UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-Q
 
(Mark One)
 	 	
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
For the quarterly period ended March 31, 2017 
or
 	 	
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
For the transition period from              to             
Commission File Number: 001-13251
 
SLM Corporation
(Exact name of registrant as specified in its charter)

 	 	
Delaware	52-2013874	
(State or other jurisdiction of
incorporation or organization)	(I.R.S. Employer
Identification No.)	
 	 	
300 Continental Drive, Newark, Delaware	19713	
(Address of principal executive offices)	(Zip Code)	
(302) 451-0200
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   þ     No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 	 	 	 	 	
Large accelerated filer	  þ	 	Accelerated filer	  ¨ 	
Non-accelerated filer	  ¨	(Do not check if a smaller reporting company)	Smaller reporting company	  ¨	
Emerging growth company	  ¨	 	 	 	
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or  revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes   þ     No   ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ¨ No þ 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

 	 	
Class
 	Outstanding at March 31, 2017	
Common Stock, $0.20 par value	431,038,789 shares	

 	

SLM CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS
INDEX

 	
 	 	 	 	
Part I. Financial Information	 	 	
Item 1.	Financial Statements	 	3	
Item 1.	Notes to the Financial Statements	 	10	
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	 	40	
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	 	66	
Item 4.	Controls and Procedures	 	70	
PART II. Other Information	 	 	
Item 1.	Legal Proceedings	 	71	
Item 1A.	Risk Factors	 	72	
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	 	72	
Item 3.	Defaults Upon Senior Securities	 	72	
Item 4.	Mine Safety Disclosures	 	73	
Item 5.	Other Information	 	73	
Item 6.	Exhibits	 	73	

2

SLM CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)

 	 	 	 	 	 	 	 	 	
 	 	March 31,	 	December 31,	
 	 	2017	 	2016	
Assets	 	 	 	 	
Cash and cash equivalents	 	$	1,077,576	
 	 	$	1,918,793	
 	
Available-for-sale investments at fair value (cost of $221,265 and $211,406, respectively)	 	216,896	
 	 	208,603	
 	
Loans held for investment (net of allowance for losses of $187,086 and $184,701, respectively)	 	16,562,210	
 	 	15,137,922	
 	
Restricted cash and investments	 	94,146	
 	 	53,717	
 	
Other interest-earning assets	 	50,342	
 	 	49,114	
 	
Accrued interest receivable	 	838,461	
 	 	766,106	
 	
Premises and equipment, net	 	87,982	
 	 	87,063	
 	
Tax indemnification receivable	 	261,033	
 	 	259,532	
 	
Other assets	 	47,855	
 	 	52,153	
 	
Total assets	 	$	19,236,501	
 	 	$	18,533,003	

Liabilities	 	 	 	 	
Deposits	 	$	13,361,871	
 	 	$	13,435,667	
 	
Long-term borrowings	 	2,837,347	
 	 	2,167,979	
 	
Income taxes payable, net	 	234,414	
 	 	184,324	
 	
Upromise member accounts	 	249,086	
 	 	256,041	
 	
Other liabilities	 	118,427	
 	 	141,934	
 	
Total liabilities	 	16,801,145	
 	 	16,185,945	

Commitments and contingencies	 	

 	 	 	 	 	
Equity	 	 	 	 	
Preferred stock, par value $0.20 per share, 20 million shares authorized:	 	 	 	 	
Series A: 3.3 million and 3.3 million shares issued, respectively, at stated value of $50 per share	 	165,000	
 	 	165,000	
 	
Series B: 4 million and 4 million shares issued, respectively, at stated value of $100 per share	 	400,000	
 	 	400,000	
 	
Common stock, par value $0.20 per share, 1.125 billion shares authorized: 440.4 million and 436.6 million shares issued, respectively	 	88,075	
 	 	87,327	
 	
Additional paid-in capital	 	1,191,466	
 	 	1,175,564	
 	
Accumulated other comprehensive loss (net of tax benefit of $4,132 and $5,364, respectively)	 	(6,691	)	 	(8,671	)	
Retained earnings	 	684,165	
 	 	595,322	
 	
Total SLM Corporation stockholders’ equity before treasury stock	 	2,522,015	
 	 	2,414,542	
 	
Less: Common stock held in treasury at cost: 9.3 million and 7.7 million shares, respectively	 	(86,659	)	 	(67,484	)	
Total equity	 	2,435,356	
 	 	2,347,058	
 	
Total liabilities and equity	 	$	19,236,501	
 	 	$	18,533,003	

See accompanying notes to consolidated financial statements.

3

SLM CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)

 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	
 	 	March 31,	
 	 	2017	 	2016	
Interest income:	 	 	 	 	
Loans	 	$	324,757	
 	 	$	245,230	
 	
Investments	 	2,143	
 	 	2,591	
 	
Cash and cash equivalents	 	2,588	
 	 	1,634	
 	
Total interest income	 	329,488	
 	 	249,455	
 	
Interest expense:	 	 	 	 	
Deposits	 	44,852	
 	 	34,012	
 	
Interest expense on short-term borrowings	 	1,236	
 	 	2,163	
 	
Interest expense on long-term borrowings	 	15,323	
 	 	3,415	
 	
Other interest expense	 	1	
 	 	2	
 	
Total interest expense	 	61,412	
 	 	39,592	
 	
Net interest income	 	268,076	
 	 	209,863	
 	
Less: provisions for credit losses	 	25,296	
 	 	32,602	
 	
Net interest income after provisions for credit losses	 	242,780	
 	 	177,261	
 	
Non-interest income:	 	 	 	 	
Losses on derivatives and hedging activities, net	 	(5,378	)	 	(354	)	
Other income	 	11,346	
 	 	21,028	
 	
Total non-interest income	 	5,968	
 	 	20,674	
 	
Non-interest expenses:	 	 	 	 	
Compensation and benefits	 	55,464	
 	 	50,209	
 	
FDIC assessment fees	 	7,229	
 	 	4,176	
 	
Other operating expenses	 	39,984	
 	 	38,500	
 	
Total operating expenses	 	102,677	
 	 	92,885	
 	
Acquired intangible asset amortization expense	 	117	
 	 	260	
 	
Total non-interest expenses	 	102,794	
 	 	93,145	
 	
Income before income tax expense	 	145,954	
 	 	104,790	
 	
Income tax expense	 	51,011	
 	 	38,875	
 	
Net income	 	94,943	
 	 	65,915	
 	
Preferred stock dividends	 	5,575	
 	 	5,139	
 	
Net income attributable to SLM Corporation common stock	 	$	89,368	
 	 	$	60,776	
 	
Basic earnings per common share attributable to SLM Corporation	 	$	0.21	
 	 	$	0.14	
 	
Average common shares outstanding	 	429,891	
 	 	427,111	
 	
Diluted earnings per common share attributable to SLM Corporation	 	$	0.20	
 	 	$	0.14	
 	
Average common and common equivalent shares outstanding	 	438,735	
 	 	430,903	

See accompanying notes to consolidated financial statements.

4

SLM CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)

 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	
 	 	March 31,	
 	 	2017	 	2016	
Net income	 	$	94,943	
 	 	$	65,915	
 	
Other comprehensive income (loss):	 	 	 	 	
Unrealized (losses) gains on investments	 	(1,567	)	 	3,024	
 	
Unrealized gains (losses) on cash flow hedges	 	4,779	
 	 	(24,374	)	
Total unrealized gains (losses)	 	3,212	
 	 	(21,350	)	
Income tax (expense) benefit	 	(1,232	)	 	8,140	
 	
Other comprehensive income (loss), net of tax (expense) benefit	 	1,980	
 	 	(13,210	)	
Total comprehensive income	 	$	96,923	
 	 	$	52,705	

See accompanying notes to consolidated financial statements.

5

SLM CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands, except share and per share amounts)
(Unaudited)

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	Common Stock Shares	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Preferred Stock Shares	 	Issued	 	Treasury	 	Outstanding	 	Preferred Stock	 	Common Stock	 	Additional Paid-In Capital	 	Accumulated
Other
Comprehensive
Loss	 	Retained Earnings	 	Treasury Stock	 	Total Equity	
Balance at December 31, 2015	 	7,300,000	
 	 	430,677,434	
 	 	(4,374,190	)	 	426,303,244	
 	 	$	565,000	
 	 	$	86,136	
 	 	$	1,135,860	
 	 	$	(16,059	)	 	$	366,609	
 	 	$	(41,223	)	 	$	2,096,323	
 	
Net income	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	65,915	
 	 	—	
 	 	65,915	
 	
Other comprehensive loss, net of tax	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	(13,210	)	 	—	
 	 	—	
 	 	(13,210	)	
Total comprehensive income	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	52,705	
 	
Cash dividends:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Preferred Stock, series A ($.87 per share)	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	(2,875	)	 	—	
 	 	(2,875	)	
Preferred Stock, series B ($.56 per share)	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	(2,264	)	 	—	
 	 	(2,264	)	
Dividend equivalent units related to employee stock-based compensation plans	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	399	
 	 	—	
 	 	(399	)	 	 	 	—	
 	
Issuance of common shares	 	—	
 	 	2,740,979	
 	 	—	
 	 	2,740,979	
 	 	—	
 	 	548	
 	 	2,159	
 	 	—	
 	 	—	
 	 	—	
 	 	2,707	
 	
Tax benefit related to employee stock-based compensation	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	(2,132	)	 	—	
 	 	—	
 	 	—	
 	 	(2,132	)	
Stock-based compensation expense	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	6,216	
 	 	—	
 	 	—	
 	 	—	
 	 	6,216	
 	
Shares repurchased related to employee stock-based compensation plans	 	—	
 	 	—	
 	 	(1,128,709	)	 	(1,128,709	)	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	(6,755	)	 	(6,755	)	
Balance at March 31, 2016	 	7,300,000	
 	 	433,418,413	
 	 	(5,502,899	)	 	427,915,514	
 	 	$	565,000	
 	 	$	86,684	
 	 	$	1,142,502	
 	 	$	(29,269	)	 	$	426,986	
 	 	$	(47,978	)	 	$	2,143,925	

See accompanying notes to consolidated financial statements.

