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Form 8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 18, 2012

SLM CORPORATION

(Exact name of registrant as specified in its charter)


Delaware	001-13251	52-2013874
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

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

Registrant’s telephone number, including area code: (302) 283-8000

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition

On April 18, 2012, SLM Corporation (the “Company”) issued a press release announcing its financial results for the quarter ended March 31, 2012. A copy of this press release is furnished as Exhibit 99.1 to this report.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.



99.1*		SLM Corporation Press Release dated April 18, 2012.

*	Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	SLM CORPORATION

Date: April 18, 2012	By:	/s/ Jonathan C. Clark
		Jonathan C. Clark Executive Vice President and Chief Financial Officer

EXHIBIT INDEX


Exhibit No.		Description

99.1*		SLM Corporation Press Release dated April 18, 2012.

*	Furnished herewith.

EX-99.1

Exhibit 99.1


FOR IMMEDIATE RELEASE

SALLIE MAE REPORTS FIRST-QUARTER 2012 FINANCIAL RESULTS

Loan Originations Increase 23 Percent;

Private Education Loan Charge-Offs Fall to 2.96 Percent

NEWARK, Del., April 18, 2012 — Sallie Mae (NASDAQ: SLM), formally SLM Corporation, today released first-quarter 2012 financial results that include a 23-percent increase in private education loan originations as compared with the first-quarter 2011. The company also reported that private education loan charge-offs fell to 2.96 percent, the lowest rate since third-quarter 2008.

“This quarter’s results continue a trend of earnings growth and credit quality improvement,” said Albert L. Lord, vice chairman and CEO. “The success of our customers continues to drive our business, and business is better.”

For the first-quarter 2012, GAAP net income was $112 million ($.21 per diluted share), compared with $175 million ($.32 per diluted share) for the year-ago quarter.

Core earnings for the quarter were $284 million ($.55 per diluted share), compared with $260 million ($.48 per diluted share) in the year-ago period. The improvement in core earnings was primarily the result of a $50 million decline in loan loss provision and a $40 million decrease in expenses offset by a $40 million net interest income reduction and a $27 million decline in debt repurchase gains. The company provides results on a core earnings basis because management utilizes this information in making management decisions.

The changes in GAAP net income are driven by the same core earnings items discussed above as well as changes in “mark-to-market” unrealized gains and losses on derivative contracts and amortization and impairment of goodwill and intangible assets that are recognized in GAAP, but not in core earnings, results. First-quarter 2012 results had a $131 million increase in unrealized “mark-to-market” losses on derivative contracts compared with the year-ago period.

Consumer Lending

In the consumer lending segment, Sallie Mae originates, finances and services private education loans.

Consumer lending core earnings for the quarter were $81 million, compared with $44 million in the first-quarter 2011. This improvement was primarily the result of reduced loan loss provision. Loan delinquency and charge-off rates improved significantly from the year-ago quarter. The first-quarter charge-off rate of 2.96 percent is the lowest charge-off rate on these loans since third-quarter 2008.

Private education loan portfolio highlights vs. first-quarter 2011 included:

Loan originations were $1.2 billion, up 23 percent from $940 million.

The portfolio, net of loan loss allowance, totaled $37 billion, compared with $36 billion.

Net interest margin, before loan loss provision, improved to 4.26 percent from 4.11 percent.

The provision for loan losses decreased to $235 million, from $275 million.

Delinquencies of 90 days or more (as a percentage of loans in repayment) were 4.4 percent, vs. 5.1 percent.

The annual charge-off rate (as a percentage of loans in repayment) was 2.96 percent, vs. 3.94 percent.

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Business Services

Sallie Mae’s business services segment includes fees from servicing, collections and college savings businesses.

Business Services core earnings were $139 million in first-quarter 2012, compared with $132 million in the year-ago quarter.

Sallie Mae provides service to 3.7 million loan customers on behalf of the Department of Education. The company earned $17 million in servicing revenue in the first-quarter 2012 from its Department of Education loan servicing contract, compared with $15 million in the year-ago quarter.

Federally Guaranteed Student Loans (FFELP)

This segment represents earnings from Sallie Mae’s amortizing portfolio of federally guaranteed student loans.

FFELP core earnings were $82 million in first-quarter 2012, compared with the year-ago quarter’s $109 million. The decrease was primarily due to lower net interest income resulting from the declining balance of the FFELP loan portfolio and an increase in funding costs.

During the first-quarter 2012, the company acquired $906 million of FFELP loans. At March 31, 2012, the company held $136 billion of federally guaranteed student loans compared with $146 billion at March 31, 2011.

Operating Expenses

First-quarter operating expenses were $262 million in 2012, down from $303 million in the year-ago quarter primarily due to the company’s ongoing cost-cutting initiatives and lower servicing costs.

Funding and Liquidity

During first-quarter 2012, the company issued $1.6 billion in FFELP asset-backed securities (ABS), $547 million in private education loan ABS and $1.5 billion of unsecured bonds.

Also in the first-quarter, the company amended its FFELP asset-backed commercial paper facility to increase the current amount available to $7.5 billion and extend the final maturity date by one year to Jan. 9, 2015.

Shareholder Distributions

In first-quarter 2012, Sallie Mae increased its regular quarterly common stock dividend to $0.125 per share, up from $0.10 in the prior quarter. In addition, during the first quarter of 2012, the company repurchased 16.7 million shares of common stock at an aggregate purchase price of $268 million. The shares were repurchased under the company’s January 2012 share repurchase program that authorizes up to $500 million of share repurchases.

Guidance

The company has not updated its guidance for 2012 results which remains:

Full-year 2012 private education loan originations of $3.2 billion.

Fully diluted 2012 core earnings per share of $2.00.

***

Sallie Mae reports financial results on a GAAP basis and also provides certain core earnings performance measures. The difference between the company’s core earnings and GAAP results for the periods presented were

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the unrealized, mark-to-market gains/losses on derivative contracts and the goodwill and acquired intangible asset amortization and impairment. These items are recognized in GAAP but not in core earnings results. The company provides core earnings measures because this is what management uses when making management decisions regarding the company’s performance and the allocation of corporate resources. In addition, the company’s equity investors, credit rating agencies and debt capital providers use these core earnings measures to monitor the company’s business performance. See “Core Earnings — Definition and Limitations” for a further discussion and a complete reconciliation between GAAP net income and core earnings. Given the significant variability of valuations of derivative instruments on expected GAAP net income, the company does not provide a GAAP equivalent for its core earnings per share guidance.

Definitions for capitalized terms in this document can be found in the company’s Annual Report on Form 10-K for the year ended Dec. 31, 2011 (filed with the SEC on Feb. 27, 2012). Certain reclassifications have been made to the balances as of and for the three months ended March 31, 2011, to be consistent with classifications adopted for 2012, and had no effect on net income, total assets or total liabilities.

***

The company will host an earnings conference call tomorrow, Apr. 19, at 8 a.m. EDT. Sallie Mae executives will be on hand to discuss various highlights of the quarter and to answer questions related to the company’s performance. Individuals interested in participating in the call should dial (877) 356-5689 (USA and Canada) or dial (706) 679-0623 (international) and use access code 68602742 starting at 7:45 a.m. EDT. A live audio webcast of the conference call may be accessed at www.SallieMae.com/investors. Investors may access a replay of the conference call via the company’s website within two hours after the call’s conclusion. A telephone replay may be accessed two hours after the call’s conclusion through May 2, by dialing (855) 859-2056 (USA and Canada) or (404) 537-3406 (international) with access code 68602742.

Presentation slides for the conference call, as well as additional information about the company’s loan portfolios, operating segments, and other details, may be accessed at www.SallieMae.com/investors under the webcasts tab.

This press release contains “forward-looking statements” and information based on management’s current expectations as of the date of this release. Statements that are not historical facts, including statements about the company’s beliefs or expectations and statements that assume or are dependent upon future events, are forward-looking statements. Forward-looking statements are subject to risks, uncertainties, assumptions and other factors that may cause actual results to be materially different from those reflected in such forward-looking statements. These factors include, among others, the risks and uncertainties set forth in Item 1A “Risk Factors” and elsewhere in the company’s Annual Report on Form 10-K for the year ended Dec. 31, 2011; increases in financing costs; limits on liquidity; increases in costs associated with compliance with laws and regulations; changes in accounting standards and the impact of related changes in significant accounting estimates; any adverse outcomes in any significant litigation to which the company is a party; credit risk associated with the company’s exposure to third parties, including counterparties to the company’s derivative transactions; and changes in the terms of student loans and the educational credit marketplace (including changes resulting from new laws and the implementation of existing laws). The company could also be affected by, among other things: changes in its funding costs and availability; reductions to its credit ratings or the credit ratings of the United States of America; failures of its operating systems or infrastructure, including those of third-party vendors; damage to its reputation; failures to successfully implement cost-cutting and restructuring initiatives and adverse effects of such initiatives on its business; changes in the demand for educational financing or in financing preferences of lenders, educational institutions, students and their families; changes in law and regulations with respect to the student lending business and financial institutions generally; increased competition from banks and other consumer lenders; the creditworthiness of its customers; changes in the general interest rate environment, including the rate relationships among relevant money-market instruments and those of its earning assets vs. its funding arrangements; changes in general economic conditions; and changes in the demand for debt management

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services. The preparation of the company’s consolidated financial statements also requires management to make certain estimates and assumptions including estimates and assumptions about future events. These estimates or assumptions may prove to be incorrect. All forward-looking statements contained in this release are qualified by these cautionary statements and are made only as of the date of this release. The company does not undertake any obligation to update or revise these forward-looking statements to conform the statement to actual results or changes in its expectations.

***

Sallie Mae (NASDAQ: SLM) is the nation’s No. 1 financial services company specializing in education. Whether college is a long way off or just around the corner, Sallie Mae turns education dreams into reality for its 25 million customers. With products and services that include college savings programs, scholarship search tools, education loans, tuition insurance, and online banking, Sallie Mae offers solutions that help families save, plan, and pay for college. Sallie Mae also provides financial services to hundreds of college campuses as well as to federal and state governments. Learn more at SallieMae.com. Commonly known as Sallie Mae, SLM Corporation and its subsidiaries are not sponsored by or agencies of the United States of America.

