(Mark One)
þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the fiscal year ended December 31, 2004
or
o		TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from           to

Delaware		52-2013874
(State of Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
12061 Bluemont Way, Reston, Virginia (Address of Principal Executive Offices)		20190 (Zip Code)

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Fixed Borrower Rate:			3.375	%
SAP Spread over Commercial Paper Rate:			(2.640	)%
Floor Strike Rate(1)			0.735	%

(1)	The interest rate at which the underlying index (Treasury bill or commercial paper) plus the fixed SAP spread equals the fixed borrower rate. Floor Income is earned anytime the interest rate of the underlying index declines below this rate.

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Item 1.	Business

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	•	our Preferred Channel;
	•	Consolidation Loans; and
	•	strategic acquisitions.

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	•	guarantee issuance — the initial approval of loan terms and guarantee eligibility;
	•	account maintenance — maintaining and updating of records on guaranteed loans; and
	•	guarantee fulfillment — review and processing of guarantee claims.

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	•	the Fair Debt Collection Practices Act;
	•	the Fair Credit Reporting Act;
	•	the Gramm-Leach-Bliley Act, including the Financial Privacy Rule and the Safeguard Rule; and
	•	the U.S. Bankruptcy Code.

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Item 2.	Properties

				Approximate
Location		Function		Square Feet
Reston, VA		Headquarters			240,000
Fishers, IN		Loan Servicing and Data Center			450,000
Wilkes Barre, PA		Loan Servicing Center			135,000
Killeen, TX		Loan Servicing Center			136,000
Lynn Haven, FL		Loan Servicing Center			133,000
Castleton, IN		Loan Servicing Center			100,000
Marianna, FL		Back-up/Disaster Recovery Facility for Loan Servicing			94,000
Big Flats, NY		Debt Management and Collections Center			60,000
Gilbert, AZ		Southwest Student Services Headquarters			60,000
Swansea, MA		AMS Headquarters			36,000
Arcade, NY		Debt Management and Collections Center			34,000
Perry, NY		Debt Management and Collections Center			20,000

Item 3.	Legal Proceedings

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Item 4.	Submission of Matters to a Vote of Security Holders

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

						1st Quarter				2nd Quarter				3rd Quarter				4th Quarter
2004			High			$	43.00			$	42.49			$	44.75			$	54.44
			Low				36.79				36.80				36.43				41.60
2003			High			$	37.72			$	42.92			$	42.42			$	40.11
			Low				33.73				36.32				37.88				35.70

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											Total Number of				Maximum Number
											Shares Purchased				of Shares that May
			Total Number								as Part of Publicly				Yet Be Purchased
			of Shares				Average Price				Announced Plans				Under the Plans
(Common shares in millions)			Purchased(1)				Paid per Share				or Programs				or Programs(2)
Period:
January 1 – March 31, 2004				8.6			$	31.26				7.9				34.2
April 1 – June 30, 2004				6.2				38.08				6.1				20.7
July 1 – September 30, 2004				11.5				38.91				11.4				8.4
October 1 – October 31, 2004				—			$	—				—				36.1
November 1 – November 30, 2004				8.4				43.71				7.9				35.8
December 1 – December 31, 2004				—				—				—				35.8
	Total fourth quarter			8.4			$	43.71				7.9
Year ended December 31, 2004				34.7			$	38.03				33.3

(1)	The total number of shares purchased includes: i) shares purchased under the stock repurchase program discussed above, and ii) shares purchased in connection with the exercise of stock options and vesting of performance stock to satisfy minimum statutory tax withholding obligations and shares tendered by employees to satisfy option exercise costs (which combined totaled 1.4 million shares for 2004).
(2)	Reduced by outstanding equity forward contracts.

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Item 6.	Selected Financial Data

		2004				2003				2002				2001				2000
Operating Data:
Net interest income		$	1,299			$	1,326			$	1,425			$	1,126			$	642
Net income			1,914				1,534				792				384				465
Basic earnings per common share, before cumulative effect of accounting change			4.36				3.08				1.69				.78				.95
Basic earnings per common share, after cumulative effect of accounting change			4.36				3.37				1.69				.78				.95
Diluted earnings per common share, before cumulative effect of accounting change			4.04				2.91				1.64				.76				.92
Diluted earnings per common share, after cumulative effect of accounting change			4.04				3.18				1.64				.76				.92
Dividends per common share			.74				.59				.28				.24				.22
Return on common stockholders’ equity			73	%			66	%			46	%			30	%			49	%
Net interest margin			1.92				2.53				2.92				2.33				1.52
Return on assets			2.80				2.89				1.60				.78				1.06
Dividend payout ratio			18				19				17				32				24
Average equity/average assets			3.73				4.19				3.44				2.66				2.34
Balance Sheet Data:
Student loans, net		$	65,981			$	50,047			$	42,339			$	41,001			$	37,647
Total assets			84,094				64,611				53,175				52,874				48,792
Total borrowings			78,122				58,543				47,861				48,350				45,375
Stockholders’ equity			3,102				2,630				1,998				1,672				1,415
Book value per common share			6.93				5.51				4.00				3.23				2.54
Other Data:
Off-balance sheet securitized student loans, net		$	41,457			$	38,742			$	35,785			$	30,725			$	29,868

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Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

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	•	the mix of student loans in the portfolio, with Consolidation Loans having the lowest spread and Private Education Loans having the highest spread;
	•	the premiums paid and capitalized costs incurred to acquire student loans which negatively impact the spread through subsequent amortization;
	•	the type and level of borrower benefit programs;
	•	the level of Floor Income; and
	•	funding and hedging costs.

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	•	applicable laws and regulations, which may change the volume, average term, effective yields and refinancing options of student loans under the FFELP or provide advantages to competing FEELP and non-FFELP loan providers;
	•	demand and competition for education financing;
	•	financing preferences of students and their families;
	•	borrower default rates on Private Education Loans;
	•	continued access to the capital markets for funding at favorable spreads particularly for our non-federally insured Private Education Loan portfolio; and
	•	our operating execution and efficiencies, including errors, omissions, and effectiveness of internal control.

	Recent Developments — Acquisitions in the Lending Business Segment

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	Recent Developments — Acquisitions in the DMO Business Segment

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		Consolidating
Estimate		Lender		Effect on Estimate		CPR		Accounting Effect
Premium		Sallie Mae		Term extension		Decrease		Estimate Adjustment(1) — increase unamortized balance of premium. Reduced annual amortization expense going forward.
Premium		Other lenders		Stafford loan prepaid		Increase		Estimate Adjustment(1) — decrease unamortized balance of premium or accelerated amortization of premium.
Borrower Benefits		Sallie Mae		Term extension		N/A		Original Stafford loan expected benefit expense reversed — new Consolidation Loan benefit amortized over a longer term. (2)
Borrower Benefits		Other lenders		Stafford loan prepaid		N/A		Borrower benefit reserve reversed into income.(2)

(1)	As estimates are updated, in accordance with SFAS No. 91, the premium balance must be adjusted from inception to reflect the new expected term of the loan.
(2)	Consolidation estimates also affect the estimates of borrowers who will eventually qualify for borrower benefits.

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		Consolidating
Estimate		Lender		Effect on Estimate		CPR		Accounting Effect
Residual Interest		Sallie Mae or other lenders		FFELP Stafford loan is prepaid		Increase		• Reduction in fair market value of Residual Interest asset resulting in either an impairment charge or reduction in prior market value gains recorded in other comprehensive income.
								• Decrease in prospective effective yield used to recognize interest income.

	•	the projected net interest yield from the underlying securitized loans, which can be impacted by the forward yield curve;
	•	the calculation of the Embedded Floor Income associated with the securitized loan portfolio;
	•	the CPR;
	•	the discount rate used, which is intended to be commensurate with the risks involved; and
	•	the expected credit losses from the underlying securitized loan portfolio.

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														Increase (decrease)
		Years Ended December 31,												2004 vs. 2003								2003 vs. 2002
		2004				2003				2002				$				%				$				%
Net interest income		$	1,299			$	1,326			$	1,425			$	(27	)			(2	)%		$	(99	)			(7	)%
Less: provision for losses			111				147				117				(36	)			(24	)			30				26
Net interest income after provision for losses			1,188				1,179				1,308				9				1				(129	)			(10	)
Gains on student loan securitizations			375				744				338				(369	)			(50	)			406				120
Servicing and securitization revenue			561				667				839				(106	)			(16	)			(172	)			(21	)
Losses on securities, net			(49	)			(10	)			(2	)			(39	)			(390	)			(8	)			(400	)
Derivative market value adjustment			849				(238	)			(1,082	)			1,087				457				844				78
Guarantor servicing fees			120				128				106				(8	)			(6	)			22				21
Debt management fees and collections revenue			340				259				186				81				31				73				39
Other income			289				249				220				40				16				29				13
Operating expenses			895				795				690				100				13				105				15
Loss on GSE debt extinguishment and defeasance			221				—				—				221				100				—				—
Income taxes			642				779				431				(137	)			(18	)			348				81
Minority interest in net earnings of subsidiaries			1				—				—				1				100				—				—
Cumulative effect of accounting change			—				130				—				(130	)			(100	)			130				—
Net income			1,914				1,534				792				380				25				742				94
Preferred stock dividends			12				12				12				—				—				—				—
Net income attributable to common stock		$	1,902			$	1,522			$	780			$	380				25	%		$	742				95	%
Basic earnings per common share, before cumulative effect of accounting change		$	4.36			$	3.08			$	1.69			$	1.28				42	%		$	1.39				82	%
Basic earnings per common share, after cumulative effect of accounting change		$	4.36			$	3.37			$	1.69			$	.99				29	%		$	1.68				99	%
Diluted earnings per common share, before cumulative effect of accounting change		$	4.04			$	2.91			$	1.64			$	1.13				39	%		$	1.27				77	%
Diluted earnings per common share, after cumulative effect of accounting change		$	4.04			$	3.18			$	1.64			$	.86				27	%		$	1.54				94	%
Dividends per common share		$	.74			$	.59			$	.28			$	.15				25	%		$	.31				111	%

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										Increase (decrease)
		December 31,								2004 vs. 2003								2003 vs. 2002
		2004				2003				$				%				$				%
Assets
Federally insured student loans, net		$	60,561			$	45,577			$	14,984				33	%		$	8,413				23	%
Private Education Loans, net			5,420				4,470				950				21				(705	)			(14	)
Academic facilities financings and other loans, net			1,048				1,031				17				2				(171	)			(14	)
Cash and investments			6,975				6,896				79				1				2,382				53
Restricted cash and investments			2,211				1,106				1,105				100				630				132
Retained Interest in securitized receivables			2,316				2,476				(160	)			(6	)			330				15
Goodwill and acquired intangible assets			1,066				592				474				80				6				1
Other assets			4,497				2,463				2,034				83				551				29
Total assets		$	84,094			$	64,611			$	19,483				30	%		$	11,436				22	%
Liabilities and Stockholders’ Equity
Short-term borrowings		$	2,207			$	18,735			$	(16,528	)			(88	)%		$	(6,884	)			(27	)%
Long-term notes			75,915				39,808				36,107				91				17,566				79
Other liabilities			2,798				3,438				(640	)			(19	)			122				4
Total liabilities			80,920				61,981				18,939				31				10,804				21
Minority interest in subsidiaries			72				—				72				100
Stockholders’ equity before treasury stock			5,129				3,180				1,949				61				(1,523	)			(32	)
Common stock held in treasury at cost			2,027				550				1,477				269				(2,155	)			(80	)
Total stockholders’ equity			3,102				2,630				472				18				632				32
Total liabilities and stockholders’ equity		$	84,094			$	64,611			$	19,483				30	%		$	11,436				22	%

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		Year Ended December 31,												% Increase (Decrease)
		2004				2003				2002				2004 vs. 2003				2003 vs. 2002
Net interest income		$	1,299			$	1,326			$	1,425				(2	)%			(7	)%
Less: provision for loan losses			111				147				117				(25	)			26
Net interest income after provision for loan losses			1,188				1,179				1,308				1				(10	)
Other income, net			1,899				1,289				203				47				535
Operating expenses			681				431				367				58				17
Income before income taxes and cumulative effect of accounting change			2,406				2,037				1,144				18				78
Income taxes			585				729				403				(20	)			81
Income before cumulative effect of accounting change			1,821				1,308				741				39				77
Cumulative effect of accounting change			—				130				—				(100	)			100
Net income		$	1,821			$	1,438			$	741				27	%			94	%

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		December 31,
		2004				2003				2002
Federally insured student loans, net		$	60,561			$	45,577			$	37,164
Private Education Loans, net			5,420				4,470				5,175
Academic facilities financings and other loans, net			1,048				1,031				1,202
Investments(1)			8,914				7,741				4,794
Retained Interest in securitized receivables			2,315				2,472				2,137
Other(2)			4,792				2,600				1,926
Total assets		$	83,050			$	63,891			$	52,398

(1)	Investments include cash and cash equivalents, short and long term investments, restricted cash and investments, leveraged leases, and municipal bonds.
(2)	Other assets include accrued interest receivable, goodwill and acquired intangible assets and other non-interest earning assets.

	Taxable Equivalent Net Interest Income

															Increase (decrease)
			Years Ended December 31,												2004 vs. 2003								2003 vs. 2002
			2004				2003				2002				$				%				$				%
Interest income
	Student loans		$	2,426			$	2,121			$	2,450			$	305				14	%		$	(329	)			(13	)%
	Academic facilities financings and other loans			74				77				96				(3	)			(4	)			(19	)			(20	)
	Investments			233				150				88				83				55				62				70
	Taxable equivalent adjustment			9				16				18				(7	)			(44	)			(2	)			(11	)
Total taxable equivalent interest income				2,742				2,364				2,652				378				16				(288	)			(11	)
Interest expense				1,434				1,022				1,210				412				40				(188	)			(16	)
Taxable equivalent net interest income			$	1,308			$	1,342			$	1,442			$	(34	)			(3	)%		$	(100	)			(7	)%

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	Average Balance Sheets

		Years Ended December 31,
		2004								2003								2002
		Balance				Rate				Balance				Rate				Balance				Rate
Average Assets
Federally insured student loans		$	51,091				4.09	%		$	40,108				4.52	%		$	38,023				5.55	%
Private Education Loans			4,795				7.00				5,019				6.13				5,059				6.69
Academic facilities financings and other loans			1,004				7.72				1,129				7.27				1,460				7.19
Cash and investments			11,321				2.11				6,840				2.36				4,885				1.98
Total interest earning assets			68,211				4.02	%			53,096				4.45	%			49,427				5.37	%
Non-interest earning assets			6,497								5,950								4,758
Total assets		$	74,708							$	59,046							$	54,185
Average Liabilities and Stockholders’ Equity
Six month floating rate notes		$	1,586				1.23	%		$	2,988				1.14	%		$	3,006				1.76	%
Other short-term borrowings			9,010				2.07				22,007				1.64				27,159				1.97
Long-term notes			58,134				2.11				28,407				2.21				19,757				3.15
Total interest bearing liabilities			68,730				2.09	%			53,402				1.91	%			49,922				2.42	%
Non-interest bearing liabilities			3,195								3,169								2,397
Stockholders’ equity			2,783								2,475								1,866
Total liabilities and stockholders’ equity		$	74,708							$	59,046							$	54,185
Net interest margin							1.92	%							2.53	%							2.92	%

	Rate/Volume Analysis

						Increase
						(decrease)
		Taxable				attributable to
		equivalent				change in
		increase
		(decrease)				Rate				Volume
2004 vs. 2003
Taxable equivalent interest income		$	378			$	(201	)		$	579
Interest expense			412				(16	)			428
Taxable equivalent net interest income		$	(34	)		$	(185	)		$	151
2003 vs. 2002
Taxable equivalent interest income		$	(288	)		$	(409	)		$	121
Interest expense			(188	)			(358	)			170
Taxable equivalent net interest income		$	(100	)		$	(51	)		$	(49	)

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	Student Loan Spread Analysis — On-Balance Sheet

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		Years Ended December 31,
		2004				2003				2002
On-Balance Sheet
Student loan yield, before Floor Income			4.53	%			4.28	%			4.98	%
Floor Income			.73				1.23				1.48
Consolidation Loan Rebate Fees			(.58	)			(.50	)			(.40	)
Offset Fees			(.03	)			(.07	)			(.10	)
Borrower benefits			(.18	)			(.06	)			(.08	)
Premium and discount amortization			(.13	)			(.18	)			(.19	)
Student loan net yield			4.34				4.70				5.69
Student loan cost of funds			(2.01	)			(1.70	)			(2.30	)
Student loan spread			2.33	%			3.00	%			3.39	%
Off-Balance Sheet
Servicing and securitization revenue, before Floor Income			1.17	%			1.27	%			1.49	%
Floor Income, net of Floor Income previously recognized in gain on sale calculation			.21				.47				1.11
Servicing and securitization revenue			1.38	%			1.74	%			2.60	%
Average Balances
On-balance sheet student loans		$	55,885			$	45,127			$	43,082
Off-balance sheet student loans			40,558				38,205				32,280
Managed student loans		$	96,443			$	83,332			$	75,362

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	Discussion of the Year-over-Year Effect of Changes in Accounting Estimates on the On-Balance Sheet Student Loan Spread

				Years Ended December 31,
				2004								2003
(Dollars in millions)				Dollar Value				Basis Points				Dollar Value				Basis Points
Changes in critical accounting estimates:
	Effect on premium/discount:
		FFELP Stafford and Consolidation Loans		$	—				—			$	(19	)			(4	)
		Private Education Loans			(8	)			(1	)			(23	)			(5	)
	Total effect on premium/discount				(8	)			(1	)			(42	)			(9	)
	Borrower benefits				5				1				10				2
Total changes in estimates				$	(3	)			—			$	(32	)			(7	)