6

SLM CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands, except share and per share amounts)
(Unaudited)

 

 	 	 	 	Common Stock Shares	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Preferred Stock Shares	 	Issued	 	Treasury	 	Outstanding	 	Preferred Stock	 	Common Stock	 	Additional Paid-In Capital	 	Accumulated
Other
Comprehensive
Income (Loss)	 	Retained Earnings	 	Treasury Stock	 	Total Equity	
Balance at December 31, 2016	 	7,300,000	
 	 	436,632,479	
 	 	(7,728,920	)	 	428,903,559	
 	 	$	565,000	
 	 	$	87,327	
 	 	$	1,175,564	
 	 	$	(8,671	)	 	$	595,322	
 	 	$	(67,484	)	 	$	2,347,058	
 	
Net income	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	94,943	
 	 	—	
 	 	94,943	
 	
Other comprehensive income, net of tax	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	1,980	
 	 	—	
 	 	—	
 	 	1,980	
 	
Total comprehensive income	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	96,923	
 	
Cumulative effect of the new stock compensation standard	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	594	
 	 	—	
 	 	(429	)	 	—	
 	 	165	
 	
Cash dividends:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Preferred Stock, series A ($0.87 per share)	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	(2,875	)	 	—	
 	 	(2,875	)	
Preferred Stock, series B ($0.67 per share)	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	(2,700	)	 	—	
 	 	(2,700	)	
Dividend equivalent units related to employee stock-based compensation plans	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	96	
 	 	—	
 	 	(96	)	 	—	
 	 	—	
 	
Issuance of common shares	 	—	
 	 	3,738,717	
 	 	
 	 	3,738,717	
 	 	—	
 	 	748	
 	 	5,787	
 	 	—	
 	 	—	
 	 	—	
 	 	6,535	
 	
Stock-based compensation expense	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	9,425	
 	 	—	
 	 	—	
 	 	—	
 	 	9,425	
 	
Shares repurchased related to employee stock-based compensation plans	 	—	
 	 	—	
 	 	(1,603,487	)	 	(1,603,487	)	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	(19,175	)	 	(19,175	)	
Balance at March 31, 2017	 	7,300,000	
 	 	440,371,196	
 	 	(9,332,407	)	 	431,038,789	
 	 	$	565,000	
 	 	$	88,075	
 	 	$	1,191,466	
 	 	$	(6,691	)	 	$	684,165	
 	 	$	(86,659	)	 	$	2,435,356	

See accompanying notes to consolidated financial statements.

7

SLM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 	
 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	
 	 	March 31,	
 	 	2017	 	2016	
Operating activities	 	 	 	 	
Net income	 	$	94,943	
 	 	$	65,915	
 	
Adjustments to reconcile net income to net cash used in operating activities:	 	 	 	 	
Provisions for credit losses	 	25,296	
 	 	32,602	
 	
Income tax expense	 	51,011	
 	 	38,875	
 	
Amortization of brokered deposit placement fee	 	2,130	
 	 	2,615	
 	
Amortization of ABCP Facility upfront fee	 	352	
 	 	122	
 	
Amortization of deferred loan origination costs and fees, net	 	1,777	
 	 	1,223	
 	
Net amortization of discount on investments	 	452	
 	 	342	
 	
Interest income on tax indemnification receivable	 	(1,501	)	 	(1,080	)	
Depreciation of premises and equipment	 	2,585	
 	 	2,104	
 	
Amortization of acquired intangibles	 	117	
 	 	260	
 	
Stock-based compensation expense	 	9,425	
 	 	6,216	
 	
Unrealized losses on derivative and hedging activities, net	 	5,364	
 	 	832	
 	
Other adjustments to net income, net	 	1,258	
 	 	250	
 	
Changes in operating assets and liabilities:	 	 	 	 	
Increase in accrued interest receivable	 	(153,055	)	 	(147,257	)	
Decrease in restricted cash and investments, net	 	5,636	
 	 	6,778	
 	
Increase in other interest-earning assets	 	(1,228	)	 	(3,606	)	
Increase in other assets	 	(13,435	)	 	(11,391	)	
Decrease in income taxes payable, net	 	(1,689	)	 	(57,119	)	
Increase in accrued interest payable	 	6,146	
 	 	9,079	
 	
Increase in payable due to entity that is a subsidiary of Navient	 	227	
 	 	1,169	
 	
(Decrease) increase in other liabilities	 	(39,424	)	 	2,159	
 	
Total adjustments	 	(98,556	)	 	(115,827	)	
Total net cash used in operating activities	 	(3,613	)	 	(49,912	)	
Investing activities	 	 	 	 	
Loans acquired and originated	 	(1,892,697	)	 	(1,806,583	)	
Net proceeds from sales of loans held for investment	 	1,972	
 	 	3,365	
 	
Proceeds from claim payments	 	11,932	
 	 	18,528	
 	
Net decrease in loans held for investment	 	506,637	
 	 	332,414	
 	
Increase in restricted cash and investments - variable interest entities	 	(46,065	)	 	(3,410	)	
Purchases of available-for-sale securities	 	(18,481	)	 	(12,090	)	
Proceeds from sales and maturities of available-for-sale securities	 	8,170	
 	 	6,566	
 	
Total net cash used in investing activities	 	(1,428,532	)	 	(1,461,210	)	
Financing activities	 	 	 	 	
Brokered deposit placement fee	 	(2,084	)	 	(2,759	)	
Net decrease in certificates of deposit	 	(151,003	)	 	(209,411	)	
Net increase in other deposits	 	83,018	
 	 	245,893	
 	
Borrowings collateralized by loans in securitization trusts - issued	 	767,994	
 	 	—	
 	
Borrowings collateralized by loans in securitization trusts - repaid	 	(99,884	)	 	(20,276	)	
Issuance costs for unsecured debt offering	 	(23	)	 	—	
 	
Borrowings under ABCP Facility	 	—	
 	 	26,325	
 	
Fees paid on ABCP Facility	 	(1,515	)	 	(1,250	)	
Preferred stock dividends paid	 	(5,575	)	 	(5,139	)	

8

 	
 	 	 	 	 	 	 	 	 	
Net cash provided by financing activities	 	590,928	
 	 	33,383	
 	
Net decrease in cash and cash equivalents	 	(841,217	)	 	(1,477,739	)	
Cash and cash equivalents at beginning of period	 	1,918,793	
 	 	2,416,219	
 	
Cash and cash equivalents at end of period	 	$	1,077,576	
 	 	$	938,480	
 	
Cash disbursements made for:	 	 	 	 	
Interest	 	$	54,648	
 	 	$	32,766	
 	
Income taxes paid	 	$	1,426	
 	 	$	56,163	
 	
Income taxes refunded	 	$	(32	)	 	$	(86	)	
See accompanying notes to consolidated financial statements.