###

Contact:

Media:

Patricia Nash Christel, (302) 283-4076, patricia.christel@SallieMae.com

Martha Holler, (302) 283-4036, martha.holler@SallieMae.com

Investors:

Joe Fisher, (302) 283-4075, joe.fisher@SallieMae.com

Steven McGarry, (302) 283-4074, steven.j.mcgarry@SallieMae.com

# # #

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Selected Financial Information and Ratios

(Unaudited)


	Quarters Ended
(Dollars and shares in millions, except per share data)	March 31, 2012			December 31, 2011			March 31, 2011

GAAP Basis
Net income attributable to SLM Corporation	$	112		$	511		$	175
Diluted earnings per common share attributable to SLM Corporation	$	.21		$	.99		$	.32
Weighted average shares used to compute diluted earnings per share		510			514			532
Return on assets		.24	%		1.09	%		.36	%

“Core Earnings” Basis⁽¹⁾
“Core Earnings” attributable to SLM Corporation	$	284		$	268		$	260
“Core Earnings” diluted earnings per common share attributable to SLM Corporation	$	.55		$	.51		$	.48
Weighted average shares used to compute diluted earnings per share		510			514			532
“Core Earnings” return on assets		.62	%		.57	%		.54	%

Other Operating Statistics
Ending FFELP Loans, net	$	135,934		$	138,130		$	145,558
Ending Private Education Loans, net		36,732			36,290			35,966

Ending total student loans, net	$	172,666		$	174,420		$	181,524

Average student loans	$	174,942		$	176,567		$	184,387

⁽¹⁾	“Core Earnings” are non-GAAP financial measures and do not represent a comprehensive basis of accounting. For a greater explanation of “Core Earnings,” see the section titled “‘Core Earnings’ — Definition and Limitations” and subsequent sections.

Results of Operations

We present the results of operations below on a consolidated basis in accordance with GAAP. The presentation of our results on a segment basis is not in accordance with GAAP. We have four business segments: Consumer Lending, Business Services, FFELP Loans and Other. Since these segments operate in distinct business environments and we manage and evaluate the financial performance of these segments using non-GAAP financial measures, these segments are presented on a “Core Earnings” basis (see “‘Core Earnings’ — Definition and Limitations”).

GAAP Statements of Income (Unaudited)


										March 31, 2012 vs. December 31, 2011 Increase						March 31, 2012 vs. March 31, 2011 Increase
	Quarters Ended									(Decrease)						(Decrease)
(Dollars in millions, except per share data)	March 31, 2012			December 31, 2011			March 31, 2011			$			%			$			%
Interest income:
FFELP Loans	$	842		$	876		$	877		$	(34	)		(4	)%	$	(35	)		(4	)%
Private Education Loans		625			616			604			9			1			21			3
Other loans		5			5			6			—			—			(1	)		(17	)
Cash and investments		5			5			5			—			—			—			—

Total interest income		1,477			1,502			1,492			(25	)		(2	)		(15	)		(1	)
Total interest expense		666			623			594			43			7			72			12

Net interest income		811			879			898			(68	)		(8	)		(87	)		(10	)
Less: provisions for loan losses		253			292			303			(39	)		(13	)		(50	)		(17	)

Net interest income after provisions for loan losses		558			587			595			(29	)		(5	)		(37	)		(6	)
Other income (loss):
Gains (losses) on loans and investments, net		—			(35	)		—			35			(100	)		—			—
Gains (losses) on derivative and hedging activities, net		(372	)		272			(242	)		(644	)		(237	)		(130	)		(54	)
Servicing revenue		97			94			98			3			3			(1	)		(1	)
Contingency revenue		90			85			78			5			6			12			15
Gains on debt repurchases		37			—			38			37			100			(1	)		(3	)
Other income		40			43			22			(3	)		(7	)		18			82

Total other income (loss)		(108	)		459			(6	)		(567	)		(124	)		(102	)		(1,700	)
Expenses:
Operating expenses		262			243			303			19			8			(41	)		(14	)
Goodwill and acquired intangible assets impairment and amortization expense		5			5			6			—			—			(1	)		(17	)
Restructuring expenses		5			3			4			2			67			1			25

Total expenses		272			251			313			21			8			(41	)		(13	)
Income from continuing operations before income tax expense		178			795			276			(617	)		(78	)		(98	)		(36	)
Income tax expense		67			285			99			(218	)		(76	)		(32	)		(32	)

Net income from continuing operations		111			510			177			(399	)		(78	)		(66	)		(37	)
Income (loss) from discontinued operations, net of tax expense (benefit)		—			1			(2	)		(1	)		(100	)		2			(100	)

Net income		111			511			175			(400	)		(78	)		(64	)		(37	)
Less: net loss attributable to noncontrolling interest		(1	)		—			—			(1	)		(100	)		(1	)		(100	)

Net income attributable to SLM Corporation		112			511			175			(399	)		(78	)		(63	)		(36	)
Preferred stock dividends		5			5			4			—			—			1			25

Net income attributable to SLM Corporation common stock	$	107		$	506		$	171		$	(399	)		(79	)%	$	(64	)		(37	)%

Basic earnings per common share attributable to SLM Corporation:
Continuing operations	$	.21		$	1.00		$	.32		$	(.79	)		(79	)%	$	(.11	)		(34	)%
Discontinued operations		—			—			—			—			—			—			—

Total	$	.21		$	1.00		$	.32		$	(.79	)		(79	)%	$	(.11	)		(34	)%

Diluted earnings per common share attributable to SLM Corporation:
Continuing operations	$	.21		$	.99		$	.32		$	(.78	)		(79	)%	$	(.11	)		(34	)%
Discontinued operations		—			—			—			—			—			—			—

Total	$	.21		$	.99		$	.32		$	(.78	)		(79	)%	$	(.11	)		(34	)%

Dividends per common share attributable to SLM Corporation	$	.125		$	.10		$	—		$	.025			25	%	$	.125			100	%

GAAP Balance Sheet (Unaudited)


(Dollars and shares in millions, except per share data)	March 31, 2012			December 31, 2011			March 31, 2011

Assets
FFELP Loans (net of allowance for losses of $180; $187 and $190, respectively)	$	135,934		$	138,130		$	145,558
Private Education Loans (net of allowance for losses of $2,190; $2,171 and $2,034, respectively)		36,732			36,290			35,966
Cash and investments		4,042			3,916			4,763
Restricted cash and investments		5,884			5,873			6,393
Goodwill and acquired intangible assets, net		471			478			472
Other assets		8,629			8,658			10,203

Total assets	$	191,692		$	193,345		$	203,355


Liabilities
Short-term borrowings	$	27,123		$	29,573		$	32,317
Long-term borrowings		155,588			154,393			161,886
Other liabilities		3,936			4,128			3,945

Total liabilities		186,647			188,094			198,148


Commitments and contingencies

Equity
Preferred stock, par value $.20 per share, 20 million shares authorized:
Series A: 3.3 million; 3.3 million and 3.3 million shares, respectively, issued at stated value of $50 per share		165			165			165
Series B: 4 million; 4 million and 4 million shares, respectively, issued at stated value of $100 per share		400			400			400
Common stock, par value $.20 per share, 1.125 billion shares authorized: 532 million; 529 million and 527 million shares, respectively, issued		106			106			105
Additional paid-in capital		4,182			4,136			4,092
Accumulated other comprehensive loss, net of tax benefit		(9	)		(14	)		(35	)
Retained earnings		814			770			480

Total SLM Corporation stockholders’ equity before treasury stock		5,658			5,563			5,207
Less: Common stock held in treasury: 39 million; 20 million and 0 shares, respectively		(620	)		(320	)		—

Total SLM Corporation stockholders’ equity		5,038			5,243			5,207
Noncontrolling interest		7			8			—

Total equity		5,045			5,251			5,207

Total liabilities and equity	$	191,692		$	193,345		$	203,355

Consolidated Earnings Summary — GAAP-basis

Three Months Ended March 31, 2012 Compared with Three Months Ended March 31, 2011

For the three months ended March 31, 2012 and 2011, net income was $112 million, or $.21 diluted earnings per common share, and $175 million, or $.32 diluted earnings per common share, respectively. The decrease in net income was primarily due to a $130 million increase in net losses on derivative and hedging activities and an $87 million decline in net interest income, which was partially offset by a $50 million decrease in provisions for loan losses and $41 million of lower expenses.

The primary contributors to each of the identified drivers of changes in net income for the current quarter compared with the year-ago quarter are as follows:

Net interest income declined by $87 million primarily due to the declining outstanding principal balance of our FFELP Loan portfolio and an increase in funding costs.

Provisions for loan losses decreased by $50 million as a result of overall improvements in credit quality and delinquency and charge-off trends.

Net losses on derivatives and hedging activities increased by $130 million. The primary factors affecting the change were interest rate and foreign currency fluctuations, which primarily affected the valuations of our Floor Income Contracts, basis swaps and foreign currency hedges during the period. Valuations of derivative instruments vary based upon many factors including changes in interest rates, credit risk, foreign currency fluctuations and other market factors. As a result, net gains and losses on derivatives and hedging activities may vary significantly in future periods.

Contingency revenue increased $12 million primarily as a result of an increase in collections on defaulted FFELP Loans.

Other income increased primarily as a result of a $19 million increase in foreign currency translation gains. The foreign currency translation gains relate to a portion of our foreign currency denominated debt that does not receive hedge accounting treatment. These gains were partially offset by losses on derivative and hedging activities related to the derivatives used to economically hedge these debt instruments.

Operating expenses decreased $41 million primarily due to our ongoing cost-cutting initiatives and lower servicing costs. In addition, first-quarter 2012 operating expenses were positively affected by an $8 million gain related to the final termination of our defined benefit pension plan. First-quarter 2011 operating expenses included $10 million in litigation contingency expense.

The effective tax rates for the first quarters of 2012 and 2011 were 38 percent and 36 percent, respectively.

“Core Earnings” — Definition and Limitations

We prepare financial statements in accordance with GAAP. However, we also evaluate our business segments on a basis that differs from GAAP. We refer to this different basis of presentation as “Core Earnings.” We provide this “Core Earnings” basis of presentation on a consolidated basis for each business segment because this is what we internally review when making management decisions regarding our performance and how we allocate resources. We also refer to this information in our presentations with credit rating agencies, lenders and investors. Because our “Core Earnings” basis of presentation corresponds to our segment financial presentations, we are required by GAAP to provide “Core Earnings” disclosure in the notes to our consolidated financial statements for our business segments.