	Discussion of Year-over-Year Fluctuations in On-Balance Sheet Student Loan Spread in Addition to Changes in Accounting Estimates

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	Student Loan Spread Analysis — Managed Basis

		Years Ended December 31,
		2004				2003				2002
Managed Basis student loan yield			4.59	%			4.26	%			4.94	%
Consolidation Loan Rebate Fees			(.42	)			(.36	)			(.26	)
Offset Fees			(.02	)			(.04	)			(.06	)
Borrower benefits			(.08	)			(.05	)			(.11	)
Premium and discount amortization			(.13	)			(.10	)			(.25	)
Managed Basis student loan net yield			3.94				3.71				4.26
Managed Basis student loan cost of funds			(2.06	)			(1.71	)			(2.38	)
Managed Basis student loan spread			1.88	%			2.00	%			1.88	%
Average Balances
On-balance sheet student loans		$	55,885			$	45,127			$	43,082
Off-balance sheet student loans			40,558				38,205				32,280
Managed student loans		$	96,443			$	83,332			$	75,362

	Discussion of the Year-over-Year Effect of Changes in Accounting Estimates on the Managed Student Loan Spread

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				Years Ended December 31,
				2004								2003
(Dollars in millions)				Dollar Value				Basis Points				Dollar Value				Basis Points
Changes in critical accounting estimates:
	Effect on premium/discount:
		FFELP Stafford and Consolidation Loans		$	36				4			$	51				6
		Private Education Loans			(24	)			(3	)			(23	)			(3	)
	Total effect on premium/discount				12				1				28				3
	Borrower benefits				22				2				39				5
Total changes in estimates				$	34				3			$	67				8

	Discussion of Year-over-Year Fluctuations in Managed Student Loan Spread in Addition to Changes in Accounting Estimates

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		Years Ended December 31,
		2004												2003												2002
		Fixed				Variable								Fixed				Variable								Fixed				Variable
		borrower				borrower								borrower				borrower								borrower				borrower
		Rate				Rate				Total				Rate				Rate				Total				Rate				Rate				Total
Floor Income:
Gross Floor Income		$	406			$	2			$	408			$	523			$	31			$	554			$	513			$	123			$	636
Payments on Floor Income Contracts			(368	)			—				(368	)			(408	)			—				(408	)			(409	)			(8	)			(417	)
Net Floor Income		$	38			$	2			$	40			$	115			$	31			$	146			$	104			$	115			$	219
Net Floor Income in basis points			7				—				7				25				7				32				24				27				51

46

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			December 31, 2004												December 31, 2003
			Fixed				Variable								Fixed				Variable
			borrower				borrower								borrower				borrower
(Dollars in billions)			Rate				Rate				Total				Rate				Rate				Total
Student loans eligible to earn Floor Income:
	On-balance sheet student loans		$	40.5			$	14.0			$	54.5			$	26.7			$	12.5			$	39.2
	Off-balance sheet student loans			7.4				24.6				32.0				8.1				23.5				31.6
Managed student loans eligible to earn Floor Income				47.9				38.6				86.5				34.8				36.0				70.8
Less: Economically hedged Floor Income				(27.8	)			—				(27.8	)			(14.7	)			—				(14.7	)
Net Managed student loans eligible to earn Floor Income			$	20.1			$	38.6			$	58.7			$	20.1			$	36.0			$	56.1
Net Managed student loans earning Floor Income			$	2.4			$	—			$	2.4			$	16.6			$	31.2			$	47.8

(Dollars in billions)		2005				2006				2007				2008
Average balance of Consolidation Loans whose Floor Income is economically hedged (Managed Basis)		$	26			$	24			$	9			$	8

	Activity in the Allowance for Private Education Loan Losses

47

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		Activity in Allowance for Private Education Loan Losses
		On-Balance Sheet												Off-Balance Sheet												Managed Basis
		Years Ended December 31,												Years Ended December 31,												Years Ended December 31,
		2004				2003				2002				2004				2003				2002				2004				2003				2002
Allowance at beginning of year		$	166			$	181			$	194			$	93			$	13			$	—			$	259			$	194			$	194
Provision for loan losses			130				107				94				28				10				—				158				117				94
Other			—				21				(27	)			—				(1	)			—				—				20				(27	)
Charge-offs			(110	)			(83	)			(76	)			(6	)			—				—				(116	)			(83	)			(76	)
Recoveries			14				11				9				—				—				—				14				11				9
Net charge-offs			(96	)			(72	)			(67	)			(6	)			—				—				(102	)			(72	)			(67	)
Balance before securitization of Private Education Loans			200				237				194				115				22				—				315				259				194
Reduction for securitization of Private Education Loans			(28	)			(71	)			(13	)			28				71				13				—				—				—
Allowance at end of year		$	172			$	166			$	181			$	143			$	93			$	13			$	315			$	259			$	194
Net charge-offs as a percentage of average loans in repayment			3.57	%			2.59	%			2.40	%			.22	%			—	%			—	%			1.92	%			1.85	%			2.25	%
Allowance as a percentage of the ending total loan balance			3.07	%			3.57	%			3.38	%			2.31	%			2.37	%			1.93	%			2.67	%			3.02	%			3.22	%
Allowance as a percentage of ending loans in repayment			6.05	%			6.50	%			6.05	%			4.27	%			4.99	%			3.50	%			5.08	%			5.86	%			5.77	%
Allowance coverage of net charge-offs			1.79				2.30				2.72				24.81				—				—				3.09				3.60				2.91
Average total loans		$	4,795			$	5,018			$	5,059			$	5,495			$	2,284			$	139			$	10,290			$	7,303			$	5,198
Ending total loans		$	5,592			$	4,636			$	5,356			$	6,205			$	3,928			$	660			$	11,797			$	8,564			$	6,016
Average loans in repayment		$	2,697			$	2,772			$	2,774			$	2,611			$	1,116			$	182			$	5,307			$	3,888			$	2,955
Ending loans in repayment		$	2,842			$	2,551			$	2,992			$	3,352			$	1,870			$	364			$	6,194			$	4,421			$	3,356

48

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			On-Balance Sheet Private Education Loan Delinquencies
			December 31,
			2004								2003								2002
			Balance				%				Balance				%				Balance				%
Loans in-school/grace/deferment(1)			$	2,787							$	1,970							$	2,171
Loans in forbearance(2)				166								236								285
Loans in repayment and percentage of each status:
	Loans current			2,555				89.9	%			2,268				88.9	%			2,776				92.8	%
	Loans delinquent 31-60 days(3)			124				4.4				115				4.5				102				3.4
	Loans delinquent 61-90 days			56				2.0				62				2.4				43				1.4
	Loans delinquent greater than 90 days			107				3.7				106				4.2				71				2.4
	Total Private Education Loans in repayment			2,842				100	%			2,551				100.0	%			2,992				100	%
Total Private Education Loans, gross				5,795								4,757								5,448
Private Education Loan unamortized discount				(203	)							(121	)							(92	)
Total Private Education Loans				5,592								4,636								5,356
Private Education Loan allowance for losses				(172	)							(166	)							(181	)
Private Education Loans, net			$	5,420							$	4,470							$	5,175
Percentage of Private Education Loans in repayment				49.0	%							53.6	%							54.9	%
Delinquencies as a percentage of Private Education Loans in repayment				10.1	%							11.1	%							7.2	%

49

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			Off-Balance Sheet Private Education Loan Delinquencies
			December 31,
			2004								2003								2002
			Balance				%				Balance				%				Balance				%
Loans in-school/grace/deferment(1)			$	2,622							$	1,858							$	222
Loans in forbearance(2)				334								255								80
Loans in repayment and percentage of each status:
	Loans current			3,191				95.2	%			1,796				96.0	%			350				96.2	%
	Loans delinquent 31-60 days(3)			84				2.5				39				2.1				7				1.9
	Loans delinquent 61-90 days			28				.8				15				.8				3				.8
	Loans delinquent greater than 90 days			49				1.5				20				1.1				4				1.1
	Total Private Education Loans in repayment			3,352				100	%			1,870				100.0	%			364				100	%
Total Private Education Loans, gross				6,308								3,983								666
Private Education Loan unamortized discount				(103	)							(55	)							(6	)
Total Private Education Loans				6,205								3,928								660
Private Education Loan allowance for losses				(143	)							(93	)							(13	)
Private Education Loans, net			$	6,062							$	3,835							$	647
Percentage of Private Education Loans in repayment				53.1	%							46.9	%							54.7	%
Delinquencies as a percentage of Private Education Loans in repayment				4.8	%							4.0	%							3.8	%

			Managed Basis Private Education Loan Delinquencies
			December 31,
			2004								2003								2002
			Balance				%				Balance				%				Balance				%
Loans in-school/grace/deferment(1)			$	5,409							$	3,828							$	2,393
Loans in forbearance(2)				500								491								365
Loans in repayment and percentage of each status:
	Loans current			5,746				92.8	%			4,064				91.9	%			3,126				93.2	%
	Loans delinquent 31-60 days(3)			208				3.3				154				3.5				109				3.3
	Loans delinquent 61-90 days			84				1.4				77				1.7				46				1.3
	Loans delinquent greater than 90 days			156				2.5				126				2.9				75				2.2
	Total Private Education Loans in repayment			6,194				100	%			4,421				100.0	%			3,356				100	%
Total Private Education Loans, gross				12,103								8,740								6,114
Private Education Loan unamortized discount				(306	)							(176	)							(98	)
Total Private Education Loans				11,797								8,564								6,016
Private Education Loan allowance for losses				(315	)							(259	)							(194	)
Private Education Loans, net			$	11,482							$	8,305							$	5,822
Percentage of Private Education Loans in repayment				51.2	%							50.6	%							54.9	%
Delinquencies as a percentage of Private Education Loans in repayment				7.2	%							8.1	%							6.8	%

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

50

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		December 31,
		2004								2003								2002
		Forbearance								Forbearance								Forbearance
		Balance				% of Total				Balance				% of Total				Balance				% of Total
Cumulative number of months borrower has used forbearance
Less than 13 months		$	334				66	%		$	326				67	%		$	223				61	%
13 to 24 months			117				24				119				24				88				24
25 to 36 months			30				6				26				5				28				8
More than 36 months			19				4				20				4				26				7
Total		$	500				100	%		$	491				100	%		$	365				100	%

51

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		Months since entering repayment
														After
		1 to 24				25 to 48				More than				Dec. 31,
December 31, 2004		Months				Months				48 Months				2004(1)				Total
Loans in-school/grace/deferment		$	—			$	—			$	—			$	5,409			$	5,409
Loans in forbearance			350				103				47				—				500
Loans in repayment — current			3,228				1,401				1,117				—				5,746
Loans in repayment — delinquent 31-60 days			110				59				39				—				208
Loans in repayment — delinquent 61-90 days			43				26				15				—				84
Loans in repayment — delinquent greater than 90 days			67				56				33				—				156
Total		$	3,798			$	1,645			$	1,251			$	5,409			$	12,103
Unamortized discount																			(306	)
Allowance for loan losses																			(315	)
Total Managed Private Education Loans, net																		$	11,482

		Months since entering repayment
														After
		1 to 24				25 to 48				More than				Dec. 31,
December 31, 2003		Months				Months				48 Months				2003(1)				Total
Loans in-school/grace/deferment		$	—			$	—			$	—			$	3,828			$	3,828
Loans in forbearance			342				100				49				—				491
Loans in repayment — current			2,192				1,074				798				—				4,064
Loans in repayment — delinquent 31-60 days			75				46				33				—				154
Loans in repayment — delinquent 61-90 days			34				27				16				—				77
Loans in repayment — delinquent greater than 90 days			48				42				36				—				126
Total		$	2,691			$	1,289			$	932			$	3,828			$	8,740
Unamortized discount																			(176	)
Allowance for loan losses																			(259	)
Total Managed Private Education Loans, net																		$	8,305

52

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		Months since entering repayment
														After
		1 to 24				25 to 48				More than				Dec. 31,
December 31, 2002		Months				Months				48 Months				2002(1)				Total
Loans in-school/grace/deferment		$	—			$	—			$	—			$	2,393			$	2,393
Loans in forbearance			239				75				51				—				365
Loans in repayment — current			1,413				798				915				—				3,126
Loans in repayment — delinquent 31-60 days			43				23				43				—				109
Loans in repayment — delinquent 61-90 days			15				13				18				—				46
Loans in repayment — delinquent greater than 90 days			17				19				39				—				75
Total		$	1,727			$	928			$	1,066			$	2,393			$	6,114
Unamortized discount																			(98	)
Allowance for loan losses																			(194	)
Total Managed Private Education Loans, net																		$	5,822

(1)	Includes all loans in-school/grace/deferment.

	Allowance for FFELP Student Loan Losses

	Other Income, Net

		Years Ended December 31,
		2004				2003				2002
Gains on student loan securitizations		$	375			$	744			$	338
Servicing and securitization revenue			561				667				839
Losses on securities, net			(49	)			(10	)			(2	)
Derivative market value adjustment			849				(238	)			(1,082	)
Other income			163				126				110
Total other income, net		$	1,899			$	1,289			$	203

53

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	Gains on Student Loan Securitizations and Servicing and Securitization Revenue

	Losses on Securities, Net

	Derivative Market Value Adjustment

	Other Income

		Years Ended
		December 31,
		2004				2003				2002
Late fees		$	94			$	65			$	56
Gains on sales of mortgages and other loan fees			22				29				13
Other			47				32				41
Total other income		$	163			$	126			$	110

54

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		December 31, 2004
		FFELP				Private				Total
Preferred Channel		$	12,756			$	3,982			$	16,738
Other commitment clients			368				45				413
Spot purchases			1,804				4				1,808
Consolidations from third parties			2,609				—				2,609
Acquisitions from off-balance sheet securitized trusts, primarily consolidations			5,554				—				5,554
Acquisition of Southwest Student Services			4,776				4				4,780
Acquisition of Student Loan Financing Association			1,435				—				1,435
Capitalized interest and deferred origination fees			1,398				(2	)			1,396
Total on-balance sheet student loan acquisitions			30,700				4,033				34,733
Consolidations to SLM Corporation from off-balance sheet securitized trusts			(5,554	)			—				(5,554	)
Capitalized interest and other — off-balance sheet securitized trusts			565				172				737
Total Managed student loan acquisitions		$	25,711			$	4,205			$	29,916

		December 31, 2003
		FFELP				Private				Total
Preferred Channel		$	10,884			$	2,901			$	13,785
Other commitment clients			344				33				377
Spot purchases			864				2				866
Consolidations from third parties			2,158				92				2,250
Acquisitions from off-balance sheet securitized trusts, primarily consolidations			6,156				—				6,156
Capitalized interest and deferred origination fees			1,024				16				1,040
Acquisition of AMS			1,246				177				1,423
Total on-balance sheet student loan acquisitions			22,676				3,221				25,897
Consolidations to SLM Corporation from off-balance sheet securitized trusts			(6,156	)			—				(6,156	)
Capitalized interest and other — off-balance sheet securitized trusts			842				79				921
Total Managed student loan acquisitions		$	17,362			$	3,300			$	20,662

55

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		December 31, 2002
		FFELP				Private				Total
Preferred Channel		$	9,261			$	2,132			$	11,393
Other commitment clients			428				35				463
Spot purchases			924				7				931
Consolidations from third parties			1,938				—				1,938
Acquisitions from off-balance sheet securitized trusts, primarily consolidations			4,121				—				4,121
Capitalized interest and deferred origination fees			1,073				(4	)			1,069
Total on-balance sheet student loan acquisitions			17,745				2,170				19,915
Consolidations to SLM Corporation from off-balance sheet securitized trusts			(4,121	)			—				(4,121	)
Capitalized interest and other — off-balance sheet securitized trusts			721				10				731
Total Managed student loan acquisitions		$	14,345			$	2,180			$	16,525

			Years Ended December 31,
			2004				2003				2002
Preferred Channel Originations — Type of Loan
	Stafford		$	11,383			$	10,077			$	8,537
	PLUS			2,303				1,882				1,482
	Total FFELP			13,686				11,959				10,019
	Private			4,307				3,270				2,352
	Total		$	17,993			$	15,229			$	12,371
Preferred Channel Originations — Source
	Sallie Mae brands		$	5,670			$	4,233			$	3,082
	Lender partners			12,323				10,996				9,289
			$	17,993			$	15,229			$	12,371

56

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		Years Ended December 31,
		2004				2003				2002
Beginning balance		$	88,789			$	78,124			$	71,726
Acquisitions, including capitalized interest			29,916				20,662				16,525
Repayments, claims, and other			(8,548	)			(7,517	)			(7,672	)
Charge-offs to reserves and securitization trusts			(135	)			(108	)			(96	)
Loan sales			(479	)			(38	)			—
Loans consolidated from SLM Corporation			(2,105	)			(2,334	)			(2,359	)
Ending balance		$	107,438			$	88,789			$	78,124

		Years Ended
		December 31,
		2004				2003				2002
Servicing and acquisition expenses		$	205			$	188			$	146
General and administrative expenses			228				221				199
Amortization of acquired intangible assets			27				22				22
Loss on GSE debt extinguishment and defeasance			221				—				—
Total operating expenses		$	681			$	431			$	367

	2004 versus 2003

	2003 versus 2002

57

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		Year Ended December 31,												% Increase (Decrease)
		2004				2003				2002				2004 vs. 2003				2003 vs. 2002
Fee income and collections revenue		$	340			$	259			$	186				31	%			39	%
Operating expenses			166				131				112				27				17
Income before income taxes and minority interest in net earnings of subsidiaries			174				128				74				36				73
Income taxes			63				44				26				43				69
Income before minority interest in net earnings of subsidiaries			111				84				48				32				75
Minority interest in net earnings of subsidiaries			1				—				—				100				—
Net income		$	110			$	84			$	48				31	%			75	%