9

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, unless otherwise noted)

 	 	 	

1. Significant Accounting Policies

Basis of Presentation
The accompanying unaudited, consolidated financial statements of SLM Corporation (“Sallie Mae,” “SLM,” the “Company,” “we,” or “us”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all the information and footnotes required by GAAP for complete consolidated financial statements. The consolidated financial statements include the accounts of SLM Corporation and its majority-owned and controlled subsidiaries after eliminating the effects of intercompany accounts and transactions. In the opinion of management, all adjustments considered necessary for a fair statement of the results for the interim periods have been included. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Operating results for the three months ended March 31, 2017 are not necessarily indicative of the results for the year ending December 31, 2017 or for any other period. These unaudited financial statements should be read in conjunction with the audited financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2016 (the “2016 Form 10-K”).
Consolidation
The consolidated financial statements include the accounts of the Company and its majority-owned and controlled subsidiaries after eliminating the effects of intercompany accounts and transactions.
We consolidate any variable interest entity (“VIE”) where we have determined we are the primary beneficiary. The primary beneficiary is the entity which has both: (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses or receive benefits of the entity that could potentially be significant to the VIE.
Allowance for Loan Losses
We maintain an allowance for loan losses at an amount sufficient to absorb probable losses incurred in our portfolios at the reporting date based on a projection of estimated probable credit losses incurred in the portfolio. Please refer to Note 2, “Significant Accounting Policies - Allowance for Loan Losses - Allowance for Private Education Loan Losses” in the 2016 Form 10-K for a description of certain information we use in estimating allowance amounts for Private Education Loans.
Troubled Debt Restructurings (“TDRs”)
For our TDR portfolio, we estimate an allowance amount sufficient to cover life-of-loan expected losses through an impairment calculation based on the difference between the loan’s basis and the present value of expected future cash flows (which would include life-of-loan default and recovery assumptions) discounted at the loan’s original effective interest rate. Our TDR portfolio is comprised mostly of loans with interest rate reductions and loans with forbearance usage greater than three months.
We modify the terms of loans for certain borrowers when we believe such modifications may increase the ability and willingness of a borrower to make payments and thus increase the ultimate overall amount collected on a loan. These modifications generally take the form of a forbearance, a temporary interest rate reduction or an extended repayment plan. We generally consider a loan that is in full principal and interest repayment status which has received more than three months of forbearance in a 24-month period to be a TDR; however, during the first nine months after a loan has entered full principal and interest repayment status, we do not count up to the first six months of forbearance received during that period against the three-month policy limit.
A loan also becomes a TDR when it is modified to reduce the interest rate on the loan (regardless of when such modification occurs and/or whether such interest rate reduction is temporary). The majority of our loans that are considered

10

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

1.	Significant Accounting Policies (Continued)	 	

TDRs involve a temporary forbearance of payments and do not change the contractual interest rate of the loan. Once a loan qualifies for TDR status, it remains a TDR for allowance purposes for the remainder of its life. Approximately 26 percent of the loans granted forbearance as of March 31, 2017 and December 31, 2016, were classified as TDRs due to their forbearance status.
Derivative Accounting
We account for our derivatives, consisting of interest rate swaps, at fair value on the consolidated balance sheets as either an asset or liability. Derivative positions are recorded as net positions by counterparty based on master netting arrangements (see Note 6, “Derivative Financial Instruments”), exclusive of accrued interest and cash collateral held or pledged. The Chicago Mercantile Exchange (“CME”) and the London Clearing House (“LCH”) made amendments to their respective rules that resulted in the prospective accounting treatment of certain daily payments historically treated as the posting of collateral (variation margin payments) being considered as the legal settlement of the outstanding exposure of the derivative. While the CME rule, which became effective in January 2017, is mandatory, the LCH allows a clearing member institution the option to adopt the rule changes on an individual contract or portfolio basis. As of March 31, 2017, $4.5 billion notional of our derivative contracts were cleared on the CME and $0.7 billion were cleared on the LCH. The derivative contracts cleared through the CME and LCH represent 79.8 percent and 13.1 percent, respectively, of our total notional derivative contracts of $5.6 billion at March 31, 2017.
Under this new rule, for derivatives cleared through the CME, the net gain (loss) position includes the variation margin amounts as settlement of the derivative and not collateral against the fair value of the derivative. Interest income (expense) related to variation margin on derivatives that are not designated as hedging instruments or are designated as fair value relationships is recognized as a gain (loss) rather than as interest income (expense). Changes in fair value for derivatives not designated as hedging instruments will be presented as realized gains (losses).
Our LCH clearing member institution has elected not to adopt the new rule change. Therefore, there has been no change to the accounting for the derivatives cleared through the LCH, and variation margin payments required to be exchanged based on the fair value of these derivatives remain accounted for as collateral.
We determine the fair value for our derivative contracts primarily using pricing models that consider current market conditions and the contractual terms of the derivative contracts. These pricing models consider interest rates, time value, forward interest rate curves, and volatility factors. Inputs are generally from active financial markets.
The majority of our derivatives qualify as effective hedges. For these derivatives, the relationship between the hedging instrument and the hedged items (including the hedged risk and method for assessing effectiveness), as well as the risk management objective and strategy for undertaking various hedge transactions at the inception of the hedging relationship, is documented.
Each derivative is designated to a specific (or pool of) liability(ies) on the consolidated balance sheets, and is designated as either a “fair value” hedge or a “cash flow” hedge. Fair value hedges are designed to hedge our exposure to changes in fair value of a fixed-rate liability. For effective fair value hedges, both the hedge and the hedged item (for the risk being hedged) are recorded at fair value with any difference reflecting ineffectiveness recorded immediately in the consolidated statements of income. Cash flow hedges are designed to hedge our exposure to variability in cash flows related to variable-rate deposits. The assessment of the hedge’s effectiveness is performed at inception and on an ongoing basis, generally using regression testing. For hedges of a pool of liabilities, tests are performed to demonstrate the similarity of individual instruments of the pool. When it is determined that a derivative is not currently an effective hedge, ineffectiveness is recognized for the full change in fair value of the derivative with no offsetting amount from the hedged item since the last time it was effective. If it is also determined the hedge will not be effective in the future, we discontinue the hedge accounting prospectively and begin amortization of any basis adjustments that exist related to the hedged item.

11

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

1.	Significant Accounting Policies (Continued)	 	

Stock-Based Compensation
We recognize stock-based compensation cost in our consolidated statements of income using the fair value method. Under this method, we determine the fair value of the stock-based compensation at the time of the grant and recognize the resulting compensation expense over the vesting period of the stock-based grant. On January 1, 2017, we adopted the Financial Accounting Standards Board’s (“FASB’s”) Accounting Standards Update (“ASU”) 2016-09 “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” This new guidance requires that we record all excess tax benefits/deficiencies related to the settlement of employee stock-based compensation to the income tax expense line item on our consolidated statements of income, under a modified retrospective basis. In the quarter ended March 31, 2017, we recorded a $6 million benefit in income tax expense because of this new standard. We previously recorded the excess tax benefits/deficiencies to the additional paid-in capital line item on our consolidated balance sheets. Under the new guidance, we also elected the option to no longer apply a forfeiture rate to our stock-based compensation expense, but to record forfeitures when they occur, and, as a result, under a modified retrospective basis we recorded a cumulative effect of the new stock compensation standard in total equity of $0.2 million, net of tax, in the first quarter of 2017.

12

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

2. Loans Held for Investment
Loans held for investment consist of Private Education Loans, FFELP Loans and Personal Loans. We use “Private Education Loans” to mean education loans to students or their families that are not made, insured or guaranteed by any state or federal government. Private Education Loans do not include loans insured or guaranteed under the previously existing Federal Family Education Loan Program (“FFELP”). We use “Personal Loans” to mean those unsecured loans to individuals that may be used for non-educational purposes. We began to opportunistically acquire Personal Loans in late 2016.
Our Private Education Loans are made largely to bridge the gap between the cost of higher education and the amount funded through financial aid, government loans and customers’ resources. Private Education Loans bear the full credit risk of the customer. We manage this risk through risk-performance underwriting strategies and qualified cosigners. Private Education Loans generally carry a variable rate indexed to LIBOR. As of March 31, 2017, 82 percent of all of our Private Education Loans were indexed to LIBOR. We provide incentives for customers to include a cosigner on the loan, and the vast majority of loans in our portfolio are cosigned. We also provide total cost incentives for customers to make payments while in school.
FFELP Loans are insured as to their principal and accrued interest in the event of default subject to a risk sharing level based on the date of loan disbursement. These insurance obligations are supported by contractual rights against the United States. For loans disbursed on or after July 1, 2006, we receive 97 percent reimbursement on all qualifying claims. For loans disbursed after October 1, 1993, and before July 1, 2006, we receive 98 percent reimbursement on all qualifying claims. For loans disbursed prior to October 1, 1993, we receive 100 percent reimbursement on all qualifying claims.
Loans held for investment are summarized as follows:

 	 	March 31,	 	December 31,	
 	 	2017	 	2016	
Private Education Loans	 	$	15,654,854	
 	 	$	14,251,675	
 	
Deferred origination costs	 	46,692	
 	 	44,206	
 	
Allowance for loan losses	 	(185,103	)	 	(182,472	)	
Total Private Education Loans, net	 	15,516,443	
 	 	14,113,409	

FFELP Loans	 	989,393	
 	 	1,010,908	
 	
Unamortized acquisition costs, net	 	2,855	
 	 	2,941	
 	
Allowance for loan losses	 	(1,637	)	 	(2,171	)	
Total FFELP Loans, net	 	990,611	
 	 	1,011,678	

Personal Loans	 	55,502	
 	 	12,893	
 	
Allowance for loan losses	 	(346	)	 	(58	)	
Total Personal Loans, net	 	55,156	
 	 	12,835	

Loans held for investment, net	 	$	16,562,210	
 	 	$	15,137,922	

 
The estimated weighted average life of education loans in our portfolio was approximately 6.0 years and 6.0 years at March 31, 2017 and December 31, 2016, respectively.