“Core Earnings” are not a substitute for reported results under GAAP. We use “Core Earnings” to manage each business segment because “Core Earnings” reflect adjustments to GAAP financial results for two items, discussed below, that create significant volatility mostly due to timing factors generally beyond the control of management. Accordingly, we believe that “Core Earnings” provide management with a useful basis from which to better evaluate results from ongoing operations against the business plan or against results from prior periods. Consequently, we disclose this information as we believe it provides investors with additional information

regarding the operational and performance indicators that are most closely assessed by management. The two items adjusted for in our “Core Earnings” presentations are (1) our use of derivatives instruments to hedge our economic risks that do not qualify for hedge accounting treatment or do qualify for hedge accounting treatment but result in ineffectiveness and (2) the accounting for goodwill and acquired intangible assets.

While GAAP provides a uniform, comprehensive basis of accounting, for the reasons described above, our “Core Earnings” basis of presentation does not. “Core Earnings” are subject to certain general and specific limitations that investors should carefully consider. For example, there is no comprehensive, authoritative guidance for management reporting. Our “Core Earnings” are not defined terms within GAAP and may not be comparable to similarly titled measures reported by other companies. Accordingly, our “Core Earnings” presentation does not represent a comprehensive basis of accounting. Investors, therefore, may not be able to compare our performance with that of other financial services companies based upon “Core Earnings.” “Core Earnings” results are only meant to supplement GAAP results by providing additional information regarding the operational and performance indicators that are most closely used by management, our board of directors, rating agencies, lenders and investors to assess performance.

Specific adjustments that management makes to GAAP results to derive our “Core Earnings” basis of presentation are described in detail in the section titled “‘Core Earnings’ — Definition and Limitations — Differences between ‘Core Earnings’ and GAAP” below.

The following tables show “Core Earnings” for each business segment and our business as a whole along with the adjustments made to the income/expense items to reconcile the amounts to our reported GAAP results as required by GAAP.


	Quarter Ended March 31, 2012
(Dollars in millions)	Consumer Lending		Business Services			FFELP Loans		Other			Eliminations⁽¹⁾			Total “Core Earnings”			Adjustments⁽²⁾			Total GAAP
Interest income:
Student loans	$	625	$	—		$	725	$	—		$	—		$	1,350		$	117		$	1,467
Other loans		—		—			—		5			—			5						5
Cash and investments		2		3			3		—			(3	)		5			—			5

Total interest income		627		3			728		5			(3	)		1,360			117			1,477
Total interest expense		202		—			424		5			(3	)		628			38			666

Net interest income		425		3			304		—			—			732			79			811
Less: provisions for loan losses		235		—			18		—			—			253			—			253

Net interest income after provisions for loan losses		190		3			286		—			—			479			79			558
Servicing revenue		12		236			25		—			(176	)		97			—			97
Contingency revenue		—		90			—		—			—			90			—			90
Gains on debt repurchases		—		—			—		37			—			37			—			37
Other income (loss)		—		8			—		3			—			11			(343	)		(332	)

Total other income (loss)		12		334			25		40			(176	)		235			(343	)		(108	)
Expenses:
Direct operating expenses		73		119			181		1			(176	)		198			—			198
Overhead expenses		—		—			—		64			—			64			—			64

Operating expenses		73		119			181		65			(176	)		262			—			262
Goodwill and acquired intangible assets impairment and amortization		—		—			—		—			—			—			5			5
Restructuring expenses		1		1			—		3			—			5			—			5

Total expenses		74		120			181		68			(176	)		267			5			272

Income (loss) from continuing operations, before income tax expense (benefit)		128		217			130		(28	)		—			447			(269	)		178
Income tax expense (benefit)⁽³⁾		47		79			48		(10	)		—			164			(97	)		67

Net income (loss) from continuing operations		81		138			82		(18	)		—			283			(172	)		111
Income from discontinued operations, net of taxes		—		—			—		—			—			—			—			—

Net income (loss)		81		138			82		(18	)		—			283			(172	)		111
Less: net loss attributable to noncontrolling interest		—		(1	)		—		—			—			(1	)		—			(1	)

Net income (loss) attributable to SLM Corporation	$	81	$	139		$	82	$	(18	)	$	—		$	284		$	(172	)	$	112

⁽¹⁾	The eliminations in servicing revenue and direct operating expense represent the elimination of intercompany servicing revenue where the Business Services segment performs the loan servicing function for the FFELP Loans segment.

⁽²⁾	“Core Earnings” adjustments to GAAP:


	Quarter Ended March 31, 2012
(Dollars in millions)	Net Impact of Derivative Accounting			Net Impact of Goodwill and Acquired Intangibles			Total
Net interest income after provisions for loan losses	$	79		$	—		$	79
Total other loss		(343	)		—			(343	)
Goodwill and acquired intangible assets impairment and amortization		—			5			5

Total “Core Earnings” adjustments to GAAP	$	(264	)	$	(5	)		(269	)

Income tax benefit								(97	)

Net loss							$	(172	)

⁽³⁾	Income taxes are based on a percentage of net income before tax for the individual reportable segment.


	Quarter Ended December 31, 2011
(Dollars in millions)	Consumer Lending			Business Services		FFELP Loans		Other			Eliminations⁽¹⁾			Total “Core Earnings”		Adjustments⁽²⁾		Total GAAP
Interest income:
Student loans	$	616		$	—	$	746	$	—		$	—		$	1,362	$	130	$	1,492
Other loans		—			—		—		5			—			5		—		5
Cash and investments		2			3		2		1			(3	)		5		—		5

Total interest income		618			3		748		6			(3	)		1,372		130		1,502
Total interest expense		201			—		392		9			(3	)		599		24		623

Net interest income (loss)		417			3		356		(3	)		—			773		106		879
Less: provisions for loan losses		255			—		19		18			—			292		—		292

Net interest income (loss) after provisions for loan losses		162			3		337		(21	)		—			481		106		587
Servicing revenue		16			238		19		1			(180	)		94		—		94
Contingency revenue		—			85		—		—			—			85		—		85
Other income (loss)		(9	)		40		1		(23	)		—			9		271		280

Total other income (loss)		7			363		20		(22	)		(180	)		188		271		459
Expenses:
Direct operating expenses		67			114		184		3			(180	)		188		—		188
Overhead expenses		—			—		1		54			—			55		—		55

Operating expenses		67			114		185		57			(180	)		243		—		243
Goodwill and acquired intangible assets impairment and amortization expense		—			—		—		—			—			—		5		5
Restructuring expenses		1			1		—		1			—			3		—		3

Total expenses		68			115		185		58			(180	)		246		5		251

Income (loss) from continuing operations, before income tax expense (benefit)		101			251		172		(101	)		—			423		372		795
Income tax expense (benefit)⁽³⁾		38			93		63		(38	)		—			156		129		285

Net income (loss) from continuing operations		63			158		109		(63	)		—			267		243		510
Income from discontinued operations, net of taxes		—			—		—		1			—			1		—		1

Net income (loss)	$	63		$	158	$	109	$	(62	)	$	—		$	268	$	243	$	511

⁽¹⁾	The eliminations in servicing revenue and direct operating expense represent the elimination of intercompany servicing revenue where the Business Services segment performs the loan servicing function for the FFELP Loans segment.

⁽²⁾	“Core Earnings” adjustments to GAAP:


	Quarter Ended December 31, 2011
(Dollars in millions)	Net Impact of Derivative Accounting		Net Impact of Goodwill and Acquired Intangibles			Total
Net interest income after provisions for loan losses	$	106	$	—		$	106
Total other income		271		—			271
Goodwill and acquired intangible assets impairment and amortization expense		—		5			5

Total “Core Earnings” adjustments to GAAP	$	377	$	(5	)		372

Income tax expense							129

Net income						$	243

⁽³⁾	Income taxes are based on a percentage of net income before tax for the individual reportable segment.


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

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

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

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

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

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

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

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

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

Net income (loss)	$	44	$	132	$	109	$	(25	)	$	—		$	260		$	(85	)	$	175

⁽¹⁾	The eliminations in servicing revenue and direct operating expense represent the elimination of intercompany servicing revenue where the Business Services segment performs the loan servicing function for the FFELP Loans segment.

⁽²⁾	“Core Earnings” adjustments to GAAP:


	Quarter Ended March 31, 2011
(Dollars in millions)	Net Impact of Derivative Accounting			Net Impact of Goodwill and Acquired Intangibles			Total
Net interest income after provisions for loan losses	$	126		$	—		$	126
Total other loss		(259	)		—			(259	)
Goodwill and acquired intangible assets impairment and amortization		—			6			6

Total “Core Earnings” adjustments to GAAP	$	(133	)	$	(6	)		(139	)

Income tax benefit								(54	)

Net loss							$	(85	)

⁽³⁾	Income taxes are based on a percentage of net income before tax for the individual reportable segment.

Differences between “Core Earnings” and GAAP

The following discussion summarizes the differences between “Core Earnings” and GAAP net income (loss) and details each specific adjustment required to reconcile our “Core Earnings” segment presentation to our GAAP earnings.


	Quarters Ended
(Dollars in millions)	March 31, 2012			December 31, 2011			March 31, 2011
“Core Earnings” adjustments to GAAP:
Net impact of derivative accounting	$	(264	)	$	377		$	(133	)
Net impact of goodwill and acquired intangibles		(5	)		(5	)		(6	)
Net income tax effect		97			(129	)		54

Total “Core Earnings” adjustments to GAAP	$	(172	)	$	243		$	(85	)

Derivative Accounting: “Core Earnings” exclude periodic unrealized gains and losses that are caused primarily by the mark-to-market valuations on derivatives that do not qualify for hedge accounting treatment under GAAP. To a lesser extent, these periodic unrealized gains and losses are also a result of ineffectiveness recognized related to effective hedges. These unrealized gains and losses occur in our Consumer Lending, FFELP Loans and Other business segments. Under GAAP, for our derivatives that are held to maturity, the cumulative net unrealized gain or loss over the life of the contract will equal $0 except for Floor Income Contracts where the cumulative unrealized gain will equal the amount for which we sold the contract. In our “Core Earnings” presentation, we recognize the economic effect of these hedges, which generally results in any net settlement cash paid or received being recognized ratably as an interest expense or revenue over the hedged item’s life.