58

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		Years Ended
		December 31,
		2004				2003				2002
General and administrative expenses		$	161			$	128			$	109
Amortization of acquired intangible assets			5				3				3
Total operating expenses		$	166			$	131			$	112

		Year Ended December 31,												% Increase (Decrease)
		2004				2003				2002				2004 vs. 2003				2003 vs. 2002
Fee income		$	120			$	128			$	106				(6	)%			21	%
Other income			126				123				110				2				12
Operating expenses			269				233				211				15				10
Income (loss) before income taxes			(23	)			18				5				(228	)			260
Income taxes			(6	)			6				2				(200	)			200
Net income (loss)		$	(17	)		$	12			$	3				(242	)%			300	%

		Years Ended
		December 31,
		2004				2003				2002
Guarantor servicing fees		$	120			$	128			$	106
Loan servicing fees			55				58				57
Other income			71				65				53
Total fee and other income		$	246			$	251			$	216

59

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	2004 versus 2003

	2003 versus 2002

		Years Ended
		December 31,
		2004				2003				2002
Servicing and acquisition expenses		$	34			$	36			$	44
General and administrative expenses			231				195				165
Amortization of acquired intangible assets			4				2				2
Total operating expenses		$	269			$	233			$	211

	2004 versus 2003

	2003 versus 2002

60

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		Years Ended December 31,
		2004				2003				2002
“Core cash” securitization adjustments:
Net interest income on securitized loans, after provisions for losses		$	1,065			$	1,104			$	895
Gains on student loan securitizations			(375	)			(744	)			(338	)
Servicing and securitization revenue			(561	)			(667	)			(839	)
Intercompany transactions with off-balance sheet trusts			23				7				(9	)
Total “core cash” securitization adjustments		$	152			$	(300	)		$	(291	)

61

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62

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		Years Ended December 31,
		2004				2003				2002
SFAS No. 133 income statement items:
Derivative market value adjustment in other income		$	(849	)		$	238			$	1,082
Less: Realized derivative market value transactions			(713	)			(739	)			(878	)
Unrealized derivative market value adjustment			(1,562	)			(501	)			204
Other pre-SFAS No. 133 accounting adjustments			9				(1	)			(4	)
Total net impact of SFAS No. 133 derivative accounting		$	(1,553	)		$	(502	)		$	200

	Reclassification of Realized Derivative Transactions

		Years Ended December 31,
		2004				2003				2002
Reclassification of realized derivative market value adjustments:
Net settlement expense on Floor Income Contracts reclassified to net interest income		$	(562	)		$	(603	)		$	(540	)
Net settlement income/expense on interest rate swaps reclassified to net interest income			(88	)			(22	)			(84	)
Realized gain/loss on closed Eurodollar futures contracts and terminated derivative contracts reclassified to other income			(63	)			(114	)			(254	)
Total reclassifications of realized derivative transactions			(713	)			(739	)			(878	)
Add: Unrealized derivative market value adjustment			1,562				501				(204	)
Derivative market value adjustment as reported		$	849			$	(238	)		$	(1,082	)

63

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		Years Ended December 31,
		2004				2003				2002
“Core cash” Floor Income adjustments:
Floor Income earned on Managed loans, net of payments on Floor Income Contracts		$	(88	)		$	(292	)		$	(474	)
Amortization of net premiums on Floor Income Contracts and futures in net interest income			194				161				134
Net losses related to closed Eurodollar futures contracts economically hedging Floor Income			50				14				202
Losses on sales of derivatives hedging Floor Income			—				94				46
Total “core cash” Floor Income adjustments		$	156			$	(23	)		$	(92	)

		Years Ended December 31,
		2004				2003				2002
Non-GAAP Performance Measures:
Net impact of securitization accounting		$	152			$	(300	)		$	(291	)
Net impact of derivative accounting(1)			(1,553	)			(502	)			200
Net impact of Floor Income			156				(23	)			(92	)
Amortization of acquired intangibles			36				27				27
Total non-GAAP performance measures		$	(1,209	)		$	(798	)		$	(156	)

(1)	In addition to the derivative accounting adjustment noted here, for the year ended December 31, 2003, upon the adoption of SFAS No. 150, adjustments also included the reversal of a gain of $130 million which was reflected as a “cumulative effect of accounting change” in the GAAP consolidated statements of income.

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		Years Ended December 31,
		2004 Ending Balance												2003 Ending Balance												2002 Ending Balance
										Total												Total												Total
										Managed												Managed												Managed
		Short Term				Long Term				Basis				Short Term				Long Term				Basis				Short Term				Long Term				Basis
GSE borrowings (unsecured)		$	—			$	—			$	—			$	16,678			$	3,414			$	20,092			$	23,332			$	15,298			$	38,630
Non-GSE borrowings (unsecured)			1,830				31,465				33,295				1,855				18,472				20,327				1,290				5,795				7,085
Indentured trusts (on-balance sheet)			377				6,873				7,250				134				1,362				1,496				5				1,149				1,154
Securitizations (on-balance sheet)			—				35,769				35,769				—				16,346				16,346				—				—				—
Securitizations (off-balance sheet)			—				43,814				43,814				—				40,606				40,606				—				37,262				37,262
Total		$	2,207			$	117,921			$	120,128			$	18,667			$	80,200			$	98,867			$	24,627			$	59,504			$	84,131

		Years Ended December 31,
		2004								2003								2002
		Average				Average				Average				Average				Average				Average
		Balance				Rate				Balance				Rate				Balance				Rate
GSE borrowings (unsecured)		$	9,967				2.21	%		$	32,847				1.80	%		$	44,141				2.33	%
Non-GSE borrowings (unsecured)			28,241				2.29				13,305				2.01				4,223				2.88
Indentured trusts (on-balance sheet)			2,168				2.47				1,221				2.68				1,558				2.97
Securitizations (on-balance sheet)			28,354				1.79				6,026				1.40				—				—
Securitizations (off-balance sheet)			42,606				2.09				39,524				1.79				32,385				2.57
Total		$	111,336				2.08	%		$	92,923				1.81	%		$	82,307				2.47	%

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S&P

Moody’s

Fitch

Short-term unsecured debt

A-1

P-1

F-1+

Long-term unsecured debt

A

A2

A+

		Debt Issued
		For the Years								Outstanding at
		Ended December 31,								December 31,
		2004				2003				2004				2003
Commercial paper		$	272			$	8,285			$	—			$	—
Convertible debentures			—				1,980				1,988				1,983
Retail medium-term notes (EdNotes)			509				356				863				357
Foreign currency denominated(1)			4,179				597				4,780				598
Extendible notes			2,496				1,747				4,246				1,747
Global notes			7,629				9,844				18,686				11,549
Medium-term notes			—				—				2,732				4,093
Total		$	15,085			$	22,809			$	33,295			$	20,327

(1)	All foreign currency denominated notes are swapped back to U.S. dollars.

	Securitization Program

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		Years Ended December 31,
		2004																2003																2002
										Pre-																Pre-																Pre-
		No. of				Amt				Tax				Gain				No. of				Amt				Tax				Gain				No. of				Amt				Tax				Gain
		Trans.				Securitized				Gain				%				Trans.				Securitized				Gain				%				Trans.				Securitized				Gain				%
FFELP Stafford loans			4			$	10,002			$	134				1.3	%			4			$	5,772			$	73				1.3	%			7			$	11,033			$	101				.9	%
Consolidation Loans			—				—				—				—				2				4,256				433				10.2				1				1,976				194				9.8
Private Education Loans			2				2,535				241				9.5				3				3,503				238				6.8				1				690				43				6.2
Total securitizations — sales			6				12,537			$	375				3.0	%			9				13,531			$	744				5.5	%			9				13,699			$	338				2.5	%
Asset-backed commercial paper(1)			1				4,186												—				—												—				—
Consolidation Loans			6				17,124												7				16,592												—				—
Total securitizations — financings			7				21,310												7				16,592												—				—
Total securitizations			13			$	33,847												16			$	30,123												9			$	13,699

(1)

In the second quarter of 2004, we closed our first asset-backed commercial paper program. The program is a revolving 364-day multi-seller conduit that allows us to borrow up to $5 billion through the sale of student loans subject to annual extensions. We may purchase student loans out of this trust at our discretion and as a result, the trust does not qualify as a QSPE and is accounted for on-balance sheet as a VIE.

	Liquidity Risk

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	Retained Interest in Securitized Receivables

			As of December 31, 2004								As of December 31, 2003
							Underlying								Underlying
			Retained				Securitized				Retained				Securitized
			Interest				Loan				Interest				Loan
			Fair Value				Balance				Fair Value				Balance
FFELP Stafford loans			$	1,037			$	27,444			$	1,023			$	26,420
Consolidation Loans(1)				585				7,393				994				8,076
Private Education Loans				694				6,309				459				3,983
	Total(2)		$	2,316			$	41,146			$	2,476			$	38,479

(1)	Includes $399 million and $727 million related to the fair value of the Embedded Floor Income as of December 31, 2004 and 2003, respectively.
(2)	Unrealized gains (pre-tax) included in accumulated other comprehensive income related to the Retained Interests totaled $445 million and $443 million as of December 31, 2004 and 2003, respectively.

	Accounting Estimates’ Effect on the Residual Interest in Securitized Trusts

		As of December 31,		As of December 31,
		2004		2003
FFELP Stafford loan CPR(1)		20% - 2005		20% - 2004
		15% - 2006		15% - 2005
		6% - thereafter		6% - thereafter
Private Education Loan CPR(2)		3%		6%
FFELP expected credit losses (as a % of securitized loan balance outstanding)(3)		0%		.17%

(1)	We increased the FFELP Stafford loan CPR assumption to account for the record levels of Consolidation Loan volume over the past three years. Unless there is a legislative change to the Consolidation Loan program through HEA reauthorization, we believe that high levels of Consolidation Loan activity will continue.
(2)	We decreased the Private Education Loan CPR assumption because these loans are repaying slower than originally projected, including slower prepayments.
(3)	We lowered our assumption of expected FFELP credit losses to zero percent to reflect the effect of the EP designation on Sallie Mae serviced FFELP loans in the trusts. The EP designation is discussed in more detail in “LENDING BUSINESS SEGMENT — Student Loans — Allowance for FFELP Student Loan Losses.”

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		Years Ended December 31,
		2004				2003				2002
Servicing revenue		$	326			$	314			$	278
Securitization revenue, before Embedded Floor Income			150				173				203
Servicing and securitization revenue, before Embedded Floor Income			476				487				481
Embedded Floor Income			241				337				364
Less: Floor Income previously recognized in gain calculation			(156	)			(157	)			(6	)
Net Embedded Floor Income			85				180				358
Total servicing and securitization revenue		$	561			$	667			$	839
Average off-balance sheet student loans		$	40,558			$	38,205			$	32,280
Average balance of Retained Interest		$	2,434			$	2,615			$	1,746

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		1 Year				2 to 3				4 to 5				Over 5
		or less				Years				Years				Years				Total
Long-term notes(1)(2)			2,473				22,248				11,418				37,968				74,107
Equity forward contracts(3)			—				951				1,205				—				2,156
Total contractual cash obligations		$	2,473			$	23,199			$	12,623			$	37,968			$	76,263

(1)	Excludes SFAS No. 133 derivative market value adjustments of $1.8 billion for long-term notes.
(2)	Includes FIN No. 46 long-term beneficial interests of $35.8 billion of notes issued by consolidated variable interest entities in conjunction with our on-balance sheet securitization transactions and included in long-term notes in the consolidated balance sheet.
(3)	Our obligation to repurchase shares under equity forward contracts is calculated using the average purchase prices for outstanding contracts in the year the contracts expire. At or prior to the maturity date of the agreements, we can purchase shares at the contracted amount plus or minus an early break fee, or we can settle the contract on a net basis with either cash or shares. If our stock price declines to a certain level, the third party with whom we entered into the contract can liquidate the position prior to the maturity date.

		1 Year				2 to 3				4 to 5				Over 5
		or less				Years				Years				Years				Total
Student loan purchases(1)(2)		$	7,846			$	1,878			$	14,120			$	23,404			$	47,248
Lines of credit(2)			150				34				327				377				888
Letters of credit(2)			157				—				—				—				157
		$	8,153			$	1,912			$	14,447			$	23,781			$	48,293

(1)	Includes amounts committed at specified dates under forward contracts to purchase student loans and anticipated future requirements to acquire student loans from lending partners (discussed below) estimated based on future originations at contractually committed rates.
(2)	Expiration of commitments and guarantees reflect the earlier of call date or maturity date as of December 31, 2004.

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71

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72

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		Frequency of Variable										Funding
Index		Resets		Assets				Funding(1)				Gap
(Dollars in billions)
3 month Commercial paper		daily		$	46.0			$	—			$	46.0
3 month Treasury bill		weekly			11.3				.3				11.0
Prime		annual			.9				—				.9
Prime		quarterly			1.3				—				1.3
Prime		monthly			2.9				—				2.9
PLUS Index		annual			1.9				2.0				(0.1	)
3-month LIBOR		daily			—				—				—
3-month LIBOR		quarterly			2.2				55.3				(53.1	)
1-month LIBOR		monthly			—				2.0				(2.0	)
CMT/CPI index		monthly/quarterly			—				1.2				(1.2	)
Non Discreet reset(2)		monthly			—				10.1				(10.1	)
Non Discreet reset(3)		daily/weekly			5.9				—				5.9
Fixed Rate(4)					11.7				13.2				(1.5	)
Total				$	84.1			$	84.1			$	—

(1)	Includes all derivatives that qualify as hedges under SFAS No. 133.
(2)	Consists of asset-backed commercial paper and auction rate securities, which are discount note type instruments that generally roll over monthly.
(3)	Includes restricted and non-restricted cash equivalents and other overnight type instruments.
(4)	Includes receivables/payables, other assets (including retained interest), other liabilities and stockholders’ equity.

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		Frequency of Variable
Index		Resets		Assets				Funding(5)				Funding Gap
(Dollars in billions)
3 month Commercial paper		daily		$	64.2			$	16.4			$	47.8
3 month Treasury bill		weekly			25.7				22.1				3.6
Prime		annual			.9				—				.9
Prime		quarterly			6.7				2.5				4.2
Prime		monthly			2.9				1.3				1.6
PLUS Index		annual			4.7				5.0				(0.3	)
3-month LIBOR		daily			—				33.2				(33.2	)
3-month LIBOR		quarterly			1.9				21.6				(19.7	)
1-month LIBOR		monthly			—				2.0				(2.0	)
CMT/ CPI index		monthly/quarterly			—				—				—
Non Discreet reset(6)		monthly			—				10.5				(10.5	)
Non Discreet reset(7)		daily/weekly			9.1				—				9.1
Fixed Rate(8)					8.9				10.4				(1.5	)
Total				$	125.0			$	125.0			$	—

(5)	Includes all derivatives that management considers economic hedges of interest rate risk and reflects how we internally manage our interest rate exposure.
(6)	Consists of asset-backed commercial paper and auction rate securities, which are discount note type instruments that generally roll over monthly.
(7)	Includes restricted and non-restricted cash equivalents and other overnight type instruments.
(8)	Includes receivables/payables, other assets, other liabilities and stockholders’ equity.

	Interest Rate Gap Analysis

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		Interest Rate Sensitivity Period
						3 months
		3 months				to				6 months				1 to				2 to				Over
		or less				6 months				to 1 year				2 years				5 years				5 years
Assets
Student loans		$	62,080			$	2,563			$	743			$	519			$	73			$	3
Academic facilities financings and other loans			252				57				76				15				22				626
Cash and investments, including restricted			6,705				110				87				286				1,227				771
Other assets			3,041				103				207				302				565				3,661
Total assets			72,078				2,833				1,113				1,122				1,887				5,061
Liabilities and Stockholders’ Equity
Short-term borrowings			1,319				483				405				—				—				—
Long-term notes			54,613				333				400				815				6,614				13,140
Other liabilities			1,941				—				—				—				—				857
Minority interest in subsidiaries			—				—				—				—				—				72
Stockholders’ equity			—				—				—				—				—				3,102
Total liabilities and stockholders’ equity			57,873				816				805				815				6,614				17,171
Period gap before adjustments			14,205				2,017				308				307				(4,727	)			(12,110	)
Adjustments for Derivatives and Other Financial Instruments
Interest rate swaps			(8,981	)			(6,955	)			(153	)			(292	)			4,028				12,353
Impact of securitized student loans			(3,157	)			3,157				—				—				—				—
Total derivatives and other financial instruments			(12,138	)			(3,798	)			(153	)			(292	)			4,028				12,353
Period gap		$	2,067			$	(1,781	)		$	155			$	15			$	(699	)		$	243
Cumulative gap		$	2,067			$	286			$	441			$	456			$	(243	)		$	—
Ratio of interest-sensitive assets to interest-sensitive liabilities			123.4	%			334.6	%			112.5	%			100.6	%			20.0	%			10.6	%
Ratio of cumulative gap to total assets			2.5	%			0.3	%			0.5	%			0.5	%			(0.3	)%			—	%

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	Weighted Average Life

		On-Balance				Off-Balance
(Averages in years)		Sheet				Sheet				Managed
Earning assets
Student loans			8.7				4.4				8.2
Academic facilities financings and other loans			7.3				—				7.3
Cash and investments			1.7				—				1.7
Total earning assets			7.9				4.4				7.7
Borrowings
Short-term borrowings			.7				—				.7
Long-term borrowings			8.4				4.4				6.9
Total borrowings			8.1				4.4				6.8

			Years Ended
			December 31,
(Shares in millions)			2004				2003
Common shares repurchased:
	Open market			.5				6.7
	Equity forwards			32.7				20.2
	Benefit plans(1)			1.5				2.4
	Total shares repurchased			34.7				29.3
	Average purchase price per share(2)		$	38.03			$	31.18
Common shares issued				10.7				18.2
Equity forward contracts:
	Outstanding at beginning of year			43.5				28.7
	New contracts			32.0				35.0
	Exercises			(32.7	)			(20.2	)
	Outstanding at end of year			42.8				43.5
Authority remaining at end of year to repurchase or enter into equity forwards				35.8				38.4

(1)	Includes shares withheld from stock option exercises and vesting of performance stock to satisfy minimum statutory tax withholding obligations and shares tendered by employees to satisfy option exercise costs.
(2)	The average purchase price per share for 2004 is calculated based on the average strike price of all equity forward contracts including those that were net settled in the cashless transactions discussed below. The average cash purchase price per share is $22.38 when a zero cash cost is reflected for those shares acquired in the cashless transactions.