13

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

2.	Loans Held for Investment (Continued)	 	

The average balance and the respective weighted average interest rates of loans in our portfolio are summarized as follows:

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	
 	 	March 31,	 	
 	 	2017	 	2016	 	
 	 	Average Balance	 	Weighted Average Interest Rate	 	Average Balance	 	Weighted Average Interest Rate	 	
Private Education Loans	 	$	15,449,555	
 	 	8.26	%	 	$	11,817,708	
 	 	8.03	%	 	
FFELP Loans	 	1,003,128	
 	 	3.69	
 	 	1,103,253	
 	 	3.42	
 	 	
Personal Loans	 	35,830	
 	 	9.16	
 	 	—	
 	 	—	
 	 	
Total portfolio	 	$	16,488,513	
 	 	 	 	$	12,920,961	

14

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

3. Allowance for Loan Losses
Our provision for loan losses represents the periodic expense of maintaining an allowance sufficient to absorb incurred probable losses in the held-for-investment loan portfolios. The evaluation of the allowance for loan losses is inherently subjective, as it requires material estimates that may be susceptible to significant changes. We believe the allowance for loan losses is appropriate to cover probable losses incurred in the loan portfolios. We began acquiring Personal Loans in the fourth quarter of 2016.

Allowance for Loan Losses Metrics

 	 	Allowance for Loan Losses	
 	 	Three Months Ended March 31, 2017	
 	 	FFELP
Loans	 	Private
Education
Loans	 	Personal
Loans	 	Total	
Allowance for Loan Losses	 	 	 	 	 	 	 	 	
Beginning balance	 	$	2,171	
 	
 	$	182,472	
 	
 	$	58	
 	
 	$	184,701	
 	
Total provision	 	(316	)	
 	26,820	
 	
 	288	
 	
 	26,792	
 	
Net charge-offs:	 	

 	

 	

 	

Charge-offs	 	(218	)	
 	(26,227	)	
 	—	
 	
 	(26,445	)	
Recoveries	 	—	
 	
 	3,259	
 	
 	—	
 	
 	3,259	
 	
Net charge-offs	 	(218	)	
 	(22,968	)	

 	
 	(23,186	)	
Loan sales(1)	 	—	
 	
 	(1,221	)	
 	—	
 	
 	(1,221	)	
Ending Balance	 	$	1,637	
 	
 	$	185,103	
 	
 	$	346	
 	
 	$	187,086	
 	
Allowance:	 	

 	

 	
 	
Ending balance: individually evaluated for impairment	 	$	—	
 	
 	$	87,150	
 	
 	$	—	
 	
 	$	87,150	
 	
Ending balance: collectively evaluated for impairment	 	$	1,637	
 	
 	$	97,953	
 	
 	$	346	
 	
 	$	99,936	
 	
Loans:	 	

 	

 	
 	
Ending balance: individually evaluated for impairment	 	$	—	
 	
 	$	701,860	
 	
 	$	—	
 	
 	$	701,860	
 	
Ending balance: collectively evaluated for impairment	 	$	989,393	
 	
 	$	14,952,994	
 	
 	$	55,502	
 	
 	$	15,997,889	
 	
Net charge-offs as a percentage of average loans in repayment (annualized) (2)	 	0.11	%	
 	0.89	%	
 	—	%	

Allowance as a percentage of the ending total loan balance	 	0.17	%	
 	1.18	%	
 	0.62	%	

Allowance as a percentage of the ending loans in repayment (2)	 	0.22	%	
 	1.76	%	
 	0.62	%	

Allowance coverage of net charge-offs (annualized)	 	1.88	
 	
 	2.01	
 	
 	—	

 	
Ending total loans, gross	 	$	989,393	
 	
 	$	15,654,854	
 	
 	$	55,502	

 	
Average loans in repayment (2)	 	$	771,435	
 	
 	$	10,265,530	
 	
 	$	35,830	

 	
Ending loans in repayment (2)	 	$	757,052	
 	
 	$	10,526,782	
 	
 	$	55,502	

 	
____________
(1)  Represents fair value adjustments on loans sold.
(2)  Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period.

15

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

3.	Allowance for Loan Losses (Continued)	 	

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Allowance for Loan Losses	
 	 	Three Months Ended March 31, 2016	
 	 	FFELP Loans	 	Private Education
Loans	 	Total	
Allowance for Loan Losses	 	 	 	 	 	 	
Beginning balance	 	$	3,691	
 	 	$	108,816	
 	 	$	112,507	
 	
Total provision	 	321	
 	 	33,839	
 	 	34,160	
 	
Net charge-offs:	 	 	 	 	 	 	
Charge-offs	 	(383	)	 	(19,004	)	 	(19,387	)	
Recoveries	 	—	
 	 	1,044	
 	 	1,044	
 	
Net charge-offs	 	(383	)	 	(17,960	)	 	(18,343	)	
Loan sales(1)	 	—	
 	 	(2,075	)	 	(2,075	)	
Ending Balance	 	$	3,629	
 	 	$	122,620	
 	 	$	126,249	
 	
Allowance:	 	 	 	 	 	 	
Ending balance: individually evaluated for impairment	 	$	—	
 	 	$	49,212	
 	 	$	49,212	
 	
Ending balance: collectively evaluated for impairment	 	$	3,629	
 	 	$	73,408	
 	 	$	77,037	
 	
Loans:	 	 	 	 	 	 	
Ending balance: individually evaluated for impairment	 	$	—	
 	 	$	318,094	
 	 	$	318,094	
 	
Ending balance: collectively evaluated for impairment	 	$	1,088,026	
 	 	$	11,793,776	
 	 	$	12,881,802	
 	
Net charge-offs as a percentage of average loans in repayment (annualized) (2)	 	0.19	%	 	0.95	%	 	 	
Allowance as a percentage of the ending total loan balance	 	0.33	%	 	1.01	%	 	 	
Allowance as a percentage of the ending loans in repayment (2)	 	0.45	%	 	1.56	%	 	 	
Allowance coverage of net charge-offs (annualized)	 	2.37	
 	 	1.71	
 	 	 	
Ending total loans, gross	 	$	1,088,026	
 	 	$	12,111,870	
 	 	 	
Average loans in repayment(2)	 	$	804,690	
 	 	$	7,534,234	
 	 	 	
Ending loans in repayment(2)	 	$	803,378	
 	 	$	7,843,076	
 	 	 	
____________
    
(1)  Represents fair value adjustments on loans sold.
(2)  Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period.

 	 	

 	 	

16

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

3.	Allowance for Loan Losses (Continued)	 	

Troubled Debt Restructurings
All of our loans are collectively assessed for impairment, except for loans classified as TDRs (where we conduct individual assessments of impairment). We modify the terms of loans for certain borrowers when we believe such modifications may increase the ability and willingness of a borrower to make payments and thus increase the ultimate overall amount collected on a loan. These modifications generally take the form of a forbearance, a temporary interest rate reduction or an extended repayment plan. We generally consider a loan that is in full principal and interest repayment status which has received more than three months of forbearance in a 24-month period to be a TDR; however, during the first nine months after a loan has entered full principal and interest repayment status, we do not count up to the first six months of forbearance received during that period against the three-month policy limit. Also, a loan becomes a TDR when it is modified to reduce the interest rate on the loan (regardless of when such modification occurs and/or whether such interest rate reduction is temporary). The majority of our loans that are considered TDRs involve a temporary forbearance of payments and do not change the contractual interest rate of the loan. Approximately 26 percent of the loans granted forbearance as of March 31, 2017 and December 31, 2016, respectively, have been classified as TDRs due to their forbearance status. For additional information, see Note 6, “Allowance for Loan Losses” in our 2016 Form 10-K.
Within the Private Education Loan portfolio, loans greater than 90 days past due are considered to be nonperforming. FFELP Loans are at least 97 percent guaranteed as to their principal and accrued interest by the federal government in the event of default and, therefore, we do not deem FFELP Loans as nonperforming from a credit risk perspective at any point in their life cycle prior to claim payment, and continue to accrue interest on those loans through the date of claim.
At March 31, 2017 and December 31, 2016, all TDR loans had a related allowance recorded. The following table provides the recorded investment, unpaid principal balance and related allowance for our TDR loans.

 	 	Recorded Investment	 	Unpaid Principal Balance	 	Allowance	
 	 	 	 	 	 	 	
March 31, 2017	 	 	 	 	 	 	
TDR Loans	 	$	712,019	
 	 	$	701,860	
 	 	$	87,150	

December 31, 2016	 	 	 	 	 	 	
TDR Loans	 	$	620,991	
 	 	$	612,606	
 	 	$	86,930	

The following table provides the average recorded investment and interest income recognized for our TDR loans.

 	 	Three Months Ended 
 March 31,	
 	 	2017	 	2016	
 	 	Average
Recorded
Investment	 	Interest
Income
Recognized	 	Average
Recorded
Investment	 	Interest
Income
Recognized	
 	 	 	 	 	 	 	 	 	
TDR Loans	 	$	669,606	
 	 	$	12,257	
 	 	$	297,315	
 	 	$	5,583	

    

17

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

3.	Allowance for Loan Losses (Continued)	 	

 	

The following table provides information regarding the loan status and aging of TDR loans.