The table below quantifies the adjustments we make for derivative accounting.


	Quarters Ended
(Dollars in millions)	March 31, 2012			December 31, 2011			March 31, 2011
“Core Earnings” derivative adjustments:
Gains (losses) on derivative and hedging activities, net, included in other income⁽¹⁾	$	(372	)	$	272		$	(242	)
Plus: Realized losses on derivative and hedging activities, net⁽¹⁾		179			208			186

Unrealized gains (losses) on derivative and hedging activities, net		(193	)		480			(56	)
Amortization of net premiums on Floor Income Contracts in net interest income for “Core Earnings”		(97	)		(98	)		(85	)
Other adjustments		26			(5	)		8

Total net impact derivative accounting⁽²⁾	$	(264	)	$	377		$	(133	)

⁽¹⁾

See “Reclassification of Realized Gains (Losses) on Derivative and Hedging Activities” below for a detailed breakdown of the components of realized losses on derivative and hedging activities.

⁽²⁾

Negative amounts are subtracted from “Core Earnings” net income to arrive at GAAP net income and positive amounts are added to “Core Earnings” net income to arrive at GAAP net income.

Reclassification of Realized Gains (Losses) on Derivative and Hedging Activities

Derivative accounting requires net settlement income/expense on derivatives and realized gains/losses related to derivative dispositions (collectively referred to as “realized gains (losses) on derivative and hedging activities”) that do not qualify as hedges to be recorded in a separate income statement line item below net interest income. Under our “Core Earnings” presentation, these gains and losses are reclassified to the income statement line item of the economically hedged item. For our “Core Earnings” net interest margin, this would primarily include: (a) reclassifying the net settlement amounts related to our Floor Income Contracts to student loan interest income and (b) reclassifying the net settlement amounts related to certain of our basis swaps to debt interest expense. The table below summarizes the realized losses on derivative and hedging activities and the associated reclassification on a “Core Earnings” basis.


	Quarters Ended
(Dollars in millions)	March 31, 2012			December 31, 2011			March 31, 2011
Reclassification of realized gains (losses) on derivative and hedging activities:
Net settlement expense on Floor Income Contracts reclassified to net interest income	$	(215	)	$	(229	)	$	(226	)
Net settlement income on interest rate swaps reclassified to net interest income		36			21			16
Foreign exchange derivatives losses reclassified to other income		—			—			(1	)
Net realized gains (losses) on terminated derivative contracts reclassified to other income		—			—			25

Total reclassifications of realized losses on derivative and hedging activities		(179	)		(208	)		(186	)
Add: Unrealized gains (losses) on derivative and hedging activities, net⁽¹⁾		(193	)		480			(56	)

Gains (losses) on derivative and hedging activities, net	$	(372	)	$	272		$	(242	)

⁽¹⁾

“Unrealized gains (losses) on derivative and hedging activities, net” comprises the following unrealized mark-to-market gains (losses):


	Quarters Ended
(Dollars in millions)	March 31, 2012			December 31, 2011		March 31, 2011
Floor Income Contracts	$	136		$	215	$	151
Basis swaps		(22	)		28		(6	)
Foreign currency hedges		(294	)		229		(194	)
Other		(13	)		8		(7	)

Total unrealized gains (losses) on derivative and hedging activities, net	$	(193	)	$	480	$	(56	)

Cumulative Impact of Derivative Accounting under GAAP compared to “Core Earnings”

As of March 31, 2012, derivative accounting has reduced GAAP equity by approximately $1.1 billion as a result of approximately $1.1 billion (after tax) of cumulative net unrealized losses recognized for GAAP, but not in “Core Earnings.” The following table rolls forward the cumulative impact to GAAP equity due to these unrealized net losses related to derivative accounting.


	Quarters Ended
(Dollars in millions)	March 31, 2012			December 31, 2011			March 31, 2011
Beginning impact of derivative accounting on GAAP equity	$	(977	)	$	(1,232	)	$	(676	)
Net impact of net unrealized gains (losses) under derivative accounting		(172	)		255			(76	)

Ending impact of derivative accounting on GAAP equity	$	(1,149	)	$	(977	)	$	(752	)

In addition, net Floor premiums received on Floor Income Contracts that have not been amortized into “Core Earnings” as of the respective year-ends are presented in the table below. These net premiums will be recognized in “Core Earnings” in future periods and are presented below net of tax. As of March 31, 2012, the remaining amortization term of the net Floor premiums was approximately 4.25 years.


	As of
(Dollars in millions)	March 31, 2012			December 31, 2011			March 31, 2011
Unamortized net Floor premiums (net of tax)	$	(711	)	$	(772	)	$	(945	)

Goodwill and Acquired Intangibles: Our “Core Earnings” exclude goodwill and intangible impairment and the amortization of acquired intangibles. The following table summarizes the acquired intangible adjustments.


	Quarters Ended
(Dollars in millions)	March 31, 2012			December 31, 2011			March 31, 2011
“Core Earnings” goodwill and acquired intangibles adjustments⁽¹⁾:
Amortization of acquired intangibles	$	(5	)	$	(5	)	$	(6	)

Total “Core Earnings” goodwill and acquired intangibles adjustments⁽¹⁾	$	(5	)	$	(5	)	$	(6	)

⁽¹⁾

Negative amounts are subtracted from “Core Earnings” net income to arrive at GAAP net income and positive amounts are added to “Core Earnings” net income to arrive at GAAP net income.

Business Segment Earnings Summary — “Core Earnings” Basis

Consumer Lending Segment

The following table shows “Core Earnings” results for our Consumer Lending segment.


	Quarters Ended							% Increase (Decrease)
(Dollars in millions)	Mar. 31, 2012		Dec. 31, 2011			Mar. 31, 2011		Mar. 31, 2012 vs. Dec. 31, 2011			Mar. 31, 2012 vs. Mar. 31, 2011
“Core Earnings” interest income:
Private Education Loans	$	625	$	616		$	604		1	%		3	%
Cash and investments		2		2			3		—			(33	)

Total “Core Earnings” interest income		627		618			607		1			3
Total “Core Earnings” interest expense		202		201			197		—			3

Net “Core Earnings” interest income		425		417			410		2			4
Less: provisions for loan losses		235		255			275		(8	)		(15	)

Net “Core Earnings” interest income after provisions for loan losses		190		162			135		17			41
Servicing revenue		12		16			17		(25	)		(29	)
Other income (loss)		—		(9	)		—		(100	)		—

Total income		12		7			17		71			(29	)
Direct operating expenses		73		67			82		9			(11	)
Restructuring expenses		1		1			1		—			—

Total expenses		74		68			83		9			(11	)

Income from continuing operations, before income tax expense		128		101			69		27			86
Income tax expense		47		38			25		24			88

“Core Earnings”	$	81	$	63		$	44		29	%		84	%

Consumer Lending Net Interest Margin

The following table shows the Consumer Lending “Core Earnings” net interest margin along with reconciliation to the GAAP-basis Consumer Lending net interest margin before provisions for loan losses.


	Quarters Ended
	March 31, 2012			December 31, 2011			March 31, 2011
“Core Earnings” basis Private Education Student Loan yield		6.42	%		6.34	%		6.36	%
Discount amortization		.24			.22			.26

“Core Earnings” basis Private Education Loan net yield		6.66			6.56			6.62
“Core Earnings” basis Private Education Loan cost of funds		(2.01	)		(1.99	)		(1.97	)

“Core Earnings” basis Private Education Loan spread		4.65			4.57			4.65
“Core Earnings” basis other asset spread impact		(.39	)		(.41	)		(.54	)

“Core Earnings” basis Consumer Lending net interest margin⁽¹⁾		4.26	%		4.16	%		4.11	%


“Core Earnings” basis Consumer Lending net interest margin⁽¹⁾		4.26	%		4.16	%		4.11	%
Adjustment for GAAP accounting treatment		(.13	)		(.13	)		(.04	)

GAAP-basis Consumer Lending net interest margin⁽¹⁾		4.13	%		4.03	%		4.07	%

⁽¹⁾

The average balances of our Consumer Lending “Core Earnings” basis interest-earning assets for the respective periods are:


(Dollars in millions)
Private Education Loans	$	37,749	$	37,259	$	37,006
Other interest-earning assets		2,327		2,517		3,360

Total Consumer Lending “Core Earnings” basis interest-earning assets	$	40,076	$	39,776	$	40,366

The increase in the “Core Earnings” basis Consumer Lending net interest margin over the year-ago quarter was primarily the result of a benefit from the decline in the average balance of our other asset portfolio. The size of the other asset portfolio, which is primarily securitization trust restricted cash and cash held at Sallie Mae Bank (the “Bank”) has decreased significantly. This other asset portfolio earns a negative yield and as a result, when its relative weighting decreases compared to the Private Education Loan portfolio, the overall net interest margin increases.

Private Education Loan Provision for Loan Losses and Charge-Offs

The following table summarizes the total Private Education Loan provision for loan losses and charge-offs.


	Quarters Ended
(Dollars in millions)	March 31, 2012		December 31, 2011		March 31, 2011
Private Education Loan provision for loan losses	$	235	$	255	$	275
Private Education Loan charge-offs	$	224	$	263	$	273

In establishing the allowance for Private Education Loan losses as of March 31, 2012, we considered several factors with respect to our Private Education Loan portfolio. In particular, we continue to see improving credit quality and continuing positive delinquency and charge-off trends in connection with this portfolio. Improving credit quality is seen in higher FICO scores and cosigner rates as well as a more seasoned portfolio compared with the year-ago quarter. The overall delinquency rate has declined to 9.1 percent from 10.4 percent and the charge-off rate has declined to 2.96 percent from 3.94 percent compared with the year-ago quarter. Apart from these overall improvements , Private Education Loans that have defaulted between 2008 and 2011 for which we have previously charged off estimated losses have, to varying degrees, not met our post-default recovery expectations to date and may continue not to do so. Our allowance for loan losses takes into account these potential recovery uncertainties.

For a more detailed discussion of our policy for determining the collectability of Private Education Loan and maintaining our allowance for Private Education Loan losses, see “Critical Accounting Policies and Estimates—Allowance for Loan Losses” in our Annual Report on Form 10-K for the year ended December 31, 2011.