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(Contracts in millions of shares)
		Outstanding				Range of		Average
Year of maturity		contracts				purchase prices		purchase price
2006			8.6			$39.74 - $50.47		$	49.73
2007			10.3			50.47			50.47
2008			7.9			50.47			50.47
2009			16.0			50.47			50.47
			42.8					$	50.32

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	•	we agreed to the termination of our marketing services agreement with Bank One, effectively allowing Bank One to “in-source” the marketing of its own education loans;
	•	Bank One paid a $14 million termination fee to the Company;
	•	we extended our ExportSS agreement, through which we purchase certain Bank One-branded FFELP student loans and certain Private Education Loans, from March 2005 through August 2008;
	•	for a $9 million fee, paid to the Company, Bank One terminated a separate loan purchase agreement that was entered into with USA Group prior to our July 2000 acquisition of that entity. Following the termination, (1) we retained the right to purchase FFELP loans originated under this agreement for the 2004-2005 academic year and all serial loans and (2) all loans that we originate and service on our servicing platforms on behalf of Bank One will be committed for sale under the ExportSS agreement after the 2004-2005 academic year.

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	•	JPMorgan Chase may not compete with the Company in the marketing, purchasing, servicing or ownership of education loans (except with respect to the continuation of business activities under the Bank One name or the name of any other JPMorgan Chase affiliate),
	•	we may use certain JPMorgan Chase trademarks for a nominal annual fee, and
	•	we acquire all rights to make additional FFELP student loans (serial loans) to customers of the joint venture who entered into master promissory notes prior to the Dutch Auction.

	•	it may use certain Sallie Mae trademarks for a nominal annual fee,
	•	we would be required to act as origination and servicing agent for JPMorgan Chase at market rates, and
	•	we would be required to provide JPMorgan Chase with access to certain Sallie Mae products and services.

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	•	requiring lenders to return to the federal government Floor Income in excess of 50 basis points per loan;
	•	gradually reducing origination fees to one percent on student loans in both the FFELP and FDLP programs;
	•	increasing loan limits for first-year and second-year students from $2,625 to $3,500 and from $3,500 to $4,500, respectively, without increasing the aggregate undergraduate borrowing limits;
	•	increasing graduate unsubsidized annual borrowing limits from $10,000 to $12,000;
	•	preserving the current variable interest rate formula on Stafford and Unsubsidized Stafford loans beyond July 1, 2006;
	•	changing the current fixed consolidation loan interest rates to variable rates;
	•	repealing the single holder rule (under the existing rule, if a borrower has multiple student loans that are held by a single lender, a new lender cannot make a consolidation loan unless the single holder declines to offer the borrower a consolidation loan or unless the single holder declines to offer to the borrower a consolidation loan with income-sensitive repayment terms);
	•	requiring student loan lenders to report to all national credit bureaus; and
	•	repealing the 9.5 percent SAP rate payable on certain student loans funded with tax exempt bonds.

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	Taxpayer-Teacher Protection Act of 2004

	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk

	Interest Rate Sensitivity Analysis

		Year ended December 31, 2004																Year ended December 31, 2003
		Interest Rates:																Interest Rates:
		Change from								Change from								Change from								Change from
		increase of								increase of								increase of								increase of
		100 basis								300 basis								100 basis								300 basis
		points								points								points								points
(Dollars in millions, except per share amounts)		$				%				$				%				$				%				$				%
Effect on Earnings
Increase/(decrease) in pre-tax net income before unrealized derivative market value adjustment		$	31				3	%		$	138				14	%		$	(158	)			(7	)%		$	(156	)			(6	)%
Unrealized derivative market value adjustment			279				18				576				37				320				64				727				145
Increase in net income before taxes		$	310				12	%		$	714				28	%		$	162				6	%		$	571				20	%
Increase in diluted earnings per share		$	.424				10	%		$	.975				24	%		$	.227				5	%		$	.801				16	%

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			At December 31, 2004
							Interest Rates:
							Change from								Change from
							increase of 100								increase of 300
							basis points								basis points
			Fair
(Dollars in millions)			Value				$				%				$				%
Effect on Fair Values
Assets
	Student loans		$	67,431			$	(315	)			—	%		$	(636	)			(1	)%
	Other earning assets			10,285				(120	)			(1	)			(333	)			(3	)
	Other assets			7,878				(652	)			(8	)			(1,154	)			(15	)
	Total assets		$	85,594			$	(1,087	)			(1	)%		$	(2,123	)			(2	)%
Liabilities
	Interest bearing liabilities		$	78,295			$	(1,202	)			(2	)%		$	(3,356	)			(4	)%
	Other liabilities			2,798				276				10				1,503				54
	Total liabilities		$	81,093			$	(926	)			(1	)%		$	(1,853	)			(2	)%

			At December 31, 2003
							Interest Rates:
							Change from								Change from
							increase of 100								increase of 300
							basis points								basis points
(Dollars in millions)			Fair Value				$				%				$				%
Effect on Fair Values
Assets
	Student loans		$	51,559			$	(399	)			(1	)%		$	(870	)			(2	)%
	Other earning assets			9,085				(112	)			(1	)			(309	)			(3	)
	Other assets			5,531				(543	)			(10	)			(839	)			(15	)
	Total assets		$	66,175			$	(1,054	)			(2	)%		$	(2,018	)			(3	)%
Liabilities
	Interest bearing liabilities		$	58,993			$	(1,458	)			(2	)%		$	(3,630	)			(6	)%
	Other liabilities			3,437				610				18				1,979				58
	Total liabilities		$	62,430			$	(848	)			(1	)%		$	(1,651	)			(3	)%

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Item 8.	Financial Statements and Supplementary Data

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A.	Controls and Procedures

Item 9B.	Other Information

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Item 10.	Directors and Executive Officers of the Registrant

Item 11.	Executive Compensation

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13.	Certain Relationships and Related Transactions

Item 14.	Principal Accountant Fees and Services

85

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Management’s Annual Report on Internal Control over Financial Reporting			F-2
Report of Independent Registered Public Accounting Firm			F-3
Consolidated Balance Sheets as of December 31, 2004 and 2003			F-5
Consolidated Statements of Income for the years ended December 31, 2004, 2003 and 2002			F-6
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2004, 2003 and 2002			F-7
Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002			F-8
Notes to Consolidated Financial Statements			F-9

	*2			Agreement and Plan of Reorganization by and among the Student Loan Marketing Association, SLM Holding Corporation, and Sallie Mae Merger Company
	**3	.1		Amended and Restated Certificate of Incorporation of the Registrant
	**3	.2		Amended By-Laws of the Registrant
	**4			Warrant Certificate No. W-2, dated as of August 7, 1997
	*10	.1††		Board of Directors Restricted Stock Plan
	*10	.2††		Board of Directors Stock Option Plan
	*10	.3††		Deferred Compensation Plan for Directors
	*10	.4††		Incentive Performance Plan
	*10	.5††		Stock Compensation Plan
	*10	.6††		1993-1998 Stock Option Plan
	*10	.7††		Supplemental Pension Plan
	*10	.8††		Supplemental Employees’ Thrift & Savings Plan (Sallie Mae 401(K) Supplemental Savings Plan)
	***10	.9††		Directors Stock Plan

86

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	***10	.10††		Management Incentive Plan
	10	.11††		Employee Stock Option Plan
	10	.12††		Amended and Restated Employees’ Stock Purchase Plan
	10	.13†††		Employment Agreement between the Registrant and Albert L. Lord, Vice Chairman of the Board of Directors and Chief Executive Officer, dated as of January 1, 2003
	10	.14†††		Employment Agreement between the Registrant and Thomas J. Fitzpatrick, President and Chief Operating Officer, dated as of January 1, 2003
	10	.15(*)		Employment Agreement between the Registrant and C.E. Andrews, Executive Vice President, Accounting and Risk Management, dated as of February 24, 2004.
	•10	.16		Named Executive Officer Compensation
	•10	.17		Summary of Non-Employee Director Compensation
	•10	.18		Limited Liability Company Agreement of Education First Marketing LLC
	•10	.19		Limited Liability Company Agreement of Education First Finance LLC
	†14			Code of Business Conduct
	*21			Subsidiaries of the Registrant
	•23			Consent of PricewaterhouseCoopers LLP
	•31	.1		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2003
	•31	.2		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2003
	•31	.3		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2003
	•32	.1		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2003
	•32	.2		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2003
	•32	.3		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2003
	†99	.1		Information on GSE Management and Directors

*	Incorporated by reference to the correspondingly numbered exhibits to the Registrant’s Registration Statement on Form S-4, as amended (File No. 333-21217)

**	Incorporated by reference to the correspondingly numbered exhibits to the Registrant’s Registration on Form S-1 (File No. 333-38391)

***	Incorporated by reference to the Registrant’s Definitive Proxy Statement on Schedule 14A, as filed with the Securities and Exchange Commission on April 10, 1998 (File No. 001-13251)

†	Filed with the Securities and Exchange Commission with the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003
††	Management Contract or Compensatory Plan or Arrangement
†††	Filed with the Securities and Exchange Commission with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003

(*)	Filed with the Securities and Exchange Commission with the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004

•	Filed with the Securities and Exchange Commission with this Form 10-K

87

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	SLM Corporation

	By:	/s/ Albert L. Lord _____________________________________ Albert L. Lord

	Chief Executive Officer

Signature				Title		Date
/s/ Albert L. Lord   Albert L. Lord				Chief Executive Officer and Director (Principal Executive Officer)		March 16, 2005
/s/ John F. Remondi   John F. Remondi				Executive Vice President, Finance (Principal Financial Officer)		March 16, 2005
/s/ C.E. Andrews   C.E. Andrews				Executive Vice President, Accounting and Risk Management (Principal Accounting Officer)		March 16, 2005
/s/ Edward A. Fox   Edward A. Fox				Chairman of the Board of Directors		March 16, 2005
/s/ Charles L. Daley   Charles L. Daley				Director		March 16, 2005
/s/ William M. Diefenderfer, III   William M. Diefenderfer, III				Director		March 16, 2005
/s/ Thomas J. Fitzpatrick   Thomas J. Fitzpatrick				President and Chief Operating Officer and Director		March 16, 2005
/s/ Diane Suitt Gilleland   Diane Suitt Gilleland				Director		March 16, 2005
/s/ Earl A. Goode   Earl A. Goode				Director		March 16, 2005
/s/ Ann Torre Grant   Ann Torre Grant				Director		March 16, 2005

88

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Signature				Title		Date
/s/ Ronald F. Hunt   Ronald F. Hunt				Director		March 16, 2005
/s/ Benjamin J. Lambert, III   Benjamin J. Lambert, III				Director		March 16, 2005
/s/ Barry A. Munitz   Barry A. Munitz				Director		March 16, 2005
/s/ A. Alexander Porter, Jr.   A. Alexander Porter, Jr.				Director		March 16, 2005
/s/ Wolfgang Schoellkopf   Wolfgang Schoellkopf				Director		March 16, 2005
/s/ Steven L. Shapiro   Steven L. Shapiro				Director		March 16, 2005
/s/ Barry L. Williams   Barry L. Williams				Director		March 16, 2005

89

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		Page
Management’s Annual Report on Internal Control over Financial Reporting			F-2
Report of Independent Registered Public Accounting Firm			F-3
Consolidated Balance Sheets			F-5
Consolidated Statements of Income			F-6
Consolidated Statements of Changes in Stockholders’ Equity			F-7
Consolidated Statements of Cash Flows			F-8
Notes to Consolidated Financial Statements			F-9

F-1

---

 

F-2

---

 

F-3

---

 

F-4

---

 

			December 31,
			2004				2003
Assets
Federally insured student loans (net of allowance for losses of $7,778 and $45,993, respectively)			$	60,561,439			$	45,577,073
Private Education Loans (net of allowance for losses of $171,886 and $165,716, respectively)				5,419,611				4,470,156
Academic facilities financings and other loans (net of allowance for losses of $11,148 and $10,052, respectively)				1,047,745				1,030,907
Investments
	Trading			155				166
	Available-for-sale			3,274,123				4,370,347
	Other			304,700				677,357
Total investments				3,578,978				5,047,870
Cash and cash equivalents				3,395,487				1,847,585
Restricted cash and investments				2,211,488				1,105,896
Retained Interest in securitized receivables				2,316,388				2,475,836
Goodwill and acquired intangible assets				1,066,142				592,112
Other assets				4,496,248				2,463,216
Total assets			$	84,093,526			$	64,610,651
Liabilities
Short-term borrowings			$	2,207,095			$	18,735,385
Long-term notes				75,914,573				39,808,174
Other liabilities				2,797,921				3,437,046
Total liabilities				80,919,589				61,980,605
Commitments and contingencies
Minority interest in subsidiaries				71,633				—
Stockholders’ equity
Preferred stock, Series A, par value $.20 per share, 20,000 shares authorized: 3,300 and 3,300 shares issued, respectively, at stated value of $50 per share				165,000				165,000
Common stock, par value $.20 per share, 1,125,000 shares authorized: 483,266 and 472,643 shares issued, respectively				96,654				94,529
Additional paid-in capital				1,905,460				1,553,240
Accumulated other comprehensive income (net of tax of $237,285 and $229,181, respectively)				440,672				425,621
Retained earnings				2,521,740				941,284
Stockholders’ equity before treasury stock				5,129,526				3,179,674
Common stock held in treasury at cost: 59,634 and 24,965 shares, respectively				2,027,222				549,628
Total stockholders’ equity				3,102,304				2,630,046
Total liabilities and stockholders’ equity			$	84,093,526			$	64,610,651

F-5

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			Years Ended December 31,
			2004				2003				2002
Interest income:
	Federally insured student loans		$	2,090,396			$	1,813,368			$	2,111,463
	Private Education Loans			335,451				307,477				338,591
	Academic facilities financings and other loans			74,289				76,740				96,025
	Investments			232,859				150,690				87,889
Total interest income				2,732,995				2,348,275				2,633,968
Interest expense:
	Short-term debt			206,151				394,109				587,725
	Long-term debt			1,227,545				627,797				621,776
Total interest expense				1,433,696				1,021,906				1,209,501
Net interest income				1,299,299				1,326,369				1,424,467
Less: provision for losses				111,066				147,480				116,624
Net interest income after provision for losses				1,188,233				1,178,889				1,307,843
Other income:
	Gains on student loan securitizations			375,384				744,289				337,924
	Servicing and securitization revenue			560,971				666,409				838,609
	Losses on securities, net			(49,358	)			(9,932	)			(1,801	)
	Derivative market value adjustment			849,041				(237,815	)			(1,082,100	)
	Guarantor servicing fees			119,934				128,189				106,172
	Debt management fees and collections revenue			339,897				258,544				185,881
	Other			288,663				249,421				220,643
Total other income				2,484,532				1,799,105				605,328
Operating expenses:
	Salaries and benefits			497,170				432,007				376,382
	Loss on GSE debt extinguishment and defeasance			220,848				—				—
	Other			397,762				363,018				313,390
Total operating expenses				1,115,780				795,025				689,772
Income before income taxes, minority interest in net earnings of subsidiaries and cumulative effect of accounting change				2,556,985				2,182,969				1,223,399
Income taxes				642,689				779,380				431,403
Income before minority interest in net earnings of subsidiaries and cumulative effect of accounting change				1,914,296				1,403,589				791,996
Minority interest in net earnings of subsidiaries				1,026				—				—
Income before cumulative effect of accounting change				1,913,270				1,403,589				791,996
Cumulative effect of accounting change				—				129,971				—
Net income				1,913,270				1,533,560				791,996
Preferred stock dividends				11,501				11,501				11,501
Net income attributable to common stock			$	1,901,769			$	1,522,059			$	780,495
Basic earnings per common share:
	Before cumulative effect of accounting change		$	4.36			$	3.08			$	1.69
	Cumulative effect of accounting change			—				.29				—
Basic earnings per common share, after cumulative effect of accounting change			$	4.36			$	3.37			$	1.69
Average common shares outstanding				436,133				452,037				462,294
Diluted earnings per common share:
	Before cumulative effect of accounting change		$	4.04			$	2.91			$	1.64
	Cumulative effect of accounting change			—				.27				—
Diluted earnings per common share, after cumulative effect of accounting change			$	4.04			$	3.18			$	1.64
Average common and common equivalent shares outstanding				475,787				482,104				474,520
Dividends per common share			$	.74			$	.59			$	.28