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	March 31,	 	December 31,	
 	 	2017	 	2016	
 	 	Balance	 	%	 	Balance	 	%	
TDR loans in in-school/grace/deferment(1)	 	$	32,121	
 	 	 	 	$	24,185	
 	 	 	
TDR loans in forbearance(2)	 	78,791	
 	 	 	 	71,851	
 	 	 	
TDR loans in repayment(3) and percentage of each status:	 	 	 	 	 	 	 	 	
Loans current	 	532,459	
 	 	90.2	%	 	462,187	
 	 	89.5	%	
Loans delinquent 31-60 days(4)	 	29,733	
 	 	5.0	
 	 	28,452	
 	 	5.5	
 	
Loans delinquent 61-90 days(4)	 	16,837	
 	 	2.8	
 	 	17,326	
 	 	3.4	
 	
Loans delinquent greater than 90 days(4)	 	11,919	
 	 	2.0	
 	 	8,605	
 	 	1.6	
 	
Total TDR loans in repayment	 	590,948	
 	 	100.0	%	 	516,570	
 	 	100.0	%	
Total TDR loans, gross	 	$	701,860	
 	 	 	 	$	612,606	
 	 	 	
_____
 	 	
(1) 	Deferment includes customers who have returned to school or are engaged 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 customers who have requested extension of grace period generally during employment transition or who have temporarily ceased making full payments due to hardship or other factors, consistent with established loan program servicing policies and procedures.	
 	 	
(3) 	Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period.	
 	 	
(4) 	The period of delinquency is based on the number of days scheduled payments are contractually past due.	

The following table provides the amount of modified loans (which includes forbearance and reductions in interest rates) that became TDRs in the periods presented. Additionally, for the periods presented, the table summarizes charge-offs occurring in the TDR portfolio, as well as TDRs for which a payment default occurred in the relevant period presented and within 12 months of the loan first being designated as a TDR. We define payment default as 60 days past due for this disclosure.

 	 	Three Months Ended 
 March 31, 2017	 	Three Months Ended 
 March 31, 2016	
 	 	Modified Loans (1)	 	Charge-offs	 	Payment-
Default	 	Modified Loans (1)	 	Charge-offs	 	Payment-
Default	
 	 	 	 	 	 	 	 	 	 	 	 	 	
TDR Loans	 	$	112,206	
 	 	$	10,523	
 	 	$	25,526	
 	 	$	61,006	
 	 	$	4,968	
 	 	$	25,671	
 	
_____
 	 	
(1) 	Represents the principal balance of loans that have been modified during the period and resulted in a TDR.	

18

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

3.	Allowance for Loan Losses (Continued)	 	

Key Credit Quality Indicators
For Private Education Loans, the key credit quality indicators are FICO scores, the existence of a cosigner, the loan status and loan seasoning. The FICO scores are assessed at original approval and periodically refreshed/updated through the loan’s term. The following table highlights the gross principal balance of our Private Education Loan portfolio stratified by key credit quality indicators.

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Private Education Loans	
 	 	Credit Quality Indicators	
 	 	March 31, 2017	 	December 31, 2016	
Credit Quality Indicators:	 	Balance(1)	 	% of Balance	 	Balance(1)	 	% of Balance	
 	 	 	 	 	 	 	 	 	
Cosigners:	 	 	 	 	 	 	 	 	
With cosigner	 	$	14,097,920	
 	 	90	%	 	$	12,816,512	
 	 	90	%	
Without cosigner	 	1,556,934	
 	 	10	
 	 	1,435,163	
 	 	10	
 	
Total	 	$	15,654,854	
 	 	100	%	 	$	14,251,675	
 	 	100	%	
 	 	 	 	 	 	 	 	 	
FICO at Original Approval:	 	 	 	 	 	 	 	 	
Less than 670	 	$	1,008,334	
 	 	6	%	 	$	920,132	
 	 	6	%	
670-699	 	2,297,815	
 	 	15	
 	 	2,092,722	
 	 	15	
 	
700-749	 	5,109,510	
 	 	33	
 	 	4,639,958	
 	 	33	
 	
Greater than or equal to 750	 	7,239,195	
 	 	46	
 	 	6,598,863	
 	 	46	
 	
Total	 	$	15,654,854	
 	 	100	%	 	$	14,251,675	
 	 	100	%	
 	 	 	 	 	 	 	 	 	
Seasoning(2):	 	 	 	 	 	 	 	 	
1-12 payments	 	$	4,233,778	
 	 	27	%	 	$	3,737,110	
 	 	26	%	
13-24 payments	 	2,937,448	
 	 	19	
 	 	2,841,107	
 	 	20	
 	
25-36 payments	 	1,951,479	
 	 	12	
 	 	1,839,764	
 	 	13	
 	
37-48 payments	 	978,576	
 	 	6	
 	 	917,633	
 	 	7	
 	
More than 48 payments	 	775,278	
 	 	5	
 	 	726,106	
 	 	5	
 	
Not yet in repayment	 	4,778,295	
 	 	31	
 	 	4,189,955	
 	 	29	
 	
Total	 	$	15,654,854	
 	 	100	%	 	$	14,251,675	
 	 	100	%	
 	 	
(1) 	Balance represents gross Private Education Loans.	
 	 	
(2) 	Number of months in active repayment (whether interest only payment, fixed payment, or full principal and interest payment status) for which a scheduled payment was due.	

19

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

3.	Allowance for Loan Losses (Continued)	 	

Key Credit Quality Indicators
For Personal Loans, the key credit quality indicators are FICO scores and loan seasoning. The FICO scores are assessed at original approval and periodically refreshed/updated through the loan’s term. The following table highlights the gross principal balance of our Personal Loan portfolio stratified by key credit quality indicators.

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Personal Loans	
 	 	Credit Quality Indicators	
 	 	March 31, 2017	 	December 31, 2016	
Credit Quality Indicators:	 	Balance(1)	 	% of Balance	 	Balance(1)	 	% of Balance	
 	 	 	 	 	 	 	 	 	
FICO at Original Approval:	 	 	 	 	 	 	 	 	
Less than 670	 	$	4,612	
 	 	8	%	 	$	1,189	
 	 	9	%	
670-699	 	15,897	
 	 	29	
 	 	3,139	
 	 	24	
 	
700-749	 	25,569	
 	 	46	
 	 	5,678	
 	 	44	
 	
Greater than or equal to 750	 	9,424	
 	 	17	
 	 	2,888	
 	 	23	
 	
Total	 	$	55,502	
 	 	100	%	 	$	12,894	
 	 	100	%	
 	 	 	 	 	 	 	 	 	
Seasoning(2):	 	 	 	 	 	 	 	 	
0-12 payments	 	$	55,502	
 	 	100	%	 	$	12,894	
 	 	100	%	
13-24 payments	 	—	
 	 	—	
 	 	—	
 	 	—	
 	
25-36 payments	 	—	
 	 	—	
 	 	—	
 	 	—	
 	
37-48 payments	 	—	
 	 	—	
 	 	—	
 	 	—	
 	
More than 48 payments	 	—	
 	 	—	
 	 	—	
 	 	—	
 	
Total	 	$	55,502	
 	 	100	%	 	$	12,894	
 	 	100	%	
 	 	
(1) 	Balance represents gross Personal Loans.	
 	 	
(2) 	Number of months in active repayment for which a scheduled payment was due.	

20

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

3.	Allowance for Loan Losses (Continued)	 	

 The following table provides information regarding the loan status of our Private Education Loans. Loans in repayment include loans making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period.

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Private Education Loans	
 	 	March 31,	 	December 31,	
 	 	2017	 	2016	
 	 	Balance	 	%	 	Balance	 	%	
Loans in-school/grace/deferment(1)	 	$	4,778,295	
 	 	 	 	$	4,189,955	
 	 	 	
Loans in forbearance(2)	 	349,777	
 	 	 	 	351,962	
 	 	 	
Loans in repayment and percentage of each status:	 	 	 	 	 	 	 	 	
Loans current	 	10,327,843	
 	 	98.1	%	 	9,509,394	
 	 	97.9	%	
Loans delinquent 31-60 days(3)	 	112,167	
 	 	1.1	
 	 	124,773	
 	 	1.3	
 	
Loans delinquent 61-90 days(3)	 	54,128	
 	 	0.5	
 	 	51,423	
 	 	0.5	
 	
Loans delinquent greater than 90 days(3)	 	32,644	
 	 	0.3	
 	 	24,168	
 	 	0.3	
 	
Total Private Education Loans in repayment	 	10,526,782	
 	 	100.0	%	 	9,709,758	
 	 	100.0	%	
Total Private Education Loans, gross	 	15,654,854	
 	 	 	 	14,251,675	
 	 	 	
Private Education Loans deferred origination costs	 	46,692	
 	 	 	 	44,206	
 	 	 	
Total Private Education Loans	 	15,701,546	
 	 	 	 	14,295,881	
 	 	 	
Private Education Loans allowance for losses	 	(185,103	)	 	 	 	(182,472	)	 	 	
Private Education Loans, net	 	$	15,516,443	
 	 	 	 	$	14,113,409	
 	 	 	
Percentage of Private Education Loans in repayment	 	 	 	67.2	%	 	 	 	68.1	%	
Delinquencies as a percentage of Private Education Loans in repayment	 	 	 	1.9	%	 	 	 	2.1	%	
Loans in forbearance as a percentage of Private Education Loans in repayment and forbearance	 	 	 	3.2	%	 	 	 	3.5	%	
 	 	
(1)	Deferment includes customers who have returned to school or are engaged 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 customers who have requested extension of grace period generally during employment transition or who have temporarily ceased making full payments due to hardship or other factors, consistent with established loan program servicing policies and procedures.	
 	 	