Other Income — Consumer Lending Segment

Included in other income for the fourth quarter 2011 was a $9 million mark-to-market loss related to classifying $12 million of non-U.S. dollar-denominated student loans as held-for-sale. This $12 million portfolio is our entire non-U.S. dollar-denominated loan portfolio.

Operating Expenses — Consumer Lending Segment

Operating expenses for our Consumer Lending segment include costs incurred to originate Private Education Loans and to service and collect on our Private Education Loan portfolio. The decreases in operating expenses in the quarter ended March 31, 2012 compared with the quarter ended March 31, 2011 were primarily the result of our cost-cutting initiatives. Operating expenses were 77 basis points and 90 basis points of average Private Education Loans in the quarters ended March 31, 2012 and 2011, respectively.

Business Services Segment

The following table shows “Core Earnings” results for our Business Services segment.


	Quarters Ended							% Increase (Decrease)
(Dollars in millions)	Mar. 31, 2012			Dec. 31, 2011		Mar. 31, 2011		Mar. 31, 2012 vs. Dec. 31, 2011			Mar. 31, 2012 vs. Mar. 31, 2011
Net interest income after provision	$	3		$	3	$	3		—	%		—	%
Servicing revenue:
Intercompany loan servicing		176			180		189		(2	)		(7	)
Third-party loan servicing		22			22		22		—			—
Guarantor servicing		11			12		9		(8	)		22
Other servicing		27			24		25		13			8

Total servicing revenue		236			238		245		(1	)		(4	)
Contingency revenue		90			85		78		6			15
Other Business Services revenue		8			40		11		(80	)		(27	)

Total other income		334			363		334		(8	)		—
Direct operating expenses		119			114		128		4			(7	)
Restructuring expenses		1			1		1		—			—

Total expenses		120			115		129		4			(7	)

Income from continuing operations, before income tax expense		217			251		208		(14	)		4
Income tax expense		79			93		76		(15	)		4

“Core Earnings”		138			158		132		(13	)		5
Less: net loss attributable to noncontrolling interest		(1	)		—		—		(100	)		(100	)

“Core Earnings” attributable to SLM Corporation	$	139		$	158	$	132		(12	)%		5	%

Our Business Services segment earns intercompany loan servicing fees from servicing the FFELP Loans in our FFELP Loans segment. The average balance of this portfolio was $135 billion and $144 billion for the quarters ended March 31, 2012 and 2011, respectively. The decline in intercompany loan servicing revenue from the year-ago period is primarily the result of a lower outstanding principal balance in the underlying portfolio.

We are servicing approximately 3.7 million accounts under the ED Servicing Contract as of March 31, 2012. Third-party loan servicing fees in the first quarter of 2012 and the first quarter of 2011 included $17 million and $15 million, respectively, of servicing revenue related to the ED Servicing Contract. Our allocation of loans awarded for servicing under the ED contract increased from 22 percent to 26 percent for the contract year ending August 2012. The increase was driven primarily by our top ranking for default prevention performance results.

The increase in contingency revenue was primarily the result of an increase in collections on defaulted FFELP Loans. The following table presents the outstanding inventory of contingent collections receivables that our Business Services segment will collect on behalf of others. We expect the inventory of contingent collections receivables to decline over time as a result of the elimination of FFELP in July 2010.


(Dollars in millions)	March 31, 2012		December 31, 2011		March 31, 2011
Student loans	$	11,004	$	11,553	$	10,393
Other		1,752		2,017		1,883

Total	$	12,756	$	13,570	$	12,276

Other servicing revenue includes account asset servicing revenue and Campus Solutions revenue. Account asset servicing revenue represents fees earned on program management, transfer and servicing agent services and administration services for 529 college savings plans we service. Assets under administration of 529 college-savings plans totaled $41.3 billion as of March 31, 2012, a 13 percent increase from the year-ago quarter. Campus Solutions revenue is earned from our Campus Solutions business whose services include comprehensive financing and transaction processing solutions that we provide to college financial aid offices and students to streamline the financial aid process.

Other Business Services revenue is primarily transaction fees that are earned in conjunction with our rewards program from participating companies based on member purchase activity, either online or in stores, depending on the contractual arrangement with the participating company. Typically, a percentage of the purchase price of the consumer members’ eligible purchases with participating companies is set aside in an account maintained by us on behalf of our members. In fourth-quarter 2011, we terminated our credit card affiliation program with a third-party bank and concurrently entered into an affiliation program with a new bank. In terminating the old program we recognized a $25 million gain which primarily represented prior cash advances we received that were previously recorded as deferred revenue.

Revenues related to services performed on FFELP Loans accounted for 76 percent and 77 percent, respectively, of total segment revenues for the quarters ended March 31, 2012 and 2011.

Operating Expenses — Business Services Segment

Operating expenses for the quarter ended March 31, 2012 decreased from the quarter ended March 31, 2011, primarily as a result of our cost-cutting initiatives.

FFELP Loans Segment

The following table shows “Core Earnings” results for our FFELP Loans segment.


	Quarters Ended						% Increase (Decrease)
(Dollars in millions)	Mar. 31, 2012		Dec. 31, 2011		Mar. 31, 2011		Mar. 31, 2012 vs. Dec. 31, 2011			Mar. 31, 2012 vs. Mar. 31, 2011
“Core Earnings” interest income:
FFELP Loans	$	725	$	746	$	736		(3	)%		(1	)%
Cash and investments		3		2		1		50			200

Total “Core Earnings” interest income		728		748		737		(3	)		(1	)
Total “Core Earnings” interest expense		424		392		370		8			15

Net “Core Earnings” interest income		304		356		367		(15	)		(17	)
Less: provisions for loan losses		18		19		23		(5	)		(22	)

Net “Core Earnings” interest income after provisions for loan losses		286		337		344		(15	)		(17	)
Servicing revenue		25		19		25		32			—
Other income		—		1		—		(100	)		—

Total other income		25		20		25		25			—
Direct operating expenses		181		185		195		(2	)		(7	)
Restructuring expenses		—		—		1		—			(100	)

Total expenses		181		185		196		(2	)		(8	)

Income from continuing operations, before income tax expense		130		172		173		(24	)		(25	)
Income tax expense		48		63		64		(24	)		(25	)

“Core Earnings”	$	82	$	109	$	109		(25	)%		(25	)%

FFELP Loans Net Interest Margin

The following table shows the FFELP Loans “Core Earnings” basis net interest margin along with reconciliation to the GAAP-basis FFELP Loans net interest margin.


	Quarters Ended
	Mar. 31, 2012			Dec. 31, 2011			Mar. 31, 2011
“Core Earnings” basis FFELP student loan yield		2.67	%		2.63	%		2.63	%
Hedged Floor Income		.28			.28			.23
Unhedged Floor Income		.11			.12			.08
Consolidation Loan Rebate Fees		(.66	)		(.65	)		(.66	)
Repayment Borrower Benefits		(.13	)		(.13	)		(.10	)
Premium amortization		(.14	)		(.13	)		(.15	)

“Core Earnings” basis FFELP student loan net yield		2.13			2.12			2.03
“Core Earnings” basis FFELP student loan cost of funds		(1.17	)		(1.05	)		(.96	)

“Core Earnings” basis FFELP student loan spread		.96			1.07			1.07
“Core Earnings” basis FFELP other asset spread impact		(.11	)		(.10	)		(.09	)

“Core Earnings” basis FFELP Loans net interest margin⁽¹⁾		.85	%		.97	%		.98	%


“Core Earnings” basis FFELP Loans net interest margin⁽¹⁾		.85	%		.97	%		.98	%
Adjustment for GAAP accounting treatment		.27			.33			.35

GAAP-basis FFELP Loans net interest margin		1.12	%		1.30	%		1.33	%

⁽¹⁾

The average balances of our FFELP “Core Earnings” basis interest-earning assets for the respective periods are:


(Dollars in millions)
FFELP Loans	$	137,193	$	139,308	$	147,381
Other interest-earning assets		6,427		5,989		5,016

Total FFELP “Core Earnings” basis interest-earning assets	$	143,620	$	145,297	$	152,397

The decrease in the “Core Earnings” basis FFELP Loans net interest margin of 13 basis points for the quarter ended March 31, 2012 compared with the year-ago quarter was primarily the result of a widening of the CP/LIBOR spread resulting in a 6 basis point decline in net interest margin as well as a general increase in our funding costs related to unsecured and ABS debt issuances over the last year.

As of March 31, 2012, our FFELP Loan portfolio totaled approximately $135.9 billion, comprised of $49.5 billion of FFELP Stafford and $86.4 billion of FFELP Consolidation Loans. The weighted-average life of these portfolios is 5.0 years and 9.1 years, respectively, assuming a Constant Prepayment Rate (“CPR”) of 5 percent and 3 percent, respectively.

On December 23, 2011, the President signed the Consolidated Appropriations Act of 2012 into law. This law includes changes that permit FFELP lenders or beneficial holders to change the index on which the Special Allowance Payments (“SAP”) are calculated for FFELP Loans first disbursed on or after January 1, 2000. We elected to use the one-month LIBOR rate rather than the CP rate commencing on April 1, 2012 in connection with our entire $128 billion of CP indexed loans. This change will help us to better match lender payments with our financing costs.

During the fourth-quarter 2011, the Administration announced a Special Direct Consolidation Loan Initiative. The initiative provides an incentive to borrowers who have at least one student loan owned by the Department of Education and at least one held by a FFELP lender to consolidate the FFELP lender’s loans into the Direct Loan program by providing a 0.25 percentage point interest rate reduction on the FFELP loans that are eligible for consolidation. The program is available from January 17, 2012 through June 30, 2012. We currently do not foresee the initiative having a significant impact on our FFELP Loans segment.

FFELP Loan Provision for Loan Losses and Charge-Offs

The following table summarizes the FFELP Loan provision for loan losses and charge-offs.