F-6

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																																	Accumulated
					Preferred				Common Stock Shares																				Additional				Other												Total
					Stock																Preferred				Common				Paid-In				Comprehensive				Retained				Treasury				Stockholders’
					Shares				Issued				Treasury				Outstanding				Stock				Stock				Capital				Income (Loss)				Earnings				Stock				Equity
Balance at December 31, 2001						3,300,000				608,209,158				(141,722,514	)			466,486,644			$	165,000			$	121,642			$	724,709			$	670,199			$	2,068,490			$	(2,077,578	)		$	1,672,462
Comprehensive income:
		Net income																																				791,996								791,996
		Other comprehensive income, net of tax:
			Change in unrealized gains (losses) on investments, net of tax																															(37,413	)											(37,413	)
			Change in unrealized gains (losses) on derivatives, net of tax																															(40,026	)											(40,026	)
Comprehensive income																																														714,557
Cash dividends:
		Common stock ($.28 per share)																																				(130,759	)							(130,759	)
		Preferred stock ($3.48 per share)																																				(11,501	)							(11,501	)
Issuance of common shares										16,342,350				845,727				17,188,077								3,268				329,880												24,110				357,258
Tax benefit related to employee stock option and purchase plan																														83,400																83,400
Premiums on equity forward purchase contracts																														(35,415	)															(35,415	)
Repurchase of common shares:
		Open market repurchases												(2,103,000	)			(2,103,000	)																							(70,872	)			(70,872	)
		Equity forward repurchases												(19,800,000	)			(19,800,000	)																							(452,265	)			(452,265	)
		Benefit plans												(4,032,933	)			(4,032,933	)																							(128,915	)			(128,915	)
Balance at December 31, 2002						3,300,000				624,551,508				(166,812,720	)			457,738,788			$	165,000			$	124,910			$	1,102,574			$	592,760			$	2,718,226			$	(2,705,520	)		$	1,997,950
Comprehensive income:
	Net income																																					1,533,560								1,533,560
	Other comprehensive income, net of tax:
			Change in unrealized gains (losses) on investments, net of tax																															(172,897	)											(172,897	)
			Change in unrealized gains (losses) on derivatives, net of tax																															7,057												7,057
			Minimum pension liability adjustment																															(1,299	)											(1,299	)
Comprehensive income																																														1,366,421
Cash dividends:
	Common stock ($.28 per share)																																					(266,881	)							(266,881	)
	Preferred stock ($3.48 per share)																																					(11,501	)							(11,501	)
Issuance of common shares										12,263,832				90,456				12,354,288								2,454				293,405												3,238				299,097
Issuance of common shares due to exercise of stock warrants										5,827,656								5,827,656								1,165				39,034																40,199
Retirement of common stock in treasury										(170,000,000	)			170,000,000				—								(34,000	)											(3,032,120	)			3,066,120				—
Donation of common stock in treasury														1,108,340				1,108,340																								40,000				40,000
Tax benefit related to employee stock option and purchase plan																														57,632																57,632
Tax benefit related to exercise of stock warrants																														65,498																65,498
Premiums on equity forward purchase contracts																														(17,361	)															(17,361	)
Cumulative effect of accounting change																														12,458																12,458
Repurchase of common shares:
		Open market repurchases												(6,718,199	)			(6,718,199	)																							(253,276	)			(253,276	)
		Equity forwards:
			Exercise cost, cash											(20,190,640	)			(20,190,640	)																							(568,877	)			(568,877	)
			Gain on settlement																																							(38,290	)			(38,290	)
		Benefit plans												(2,441,990	)			(2,441,990	)																							(93,023	)			(93,023	)
Balance at December 31, 2003						3,300,000				472,642,996				(24,964,753	)			447,678,243			$	165,000			$	94,529			$	1,553,240			$	425,621			$	941,284			$	(549,628	)		$	2,630,046
Comprehensive income:
	Net income																																					1,913,270								1,913,270
	Other comprehensive income, net of tax:
			Change in unrealized gains (losses) on investments, net of tax																															(42,849	)											(42,849	)
			Change in unrealized gains (losses) on derivatives, net of tax																															57,644												57,644
			Minimum pension liability adjustment																															256												256
Comprehensive income																																														1,928,321
Cash dividends:
	Common stock ($.74 per share)																																					(321,313	)							(321,313	)
	Preferred stock ($3.48 per share)																																					(11,501	)							(11,501	)
Issuance of common shares										10,623,412				61,810				10,685,222								2,125				293,614												2,449				298,188
Tax benefit related to employee stock option and purchase plan																														58,606																58,606
Repurchase of common shares:
		Open market repurchases												(563,500	)			(563,500	)																							(21,554	)			(21,554	)
		Equity forwards:
			Exercise cost, cash											(19,323,760	)			(19,323,760	)																							(694,050	)			(694,050	)
			Exercise cost, net settlement											(13,393,350	)			(13,393,350	)																							(629,331	)			(629,331	)
			Gain on settlement											—				—																								(73,419	)			(73,419	)
		Benefit plans												(1,450,466	)			(1,450,466	)																							(61,689	)			(61,689	)
Balance at December 31, 2004						3,300,000				483,266,408				(59,634,019	)			423,632,389			$	165,000			$	96,654			$	1,905,460			$	440,672			$	2,521,740			$	(2,027,222	)		$	3,102,304

F-7

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				Years Ended December 31,
				2004				2003				2002
Operating activities
Net income				$	1,913,270			$	1,533,560			$	791,996
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
	Cumulative effect of accounting change				—				(129,971	)			—
	Gains on student loan securitizations				(375,384	)			(744,289	)			(337,924	)
	Loss on securities, net				49,358				9,932				1,801
	Loss on GSE debt extinguishment and defeasance				220,848				—				—
	Unrealized derivative market value adjustment, excluding equity forwards				(802,548	)			(570,189	)			203,904
	Unrealized derivative market value adjustment — equity forwards				(759,423	)			68,233				—
	Provision for losses				111,066				147,480				116,624
	Donation of treasury stock				—				40,000				—
	Minority interest, net				(502	)			—				—
	Mortgage loans originated				(1,461,979	)			(1,577,094	)			(411,692	)
	Proceeds from sales of mortgage loans				1,257,574				1,565,343				343,050
	(Increase) in restricted cash				(791,176	)			(123,222	)			(76,063	)
	(Increase) decrease in accrued interest receivable				(467,745	)			29,130				(30,012	)
	Increase (decrease) in accrued interest payable				162,018				94,474				(2,684	)
	Decrease in Retained Interest in securitized receivables				85,767				96,000				40,000
	Decrease in other assets, goodwill and acquired intangible assets				596,101				321,799				169,221
	(Decrease) increase in other liabilities				(54,461	)			132,378				(167,578	)
	Total adjustments				(2,230,486	)			(639,996	)			(151,353	)
	Net cash (used in) provided by operating activities				(317,216	)			893,564				640,643
Investing activities
	Student loans acquired				(22,673,926	)			(18,318,703	)			(15,793,453	)
	Loans purchased from securitized trusts (primarily loan consolidations)				(5,552,467	)			(6,156,521	)			(4,121,395	)
	Reduction of student loans:
		Installment payments			5,020,214				3,857,285				4,104,599
		Claims and resales			798,327				645,966				644,899
		Proceeds from securitization of student loans treated as sales			12,475,726				13,482,900				13,785,833
		Proceeds from sales of student loans			478,402				38,362				54,754
	Academic facilities financings and other loans originated				(403,156	)			(380,957	)			(545,522	)
	Academic facilities financings and other loans repayments				593,261				627,585				1,425,610
	Purchases of available-for-sale securities				(292,943,325	)			(275,412,837	)			(50,109,810	)
	Proceeds from sales of available-for-sale securities				124,205				10,505				133,498
	Proceeds from maturities of available-for-sale securities				293,743,096				274,274,563				50,337,774
	Purchases of held-to-maturity and other securities				(292,330	)			(304,491	)			(270,201	)
	Proceeds from sale of held-to-maturity securities and other securities				—				—				786
	Proceeds from maturities of held-to-maturity securities and other securities				275,567				279,176				364,656
	Return of investment from Retained Interest				449,539				315,610				62,067
	Purchase of subsidiaries, net of cash acquired				(868,404	)			(113,614	)			(49,911	)
	Net cash (used in) provided by investing activities				(8,775,271	)			(7,155,171	)			24,184
Financing activities
	Short-term borrowings issued				290,974,707				764,160,787				697,736,546
	Short-term borrowings repaid				(298,108,496	)			(772,657,799	)			(698,920,387	)
	Long-term notes issued				14,803,726				19,233,448				20,388,724
	Long-term notes repaid				(15,826,730	)			(18,658,436	)			(19,430,003	)
	Borrowings collateralized by loans in trust				21,584,931				16,442,305				—
	GSE debt extinguishment				(1,967,607	)			—				—
	Common stock issued				289,965				339,296				357,258
	Premiums on equity forward contracts				—				(17,361	)			(35,415	)
	Common stock repurchased				(777,293	)			(917,353	)			(652,052	)
	Common dividends paid				(321,313	)			(266,882	)			(130,759	)
	Preferred dividends paid				(11,501	)			(11,501	)			(11,501	)
	Net cash provided by (used in) financing activities				10,640,389				7,646,504				(697,589	)
	Net increase (decrease) in cash and cash equivalents				1,547,902				1,384,897				(32,762	)
	Cash and cash equivalents at beginning of year				1,847,585				462,688				495,450
	Cash and cash equivalents at end of year			$	3,395,487			$	1,847,585			$	462,688
Cash disbursements made for:
	Interest			$	1,214,249			$	930,619			$	1,643,400
	Income taxes			$	549,319			$	655,796			$	555,200
Noncash financing activity:
	Transfer of investments to trust to defease GSE debt			$	1,305,906			$	—			$	—

F-8

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F-9

---

 

F-10

---

 

F-11

---

 

F-12

---

 

	•	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 activities in which the trust can participate are significantly limited. These activities are entirely specified up-front in the initial legal documents creating the QSPE.
	•	There are limits to the assets the QSPE can hold; specifically, it can hold only financial assets transferred to it that are passive in nature, passive derivative instruments pertaining to the beneficial interests held by independent third parties, servicing rights, temporary investments pending distribution to security holders, and cash.
	•	It can only dispose of its assets in automatic response to the occurrence of an event specified in the applicable legal documents and out of the control of the Company.

F-13

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F-14

---

 

F-15

---

 

F-16

---

 

		Years Ended December 31,
		2004				2003				2002
Risk free interest rate			2.59%				2.47%				3.56%
Expected volatility			16.27%				25.31%				31.32%
Expected dividend rate			1.66%				1.28%				1.14%
Expected life of the option (in years)			3 years				3 years				3 years

		Years Ended December 31,
		2004				2003				2002
Net income attributable to common stock		$	1,901,769			$	1,522,059			$	780,495
Less: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects			(41,885	)			(85,503	)			(104,081	)
Pro forma net income attributable to common stock		$	1,859,884			$	1,436,556			$	676,414
Basic earnings per common share, after cumulative effect of accounting change		$	4.36			$	3.37			$	1.69
Pro forma basic earnings per common share, after cumulative effect of accounting change		$	4.26			$	3.18			$	1.46
Diluted earnings per common share, after cumulative effect of accounting change		$	4.04			$	3.18			$	1.64
Pro forma diluted earnings per common share, after cumulative effect of accounting change		$	3.96			$	3.00			$	1.43

F-17

---

 

F-18

---

 

F-19

---

 

		December 31,
		2004								2003
FFELP — Stafford		$	15,584,683				23.8	%		$	15,280,494				30.7	%
FFELP — PLUS/SLS			2,036,893				3.1				2,083,964				4.2
FFELP — Consolidation Loans			40,965,445				62.7				26,459,538				53.2
Private Education Loans			5,794,629				8.9				4,757,442				9.6
HEAL(1)			991,368				1.5				1,160,835				2.3
Total student loans, gross			65,373,018				100.0	%			49,742,273				100.0	%
Unamortized premium/discount, net			787,696								516,665
			66,160,714								50,258,938
Allowance for student loan losses			(179,664	)							(211,709	)
Total student loans, net		$	65,981,050							$	50,047,229

(1)	The HEAL program was integrated into the FFELP in 1998, so there are no new originations under that program.

F-20

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			Years ended December 31,
			2004				2003				2002
Balance at beginning of period			$	211,709			$	230,684			$	251,689
Additions
	Provisions for student loan losses			133,123				142,077				110,328
	Recoveries			14,138				13,106				10,683
Deductions
	Reductions for student loan sales and securitizations			(35,887	)			(85,579	)			(27,427	)
	Charge-offs			(117,441	)			(95,445	)			(84,648	)
	Reduction in federal Risk Sharing allowance/provision for EP designation			(32,709	)			—				—
Other				6,731				6,866				(29,941	)
Balance at end of period			$	179,664			$	211,709			$	230,684

F-21

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F-22

---

 

		Years ended December 31,
		2004				2003				2002
Allowance at beginning of year		$	165,716			$	180,933			$	193,435
Provision for loan losses			129,768				107,408				93,832
Other			372				20,631				(27,020	)
Charge-offs			(110,271	)			(83,001	)			(75,641	)
Recoveries			14,007				11,096				9,039
Net charge-offs			(96,264	)			(71,905	)			(66,602	)
Balance before securitization of Private Education Loans			199,592				237,067				193,645
Reduction for securitization of Private Education Loans			(27,706	)			(71,351	)			(12,712	)
Allowance at end of year		$	171,886			$	165,716			$	180,933
Net charge-offs as a percentage of average loans in repayment			3.57	%			2.59	%			2.40	%
Allowance as a percentage of the ending total loan balance			3.07	%			3.57	%			3.38	%
Allowance as a percentage of the ending loans in repayment			6.05	%			6.50	%			6.05	%
Allowance coverage of net charge-offs			1.79				2.30				2.72
Average total loans		$	4,795			$	5,018			$	5,059
Ending total loans		$	5,592			$	4,636			$	5,356
Average loans in repayment		$	2,697			$	2,772			$	2,774
Ending loans in repayment		$	2,842			$	2,551			$	2,992

F-23

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			December 31,
			2004								2003								2002
(Dollars in millions)			Balance				%				Balance				%				Balance				%
Loans in-school/grace/deferment(1)			$	2,787							$	1,970							$	2,171
Loans in forbearance(2)				166								236								285
Loans in repayment and percentage of each status:
	Loans current			2,555				89.9	%			2,268				88.9	%			2,776				92.8	%
	Loans delinquent 31-60 days(3)			124				4.4				115				4.5				102				3.4
	Loans delinquent 61-90 days			56				2.0				62				2.4				43				1.4
	Loans delinquent greater than 90 days			107				3.7				106				4.2				71				2.4
	Total Private Education Loans in repayment			2,842				100	%			2,551				100.0	%			2,992				100	%
Total Private Education Loans, gross				5,795								4,757								5,448
Private Education Loan unamortized discount				(203	)							(121	)							(92	)
Total Private Education Loans				5,592								4,636								5,356
Private Education Loan allowance for losses				(172	)							(166	)							(181	)
Private Education Loans, net			$	5,420							$	4,470							$	5,175
Percentage of Private Education Loans in repayment				49.0	%							53.6	%							54.9	%
Delinquencies as a percentage of Private Education Loans in repayment				10.1	%							11.1	%							7.2	%

(1)	Loans for borrowers who still may be attending school or engaging in other permitted educational activities and are not yet required to make payments on the loans, e.g., residency periods for medical students or a grace period for bar exam preparation.
(2)	Loans for borrowers who have requested extension of grace period during employment transition or who have temporarily ceased making full payments due to hardship or other factors, consistent with the established loan program servicing procedures and policies.
(3)	The period of delinquency is based on the number of days scheduled payments are contractually past due.

F-24

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				December 31, 2004
								Gross				Gross
				Amortized				Unrealized				Unrealized				Market
				Cost				Gains				Losses				Value
Investments
Trading
	U.S. Treasury and other U.S. government agency obligations:
		U.S. Treasury securities (Rabbi Trust)		$	148			$	7			$	—			$	155
	Total investment securities trading			$	148			$	7			$	—			$	155
Available-for-sale
	U.S. Treasury and other U.S. government agency obligations:
		U.S. Treasury backed securities		$	1,483,102			$	388,095			$	(520	)		$	1,870,677
		U.S. government-guaranteed securities			155,888				1,709				—				157,597
		U.S. Treasury securities			103,365				3				(186	)			103,182
		U.S. government agencies obligations			51,446				105				(179	)			51,372
	State and political subdivisions of the U.S.:
		Student loan revenue bonds			22,655				493				—				23,148
	Other securities:
		Certificates of Deposit			550,300				—				—				550,300
		Asset-backed securities			371,553				835				(99	)			372,289
		Commercial paper			139,986				—				—				139,986
		Other securities			5,530				42				—				5,572
	Total investment securities available-for-sale			$	2,883,825			$	391,282			$	(984	)		$	3,274,123
Restricted Investments
Available-for sale
	U.S. Treasury and other U.S. government agencies obligations			$	197,373			$	—			$	(755	)		$	196,618
	Third party repurchase agreements				143,300				—				—				143,300
	Guaranteed investment contracts				85,866				—				—				85,866
	Total available-for-sale restricted investments			$	426,539			$	—			$	(755	)		$	425,784
Held-to-maturity
	Guaranteed investment contracts			$	9,031			$	131			$	(14	)		$	9,148
	Other securities				2,718				—				—				2,718
	Total held-to-maturity restricted investments			$	11,749			$	131			$	(14	)		$	11,866

F-25

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				December 31, 2003
								Gross				Gross
				Amortized				Unrealized				Unrealized				Market
				Cost				Gains				Losses				Value
Investments
Trading
	U.S. Treasury and other U.S. government agency obligations:
		U.S. Treasury securities (Rabbi Trust)		$	150			$	16			$	—			$	166
	Total investment securities trading			$	150			$	16			$	—			$	166
Available-for-sale
	U.S. Treasury and other U.S. government agency obligations:
		U.S. Treasury backed securities		$	1,189,540			$	505,101			$	—			$	1,694,641
		U.S. Treasury securities			88,442				3				(1	)			88,444
	State and political subdivisions of the U.S.:
		Student loan revenue bonds			79,282				1,568				(16	)			80,834
	Other securities:
		Asset-backed securities			730,245				2,115				(14	)			732,346
		Commercial paper			1,115,142				—				—				1,115,142
		Certificates of Deposit			655,300				—				—				655,300
		Other securities			3,558				82				—				3,640
	Total investment securities available-for-sale			$	3,861,509			$	508,869			$	(31	)		$	4,370,347
Restricted Investments
Available-for sale
	U.S. Treasury and other U.S. government agencies obligations			$	64,418			$	238			$	(105	)		$	64,551
	Third party repurchase agreements				138,600				—				—				138,600
	Total available-for-sale restricted investments			$	203,018			$	238			$	(105	)		$	203,151
Held-to-maturity
	Guaranteed investment contracts			$	14,326			$	230			$	(30	)		$	14,526
	Other securities				2,833				—				—				2,833
	Total held-to-maturity restricted investments			$	17,159			$	230			$	(30	)		$	17,359

F-26

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		December 31, 2004
		Held-to-				Available-for-
		maturity				Sale				Trading				Other
Year of Maturity
2005		$	1,848			$	1,104,457			$	—			$	2,852
2006			—				328,515				155				—
2007			903				758,161				—				5,097
2008			—				520,451				—				—
2009			910				525,963				—				5,690
2010-2014			2,718				2,915				—				216,618
After 2014			5,487				459,445				—				74,443
Total (Fair Value)		$	11,866			$	3,699,907			$	155			$	304,700

F-27

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					As of December 31 , 2004
			Average						Accumulated
(Dollars in millions)			Amortization Period		Gross				Amortization				Net
Intangible assets subject to amortization:
	Customer, services, and lending relationships		12 years		$	239			$	(48	)		$	191
	Tax exempt bond funding (1)		10 years			64				(6	)			58
	Software and technology		7 years			80				(39	)			41
	Non-compete agreements		2 years			10				(7	)			3
	Total					393				(100	)			293
Intangible assets not subject to amortization:
	Trade name and trademark		Indefinite			71				—				71
Total acquired intangible assets					$	464			$	(100	)		$	364

(1)

In connection with the Company’s 2004 acquisition of Southwest Student Services Corporation (see Note 11, “Acquisitions”), the Company acquired certain tax exempt bonds that enable the Company to earn a minimum yield of 9.5 percent on student loans funded by those bonds in indentured trusts. If the student loan is removed from the trust such that it is no longer funded by the bonds, it ceases earning the minimum yield of 9.5 percent. A different student loan can be substituted in the trust and begin earning the minimum yield of 9.5 percent. This feature remains as long as the bonds are outstanding.