(3) 	The period of delinquency is based on the number of days scheduled payments are contractually past due.	

21

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

3.	Allowance for Loan Losses (Continued)	 	

 Accrued Interest Receivable
The following table provides information regarding accrued interest receivable on our Private Education Loans. The table also discloses the amount of accrued interest on loans greater than 90 days past due as compared to our allowance for uncollectible interest. The allowance for uncollectible interest exceeds the amount of accrued interest on our 90 days past due Private Education Loan portfolio for all periods presented.

 	 	Private Education Loan	
 	 	Accrued Interest Receivable	
 	 	Total Interest Receivable	 	Greater Than 90 Days Past Due	 	Allowance for Uncollectible Interest	
 	 	 	 	 	 	 	
March 31, 2017	 	$	825,680	
 	 	$	1,108	
 	 	$	2,868	
 	
December 31, 2016	 	$	739,847	
 	 	$	845	
 	 	$	2,898	

 

22

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

4. Deposits

The following table summarizes total deposits at March 31, 2017 and December 31, 2016.

 	 	March 31,	 	December 31,	 	
 	 	2017	 	2016	 	
Deposits - interest bearing	 	$	13,360,698	
 	 	$	13,434,990	
 	 	
Deposits - non-interest bearing	 	1,173	
 	 	677	
 	 	
Total deposits	 	$	13,361,871	
 	 	$	13,435,667	

Interest bearing deposits as of March 31, 2017 and December 31, 2016 consisted of retail non-maturity savings deposits, retail and brokered non-maturity money market deposits (“MMDAs”) and brokered and retail certificates of deposit (“CDs”). Interest bearing deposits include deposits from Educational 529 and Health Savings plans that diversify our funding sources and add deposits we consider to be core. These and other large omnibus accounts, aggregating the deposits of many individual depositors, represented $5.4 billion of our deposit total as of March 31, 2017.
Some of our deposit products are serviced by third-party providers. Placement fees associated with the brokered CDs are amortized into interest expense using the effective interest rate method. We recognized placement fee expense of $2.1 million and $2.6 million in the three months ended March 31, 2017 and 2016, respectively. Fees paid to third-party brokers related to brokered CDs were $2.1 million and $2.8 million for the three months ended March 31, 2017 and 2016, respectively.
Interest bearing deposits at March 31, 2017 and December 31, 2016 are summarized as follows:

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	March 31, 2017	 	December 31, 2016	 	
 	 	Amount	 	Qtr.-End Weighted Average Stated Rate (1)	 	Amount	 	Year-End Weighted Average Stated Rate (1)	 	
 	 	 	 	 	 	 	 	 	 	
Money market	 	$	7,187,495	
 	 	1.37	%	 	$	7,129,404	
 	 	1.22	%	 	
Savings	 	857,980	
 	 	0.94	
 	 	834,521	
 	 	0.84	
 	 	
Certificates of deposit	 	5,315,223	
 	 	1.58	
 	 	5,471,065	
 	 	1.41	
 	 	
Deposits - interest bearing	 	$	13,360,698	
 	 	 	 	$	13,434,990	

 	 	
____________
(1)  Includes the effect of interest rate swaps in effective hedge relationships.

 As of March 31, 2017 and December 31, 2016, there were $304.6 million and $304.5 million, respectively, of deposits exceeding Federal Deposit Insurance Corporation (“FDIC”) insurance limits. Accrued interest on deposits was $22.9 million and $18.9 million at March 31, 2017 and December 31, 2016, respectively.

23

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

5. Borrowings

Outstanding borrowings consist of secured borrowings issued through our term asset-backed securitization (“ABS”) program and our asset-backed commercial paper (“ABCP”) funding facility (the “ABCP Facility”). The following table summarizes our secured borrowings at March 31, 2017 and December 31, 2016.

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	March 31, 2017	 	December 31, 2016	
 	 	Short-Term	 	Long-Term	 	Total	 	Short-Term	 	Long-Term	 	Total	
Secured borrowings:	 	 	 	 	 	 	 	 	 	 	 	 	
Private Education Loan term securitizations	 	$	—	
 	 	$	2,837,347	
 	 	$	2,837,347	
 	 	$	—	
 	 	$	2,167,979	
 	 	$	2,167,979	
 	
ABCP Facility	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	
Total	 	$	—	
 	 	$	2,837,347	
 	 	$	2,837,347	
 	 	$	—	
 	 	$	2,167,979	
 	 	$	2,167,979	

Short-term Borrowings    
Asset-Backed Commercial Paper Funding Facility
On February 25, 2016 and February 22, 2017, we amended and extended the maturity of our ABCP Facility. The amended ABCP Facility is a $750 million ABCP Facility, in which we no longer hold a participation interest. As a result, the full $750 million is available for us to draw. We hold 100 percent of the residual interest in the ABCP Facility trust. Under the amended ABCP Facility, we incur financing costs of between 0.35 percent and 0.45 percent on unused borrowing capacity and approximately 3‑month LIBOR plus 0.90 percent on outstandings. The amended ABCP Facility extends the revolving period, during which we may borrow, repay and reborrow funds, until February 22, 2018. The scheduled amortization period, during which amounts outstanding under the ABCP Facility must be repaid, ends on February 22, 2019 (or earlier, if certain material adverse events occur). At March 31, 2017, there were no borrowings outstanding under the ABCP Facility. We expect to amend and extend the ABCP Facility on an annual basis.

24

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

5.	Borrowings (Continued)	

Long-term Borrowings    
On February 8, 2017, we executed our $772 million SMB Private Education Loan Trust 2017-A term ABS transaction, which was accounted for as a secured financing. We sold $772 million of notes to third parties and retained a 100 percent interest in the residual certificates issued in the securitization, raising approximately $768 million of gross proceeds. The Class A and Class B notes had a weighted average life of 4.27 years and priced at a weighted average LIBOR equivalent cost of 1-month LIBOR plus 0.93 percent. At March 31, 2017, $795 million of our Private Education Loans were encumbered as a result of this transaction.

Secured Financings at Issuance

Issue	 	Date Issued	 	Total Issued	 	Weighted Average Cost of Funds(1)	 	Weighted Average Life
 (in years)	
 	 	 	 	 	 	 	 	 	
Private Education:	 	 	 	 	 	 	
2015-B	 	July 2015	 	$	630,800	
 	 	1-month LIBOR plus 1.53%	 	4.82	
Total notes issued in 2015	 	$	630,800	

Total loan and accrued interest amount securitized at inception in 2015	 	$	745,580	

2016-A	 	May 2016	 	$	501,000	
 	 	1-month LIBOR plus 1.38%	 	4.01	
2016-B	 	July 2016	 	607,000	
 	 	1-month LIBOR plus 1.36%	 	4.01	
2016-C	 	October 2016	 	674,000	
 	 	1-month LIBOR plus 1.15%	 	4.27	
Total notes issued in 2016	 	$	1,782,000	

Total loan and accrued interest amount securitized at inception in 2016	 	$	2,107,042	

2017-A	 	February 2017	 	$	772,000	
 	 	1-month LIBOR plus 0.93%	 	4.27	
Total notes issued in 2017	 	$	772,000	

Total loan and accrued interest amount securitized at inception in 2017	 	$	856,253	

____________
(1) Represents LIBOR equivalent cost of funds for floating and fixed rate bonds, excluding issuance costs.

25

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

5.	Borrowings (Continued)	

Consolidated Funding Vehicles

We consolidate our financing entities that are VIEs as a result of our being the entities’ primary beneficiary. As a result, these financing VIEs are accounted for as secured borrowings. We consolidate the following financing VIEs as of March 31, 2017 and December 31, 2016, respectively:

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	March 31, 2017	
 	 	Debt Outstanding	 	Carrying Amount of Assets Securing Debt Outstanding	
 	 	Short-Term	 	Long-Term	 	Total	 	Loans	 	Restricted Cash	 	Other Assets (1)	 	Total	
Secured borrowings:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Private Education Loan term securitizations	 	$	—	
 	 	$	2,837,347	
 	 	$	2,837,347	
 	 	$	3,275,417	
 	 	$	90,682	
 	 	$	217,687	
 	 	$	3,583,786	
 	
ABCP Facility	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	
Total	 	$	—	
 	 	$	2,837,347	
 	 	$	2,837,347	
 	 	$	3,275,417	
 	 	$	90,682	
 	 	$	217,687	
 	 	$	3,583,786	
 	