	Quarters Ended
(Dollars in millions)	Mar. 31, 2012		Dec. 31, 2011		Mar. 31, 2011
FFELP Loan provision for loan losses	$	18	$	19	$	23
FFELP Loan charge-offs		23		19		20

Operating Expenses — FFELP Loans

Operating expenses for our FFELP Loans segment primarily include the contractual rates we pay to service loans in term asset-backed securitization trusts or a similar rate if a loan is not in a term financing facility (which is presented as an intercompany charge from the Business Services segment who services the loans), the fees we pay for third-party loan servicing and costs incurred to acquire loans. The intercompany revenue charged from the Business Services segment and included in those amounts was $176 million and $189 million for the quarters ended March 31, 2012 and 2011, respectively. These amounts exceed the actual cost of servicing the loans. Operating expenses were 53 basis points and 54 basis points of average FFELP Loans in the quarters ended March 31, 2012 and 2011, respectively. The decline in operating expenses from the prior year quarter was primarily the result of the $10.2 billion reduction in the average outstanding balance of our FFELP Loans portfolio.

Other Segment

The following table shows “Core Earnings” results of our Other segment.


	Quarters Ended									% Increase (Decrease)
(Dollars in millions)	March 31, 2012			December 31, 2011			March 31, 2011			Mar. 31, 2012 vs. Dec. 31, 2011			Mar. 31, 2012 vs. Mar. 31, 2011
Net interest income (loss) after provision for loan losses	$	—		$	(21	)	$	(13	)		(100	)%		(100	)%
Gains on debt repurchases		37			—			64			100			(42	)
Other		3			(22	)		2			114			50

Total income (loss)		40			(22	)		66			282			(39	)
Direct operating expenses		1			3			8			(67	)		(88	)
Overhead expenses:
Corporate overhead		36			29			49			24			(27	)
Unallocated information technology costs		28			25			30			12			(7	)

Total overhead expenses		64			54			79			19			(19	)

Total operating expenses		65			57			87			14			(25	)
Restructuring expenses		3			1			1			200			200

Total expenses		68			58			88			17			(23	)

Loss from continuing operations, before income tax benefit		(28	)		(101	)		(35	)		(72	)		(20	)
Income tax benefit		(10	)		(38	)		(12	)		(74	)		(17	)

Net loss from continuing operations		(18	)		(63	)		(23	)		(71	)		(22	)
Income (loss) from discontinued operations, net of tax		—			1			(2	)		(100	)		(100	)

“Core Earnings” net loss	$	(18	)	$	(62	)	$	(25	)		(71	)%		(28	)%

Net Interest Income (Loss) after Provision for Loan Losses

Net interest income (loss) after provision for loan losses includes net interest income related to our corporate liquidity portfolio as well as net interest income and provision expense related to our mortgage and consumer loan portfolios. The $13 million improvement in the current quarter compared with the prior year quarter was primarily the result of our not recording any provision for loan losses related to our mortgage and consumer loan portfolios in the first quarter of 2012. Each quarter we perform an analysis regarding the adequacy of the loan loss allowance for these portfolios and we determined that at March 31, 2012 no additional allowance for loan losses was required related to this $168 million portfolio.

Gains on Debt Repurchases

We began repurchasing our outstanding debt in 2008. We repurchased $204 million and $825 million face amount of our debt for the quarters ended March 31, 2012 and 2011, respectively.

Other Income

The fourth quarter of 2011 had $26 million of impairment recorded related to our investments in leveraged leases. The impairment was primarily related to American Airlines filing for bankruptcy in the fourth quarter of 2011. As a result of their bankruptcy filing we fully impaired our related leveraged lease investments.

Overhead

Corporate overhead is comprised of costs related to executive management, the board of directors, accounting, finance, legal, human resources and stock-based compensation expense. Unallocated information technology costs are related to infrastructure and operations.

The decrease in overhead for the quarter ended March 31, 2012 compared with the quarter ended March 31, 2011 was primarily the result of our cost-cutting initiatives as well as an $8 million gain related to the final termination of our defined benefit pension plan.

Financial Condition

This section provides additional information regarding the changes related to our loan portfolio assets and related liabilities as well as credit quality and performance indicators related to our Consumer Lending portfolio.

Summary of our Student Loan Portfolio

Ending Student Loan Balances, net


	March 31, 2012
(Dollars in millions)	FFELP Stafford and Other			FFELP Consolidation Loans			Total FFELP Loans			Private Education Loans			Total
Total student loan portfolio:
In-school⁽¹⁾	$	2,850		$	—		$	2,850		$	2,421		$	5,271
Grace, repayment and other⁽²⁾		45,966			85,674			131,640			36,104			167,744

Total, gross		48,816			85,674			134,490			38,525			173,015
Unamortized premium/(discount)		803			821			1,624			(853	)		771
Receivable for partially charged-off loans		—			—			—			1,250			1,250
Allowance for loan losses		(111	)		(69	)		(180	)		(2,190	)		(2,370	)

Total student loan portfolio	$	49,508		$	86,426		$	135,934		$	36,732		$	172,666

% of total FFELP		36	%		64	%		100	%
% of total		29	%		50	%		79	%		21	%		100	%

	December 31, 2011
(Dollars in millions)	FFELP Stafford and Other			FFELP Consolidation Loans			Total FFELP Loans			Private Education Loans			Total
Total student loan portfolio:
In-school⁽¹⁾	$	3,100		$	—		$	3,100		$	2,263		$	5,363
Grace, repayment and other⁽²⁾		46,618			86,925			133,543			35,830			169,373

Total, gross		49,718			86,925			136,643			38,093			174,736
Unamortized premium/(discount)		839			835			1,674			(873	)		801
Receivable for partially charged-off loans		—			—			—			1,241			1,241
Allowance for loan losses		(117	)		(70	)		(187	)		(2,171	)		(2,358	)

Total student loan portfolio	$	50,440		$	87,690		$	138,130		$	36,290		$	174,420

% of total FFELP		37	%		63	%		100	%
% of total		29	%		50	%		79	%		21	%		100	%


	March 31, 2011
(Dollars in millions)	FFELP Stafford and Other			FFELP Consolidation Loans			Total FFELP			Private Education Loans			Total
Total student loan portfolio:
In-school⁽¹⁾	$	6,073		$	—		$	6,073		$	3,412		$	9,485
Grace, repayment and other⁽²⁾		47,477			90,366			137,843			34,374			172,217

Total, gross		53,550			90,366			143,916			37,786			181,702
Unamortized premium/(discount)		937			895			1,832			(876	)		956
Receivable for partially charged-off loans		—			—			—			1,090			1,090
Allowance for loan losses		(121	)		(69	)		(190	)		(2,034	)		(2,224	)

Total student loan portfolio	$	54,366		$	91,192		$	145,558		$	35,966		$	181,524

% of total FFELP		37	%		63	%		100	%
% of total		30	%		50	%		80	%		20	%		100	%

⁽¹⁾	Loans for borrowers still attending school and are not yet required to make payments on the loan.

⁽²⁾	Includes loans in deferment or forbearance.

Average Student Loan Balances (net of unamortized premium/discount)


	Quarter Ended March 31, 2012
(Dollars in millions)	FFELP Stafford and Other			FFELP Consolidation Loans			Total FFELP			Private Education Loans			Total
Total	$	50,149		$	87,044		$	137,193		$	37,749		$	174,942
% of FFELP		37	%		63	%		100	%
% of total		28	%		50	%		78	%		22	%		100	%

	Quarter Ended December 31, 2011
(Dollars in millions)	FFELP Stafford and Other			FFELP Consolidation Loans			Total FFELP			Private Education Loans			Total
Total	$	51,106		$	88,202		$	139,308		$	37,259		$	176,567
% of FFELP		37	%		63	%		100	%
% of total		29	%		50	%		79	%		21	%		100	%

	Quarter Ended March 31, 2011
(Dollars in millions)	FFELP Stafford and Other			FFELP Consolidation Loans			Total FFELP			Private Education Loans			Total
Total	$	55,535		$	91,846		$	147,381		$	37,006		$	184,387
% of FFELP		38	%		62	%		100	%
% of total		30	%		50	%		80	%		20	%		100	%

Student Loan Activity


	Quarter Ended March 31, 2012
(Dollars in millions)	FFELP Stafford and Other			FFELP Consolidation Loans			Total FFELP			Total Private Education Loans			Total Portfolio
Beginning balance	$	50,440		$	87,690		$	138,130		$	36,290		$	174,420
Acquisitions and originations		819			78			897			1,151			2,048
Capitalized interest and premium/discount amortization		335			398			733			245			978
Consolidations to third parties		(719	)		(225	)		(944	)		(23	)		(967	)
Sales		(135	)		—			(135	)		—			(135	)
Repayments/defaults/other		(1,232	)		(1,515	)		(2,747	)		(931	)		(3,678	)

Ending balance	$	49,508		$	86,426		$	135,934		$	36,732		$	172,666


	Quarter Ended December 31, 2011
(Dollars in millions)	FFELP Stafford and Other			FFELP Consolidation Loans			Total FFELP			Total Private Education Loans			Total Portfolio
Beginning balance	$	51,682		$	88,977		$	140,659		$	36,157		$	176,816
Acquisitions and originations		121			31			152			569			721
Capitalized interest and premium/discount amortization		508			378			886			419			1,305
Consolidations to third parties		(617	)		(250	)		(867	)		(21	)		(888	)
Sales		(186	)		—			(186	)		—			(186	)
Repayments/defaults/other		(1,068	)		(1,446	)		(2,514	)		(834	)		(3,348	)

Ending balance	$	50,440		$	87,690		$	138,130		$	36,290		$	174,420


	Quarter Ended March 31, 2011
(Dollars in millions)	FFELP Stafford and Other			FFELP Consolidation Loans			Total FFELP			Total Private Education Loans			Total Portfolio
Beginning balance	$	56,252		$	92,397		$	148,649		$	35,656		$	184,305
Acquisitions and originations		103			247			350			929			1,279
Capitalized interest and premium/discount amortization		322			371			693			294			987
Consolidations to third parties		(851	)		(278	)		(1,129	)		(17	)		(1,146	)
Sales		(189	)		—			(189	)		—			(189	)
Repayments/defaults/other		(1,271	)		(1,545	)		(2,816	)		(896	)		(3,712	)

Ending balance	$	54,366		$	91,192		$	145,558		$	35,966		$	181,524

Private Education Loan Originations

Total Private Education Loan originations increased 23 percent from the year-ago quarter to $1.2 billion in the quarter ended March 31, 2012.

The following table summarizes our Private Education Loan originations.


