽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, 2009
	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)	$	(965	)	$	298		$	129	$	—		$	(538	)
Less: provisions for loan losses		(445	)		—			—		—			(445	)

Net interest income (loss) after provisions for loan losses		(520	)		298			129		—			(93	)
Contingency fee revenue		—			—			—		—			—
Collections revenue		1			—			—		—			1
Guarantor servicing fees		—			—			—		—			—
Other income		318			(604	)		—		—			(286	)

Total other income (loss)		319			(604	)		—		—			(285	)
Restructuring expenses		—			—			—		—			—
Operating expenses		—			—			—		75			75

Total expenses		—			—			—		75			75

Income (loss) from continuing operations, before income tax benefit		(201	)		(306	)		129		(75	)		(453	)
Loss from discontinued operations, net of taxes		—			—			—		(1	)		(1	)

Total “Core Earnings” adjustments to GAAP	$	(201	)	$	(306	)	$	129	$	(76	)		(454	)

Income tax benefit													(181	)
Less: net income attributable to noncontrolling interest													—

Net loss attributable to SLM Corporation												$	(273	)


	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		—		129			—		129			(1	)		128
Guarantor servicing fees		—		—			121		121			—			121
Other income		180		—			199		379			(356	)		23

Total other income		180		469			320		969			(357	)		612
Restructuring expenses		49		11			23		83			—			83
Operating expenses		583		389			256		1,228			88			1,316

Total expenses		632		400			279		1,311			88			1,399

Income (loss) from continuing operations, before income tax expense (benefit)		957		44			47		1,048			(1,190	)		(142	)
Income tax expense (benefit)⁽¹⁾		338		23			17		378			(454	)		(76	)

Net income (loss) from continuing operations		619		21			30		670			(736	)		(66	)
Loss from discontinued operations, net of taxes		—		(140	)		—		(140	)		(3	)		(143	)

Net income (loss)		619		(119	)		30		530			(739	)		(209	)
Less: net income attributable to noncontrolling interest		—		4			—		4			—			4

Net income (loss) attributable to SLM Corporation	$	619	$	(123	)	$	30	$	526		$	(739	)	$	(213	)

Economic Floor Income (net of tax) not included in “Core Earnings”	$	55	$	—		$	—	$	55


⁽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			—			—			86			88

Total expenses		2			—			—			86			88

Income (loss) from continuing operations, before income tax benefit		(442	)		(560	)		(102	)		(86	)		(1,190	)
Loss from discontinued operations, net of taxes		—			—			—			(3	)		(3	)

Total “Core Earnings” adjustments to GAAP	$	(442	)	$	(560	)	$	(102	)	$	(89	)		(1,193	)

Income tax benefit														(454	)
Less: net income attributable to noncontrolling interest														—

Net loss attributable to SLM Corporation													$	(739	)


	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		—		217			—			217		3			220
Guarantor servicing fees		—		—			156			156		—			156
Other income		194		—			218			412		(679	)		(267	)

Total other income		194		553			374			1,121		(676	)		445
Restructuring expenses		19		2			2			23		—			23
Operating expenses		690		361			339			1,390		97			1,487

Total expenses		709		363			341			1,413		97			1,510

Income (loss) from continuing operations, before income tax expense (benefit)		673		163			32			868		(1,360	)		(492	)
Income tax expense (benefit)⁽¹⁾		249		60			12			321		87			408

Net income (loss) from continuing operations		424		103			20			547		(1,447	)		(900	)
Income from discontinued operations, net of taxes		—		15			—			15		(9	)		6

Net income (loss)		424		118			20			562		(1,456	)		(894	)
Less: net income attributable to noncontrolling interest		—		2			—			2		—			2

Net income (loss) attributable to SLM Corporation	$	424	$	116		$	20		$	560	$	(1,456	)	$	(896	)

Economic Floor Income (net of tax) not included in “Core Earnings”	$	8	$	—		$	—		$	8


⁽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		3			—			—			—			3
Guarantor servicing fees		—			—			—			—			—
Other income		680			(1,359	)		—			—			(679	)

Total other income (loss)		683			(1,359	)		—			—			(676	)
Restructuring expenses		—			—			—			—			—
Operating expenses		—			—			—			97			97

Total expenses		—			—			—			97			97

Income (loss) from continuing operations, before income tax expense		247			(1,341	)		(169	)		(97	)		(1,360	)
Loss from discontinued operations, net of taxes		—			—			—			(9	)		(9	)

Total “Core Earnings” adjustments to GAAP	$	247		$	(1,341	)	$	(169	)	$	(106	)		(1,369	)

Income tax expense														87
Less: net income attributable to noncontrolling interest														—

Net loss attributable to SLM Corporation													$	(1,456	)

Summary of “Core Earnings” Adjustments to GAAP

The adjustments required to reconcile from the Company’s “Core Earnings” results to its GAAP results of operations relate to differing treatments for securitization transactions, derivatives, Floor Income, and certain other items that management does not consider in evaluating the Company’s operating results. The following table reflects aggregate adjustments associated with these areas for the years ended December 31, 2009, 2008, and 2007.