____
(1) Other assets primarily represent accrued interest receivable.

 	 	December 31, 2016	
 	 	Debt Outstanding	 	Carrying Amount of Assets Securing Debt Outstanding	
 	 	Short-Term	 	Long-Term	 	Total	 	Loans	 	Restricted Cash	 	Other Assets (1)	 	Total	
Secured borrowings:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Private Education Loan term securitizations	 	$	—	
 	 	$	2,167,979	
 	 	$	2,167,979	
 	 	$	2,562,156	
 	 	$	44,617	
 	 	$	160,783	
 	 	$	2,767,556	
 	
ABCP Facility	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	
Total	 	$	—	
 	 	$	2,167,979	
 	 	$	2,167,979	
 	 	$	2,562,156	
 	 	$	44,617	
 	 	$	160,783	
 	 	$	2,767,556	
 	
____
(1) Other assets primarily represent accrued interest receivable.

Other Borrowing Sources
We maintain discretionary uncommitted Federal Funds lines of credit with various correspondent banks, which totaled $125 million at March 31, 2017. The interest rate we are charged on these lines of credit is priced at Fed Funds plus a spread at the time of borrowing, and is payable daily. We did not utilize these lines of credit in the three months ended March 31, 2017 or in the year ended December 31, 2016.
We established an account at the Federal Reserve Bank (“FRB”) to meet eligibility requirements for access to the Primary Credit borrowing facility at the FRB’s Discount Window (the “Window”). The Primary Credit borrowing facility is a lending program available to depository institutions that are in generally sound financial condition. All borrowings at the Window must be fully collateralized. We can pledge to the FRB asset-backed and mortgage-backed securities, as well as FFELP Loans and Private Education Loans, as collateral for borrowings at the Window. Generally, collateral value is assigned based on the estimated fair value of the pledged assets. At March 31, 2017 and December 31, 2016, the value of our pledged collateral at the FRB totaled $2.6 billion and $2.6 billion, respectively. The interest rate charged to us is the discount rate set by the FRB. We did not utilize this facility in the three months ended March 31, 2017 or in the year ended December 31, 2016.

26

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

6. Derivative Financial Instruments

We maintain an overall interest rate risk management strategy that incorporates the use of derivative instruments to reduce the economic effect of interest rate changes. Our goal is to manage interest rate sensitivity by modifying the repricing frequency and underlying index characteristics of certain balance sheet liabilities so any adverse impacts related to movements in interest rates are managed within low to moderate limits. As a result of interest rate fluctuations, hedged liabilities will appreciate or depreciate in market value or create variability in cash flows. Income or loss on the derivative instruments linked to the hedged item will generally offset the effect of this unrealized appreciation or depreciation or volatility in cash flows for the period the item is being hedged. We view this strategy as a prudent management of interest rate risk. Please refer to Note 11, “Derivative Financial Instruments” in our 2016 Form 10-K for a full discussion of our risk management strategy.
Although we use derivatives to reduce the risk of interest rate changes, the use of derivatives does expose us to both market and credit risk. Market risk is the chance of financial loss resulting from changes in interest rates and market liquidity. Credit risk is the risk that a counterparty will not perform its obligations under a contract and it is limited to the loss of the fair value gain in a derivative that the counterparty owes us less collateral held and plus collateral posted. When the fair value of a derivative contract less collateral held and plus collateral posted is negative, we owe the counterparty and, therefore, we have no credit risk exposure to the counterparty; however, the counterparty has exposure to us. We minimize the credit risk in derivative instruments by entering into transactions with highly-rated counterparties that are reviewed regularly by our Credit Department. We also maintain a policy of requiring that all derivative contracts be governed by an International Swaps and Derivatives Association, Inc. Master Agreement. Depending on the nature of the derivative transaction, bilateral collateral arrangements are required as well. When we have more than one outstanding derivative transaction with the counterparty, and there exists legally enforceable netting provisions with the counterparty (i.e., a legal right to offset receivable and payable derivative contracts), the “net” mark-to-market exposure, less collateral held and plus collateral posted, represents exposure with the counterparty. We refer to this as the “net position.” When there is a net negative exposure, we consider our exposure to the counterparty and the net position to be zero.
Title VII of the Dodd-Frank Act Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) requires all standardized derivatives, including most interest rate swaps, to be submitted for clearing to central counterparties to reduce counterparty risk. The CME and the LCH made amendments to their respective rules that resulted in the prospective accounting treatment of certain daily variation margin payments being considered as the legal settlement of the outstanding exposure of the derivative instead of the posting of collateral. The CME rule changes, which became effective in January 2017, result in all variation margin payments on derivatives cleared through the CME being accounted for as legal settlement, while the LCH allows the clearing member institution the option to adopt the rule changes on an individual contract or portfolio basis. As of March 31, 2017, $4.5 billion notional of our derivative contracts were cleared on the CME and $0.7 billion were cleared on the LCH. The derivative contracts cleared through the CME and LCH represent 79.8 percent and 13.1 percent, respectively, of our total notional derivative contracts of $5.6 billion at March 31, 2017.
Under this new rule, for derivatives cleared through the CME, the net gain (loss) position includes the variation margin amounts as settlement of the derivative and not collateral against the fair value of the derivative. Interest income (expense) related to variation margin on derivatives that are not designated as hedging instruments or are designated as fair value relationships is recognized as a gain (loss) rather than as interest income (expense). Changes in fair value for derivatives not designated as hedging instruments will be presented as realized gains (losses).
Our LCH clearing member institution has elected not to adopt the new rule change. Therefore, there has been no change to the accounting for the derivatives cleared through the LCH, and variation margin payments required to be exchanged based on the fair value of those derivatives remain accounted for as collateral.

27

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

6.	Derivative Financial Instruments (Continued)	 	

Our exposure is limited to the value of the derivative contracts in a gain position less any collateral held and plus any collateral posted. When there is a net negative exposure, we consider our exposure to the counterparty to be zero. At March 31, 2017 and December 31, 2016, we had a net positive exposure (derivative gain positions to us, less collateral held by us and plus collateral posted with counterparties) related to derivatives of $43.2 million and $44.6 million, respectively.

Summary of Derivative Financial Statement Impact
The following tables summarize the fair values and notional amounts of all derivative instruments at March 31, 2017 and December 31, 2016, and their impact on earnings and other comprehensive income for the three months ended March 31, 2017 and 2016. Please refer to Note 11, “Derivative Financial Instruments” in our 2016 Form 10-K for a full discussion of cash flow hedges, fair value hedges, and trading activities. The net fair value of derivative instruments as of March 31, 2017 was a liability of $7.6 million, compared to the net fair value as of December 31, 2016 liability of $18.1 million. The change in the net fair value reflects a $6.3 million decrease in fair value offset by variation margin amounts of $16.7 million. The net position as of March 31, 2017 was $42.6 million, compared to $30.0 million as of December 31, 2016. The change in the net position reflects a $6.3 million decrease in fair value, $3.8 million decrease in collateral held and pledged (for contracts other than those cleared through the CME), offset by variation margin impacts of $22.7 million.

Impact of Derivatives on the Consolidated Balance Sheet

 	 	 	Cash Flow Hedges	 	Fair Value Hedges	 	Trading	 	Total	
 	 	 	March 31,	 	December
31,	 	March 31,	 	December
31,	 	March 31,	 	December
31,	 	March 31,	 	December
31,	
 	 	 	2017	 	2016	 	2017	 	2016	 	2017	 	2016	 	2017	 	2016	
Fair Values (1)	Hedged Risk Exposure	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Derivative Assets: (2)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest rate swaps	Interest rate	 	$	—	
 	 	$	—	
 	 	$	200	
 	 	$	7,808	
 	 	$	—	
 	 	$	—	
 	 	$	200	
 	 	$	7,808	
 	
Derivative Liabilities: (2)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest rate swaps	Interest rate	 	(7,147	)	 	(14,463	)	 	(616	)	 	(10,398	)	 	(118	)	 	(1,076	)	 	(7,881	)	 	(25,937	)	
Total net derivatives	 	 	$	(7,147	)	 	$	(14,463	)	 	$	(416	)	 	$	(2,590	)	 	$	(118	)	 	$	(1,076	)	 	$	(7,681	)	 	$	(18,129	)	
     ___________
 	 	
(1)	Except for instruments cleared through the CME, fair values reported are exclusive of collateral held and pledged and accrued interest. Assets and liabilities are presented without consideration of master netting agreements. Derivatives are carried on the balance sheet based on net position by counterparty under master netting agreements, and classified in other assets or other liabilities depending on whether in a net positive or negative position. The net position includes the variation margin as legal settlement of the derivative contract for instruments cleared with the CME.	

(2)	The following table reconciles gross positions with the impact of master netting agreements to the balance sheet classification:	

28

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

6.	Derivative Financial Instruments (Continued)	 	

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Other Assets	 	Other Liabilities	
 	 	March 31,	 	December 31,	 	March 31,	 	December 31,	
 	 	2017	 	2016	 	2017	 	2016	
Gross position(1)	 	$	200	
 	 	$	7,808	
 	 	$	(7,881	)	 	$	(25,937	)	
Impact of master netting agreement	 	(196	)	 	(7,808	)	 	196	
 	 	7,808	
 	
Derivative values with impact of master netting agreements (as carried on balance sheet)	 	4	
 	 	—	
 	 	(7,685	)	 	(18,129	)	
Cash collateral (held) pledged(2)	 	(320	)	 	—	
 	 	50,342	
 	 	48,134	
 	
Net position	 	$	—	
 	 	$	—	
 	 	$	42,657	
 	 	$	30,005	
 	
__________
 	 	
(1)	Except for instruments cleared with the CME, gross position amounts are exclusive of accrued interest and collateral held and pledged.	
 	 	