					As of December 31 , 2003
			Average						Accumulated
(Dollars in millions)			Amortization Period		Gross				Amortization				Net
Intangible assets subject to amortization:
	Customer, services, and lending relationships		14 years		$	174			$	(32	)		$	142
	Software and technology		7 years			78				(27	)			51
	Non-compete agreements		2 years			6				(5	)			1
	Total					258				(64	)			194
Intangible assets not subject to amortization:
	Trade name and trademark		Indefinite			59				—				59
Total acquired intangible assets					$	317			$	(64	)		$	253

F-28

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		January 1,								December 31,
(Dollars in millions)		2004				Acquisitions				2004
Lending		$	191			$	245			$	436
Debt Management Operations			79				118				197
Corporate and Other			69				1				70
Total		$	339			$	364			$	703

		January 1,								December 31,
(Dollars in millions)		2003				Acquisitions				2003
Lending		$	164			$	27			$	191
Debt Management Operations			63				16				79
Corporate and Other			80				(11	)			69
Total		$	307			$	32			$	339

										Year ended
		December 31, 2004								December 31, 2004
						Weighted								Weighted
						Average								Average
		Ending				Interest				Average				Interest
		Balance				Rate				Balance				Rate
Six month floating rate notes		$	—				—	%		$	1,585,830				1.18	%
Other floating rate notes			29,256				4.96				373,888				1.22
Discount notes			—				—				1,687,391				.96
Commercial paper			—				—				125,224				1.86
Short-term portion of long-term notes			2,177,839				2.83				6,824,097				3.18
Total short-term borrowings		$	2,207,095				2.86	%		$	10,596,430				2.44	%
Maximum outstanding at any month end		$	20,177,348

F-29

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										Year ended
		December 31, 2003								December 31, 2003
						Weighted								Weighted
						Average								Average
		Ending				Interest				Average				Interest
		Balance				Rate				Balance				Rate
Six month floating rate notes		$	2,724,669				.97	%		$	2,987,643				1.09	%
Other floating rate notes			215,532				.95				841,248				1.18
Discount notes			3,376,440				.96				8,338,001				1.16
Fixed rate notes			—				—				602,527				2.34
Commercial paper			—				—				59,053				1.27
Short-term portion of long-term notes			12,418,744				3.27				12,166,460				2.61
Total short-term borrowings		$	18,735,385				2.50	%		$	24,994,932				1.89	%
Maximum outstanding at any month end		$	28,709,732

										Year ended
		December 31, 2002								December 31, 2002
						Weighted								Weighted
						Average								Average
		Ending				Interest				Average				Interest
		Balance				Rate				Balance				Rate
Six month floating rate notes		$	2,999,631				1.25	%		$	3,006,177				1.71	%
Other floating rate notes			2,297,954				1.18				2,579,690				1.70
Discount notes			7,029,037				1.75				10,586,685				1.95
Fixed rate notes			1,649,969				2.35				1,693,771				2.79
Commercial paper			234,975				1.38				136,914				1.75
Securities sold — not yet purchased and repurchase agreements			—				—				146,500				1.70
Short-term portion of long-term notes			11,407,389				1.90				12,015,155				2.25
Total short-term borrowings		$	25,618,955				1.74	%		$	30,164,892				2.07	%
Maximum outstanding at any month end		$	33,431,624

F-30

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												Year ended
												December 31,
				December 31, 2004								2004
								Weighted
								Average
				Ending				Interest				Average
				Balance				Rate				Balance
Floating rate notes:
	U.S. dollar denominated:
		Interest bearing, due 2006-2047		$	47,792,701				2.48	%		$	35,023,181
	Non U.S. dollar denominated:
		Australian dollar–denominated, due 2009			164,003				5.82				102,150
		Euro–denominated, due 2006-2040			4,339,287				2.33				2,321,228
		Singapore dollar–denominated, due 2009			30,000				1.58				25,492
		Sterling-denominated, due 2006-2039			722,571				5.08				570,479
Total floating rate notes					53,048,562				2.51				38,042,530
Fixed rate notes:
	U.S. dollar denominated:
		Interest bearing, due 2006-2043			12,614,188				4.67				12,923,633
		Zero coupon			—				—				204,890
	Non U.S. dollar denominated:
		Australian dollar-denominated, due 2009			310,949				5.70				169,779
		Canadian dollar-denominated, due 2009			167,262				4.32				11,490
		Euro-denominated, due 2006-2039			5,728,710				3.27				4,047,730
		Hong Kong dollar-denominated, due 2014			26,563				4.70				22,945
		Japanese yen-denominated, due 2009-2034			453,211				1.63				277,526
		Singapore dollar-denominated, due 2014			66,498				3.56				52,055
		Sterling-denominated, due 2006-2039			3,319,666				4.51				2,305,444
		Swiss franc-denominated, due 2009			178,964				2.37				75,800
Total fixed rate notes					22,866,011				4.22				20,091,292
Total long-term notes				$	75,914,573				3.03	%		$	58,133,822

F-31

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												Year ended
												December 31,
				December 31, 2003								2003
								Weighted
								Average
				Ending				Interest				Average
				Balance				Rate				Balance
Floating rate notes:
	U.S. dollar denominated:
		Interest bearing, due 2005-2047		$	22,129,213				1.37	%		$	13,764,648
	Non U.S. dollar denominated:
		Euro–denominated, due 2006			17,836				2.36				1,515
Total floating rate notes					22,147,049				1.37				13,766,163
Fixed rate notes:
	U.S. dollar denominated:
		Interest bearing, due 2005-2043			13,018,659				4.40				13,222,312
		Zero coupon, due 2014-2022			252,889				11.79				239,343
	Non U.S. dollar denominated:
		Euro-denominated, due 2005-2033			2,474,432				3.47				884,227
		Sterling-denominated, due 2005-2039			1,915,145				5.04				294,887
Total fixed rate notes					17,661,125				4.44				14,640,769
Total long-term notes				$	39,808,174				2.73	%		$	28,406,932

F-32

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		December 31, 2004
		Stated				Maturity to
Year of Maturity		Maturity(1)				Call Date(1)
2005		$	2,473,164			$	6,125,964
2006			14,379,879				14,465,026
2007			7,868,128				7,930,189
2008			5,809,912				6,346,391
2009			5,608,599				6,023,644
2010			3,293,810				3,297,332
2011-2047			34,673,959				29,918,905
			74,107,451				74,107,451
SFAS No. 133 derivative market value adjustment			1,807,122				1,807,122
		$	75,914,573			$	75,914,573

(1)	The Company views its on-balance sheet securitization trust debt as long-term and projects its maturities based on the Company’s current estimates regarding loan prepayment speeds. The projected principal paydowns of $2.5 billion shown in year 2005 relate to the on-balance sheet securitization trust debt.

F-33

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			Years ended
			December 31, 2004																December 31, 2003																December 31, 2002
			No. of				Amount				Pre-Tax				Gain				No. of				Amount				Pre-Tax				Gain				No. of				Amount				Pre-Tax				Gain
			Transactions				Securitized				Gain				%				Transactions				Securitized				Gain				%				Transactions				Securitized				Gain				%
FFELP
	Stafford loans			4			$	10,002			$	134				1.3	%			4			$	5,772			$	73				1.3	%			7			$	11,033			$	101				.9	%
Consolidation Loans				—				—				—				—				2				4,256				433				10.2				1				1,976				194				9.8
Private Education Loans				2				2,535				241				9.5				3				3,503				238				6.8				1				690				43				6.2
Total securitizations — sales				6				12,537			$	375				3.0	%			9				13,531			$	744				5.5	%			9				13,699			$	338				2.5	%
Asset-backed commercial paper (1)				1				4,186												—				—												—				—
Consolidation Loans				6				17,124												7				16,592												—				—
Total securitizations — financings				7				21,310												7				16,592												—				—
Total securitizations				13			$	33,847												16			$	30,123												9			$	13,699

(1)

In the second quarter of 2004 the Company closed its first asset-backed commercial paper program. The program is a revolving 364-day multi-seller conduit that allows the Company to borrow up to $5 billion subject to annual extensions. The Company may purchase loans out of this trust at its discretion and as a result, the trust does not qualify as a QSPE and is accounted for on-balance sheet as a VIE.

		Years ended December 31,
		2004												2003
		FFELP								Private				FFELP								Private
		Stafford				Consolidation				Education				Stafford				Consolidation				Education
		Loans				Loans(1)				Loans				Loans				Loans				Loans
Prepayment speed			**				—				6	%			9	%			7	%			6	%
Weighted-average life (in years)			4.2				—				7.2				4.6				8.0				6.5
Expected credit losses (% of principal securitized)			0.12	%			—				4.72	%			0.52	%			0.75	%			4.03	%
Residual cash flows discounted at (weighted average)			12	%			—				12	%			12	%			6	%			12	%

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

**	Securitizations through August 2004 used a CPR of 20 percent for 2004, 15 percent for 2005, and 6 percent thereafter. Securitizations from September 2004 through December 2004 used a CPR of 20 percent for 2004 through 2005, 15 percent for 2006 and 6 percent thereafter.

F-34

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		Years ended December 31,
(Dollars in millions)		2004				2003				2002
Net proceeds from new securitizations completed during the period		$	12,476			$	13,483			$	13,785
Purchases of delinquent Private Education Loans from securitization trusts			(33	)			(6	)			—
Servicing fees received(1)			319				298				274
Cash distributions from trusts related to Residual Interests			844				870				861

(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, Consolidation Loan and Private Education Loan securitizations, respectively.

F-35

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		As of December 31,		As of December 31,
		2004		2003
FFELP Stafford loan CPR(1)		20% - 2005		20% - 2004
		15% - 2006		15% - 2005
		6% - thereafter		6% - thereafter
Private Education Loan CPR(2)		3%		6%
FFELP expected credit losses (as a % of securitized loan balance outstanding)(3)		0%		0.17%

(1)	The FFELP Stafford loan CPR assumption was increased to account for the continued high levels of Consolidation Loan activity over the past three years. Unless there is a legislative change in HEA reauthorization, the Company believes that high levels of Consolidation Loan activity will continue.
(2)	The Private Education Loan CPR assumption was decreased due to these loans repaying slower than originally projected, including a slower prepayment.
(3)	The Company lowered its assumption of expected FFELP credit losses to zero percent to reflect the effect of the EP designation on Sallie Mae serviced FFELP loans in the trusts. The EP designation is discussed in more detail in Note 4, “Allowance for Student Loan Losses.”

			As of December 31, 2004								As of December 31, 2003
							Underlying								Underlying
			Retained				Securitized				Retained				Securitized
			Interest				Loan				Interest				Loan
(Dollars in millions)			Fair Value				Balance(3)				Fair Value				Balance(3)
FFELP Stafford loans			$	1,037			$	27,444			$	1,023			$	26,420
Consolidation Loans				585				7,393				994				8,076
Private Education Loans				694				6,309				459				3,983
	Total(1)(2)		$	2,316			$	41,146			$	2,476			$	38,479

(1)	Unrealized gains (pre-tax) included in accumulated other comprehensive income related to the Retained Interests totaled $445 million and $443 million as of December 31, 2004 and 2003, respectively.
(2)	Includes $399 million and $727 million related to the fair value of the Embedded Floor Income as of December 31, 2004 and 2003, respectively.
(3)	In addition to student loans in off-balance sheet trusts, the Company had $31.5 billion and $16.1 billion of securitized student loans outstanding (face amount) as of December 31, 2004 and 2003, respectively, in on-balance sheet Consolidation Loan securitization trusts.

F-36

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F-37

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			Year ended December 31, 2004
			FFELP				Consolidation Loan				Private Education Loan
			Trusts				Trusts				Trusts
	Fair value of Residual Interest (millions)		$	1,037			$	585	(5)		$	694
	Weighted-average life (in years)			3.1				8.2				7.5
	Prepayment speed assumptions (annual rate)			6%- 20	% (2)			6	%			3	%
	Impact on fair value of 5% absolute increase		$	(112	)		$	(88	)		$	(136	)
	Impact on fair value of 10% absolute increase		$	(207	)		$	(158	)		$	(240	)
	Expected credit losses			0	% (4)			0	%(4)			4.54	%(3)
	Impact on fair value of 5% absolute increase in default rate		$	—			$	—			$	(137	)
	Impact on fair value of 10% absolute increase in default rate		$	—			$	—			$	(274	)
	Residual cash flows discount rate			12	%			9	%			12	%
	Impact on fair value of 5% absolute increase		$	(100	)		$	(84	)		$	(128	)
	Impact on fair value of 10% absolute increase		$	(183	)		$	(147	)		$	(218	)
Difference between Asset and Funding underlying			3 month LIBOR forward curve at December 31, 2004
indices(1)			plus contracted spreads
	Impact on fair value of 0.25% absolute increase in funding index compared to Asset index		$	(164	)		$	(69	)		$	(9	)
	Impact on fair value of 0.50% absolute increase in funding index compared to Asset index		$	(335	)		$	(138	)		$	(18	)

(1)	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 indices as indicated while keeping asset underlying indices fixed.
(2)	20% in 2005, 15% in 2006 and 6% thereafter.
(3)	The Company includes expected credit losses when projecting future cash flows related to the Private Education Loan securitizations’ Residual Interest. In every instance to date, the Company has exercised a contingent call option and purchased delinquent Private Education Loans at par from the trust prior to default. Thus, no loss has been sustained by any of the trusts or the related Residual Interests. When the Company purchases delinquent Private Education Loans from the trust, the Company records a loss for the difference between the par value paid and the loan’s fair value at the time of purchase. The Company recorded losses of $27 million and $1 million for the years ended December 31, 2004 and 2003, respectively, related to this activity.
(4)	As previously discussed in Note 4, “Allowance for Student Loan Losses,” the FFELP trusts do not experience credit losses because of the Company’s EP designation. As a result, there is no change in fair value related to credit losses. An increase in FFELP default rates will increase prepayment speeds and these effects are depicted above in the prepayment speed assumption sensitivity.
(5)	Certain consolidation trusts have $1.9 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 highly-rated counterparties. These swaps are in a $477 million gain position (in the aggregate) 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 a part of the fair value of the Residual Interest in the table

F-38

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above. The Company’s corporate derivatives contain provisions that typically require collateral to be posted on a regular basis for changes in market values. In contrast, the derivatives that the trusts have entered into do not require the swap counterparties to post collateral to the respective trust for changes in market value. Collateral is only required in the event 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 $451 million as of December 31, 2004.

10.	Derivative Financial Instruments

	Risk Management Strategy

F-39

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	SFAS No. 133

F-40

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F-41

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		December 31,
		Cash Flow								Fair Value								Trading								Total
		2004				2003				2004				2003				2004				2003				2004				2003
Fair Values
(Dollars in millions)
Interest rate swaps		$	25			$	(4	)		$	(176	)		$	(182	)		$	(84	)		$	(133	)		$	(235	)		$	(319	)
Floor/ Cap contracts			—				—				—				—				(625	)			(1,168	)			(625	)			(1,168	)
Futures			—				(76	)			—				—				(2	)			(40	)			(2	)			(116	)
Equity forwards			—				—				—				—				139				48				139				48
Cross-currency interest rate swaps			—				—				1,839				281				—				—				1,839				281
Total		$	25			$	(80	)		$	1,663			$	99			$	(572	)		$	(1,293	)		$	1,116			$	(1,274	)
Notional Values
(Dollars in billions)
Interest rate swaps		$	5.8			$	1.6			$	13.4			$	16.8			$	85.9			$	74.2			$	105.1			$	92.6
Floor/ Cap contracts			—				—				—				—				41.7				34.1				41.7				34.1
Futures			1.0				8.2				—				—				6.5				23.1				7.5				31.3
Cross-currency interest rate swaps			—				—				13.7				4.1				—				—				13.7				4.1
Other(1)			—				—				—				—				2.0				2.0				2.0				2.0
Total		$	6.8			$	9.8			$	27.1			$	20.9			$	136.1			$	133.4			$	170.0			$	164.1
Contracts
(Shares in millions)
Equity forwards			—				—				—				—				42.8				43.5				42.8				43.5

(1)	“Other” consists of an embedded derivative bifurcated from the convertible debenture issuance that relates primarily to certain contingent interest and conversion features of the debt. The embedded derivative has had zero fair value since inception. (See Note 8, “Long-Term Notes.”)