	Years Ended December 31,
(Dollars in millions)	2009			2008			2007

“Core Earnings” adjustments to GAAP:
Net impact of securitization accounting⁽¹⁾	$	(201	)	$	(442	)	$	247
Net impact of derivative accounting⁽²⁾		(306	)		(560	)		(1,341	)
Net impact of Floor Income⁽³⁾		129			(102	)		(169	)
Net impact of acquired intangibles⁽⁴⁾		(76	)		(89	)		(106	)
Net tax effect⁽⁵⁾		181			454			(87	)

Total “Core Earnings” adjustments to GAAP	$	(273	)	$	(739	)	$	(1,456	)


⁽¹⁾		Securitization accounting: Under GAAP, certain securitization transactions in the Company’s Lending operating segment are accounted for as sales of assets. Under “Core Earnings” 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 “Core Earnings” and are replaced by interest income, provisions for loan losses, and interest expense as earned or incurred on the securitization loans. The Company also excludes transactions with its off-balance sheet trusts from “Core Earnings” as they are considered intercompany transactions on a “Core Earnings” basis.

⁽²⁾		Derivative accounting: “Core Earnings” exclude periodic unrealized gains and losses that are caused primarily by the mark-to-market derivative valuations prescribed by ASC 815 on derivatives that do not qualify for “hedge treatment” under GAAP. These unrealized gains and losses occur in the Company’s Lending operating segment. In the Company’s “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 item’s life.

⁽³⁾		Floor Income: The timing and amount (if any) of Floor Income earned in the Company’s Lending operating segment is uncertain and in excess of expected spreads. Therefore, the Company only includes such income in “Core Earnings” when it is Fixed Rate Floor Income that is 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, they are marked-to-market through the “gains (losses) on derivative and hedging activities, net” line in the consolidated statement of income with no offsetting gain or loss recorded for the economically hedged items. For “Core Earnings,” the Company reverses the fair value adjustments on the Floor Income Contracts and futures economically hedging Floor Income and include in income the amortization of net premiums received on contracts economically hedging Fixed Rate Floor 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 Company’s “Core Earnings” effective tax rate for the year. The net tax effect for the year ended December 31, 2007 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.

Discontinued Operations

12 Months Ended

Dec. 31, 2009

Discontinued Operations [Abstract]

Discontinued Operations


21.	Discontinued Operations

In the fourth quarter of 2009, the Company sold all of the assets in its Purchased Paper — Mortgage/Properties business for $280 million, resulting in an after-tax loss of $95 million. The Purchased Paper — Mortgage/Properties business is considered a “Component” of the Company’s APG reporting unit in accordance with ASC 360 as the business comprises operations and cash flows that can be clearly distinguished operationally and for financial reporting purposes, from the rest of the Company. In accordance with ASC 205, this Component is presented as discontinued operations as (1) the operations and cash flows of the Component have been eliminated from the ongoing operations of the Company as of December 31, 2009, and (2) the Company will have no continuing involvement in the operations of this Component subsequent to the sale.

The following table summarizes the discontinued assets and liabilities of Purchased Paper — Mortgage/Properties business at December 31, 2009 and 2008, respectively.


	At December 31,
	2009		2008

Assets:
Cash and equivalents	$	351	$	11,635
Other assets		34,072		788,163

Assets of discontinued operations	$	34,423	$	799,798

Liabilities:
Liabilities of discontinued operations	$	29,796	$	753,638

At December 31, 2009, other assets of the Company’s discontinued operations consist of a receivable from SLM Corporation associated with the 2009 net operating loss generated by its discontinued operations, which has been utilized by SLM Corporation and its subsidiaries in its 2009 consolidated U.S. federal income tax return. At December 31, 2009, liabilities of the Company’s discontinued operations consist primarily of estimated reserves associated with certain recourse and buy-back provisions associated with the asset sale, as well as restructuring liabilities related to severance and contract termination costs.