	Quarters Ended
(Dollars in millions)	March 31, 2012		December 31, 2011		March 31, 2011
Private Education Loan originations	$	1,160	$	457	$	940

Consumer Lending Portfolio Performance

Private Education Loan Delinquencies and Forbearance


	Private Education Loan Delinquencies
	March 31, 2012						December 31, 2011						March 31, 2011
(Dollars in millions)	Balance			%			Balance			%			Balance			%
Loans in-school/grace/deferment⁽¹⁾	$	6,917					$	6,522					$	8,323
Loans in forbearance⁽²⁾		1,372						1,386						1,343
Loans in repayment and percentage of each status:
Loans current		27,499			90.9	%		27,122			89.9	%		25,195			89.6	%
Loans delinquent 31-60 days⁽³⁾		859			2.8			1,076			3.6			930			3.3
Loans delinquent 61-90 days⁽³⁾		544			1.9			520			1.6			564			2.0
Loans delinquent greater than 90 days⁽³⁾		1,334			4.4			1,467			4.9			1,431			5.1

Total Private Education Loans in repayment		30,236			100	%		30,185			100	%		28,120			100	%

Total Private Education Loans, gross		38,525						38,093						37,786
Private Education Loan unamortized discount		(853	)					(873	)					(876	)

Total Private Education Loans		37,672						37,220						36,910
Private Education Loan receivable for partially charged-off loans		1,250						1,241						1,090
Private Education Loan allowance for losses		(2,190	)					(2,171	)					(2,034	)

Private Education Loans, net	$	36,732					$	36,290					$	35,966

Percentage of Private Education Loans in repayment					78.5	%					79.2	%					74.4	%

Delinquencies as a percentage of Private Education Loans in repayment					9.1	%					10.1	%					10.4	%

Loans in forbearance as a percentage of loans in repayment and forbearance					4.3	%					4.4	%					4.6	%

Loans in repayment greater than 12 months as a percentage of loans in repayment⁽⁴⁾					74.1	%					72.4	%					66.2	%

⁽¹⁾	Deferment includes borrowers who have returned to school or are engaged in other permitted educational activities and are not yet required to make payments on their loans, e.g., residency periods for medical students or a grace period for bar exam preparation.

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

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

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

Allowance for Private Education Loan Losses

The following table summarizes changes in the allowance for Private Education Loan losses.


	Quarters Ended
(Dollars in millions)	March 31, 2012			December 31, 2011			March 31, 2011
Allowance at beginning of period	$	2,171		$	2,167		$	2,021
Provisions for Private Education Loan losses		235			255			275
Charge-offs		(224	)		(263	)		(273	)
Reclassification of interest reserve		8			12			11

Allowance at end of period	$	2,190		$	2,171		$	2,034

Charge-offs as a percentage of average loans in repayment (annualized)		2.96	%		3.52	%		3.94	%
Charge-offs as a percentage of average loans in repayment and forbearance (annualized)		2.84	%		3.36	%		3.75	%
Allowance as a percentage of the ending total loan balance		5.5	%		5.5	%		5.2	%
Allowance as a percentage of ending loans in repayment		7.2	%		7.2	%		7.2	%
Average coverage of charge-offs (annualized)		2.4			2.1			1.8
Ending total loans⁽¹⁾	$	39,775		$	39,334		$	38,876
Average loans in repayment	$	30,378		$	29,706		$	28,127
Ending loans in repayment	$	30,236		$	30,185		$	28,120

⁽¹⁾

Ending total loans represent gross Private Education Loans, plus the receivable for partially charged-off loans.

The following table provides detail for our traditional and non-traditional Private Education Loans.


	March 31, 2012									December 31, 2011									March 31, 2011
(Dollars in millions)	Traditional			Non- Traditional			Total			Traditional			Non- Traditional			Total			Traditional			Non- Traditional			Total
Ending total loans⁽¹⁾	$	35,755		$	4,020		$	39,775		$	35,233		$	4,101		$	39,334		$	34,563		$	4,313		$	38,876
Ending loans in repayment		27,588			2,648			30,236			27,467			2,718			30,185			25,401			2,719			28,120
Private Education Loan allowance for loan losses		1,587			603			2,190			1,542			629			2,171			1,298			736			2,034
Charge-offs as a percentage of average loans in repayment (annualized)		2.26	%		10.30	%		2.96	%		2.68	%		11.94	%		3.52	%		2.92	%		13.42	%		3.94	%
Allowance as a percentage of total ending loan balance		4.4	%		15.0	%		5.5	%		4.4	%		15.3	%		5.5	%		3.8	%		17.1	%		5.2	%
Allowance as a percentage of ending loans in repayment		5.8	%		22.8	%		7.2	%		5.6	%		23.1	%		7.2	%		5.1	%		27.1	%		7.2	%
Average coverage of charge-offs (annualized)		2.5			2.2			2.4			2.1			2.0			2.1			1.8			2.0			1.8
Delinquencies as a percentage of Private Education Loans in repayment		7.7	%		23.3	%		9.1	%		8.6	%		26.0	%		10.1	%		8.7	%		26.4	%		10.4	%
Delinquencies greater than 90 days as a percentage of Private Education Loans in repayment		3.6	%		12.5	%		4.4	%		4.0	%		13.6	%		4.9	%		4.1	%		14.4	%		5.1	%
Loans in forbearance as a percentage of loans in repayment and forbearance		4.1	%		6.8	%		4.3	%		4.2	%		6.6	%		4.4	%		4.4	%		6.5	%		4.6	%
Loans that entered repayment during the period⁽²⁾	$	729		$	54		$	783		$	1,514		$	110		$	1,624		$	1,519		$	86		$	1,605
Percentage of Private Education Loans with a cosigner		66	%		29	%		63	%		65	%		29	%		62	%		64	%		29	%		60	%
Average FICO at origination		727			624			718			726			624			717			725			623			716

⁽¹⁾	Ending total loans represent gross Private Education Loans, plus the receivable for partially charged-off loans.

⁽²⁾	Includes loans that are required to make a payment for the first time.

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

Receivable for Partially Charged-Off Private Education Loans

At the end of each month, for loans that are 212 days past due, we charge off the estimated loss of a defaulted loan balance. Actual recoveries are applied against the remaining loan balance that was not charged off. We refer to this remaining loan balance as the “receivable for partially charged-off loans.” If actual periodic recoveries are less than expected, the difference is immediately charged off through the allowance for loan losses with an offsetting reduction in the receivable for partially charged-off Private Education Loans. If actual periodic recoveries are greater than expected, they will be reflected as a recovery through the allowance for loan losses once the cumulative recovery amount exceeds the cumulative amount originally expected to be recovered.

The following table summarizes the activity in the receivable for partially charged-off Private Education Loans.


	Quarters Ended
(Dollars in millions)	March 31, 2012			December 31, 2011			March 31, 2011
Receivable at beginning of period	$	1,241		$	1,192		$	1,040
Expected future recoveries of current period defaults⁽¹⁾		69			99			97
Recoveries⁽²⁾		(50	)		(39	)		(40	)
Charge-offs⁽³⁾		(10	)		(11	)		(7	)

Receivable at end of period	$	1,250		$	1,241		$	1,090

⁽¹⁾

Remaining loan balance expected to be collected from contractual loan balances partially charged off during the period. This is the difference between the defaulted loan balance and the amount of the defaulted loan balance that was charged off.

⁽²⁾

Current period cash collections

⁽³⁾

Represents the current period recovery shortfall – the difference between what was expected to be collected and what was actually collected.

The tables below show the composition and status of the Private Education Loan portfolio aged by number of months in active repayment status (months for which a scheduled monthly payment was due). As indicated in the tables, the percentage of loans in forbearance status decreases the longer the loans have been in active repayment status. At March 31, 2012, loans in forbearance status as a percentage of loans in repayment and forbearance were 7.1 percent for loans that have been in active repayment status for less than 25 months. The percentage drops to 1.3 percent for loans that have been in active repayment status for more than 48 months. Approximately 79 percent of our Private Education Loans in forbearance status has been in active repayment status less than 25 months.


	Monthly Scheduled Payments Due															Not Yet in Repayment			Total
(Dollars in millions) March 31, 2012	0 to 12			13 to 24			25 to 36			37 to 48			More than 48			Not Yet in Repayment			Total
Loans in-school/grace/deferment	$	—		$	—		$	—		$	—		$	—		$	6,917		$	6,917
Loans in forbearance		892			198			132			64			86			—			1,372
Loans in repayment — current		6,529			5,920			5,204			3,626			6,220			—			27,499
Loans in repayment — delinquent 31-60 days		381			171			136			72			99			—			859
Loans in repayment — delinquent 61-90 days		265			107			79			39			54			—			544
Loans in repayment — delinquent greater than 90 days		663			270			186			93			122			—			1,334

Total	$	8,730		$	6,666		$	5,737		$	3,894		$	6,581		$	6,917			38,525

Unamortized discount																				(853	)
Receivable for partially charged-off loans																				1,250
Allowance for loan losses																				(2,190	)

Total Private Education Loans, net																			$	36,732

Loans in forbearance as a percentage of loans in repayment and forbearance		10.2	%		3.0	%		2.3	%		1.7	%		1.3	%		—	%		4.3	%


	Monthly Scheduled Payments Due															Not Yet in Repayment			Total
(Dollars in millions) December 31, 2011	0 to 12			13 to 24			25 to 36			37 to 48			More than 48			Not Yet in Repayment			Total
Loans in-school/grace/deferment	$	—		$	—		$	—		$	—		$	—		$	6,522		$	6,522
Loans in forbearance		920			194			126			66			80			—			1,386
Loans in repayment — current		6,866			6,014			5,110			3,486			5,646			—			27,122
Loans in repayment — delinquent 31-60 days		506			212			158			83			117			—			1,076
Loans in repayment — delinquent 61-90 days		245			100			78			41			56			—			520
Loans in repayment — delinquent greater than 90 days		709			317			205			102			134			—			1,467

Total	$	9,246		$	6,837		$	5,677		$	3,778		$	6,033		$	6,522			38,093

Unamortized discount																				(873	)
Receivable for partially charged-off loans																				1,241
Allowance for loan losses																				(2,171	)

Total Private Education Loans, net																			$	36,290

Loans in forbearance as a percentage of loans in repayment and forbearance		10.0	%		2.8	%		2.2	%		1.8	%		1.3	%		—	%		4.4	%