F-42

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		Years Ended December 31,
		Cash Flow												Fair Value												Trading												Total
(Dollars in millions)		2004				2003				2002				2004				2003				2002				2004				2003				2002				2004				2003				2002
Changes to accumulated other comprehensive income, net of tax
Hedge ineffectiveness reclassified to earnings		$	9			$	(1	)		$	1			$	—			$	—			$	—			$	—			$	—			$	—			$	9			$	(1	)		$	1
Change in fair value to cash flow hedges			22				(12	)			(82	)			—				—				—				—				—				—				22				(12	)			(82	)
Amortization of effective hedges and transition adjustment(1)			26				15				9				—				—				—				—				—				1				26				15				10
Discontinued hedges			1				5				31				—				—				—				—				—				—				1				5				31
Change in accumulated other comprehensive income, net		$	58			$	7			$	(41	)		$	—			$	—			$	—			$	—			$	—			$	1			$	58			$	7			$	(40	)
Earnings Summary
Amortization of closed futures contracts’ gains/losses in interest expense(2)		$	(40	)		$	(24	)		$	(16	)		$	—			$	—			$	—			$	—			$	—			$	—			$	(40	)		$	(24	)		$	(16	)
Amortization of transition adjustment			—				—				—				—				—				—				—				—				(1	)			—				—				(1	)
Recognition of hedge losses related to GSE Wind-Down			(10	)			—				—				—				—				—				—				—				—				(10	)			—				—
Derivative market value adjustment — Realized(3)			(4	)			(7	)			(47	)			—				—				—				(709	)			(732	)			(831	)			(713	)			(739	)			(878	)
Derivative market value adjustment — Unrealized(4)			—				1	(5)			(1	) (5)			(15	)			(1	) (5)			1	(5)			1,577				501				(204	)			1,562				501				(204	)
Total earnings impact		$	(54	)		$	(30	)		$	(64	)		$	(15	)		$	(1	)		$	1			$	868			$	(231	)		$	(1,036	)		$	799			$	(262	)		$	(1,099	)

(1)	The Company expects to amortize $25 million of after-tax net losses from accumulated other comprehensive income to earnings during the next 12 months related to closed futures contracts that were hedging the forecasted issuance of debt instruments that are outstanding as of December 31, 2004.
(2)	For futures contracts that qualify as SFAS No. 133 hedges where the hedged transaction occurs.
(3)	Includes net settlement income/expense related to trading derivatives and realized gains and losses related to derivative dispositions.
(4)	In addition to the unrealized derivative market value adjustment, the Company recorded a $130 million cumulative effect of accounting change for equity forward contracts in accordance with the transition provisions of SFAS No. 150 in 2003. Explanation of the transition can be found in Note 2, “Significant Accounting Policies”.
(5)	The change in fair value of cash flow and fair value hedges represents amounts related to ineffectiveness.

F-43

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11.	Acquisitions

	AFS Holdings, LLC

	Southwest Student Services Corporation

F-44

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11.	Acquisitions (Continued)

(Dollars in millions)
Student loans			$	5,019
Cash and investments				134
Goodwill				220
Other intangible assets				85
Other assets				91
Short-term borrowings				(77	)
Long-term notes				(4,829	)
Other liabilities				(110	)
	Net assets acquired		$	533

	Education Assistance Foundation and Student Loan Finance Association

F-45

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11.	Acquisitions (Continued)

	Academic Management Services Corporation

12.	Fair Values of Financial Instruments

	Student Loans

F-46

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	Academic Facilities Financings and Other Loans

	Cash and Investments (Including “Restricted”)

	Short-term Borrowings and Long-term Notes

	Derivative Financial Instruments

F-47

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			December 31, 2004												December 31, 2003
			Fair				Carrying								Fair				Carrying
(Dollars in millions)			Value				Value				Difference				Value				Value				Difference
Earning assets
	Student loans		$	67,431			$	65,981			$	1,450			$	51,559			$	50,047			$	1,512
	Academic facilities financings and other loans			1,099				1,048				51				1,084				1,031				53
	Cash and investments			9,186				9,186				—				8,001				8,001				—
	Total earning assets			77,716				76,215				1,501				60,644				59,079				1,565
Interest bearing liabilities
	Short-term borrowings			2,210				2,207				(3	)			18,793				18,735				(58	)
	Long-term notes			76,085				75,915				(170	)			40,200				39,808				(392	)
	Total interest bearing liabilities			78,295				78,122				(173	)			58,993				58,543				(450	)
Derivative financial instruments
	Floor Income/ Cap Contracts			(625	)			(625	)							(1,168	)			(1,168	)			—
	Interest rate swaps			(235	)			(235	)			—				(319	)			(319	)			—
	Cross currency interest rate swaps			1,839				1,839				—				281				281				—
	Equity forwards			139				139				—				48				48				—
	Futures contracts			(2	)			(2	)			—				(116	)			(116	)			—
	Excess of fair value over carrying value										$	1,328											$	1,115

13.	Commitments, Contingencies and Guarantees

	Bank One/ JPMorgan Chase Relationships

	•	the Company agreed to the termination of its marketing services agreement with Bank One, effectively allowing Bank One to “in-source” the marketing of its own education loans;
	•	Bank One paid a $14 million termination fee to the Company;
	•	the Company extended its ExportSS agreement, through which the Company purchases certain Bank One-branded FFELP student loans and certain Private Education Loans, from March 2005 through August 2008; and

F-48

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	•	for a $9 million fee paid to the Company, Bank One terminated a separate loan purchase agreement that was entered into with USA Group prior to the Company’s July 2000 acquisition of that entity. Following the termination, (1) the Company retained the right to purchase FFELP loans originated under this agreement for the 2004-2005 academic year and all serial loans and (2) all loans that the Company originates and services on the Company’s servicing platforms on behalf of Bank One will be committed for sale under the ExportSS agreement after the 2004-2005 academic year.

	JPMorgan Chase Joint Venture

	•	JPMorgan Chase may not compete with the Company in the marketing, purchasing, servicing or ownership of education loans (except with respect to the continuation of business activities under the Bank One name or the name of any other JPMorgan Chase affiliate),
	•	the Company may use certain JPMorgan Chase trademarks for a nominal annual fee, and
	•	the Company acquires all rights to make additional FFELP student loans (serial loans) to customers of the joint venture who entered into master promissory notes prior to the Dutch Auction.

	•	it may use certain Sallie Mae trademarks for a nominal annual fee,
	•	the Company would be required to act as origination and servicing agent for JPMorgan Chase at market rates, and
	•	the Company would be required to provide JPMorgan Chase with access to certain Sallie Mae products and services.

F-49

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		December 31,
		2004				2003
Student loan purchase commitments(1)(2)		$	47,247,669			$	37,230,275
Lines of credit			887,790				905,255
Letters of credit			157,674				1,566,652
		$	48,293,133			$	39,702,182

		Student Loan				Lines of				Letters of
		Purchases(1)(2)				Credit				Credit				Total
2005		$	7,845,606			$	150,000			$	157,674			$	8,153,280
2006			1,877,965				34,101				—				1,912,066
2007			14,120,323				327,317				—				14,447,640
2008			23,403,775				376,372				—				23,780,147
Total		$	47,247,669			$	887,790			$	157,674			$	48,293,133

(1)	Includes amounts committed at specified dates under forward contracts to purchase student loans and estimated future requirements to acquire student loans from lending partners estimated based on expected future volumes at contractually committed rates.
(2)	These commitments are not accounted for as derivatives under SFAS No. 133 as they do not meet the definition of a derivative due to the lack of a fixed and determinable purchase amount.

F-50

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	Contingencies

F-51

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14.	Preferred Stock

15.	Common Stock

F-52

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	Common Stock Repurchase Program and Equity Forward Contracts

F-53

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			Years Ended
			December 31,
(Shares in millions)			2004				2003
Common shares repurchased:
	Open market			.5				6.7
	Equity forwards			32.7				20.2
	Benefit plans(1)			1.5				2.4
	Total shares repurchased			34.7				29.3
	Average purchase price per share(2)		$	38.03			$	31.18
Common shares issued				10.7				18.2
Equity forward contracts:
	Outstanding at beginning of year			43.5				28.7
	New contracts			32.0				35.0
	Exercises			(32.7	)			(20.2	)
	Outstanding at end of year			42.8				43.5
Authority remaining at end of year to repurchase or enter into equity forwards				35.8				38.4

(1)	Includes shares withheld from stock option exercises and vesting of performance stock to satisfy minimum statutory tax withholding obligations and shares tendered by employees to satisfy option exercise costs.
(2)	The average purchase price per share for 2004 is calculated based on the average strike price of all equity forward contracts including those that were net settled in the cashless transactions discussed above. The average cash purchase price per share is $22.38 when a zero cash cost is reflected for those shares acquired in the cashless transactions.

		Outstanding				Range of		Average
Year of maturity		Contracts				purchase prices		purchase Price
(Contracts in millions of shares)
2006			8.6			$39.74 — $50.47		$	49.73
2007			10.3			50.47			50.47
2008			7.9			50.47			50.47
2009			16.0			50.47			50.47
			42.8					$	50.32

F-54

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	Earnings per Share

			Years Ended
			December 31,				December 31,				December 31,
			2004				2003				2002
Numerator:
Net income attributable to common stock			$	1,901,769			$	1,522,059			$	780,495
Adjusted for debt expense of Co-Cos, net of taxes				21,405				11,005				—
Net income attributable to common stock, adjusted			$	1,923,174			$	1,533,064			$	780,495
Denominator:
Weighted-average shares used to compute basic EPS				436,133				452,037				462,294
Effect of dilutive securities:
	Dilutive effect of stock options, deferred compensation, restricted stock units, ESPP, and equity forwards			9,342				11,298				12,226
	Dilutive effect of Co-Cos			30,312				18,769				—
Dilutive potential common shares				39,654				30,067				12,226
Weighted-average shares used to compute diluted EPS				475,787				482,104				474,520

F-55

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			Years Ended
			December 31,				December 31,				December 31,
			2004				2003				2002
Net earnings per share
Basic EPS			$	4.36			$	3.37			$	1.69
	Dilutive effect of stock options, deferred compensation, restricted stock units, ESPP, and equity forwards			(.09	)			(.08	)			(.05	)
	Dilutive effect of Co-Cos			(.23	)			(.11	)			—
Diluted EPS			$	4.04			$	3.18			$	1.64

16.	Stock-Based Compensation Plans

F-56

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		Years Ended December 31,
		2004								2003								2002
						Average								Average								Average
		Options				Price				Options				Price				Options				Price
Outstanding at beginning of year			42,400,231			$	28.93				43,828,155			$	26.03				34,318,266			$	20.25
Direct options granted			6,204,181				41.11				10,009,627				36.18				24,134,718				29.49
Replacement options granted			633,210				43.03				1,184,374				37.70				1,806,270				31.21
Exercised			(9,231,460	)			26.51				(10,833,755	)			24.50				(14,316,297	)			18.62
Canceled			(1,257,844	)			36.27				(1,788,170	)			31.02				(2,114,802	)			26.24
Outstanding at end of year			38,748,318			$	31.45				42,400,231			$	28.93				43,828,155			$	26.03
Exercisable at end of year			19,805,143			$	27.71				20,445,682			$	24.51				15,222,849			$	20.08
Weighted-average fair value per share of options granted during the year						$	5.14							$	6.95							$	7.35

F-57

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										Average Remaining
Exercise Prices		Options				Average Price				Contractual Life
Under $25			5,107,346				$18.38				5.5	Yrs.
$25-$35			17,985,282				29.11				7.1
Above $35			15,655,690				38.40				8.8
Total			38,748,318				$31.45				7.6	Yrs.

		Years Ended December 31,
		2004								2003								2002
						Average								Average								Average
		Options				Price				Options				Price				Options				Price
Outstanding at beginning of year			3,962,055			$	24.75				4,412,310			$	22.65				4,686,645			$	18.86
Direct options granted			255,545				37.87				350,625				35.20				885,000				28.67
Replacement options granted			37,527				42.43				235,882				39.42				513,087				31.30
Exercised			(611,038	)			23.00				(1,036,762	)			22.69				(1,612,422	)			17.49
Canceled			—				—				—				—				(60,000	)			28.67
Outstanding at end of year			3,644,089			$	26.14				3,962,055			$	24.75				4,412,310			$	22.65
Exercisable at end of year			3,606,562			$	25.97				3,375,548			$	22.63				3,899,223			$	21.51
Weighted-average fair value per share of options granted during the year						$	4.62							$	8.93							$	7.03

F-58

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			(a)												Number of
			Number of												securities remaining
			securities to be				Weighted average				Average				available for future
			issued upon exercise				exercise price				remaining life				issuance under equity				Types of
			of outstanding				of outstanding				(years) of				compensation				awards
Plan Category			options and rights				options and rights				options outstanding				plans(1)				issuable(2)
Equity compensation plans approved by security holders:
	Directors Stock Plan			3,518,089			$	26.80				6.62				2,368,057				NQ,ST
	SLM Corporation Incentive Plan(3)			3,511,500				43.28				9.73				11,130,921				NQ,ISO RES,RSU
	Expired Plans(4)			21,167,476				31.01				7.43				—				NQ,ISO RES,RSU
Total approved by security holders				28,197,065				32.01				7.61				13,498,978
Equity compensation plans not approved by security holders:
	Employee Stock Purchase Plan (5)			—				—				—				2,509,029
	Expired Plan(6)			14,195,342				28.98				7.27				—				NQ,RES
Total not approved by security holders				14,195,342				28.98				7.27				2,509,029
Total				42,392,407			$	30.99				7.50				16,008,007

(1)	Excludes securities included in column (a) and excludes shares that may be issued under the replacement option program.
(2)	NQ (Non-Qualified Stock Option), ISO (Incentive Stock Option), RES (Restricted/ Performance Stock), RSU (Restricted Stock Unit), ST (Stock Grant).
(3)	The SLM Corporation Incentive Plan is subject to an aggregate limit of 2,000,000 shares that may be issued as Restricted Stock or Restricted Stock Units. As of December 31, 2004, 1,645,581 shares are remaining from this authority.
(4)	Expired plans for which unexercised options remain outstanding include the 1993-1998 Stock Option Plan, Management Incentive Plan and Board of Directors Stock Option Plan.
(5)	Number of shares available for issuance under the ESPP.
(6)	Expired plan for which unexercised options remain outstanding includes the Employee Stock Option Plan.

17.	Benefit Plans

F-59

---

 

F-60

---

 

			December 31,
			2004				2003
Change in Benefit Obligation
	Projected benefit obligation at beginning of year		$	184,019			$	158,711
	Service cost			10,862				11,103
	Interest cost			11,237				10,349
	Acquisitions			—				—
	Actuarial loss			14,279				12,480
	Curtailment gain			(6,310	)			—
	Benefits paid			(11,735	)			(8,624	)
	Benefit obligation at end of year		$	202,352			$	184,019
Change in Plan Assets
	Fair value of plan assets at beginning of year		$	184,495			$	147,189
	Actual return on plan assets			26,856				35,895
	Acquisitions			—				—
	Employer contribution			1,745				11,217
	Benefits paid			(11,735	)			(8,624	)
	Administrative payments			(1,545	)			(1,182	)
	Fair value of plan assets at end of year		$	199,816			$	184,495
Funded Status
	Funded status at end of year		$	(2,536	)		$	476
	Unrecognized net actuarial gain			(20,780	)			(25,140	)
	Unrecognized prior service cost and transition asset			186				325
	Accrued pension cost		$	(23,130	)		$	(24,339	)

F-61

---

 

			December 31,
			2004				2003
Amounts recognized in the statement of financial position consist of:
	Prepaid benefit cost		$	—			$	—
	Accrued benefit liability			(25,091	)			(27,550	)
	Intangible asset			356				1,213
	Accumulated other comprehensive income			1,605				1,998
	Net amount recognized		$	(23,130	)		$	(24,339	)
Additional year-end information for plans with accumulated benefit obligations in excess of plan assets:
	Projected benefit obligation		$	19,643			$	22,323
	Accumulated benefit obligation			19,500				19,200
	Fair value of plan assets			—				—

		Years Ended December 31,
		2004				2003				2002
Service cost — benefits earned during the period		$	10,862			$	11,103			$	10,041
Interest cost on project benefit obligations			11,237				10,349				9,542
Expected return on plan assets			(15,674	)			(12,833	)			(16,003	)
Curtailment gain			(4,506	)			—				—
Net amortization and deferral			(1,384	)			(658	)			(3,007	)
Net periodic pension cost (benefit)		$	535			$	7,961			$	573

		December 31,
		2004				2003
Discount rate			5.75%				6.25%
Expected return on plan assets			8.50%				8.50%
Rate of compensation increase			4.00%				4.00%

F-62

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		December 31,
		2004				2003
Discount rate			6.25%				6.75%
Expected return on plan assets			8.50%				8.50%
Rate of compensation increase			4.00%				4.00%

		Plan Assets
		December 31,
		2004				2003
Asset Category
Equity securities			69	%			75	%
Fixed income securities			10				12
Cash equivalents			21				13
Total			100	%			100	%

F-63

---

 

2005		$	14,156
2006			14,770
2007			15,399
2008			16,490
2009			16,414
2010 – 2014			82,309

F-64

---

 

	401(k) Plans

18.	Segment Reporting

F-65

---

 

	Lending

F-66

---

 

	DMO

	Corporate and Other

	Financial Highlights

F-67

---

 

		Year Ended December 31, 2004
														Total
										Corporate				Core Cash								Total
(Dollars in millions)		Lending				DMO				and Other				Measures				Adjustments				GAAP
Net interest income		$	1,822			$	—			$	—			$	1,822			$	(523	)		$	1,299
Less provision for loan losses			114				—				—				114				(3	)			111
Net interest income after provision for losses			1,708				—				—				1,708				(520	)			1,188
Fee income and collections revenue			—				340				120				460				—				460
Other income, net			134				—				126				260				1,765				2,025
Operating expenses			654				161				265				1,080				36				1,116
Income taxes(1)			423				63				(6	)			480				162				642
Minority interest in net earnings of subsidiaries			—				1				—				1				—				1
Net income		$	765			$	115			$	(13	)		$	867			$	1,047			$	1,914

		Year Ended December 31, 2003
														Total
										Corporate				Core Cash								Total
(Dollars in millions)		Lending				DMO				and Other				Measures				Adjustments				GAAP
Net interest income		$	1,652			$	—			$	—			$	1,652			$	(326	)		$	1,326
Less provision for loan losses			130				—				—				130				17				147
Net interest income after provision for losses		$	1,522			$	—			$	—			$	1,522			$	(343	)		$	1,179
Fee income and collections revenue			—				259				128				387				—				387
Other income, net			121				—				123				244				1,168				1,412
Operating expenses			409				128				231				768				27				795
Income taxes(1)			409				44				6				459				320				779
Cumulative effect of accounting change			—				—				—				—				130				130
Net income		$	825			$	87			$	14			$	926			$	608			$	1,534

(1)	Income taxes are based on a percentage of net income before tax for the individual reportable segments.