The following table summarizes the discontinued operations for the years ended December 31, 2009, 2008 and 2007, respectively.


	Years Ended December 31,
	2009			2008			2007

Operations:
Income (loss) from discontinued operations before income taxes	$	(217,083	)	$	(234,024	)	$	10,284
Income tax expense (benefit)		(59,393	)		(90,805	)		4,008

Income (loss) from discontinued operations, net of taxes	$	(157,690	)	$	(143,219	)	$	6,276

Disposal:
Loss on disposal before income taxes	$	(118,761	)	$	—		$	—
Income tax benefit		(23,053	)		—			—

Loss on disposal, net of taxes	$	(95,708	)	$	—		$	—

Quarterly Financial Information (unaudited)

12 Months Ended

Dec. 31, 2009

Quarterly Financial Information (unaudited) [Abstract]

Quarterly Financial Information (unaudited)


22.	Quarterly Financial Information (unaudited)


	2009
	First			Second			Third			Fourth
	Quarter			Quarter			Quarter			Quarter

Net interest income	$	215,063		$	383,701		$	525,176		$	598,786
Less: provisions for loan losses		250,279			278,112			321,127			269,442

Net interest income (loss) after provisions for loan losses		(35,216	)		105,589			204,049			329,344
Gains (losses) on derivative and hedging activities, net		104,025			(561,795	)		(111,556	)		(35,209	)
Other income		249,632			608,626			469,051			663,572
Restructuring expenses		3,773			3,333			2,492			4,169
Operating expenses		295,116			308,164			312,904			339,122
Income tax expense (benefit)		(5,517	)		(43,110	)		80,423			206,568

Net income (loss) from continuing operations		25,069			(115,967	)		165,725			407,848
Loss from discontinued operations, net of taxes		(46,174	)		(6,542	)		(6,417	)		(98,557	)

Net income (loss)		(21,105	)		(122,509	)		159,308			309,291
Less: net income attributable to noncontrolling interest		281			211			198			157

Net income (loss) attributable to SLM Corporation		(21,386	)		(122,720	)		159,110			309,134
Preferred stock dividends		26,395			25,800			42,627			51,014

Net income (loss) attributable to SLM Corporation common stock	$	(47,781	)	$	(148,520	)	$	116,483		$	258,120

Basic earnings (loss) per common share:
Earnings (loss) from continuing operations	$	—		$	(.31	)	$	.26		$	.74
Earnings (loss) from discontinued operations		(.10	)		(.01	)		(.01	)		(.20	)

Earnings (loss) from net income	$	(.10	)	$	(.32	)	$	.25		$	.54

Diluted earnings (loss) per common share:
Earnings (loss) from continuing operations	$	—		$	(.31	)	$	.26		$	.71
Earnings (loss) from discontinued operations		(.10	)		(.01	)		(.01	)		(.19	)

Earnings (loss) from net income	$	(.10	)	$	(.32	)	$	.25		$	.52


	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		338,859			230,390			199,895			287,922
Restructuring expenses		20,520			46,740			10,508			5,748
Operating expenses		346,046			344,302			353,739			270,864
Income tax expense (benefit)		(60,725	)		167,519			(51,301	)		(132,263	)

Net income (loss) from continuing operations		(100,720	)		293,400			(66,968	)		(191,186	)
Loss from discontinued operations, net of taxes		(3,149	)		(24,738	)		(91,029	)		(24,304	)

Net income (loss)		(103,869	)		268,662			(157,997	)		(215,490	)
Less: net income attributable to noncontrolling interest		(65	)		2,926			544			527

Net income (loss) attributable to SLM Corporation		(103,804	)		265,736			(158,541	)		(216,017	)
Preferred stock dividends		29,025			27,391			27,474			27,316

Net income (loss) attributable to SLM Corporation common stock	$	(132,829	)	$	238,345		$	(186,015	)	$	(243,333	)

Basic earnings (loss) per common share:
Earnings (loss) from continuing operations	$	(.27	)	$	.56		$	(.20	)	$	(.47	)
Earnings (loss) from discontinued operations		(.01	)		(.05	)		(.20	)		(.05	)

Earnings (loss) from net income	$	(.28	)	$	.51		$	(.40	)	$	(.52	)

Diluted earnings (loss) per common share:
Earnings (loss) from continuing operations	$	(.27	)	$	.55		$	(.20	)	$	(.47	)
Earnings (loss) from discontinued operations		(.01	)		(.05	)		(.20	)		(.05	)

Earnings (loss) from net income	$	(.28	)	$	.50		$	(.40	)	$	(.52	)