	Monthly Scheduled Payments Due															Not Yet in Repayment			Total
(Dollars in millions) March 31, 2011	0 to 12			13 to 24			25 to 36			37 to 48			More than 48			Not Yet in Repayment			Total
Loans in-school/grace/deferment	$	—		$	—		$	—		$	—		$	—		$	8,323		$	8,323
Loans in forbearance		967			172			99			48			57			—			1,343
Loans in repayment — current		7,912			5,883			4,136			2,864			4,400			—			25,195
Loans in repayment — delinquent 31-60 days		460			201			122			62			85			—			930
Loans in repayment — delinquent 61-90 days		336			104			57			28			39			—			564
Loans in repayment — delinquent greater than 90 days		803			304			150			73			101			—			1,431

Total	$	10,478		$	6,664		$	4,564		$	3,075		$	4,682		$	8,323			37,786

Unamortized discount																				(876	)
Receivable for partially charged-off loans																				1,090
Allowance for loan losses																				(2,034	)

Total Private Education Loans, net																			$	35,966

Loans in forbearance as a percentage of loans in repayment and forbearance		9.2	%		2.6	%		2.2	%		1.6	%		1.2	%		—	%		4.6	%

The monthly average number of loans granted forbearance as a percentage of loans in repayment and forbearance decreased to 5.2 percent in the first quarter of 2012 compared with the year-ago quarter of 5.4 percent. As of March 31, 2012, 2.5 percent of loans in current status were delinquent as of the end of the prior month, but were granted a forbearance that made them current as of March 31, 2012 (borrowers made payments on approximately 24 percent of these loans immediately prior to being granted forbearance).

Liquidity and Capital Resources

We expect to fund our ongoing liquidity needs, including the origination of new Private Education Loans and the repayment of $2.2 billion of senior unsecured notes that mature in the next twelve months, primarily through our current cash and investment portfolio and the collection of additional bank deposits, the very predictable operating cash flows provided by earnings and repayment of principal on unencumbered student loan assets and distributions from our securitization trusts (including servicing fees which are priority payments within the trusts). We may also draw down on our FFELP ABCP Facilities and the facility with the Federal Home Loan Bank in Des Moines (the “FHLB-DM Facility”); and we may also issue term ABS and unsecured debt.

Currently, new Private Education Loan originations are initially funded through deposits and subsequently securitized to term on a programmatic basis. We have $670 million of cash at the Bank as of March 31, 2012 available to fund future originations. We no longer originate FFELP Loans and therefore no longer have liquidity requirements for new FFELP Loan originations.

The acquisition of loan portfolios may require additional funding. Additionally, it is our intent to refinance, primarily through securitizations, the FFELP Loans that are currently in the ED Conduit Program by its January 2014 maturity date. We currently have $18.5 billion of collateral in the ED Conduit Program. While the assets in this facility can be put to ED at the conclusion of the program thus eliminating a call on our liquidity, we intend to refinance these assets in the term ABS market prior to the facility’s expiration. In addition, capacity is maintained in our FFELP ABCP Facility and our FHLB-DM Facility to finance a portion of this collateral should term financing not be achieved or available.

Sources of Liquidity and Available Capacity

The following tables detail our main sources of primary liquidity.


Ending Balances	As of
(Dollars in millions)	March 31, 2012		December 31, 2011		March 31, 2011
Sources of primary liquidity:
Unrestricted cash and liquid investments:
Holding Company and other non-bank subsidiaries	$	2,439	$	1,403	$	2,804
SLM Bank⁽¹⁾		670		1,462		1,147

Total unrestricted cash and liquid investments	$	3,109	$	2,865	$	3,951

Unencumbered FFELP Loans	$	1,080	$	994	$	2,387


Average Balances	Quarters Ended
(Dollars in millions)	March 31, 2012		December 31, 2011		March 31, 2011
Sources of primary liquidity:
Unrestricted cash and liquid investments:
Holding Company and other non-bank subsidiaries	$	1,656	$	1,802	$	2,926
SLM Bank⁽¹⁾		880		1,109		1,383

Total unrestricted cash and liquid investments	$	2,536	$	2,911	$	4,309

Unencumbered FFELP Loans	$	1,080	$	890	$	2,180

⁽¹⁾

This cash will be used primarily to originate or acquire student loans at the Bank. Our ability to pay dividends from the Bank is subject to capital and liquidity requirements applicable to the Bank.

In addition to the sources of primary liquidity listed in the tables above, we may also have liquidity available under secured credit facilities to the extent we have eligible collateral and capacity available. Current borrowing capacity under the FFELP ABCP Facility and FHLB-DM Facility is determined based on each facility’s size, current usage and qualifying collateral from the unencumbered FFELP Loans reported as primary liquidity in the tables above. Additional borrowing capacity could be used to fund FFELP Loan portfolio acquisitions and to refinance FFELP Loans used as collateral in the ED Conduit Program Facility. As of March 31, 2012, December 31, 2011 and March 31, 2011, the maximum amount we could borrow under these facilities was $10.5 billion, $11.3 billion and $11.7 billion, respectively. For the quarters ended March 31, 2012, December 31, 2011 and March 31, 2011, the average maximum amount we could borrow under these facilities was $12.1 billion, $11.1 billion and $12.0 billion, respectively. These maximum total amounts we can borrow are contingent upon obtaining eligible collateral. If we use our unencumbered FFELP Loans as collateral to borrow against these facilities, the remaining amount we could borrow is reduced accordingly.

In addition to the sources of primary liquidity listed in the table above, we hold a number of other unencumbered assets, consisting primarily of Private Education Loans and other assets. At March 31, 2012, we had a total of $20.9 billion of unencumbered assets (which includes the assets that comprise our primary liquidity and are available to serve as collateral for our secondary liquidity), excluding goodwill and acquired intangibles. Total unencumbered student loans, net, comprised $12.5 billion of our unencumbered assets of which $11.4 billion and $1.1 billion related to Private Education Loans, net and FFELP Loans, net, respectively.

The following table reconciles encumbered and unencumbered assets and their net impact on total tangible equity.


(Dollars in billions)	March 31, 2012			December 31, 2011			March 31, 2011
Net assets of consolidated variable interest entities (encumbered assets)	$	12.8		$	12.9		$	12.6
Tangible unencumbered assets⁽¹⁾		20.9			20.2			24.1
Unsecured debt		(25.4	)		(24.1	)		(27.3	)
Mark-to-market on unsecured hedged debt⁽²⁾		(1.7	)		(1.9	)		(1.4	)
Other liabilities, net		(2.0	)		(2.3	)		(3.3	)

Total tangible equity	$	4.6		$	4.8		$	4.7

⁽¹⁾

Excludes goodwill and acquired intangible assets.

⁽²⁾

At March 31, 2012, December 31, 2011 and March 31, 2011, there were $1.5 billion, $1.6 billion and $1.3 billion, respectively, of net gains on derivatives hedging this debt in unencumbered assets, which partially offset these losses.

“Core Earnings” Basis Borrowings

The following table presents the ending balances of our “Core Earnings” basis borrowings.


	March 31, 2012						December 31, 2011						March 31, 2011
(Dollars in millions)	Short Term		Long Term		Total		Short Term		Long Term		Total		Short Term		Long Term		Total
Unsecured borrowings:
Senior unsecured debt	$	2,192	$	16,182	$	18,374	$	1,801	$	15,199	$	17,000	$	3,741	$	16,894	$	20,635
Brokered deposits		1,455		1,957		3,412		1,733		1,956		3,689		1,324		2,808		4,132
Retail and other deposits		2,311		—		2,311		2,123		—		2,123		1,500		—		1,500
Other⁽¹⁾		1,284		—		1,284		1,329		—		1,329		1,064		—		1,064

Total unsecured borrowings		7,242		18,139		25,381		6,986		17,155		24,141		7,629		19,702		27,331

Secured borrowings:
FFELP Loan securitizations		—		107,211		107,211		—		107,905		107,905		—		112,229		112,229
Private Education Loan securitizations		—		18,334		18,334		—		19,297		19,297		—		20,983		20,983
ED Conduit Program facility		18,539		—		18,539		21,313		—		21,313		23,573		—		23,573
FFELP ABCP Facility		—		5,459		5,459		—		4,445		4,445		325		4,671		4,996
Private Education Loan ABCP Facility		—		2,666		2,666		—		1,992		1,992		—		—		—
Acquisition financing⁽²⁾		—		856		856		—		916		916		—		1,064		1,064
FHLB-DM Facility		1,250		—		1,250		1,210		—		1,210		525		—		525

Total secured borrowings		19,789		134,526		154,315		22,523		134,555		157,078		24,423		138,947		163,370

Total	$	27,031	$	152,665	$	179,696	$	29,509	$	151,710	$	181,219	$	32,052	$	158,649	$	190,701

⁽¹⁾	“Other” primarily consists of the obligation to return cash collateral held related to derivative exposure.

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

Transactions during the First-Quarter 2012

The following financing transactions have taken place in the first quarter of 2012:

•

On January 13, 2012, the FFELP ABCP Facility was amended to increase the amount available to $7.5 billion, reflecting an increase of $2.5 billion over the previously scheduled facility reduction. In addition, the amendment extends the final maturity date by one year to January 9, 2015 and increases the amount available at future step-down dates.

•

On January 19, 2012, we issued $765 million of FFELP ABS.

•

On January 27, 2012, we issued a $1.5 billion senior unsecured bond, consisting of a $750 million five-year term bond and a $750 million ten-year term bond.

•

On February 9, 2012, we issued $547 million of Private Education Loan ABS.

•

On March 15, 2012, we issued $824 million of FFELP ABS.

In addition, on January 26, 2012, we increased our regular quarterly common stock dividend to $0.125 per share, up from $0.10 per share in the prior quarter. We paid our quarterly dividend on March 16, 2012. During the first quarter of 2012, we repurchased 16.7 million shares of common stock at an aggregate purchase price of $268 million. The shares were repurchased on the open market under our January 2012 share repurchase program that authorizes up to $500 million of share repurchases. In the twelve-month period ended March 31, 2012 the company has repurchased a total of 35.8 million shares.

Recent Second-Quarter 2012 Transactions

On April 12, we issued $891 million of Private Education Loan ABS.