F-68

---

 

		Year Ended December 31, 2002
														Total
										Corporate				Core Cash								Total
(Dollars in millions)		Lending				DMO				and Other				Measures				Adjustments				GAAP
Net interest income		$	1,359			$	—			$	—			$	1,359			$	66			$	1,425
Less provision for loan losses			131				—				—				131				(14	)			117
Net interest income after provision for losses		$	1,228			$	—			$	—			$	1,228			$	80			$	1,308
Fee income and collections revenue			—				186				106				292				—				292
Other income, net			100				—				110				210				103				313
Operating expenses			345				109				209				663				27				690
Income taxes(1)			349				26				2				377				54				431
Net income		$	634			$	51			$	5			$	690			$	102			$	792

(1)	Income taxes are based on a percentage of net income before tax for the individual reportable segments.

F-69

---

 

		Years Ended December 31,
		2004				2003				2002
Net impact of securitization accounting(1)		$	(152	)		$	300			$	291
Net impact of derivative accounting(2)			1,553				502				(200	)
Net impact of Floor Income(3)			(156	)			23				92
Amortization of acquired intangibles(4)			(36	)			(27	)			(27	)
Net tax effect(5)			(162	)			(320	)			(54	)
Cumulative effect of accounting change(6)			—				130				—
Total adjustments		$	1,047			$	608			$	102

(1)	Securitization: Under GAAP, certain securitization transactions are accounted for as sales of assets. Under “core cash,” the Company presents all securitization transactions as long-term non-recourse financings. The upfront “gains” on sale from securitization transactions as well as ongoing “servicing and securitization revenue” presented in accordance with GAAP are excluded from the “core cash” measures and replaced by the interest income, provision for loan losses, and interest expense as they are earned or incurred on the securitization loans. The Company also excludes transactions with its off-balance sheet trusts which would be considered intercompany on a Managed Basis.
(2)	Derivative accounting: “Core cash” measures exclude the periodic unrealized gains and losses caused by the one-sided mark-to-market derivative valuations prescribed by SFAS No. 133 and recognize the economic effect of these hedges, which results in any cash paid or received being recognized ratably as an expense or revenue over the hedged item’s life. The Company also excludes the gain or loss on equity forward contracts that are required to be accounted for in accordance with SFAS No. 133 as derivatives and are marked to market through earnings.
(3)	Floor income: The timing and amount (if any) of Floor Income earned is uncertain and in excess of expected spreads and, therefore, the Company excludes such income when it is not economically hedged from “core cash” measures. The Company employs derivatives, primarily Floor Income Contracts and futures, to economically hedge Floor Income. These derivatives do not qualify as effective accounting hedges and therefore are marked-to-market through the derivative market value adjustment. For “core cash” measures, the Company reverses the fair value adjustments on the Floor Income Contracts and futures economically hedging Floor Income and includes the amortization of net premiums received (net of Eurodollar futures contracts’ realized gains or losses) in income.
(4)	Other items: The Company excludes amortization of acquired intangibles.
(5)	Such tax effect is based upon the Company’s “core cash” effective tax rate for the year. The net tax effect results primarily from the exclusion of the permanent income tax impact of the equity forward contracts.
(6)	For the year ended December 31, 2003, upon the adoption of SFAS No. 150, the Company also excluded a gain of $130 million which was reflected as a “cumulative effect of accounting change” in the consolidated statements of income.

F-70

---

 

19.	Income Taxes

		Years Ended
		December 31,
		2004				2003				2002
Statutory rate			35.0	%			35.0	%			35.0	%
Equity forward contracts			(10.4	)			1.1				—
Tax exempt interest			(.1	)			(.3	)			(.6	)
Life Insurance Proceeds			(.2	)			(.2	)			(.5	)
State tax, net of federal benefit			.5				.3				.6
Credits			(.4	)			(.4	)			(.7	)
Other, net			.7				.2				1.5
Effective tax rate			25.1	%			35.7	%			35.3	%

		December 31,
		2004				2003				2002
Current provision:
Federal		$	375,496			$	684,065			$	567,483
State			7,982				27,400				11,280
Total current provision			383,478				711,465				578,763
Deferred provision/(benefit):
Federal			248,776				87,086				(146,848	)
State			10,435				(19,171	)			(512	)
Total deferred provision/(benefit)			259,211				67,915				(147,360	)
Provision for income tax expense		$	642,689			$	779,380			$	431,403

F-71

---

 

			December 31,
			2004				2003
Deferred tax assets:
	Loan origination services		$	22,835			$	65,156
	Student loan reserves			136,421				89,336
	In-substance defeasance transactions			24,117				27,885
	Accrued expenses not currently deductible			56,904				51,531
	Deferred revenue			10,238				36,346
	Partnership income			33,624				34,383
	Warrants issuance			57,081				65,498
	Unrealized investment gains			28,866				209,038
	Other			66,064				63,466
	Total deferred tax assets			436,150				642,639
Deferred tax liabilities:
	Leases			206,559				233,236
	Securitization transactions			98,174				121,888
	Depreciation/amortization			88,525				28,602
	Additional tax deductible expenses			62,006				14,445
	Other			6,985				20,934
	Total deferred tax liabilities			462,249				419,105
	Net deferred tax assets/(liabilities)		$	(26,099	)		$	223,534

F-72

---

 

20.	Quarterly Financial Information (unaudited)

		2004
		First				Second				Third				Fourth
		Quarter				Quarter				Quarter				Quarter
Net interest income		$	321,715			$	332,607			$	312,943			$	332,034
Less: provision for losses			39,818				28,344				10,930				31,974
Net interest income after provision for losses			281,897				304,263				302,013				300,060
Derivative market value adjustment			(116,743	)			386,147				73,000				506,637
Other income			424,466				483,354				392,463				335,208
Operating expenses			208,877				206,051				313,762				387,090
Income taxes			89,278				352,787				97,136				103,488
Minority interest in net earnings of subsidiaries			—				—				—				1,026
Net income			291,465				614,926				356,578				650,301
Preferred stock dividends			2,886				2,864				2,875				2,876
Net income attributable to common stock		$	288,579			$	612,062			$	353,703			$	647,425
Basic earnings per common share		$	.65			$	1.39			$	.81			$	1.52
Diluted earnings per common share		$	.61			$	1.29			$	.76			$	1.40

		2003
		First				Second				Third				Fourth
		Quarter				Quarter				Quarter				Quarter
Net interest income		$	346,218			$	354,168			$	333,473			$	292,510
Less: provision for losses			42,545				36,449				41,695				26,791
Net interest income after provision for losses			303,673				317,719				291,778				265,719
Derivative market value adjustment			(119,063	)			(205,295	)			91,041				(4,498	)
Other income			636,975				646,248				351,709				401,988
Operating expenses			178,344				184,662				180,097				251,922
Income taxes			226,692				201,316				204,514				146,858
Cumulative effect of accounting change			—				—				129,971				—
Net income			416,549				372,694				479,888				264,429
Preferred stock dividends			2,875				2,875				2,875				2,876
Net income attributable to common stock		$	413,674			$	369,819			$	477,013			$	261,553
Basic earnings per common share, after cumulative effect of accounting change		$	.91			$	.82			$	1.06			$	.58
Diluted earnings per common share, after cumulative effect of accounting change		$	.88			$	.78			$	.98			$	.54

F-73

---

 

		2002
		First				Second				Third				Fourth
		Quarter				Quarter				Quarter				Quarter
Net interest income		$	392,101			$	394,401			$	342,884			$	295,081
Less: provision for losses			20,237				27,550				34,771				34,066
Net interest income after provision for losses			371,864				366,851				308,113				261,015
Derivative market value adjustment			18,603				(406,005	)			(536,929	)			(157,769	)
Other income			430,845				402,751				297,406				556,426
Operating expenses			166,801				167,942				174,309				180,720
Income taxes			232,167				69,654				(43,340	)			172,922
Net income (loss)			422,344				126,001				(62,379	)			306,030
Preferred stock dividends			2,875				2,875				2,875				2,876
Net income (loss) attributable to common stock		$	419,469			$	123,126			$	(65,254	)		$	303,154
Basic earnings (loss) per common share		$	.90			$	.27			$	(.14	)		$	.66
Diluted earnings (loss) per common share		$	.88			$	.26			$	(.14	)		$	.64

21.	Completion of the GSE Wind-Down

F-74

---

 

F-75

---

 

	•	default of the borrower;
	•	the death, bankruptcy or permanent, total disability of the borrower;
	•	closing of the borrower’s school prior to the end of the academic period;
	•	false certification by the borrower’s school of his eligibility for the loan; and
	•	an unpaid school refund.

	•	Subsidized Federal Stafford Loans to students who demonstrate requisite financial need;
	•	Unsubsidized Federal Stafford Loans to students who either do not demonstrate financial need or require additional loans to supplement their Subsidized Stafford Loans;
	•	Federal PLUS Loans to parents of dependent students whose estimated costs of attending school exceed other available financial aid; and
	•	Consolidation Loans, which consolidate into a single loan a borrower’s obligations under various federally authorized student loan programs.

A-1

---

 

	•	is a United States citizen, national or permanent resident;
	•	has been accepted for enrollment or is enrolled and maintaining satisfactory academic progress at a participating educational institution; and
	•	is carrying at least one-half of the normal full-time academic workload for the course of study the student is pursuing.

A-2

---

 

Date of First Disbursement		Special Allowance Margin
Before 10/17/86		3.50%
From 10/17/86 through 09/30/92		3.25%
From 10/01/92 through 06/30/95		3.10%
From 07/01/95 through 06/30/98		2.50% for Stafford Loans that are in In-School, Grace or Deferment
		3.10% for Stafford Loans that are in Repayment and all other loans
From 07/01/98 through 12/31/99		2.20% for Stafford Loans that are in In-School, Grace or Deferment
		2.80% for Stafford Loans that are in Repayment 3.10% for PLUS, SLS and Consolidation loans

A-3

---

 

Date of First Disbursement		Special Allowance Margin
From 01/01/00		1.74% for Stafford Loans that are in In-School, Grace or Deferment
		2.34% for Stafford Loans that are in Repayment
		2.64% for PLUS and Consolidation loans

	•	federal reinsurance of Stafford Loans made by eligible lenders to qualified students;
	•	federal interest subsidy payments on Subsidized Stafford Loans paid by the Department of Education to holders of the loans in lieu of the borrowers’ making interest payments during in-school, grace and deferment periods; and
	•	special allowance payments representing an additional subsidy paid by the Department to the holders of eligible Stafford Loans.

A-4

---

 

Trigger Date		Borrower Rate		Maximum Borrower Rate		Interest Rate Margin
Before 01/01/81		7%		7%		N/ A
From 01/01/81 through 09/12/83		9%		9%		N/ A
From 09/13/83 through 06/30/88		8%		8%		N/ A
From 07/01/88 through 09/30/92		8% for 48 months; thereafter, 91-day Treasury + Interest Rate Margin		8% for 48 months, then 10%		3.25% for loans made before 7/23/92 and for loans made on or before 10/1/92 to new student borrowers; 3.10% for loans made after 7/23/92 and before 7/1/94 to borrowers with outstanding FFELP loans
From 10/01/92 through 06/30/94		91-day Treasury + Interest Rate Margin		9%		3.10%
From 07/01/94 through 06/30/95		91-day Treasury + Interest Rate Margin		8.25%		3.10%
From 07/01/95 through 06/30/98		91-day Treasury + Interest Rate Margin		8.25%		2.50% (In-School, Grace or Deferment); 3.10% (Repayment)
From 07/01/98 through 06/30/06		91-day Treasury + Interest Rate Margin		8.25%		1.70% (In-School, Grace or Deferment); 2.30% (Repayment)
From 07/01/06		6.8%		6.8%		N/ A

	•	while the borrower is a qualified student,
	•	during the grace period, and
	•	during prescribed deferral periods.

A-5

---

 

										Independent Students
						All Students				Additional
		Subsidized				Subsidized and				Unsubsidized
Borrower’s Academic Level Base Amount Subsidized		On or After				Unsubsidized On				Only On or				Maximum Annual
and Unsubsidized On or After 10/1/93		1/1/87				or After 10/1/93				After 7/1/94				Total Amount
Undergraduate (per year):
1st year		$	2,625			$	2,625			$	4,000			$	6,625
2nd year		$	2,625			$	3,500			$	4,000			$	7,500
3rd year and above		$	4,000			$	5,500			$	5,000			$	10,500
Graduate (per year)		$	7,500			$	8,500			$	10,000			$	18,500
Aggregate Limit:
Undergraduate		$	17,250			$	23,000			$	23,000			$	46,000
Graduate (including undergraduate)		$	54,750			$	65,500			$	73,000			$	138,500

	•	The loan limits include both FFELP and FDLP loans.
	•	The amounts in the second column represent the combined maximum loan amount per year for Subsidized and Unsubsidized Stafford Loans. Accordingly, the maximum amount that a student may borrow under an Unsubsidized Stafford Loan is the difference between the combined maximum loan amount and the amount the student received in the form of a Subsidized Stafford Loan.

	•	Students attending certain medical schools are eligible for higher annual and aggregate loan limits.
	•	The annual loan limits are sometimes reduced when the student is enrolled in a program of less than one academic year or has less than a full academic year remaining in his program.

A-6

---

 

	•	enrolled in an approved graduate fellowship program or rehabilitation program; or
	•	seeking, but unable to find, full-time employment (subject to a maximum deferment of 3 years); or
	•	having an economic hardship, as defined in the Act (subject to a maximum deferment of 3 years).

				Maximum		Interest
Trigger Date		Borrower Rate		Borrower Rate		Rate Margin
Before 10/01/81		9%		9%			N/A
From 10/01/81 through 10/30/82		14%		14%			N/A
From 11/01/82 through 06/30/87		12%		12%			N/A
From 07/01/87 through 09/30/92		1-year Index + Interest Rate Margin		12%			3.25%
From 10/01/92 through 06/30/94		1-year Index + Interest Rate Margin		PLUS 10%, SLS 11%			3.10%
From 07/01/94 through 06/30/98		1-year Index + Interest Rate Margin		9%			3.10%
From 6/30/98 through 06/30/06		91-day Treasury + Interest Rate Margin		9%			3.10%
From 07/01/06		7.9%		7.9%			N/A

	•	the borrower rate is set at the maximum borrower rate and
	•	the sum of the average of the bond equivalent rates of 3-month Treasury bills auctioned during that quarter and the applicable interest rate margin exceeds the maximum borrower rate.

A-7

---

 

A-8

---

 

Claims Paid Date		Maximum				9% Trigger				5% Trigger
Before October 1, 1993			100	%			90	%			80	%
October 1, 1993 — September 30, 1998			98	%			88	%			78	%
On or after October 1, 1998			95	%			85	%			75	%

A-9

---

 

Source		Basis
Insurance Premium		Up to 1% of the principal amount guaranteed, withheld from the proceeds of each loan disbursement.
Loan Processing and Issuance Fee		.4% of the principal amount guaranteed in each fiscal year, paid by the Department of Education.
Account Maintenance Fee		.10% of the original principal amount of loans outstanding, paid by the Department of Education.
Default Aversion Fee		1% of the outstanding amount of loans submitted by a lender for default aversion assistance, minus 1% of the unpaid principal and interest paid on default claims, which is, paid once per loan by transfers out of the Student Loan Reserve Fund.
Collection Retention		23% of the amount collected on loans on which reinsurance has been paid (18.5% collected for a defaulted loan that is purchased by a lender for rehabilitation or consolidation), withheld from gross receipts.

A-10

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A-11

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A-12

 

 

 

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