(2)	Cash collateral (held) pledged excludes amounts that represent legal settlement of the derivative contracts.	

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Cash Flow	 	Fair Value	 	Trading	 	Total	
 	 	March 31,	 	December 31,	 	March 31,	 	December 31,	 	March 31,	 	December 31,	 	March 31,	 	December 31,	
 	 	2017	 	2016	 	2017	 	2016	 	2017	 	2016	 	2017	 	2016	
Notional Values	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest rate swaps	 	$	1,026,538	
 	 	$	1,054,688	
 	 	$	3,988,051	
 	 	$	3,628,062	
 	 	$	656,681	
 	 	$	494,638	
 	 	$	5,671,270	
 	 	$	5,177,388	

29

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

6.	Derivative Financial Instruments (Continued)	 	

Impact of Derivatives on the Consolidated Statements of Income

 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended 
 March 31,	
 	 	2017	 	2016	
 	 	 	 	 	
Fair Value Hedges	 	 	 	 	
Interest rate swaps:	 	 	 	 	
Hedge ineffectiveness realized gains (losses) recorded in earnings (1)	 	$	(4,167	)	 	$	(2,416	)	
Realized gains recorded in interest expense	 	4,547	
 	 	7,258	
 	
Total	 	$	380	
 	 	$	4,842	

Cash Flow Hedges	 	 	 	 	
Interest rate swaps:	 	 	 	 	
Hedge ineffectiveness losses recorded in earnings (1)	 	$	(72	)	 	$	(278	)	
Realized losses recorded in interest expense	 	(3,339	)	 	(4,621	)	
Total	 	$	(3,411	)	 	$	(4,899	)	
 	 	 	 	 	
Trading	 	 	 	 	
Interest rate swaps:	 	 	 	 	
Interest reclassification	 	$	80	
 	 	$	688	
 	
Realized (losses) gains recorded in earnings	 	(1,219	)	 	1,653	
 	
Total(1) 	 	(1,139	)	 	2,341	
 	
Total	 	$	(4,170	)	 	$	2,284	

________
 	 	
(1)	Amounts included in “losses on derivatives and hedging activities, net” in the consolidated statements of income.	

30

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

6.	Derivative Financial Instruments (Continued)	 	

Impact of Derivatives on the Statements of Changes in Stockholders’ Equity

 	 	Three Months Ended	
 	 	March 31,	
 	 	2017	 	2016	
Amount of gain (loss) recognized in other comprehensive income (loss)	 	$	1,440	
 	 	$	(28,995	)	
Less: amount of (loss) gain reclassified in interest expense (1)	 	(3,339	)	 	(4,621	)	
Total change in other comprehensive income (loss) for unrealized gains (losses) on derivatives, before income tax benefit	 	$	4,779	
 	 	$	(24,374	)	
___________
(1)   Amounts included in “realized losses recorded in interest expense” in the “Impact of Derivatives on the Consolidated Statements of Income” table.
Cash Collateral
As of March 31, 2017, cash collateral held and pledged excludes amounts that represent legal settlement of the derivative contracts held with CME. Cash collateral held related to derivative exposure between us and our derivatives counterparties was $0.3 million and $1.0 million at March 31, 2017 and December 31, 2016, respectively. Collateral held is recorded in “Other Liabilities” on the consolidated balance sheets. Cash collateral pledged related to derivative exposure between us and our derivatives counterparties was $50.3 million and $49.1 million at March 31, 2017 and December 31, 2016, respectively. Collateral pledged is recorded in “Other interest-earning assets” on the consolidated balance sheets.

31

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

7. Stockholders’ Equity

The following table summarizes our common share repurchases and issuances.

 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended 
 March 31,	 	
(Shares and per share amounts in actuals)	 	2017	 	2016	 	
Shares repurchased related to employee stock-based compensation plans (1)(2)	 	1,603,487	
 	 	1,128,709	
 	 	
Average purchase price per share	 	$	11.96	
 	 	$	5.98	
 	 	
Common shares issued(3)	 	3,738,717	
 	 	2,740,979	

__________________
 	 	
(1) 	Comprised of shares withheld from stock option exercises and vesting of restricted stock for employees’ tax withholding obligations and shares tendered by employees to satisfy option exercise costs.	
 	 	
(2) 	At the present time, we do not intend to initiate a publicly announced share repurchase program.	
 	 	
(3) 	Common shares issued under our various compensation and benefit plans.	
 
The closing price of our common stock on March 31, 2017 was $12.10.

32

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

8. Earnings per Common Share

Basic earnings per common share (“EPS”) are calculated using the weighted average number of shares of common stock outstanding during each period. A reconciliation of the numerators and denominators of the basic and diluted EPS calculations follows.

 	 	Three Months Ended	
 	 	March 31,	
(In thousands, except per share data)	 	2017	 	2016	
Numerator:	 	 	 	 	
Net income	 	$	94,943	
 	 	$	65,915	
 	
Preferred stock dividends	 	5,575	
 	 	5,139	
 	
Net income attributable to SLM Corporation common stock	 	$	89,368	
 	 	$	60,776	
 	
Denominator:	 	 	 	 	
Weighted average shares used to compute basic EPS	 	429,891	
 	 	427,111	
 	
Effect of dilutive securities:	 	 	 	 	
Dilutive effect of stock options, restricted stock, restricted stock units and Employee Stock Purchase Plan (“ESPP”)  (1)(2)	 	8,844	
 	 	3,792	
 	
Weighted average shares used to compute diluted EPS	 	438,735	
 	 	430,903	

Basic earnings per common share attributable to SLM Corporation	 	$	0.21	
 	 	$	0.14	

Diluted earnings per common share attributable to SLM Corporation	 	$	0.20	
 	 	$	0.14	

________________             
 	 	
(1) 	Includes the potential dilutive effect of additional common shares that are issuable upon exercise of outstanding stock options, restricted stock, restricted stock units, and the outstanding commitment to issue shares under the ESPP, determined by the treasury stock method.	
 	 	
(2) 	For the three months ended March 31, 2017 and 2016, securities covering approximately0 and 6 million shares, respectively, were outstanding but not included in the computation of diluted earnings per share because they were anti-dilutive.	

33

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

9. Fair Value Measurements

We use estimates of fair value in applying various accounting standards for our financial statements.

We categorize our fair value estimates based on a hierarchical framework associated with three levels of price transparency utilized in measuring financial instruments at fair value. For additional information regarding our policies for determining fair value and the hierarchical framework, see Note 2, “Significant Accounting Policies - Fair Value Measurement” in our 2016 Form 10-K.

During the three months ended March 31, 2017, there were no significant transfers of financial instruments between levels or changes in our methodology or assumptions used to value our financial instruments.

The following table summarizes the valuation of our financial instruments that are marked to fair value on a recurring basis.

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Fair Value Measurements on a Recurring Basis	
 	 	March 31, 2017	 	December 31, 2016	
 	 	Level 1 	 	Level 2 	 	Level 3 	 	Total 	 	Level 1 	 	Level 2 	 	Level 3 	 	Total 	
Assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Available-for-sale investments	 	$	—	
 	 	$	216,896	
 	 	$	—	
 	 	$	216,896	
 	 	$	—	
 	 	$	208,603	
 	 	$	—	
 	 	$	208,603	
 	
Derivative instruments	 	—	
 	 	200	
 	 	—	
 	 	200	
 	 	—	
 	 	7,808	
 	 	—	
 	 	7,808	
 	
Total	 	$	—	
 	 	$	217,096	
 	 	$	—	
 	 	$	217,096	
 	 	$	—	
 	 	$	216,411	
 	 	$	—	
 	 	$	216,411	

Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Derivative instruments	 	$	—	
 	 	$	(7,881	)	 	$	—	
 	 	$	(7,881	)	 	$	—	
 	 	$	(25,937	)	 	$	—	
 	 	$	(25,937	)	
Total	 	$	—	
 	 	$	(7,881	)	 	$	—	
 	 	$	(7,881	)	 	$	—	
 	 	$	(25,937	)	 	$	—	
 	 	$	(25,937	)	

 

34

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

9.	Fair Value Measurements (Continued)	 	

The following table summarizes the fair values of our financial assets and liabilities, including derivative financial instruments.

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	March 31, 2017	 	December 31, 2016	
 	 	Fair
Value	 	Carrying
Value	 	Difference	 	Fair
Value	 	Carrying
Value	 	Difference	
Earning assets	 	 	 	 	 	 	 	 	 	 	 	 	
Loans held for investment, net	 	$	18,443,622	
 	 	$	16,562,210	
 	 	$	1,881,412	
 	 	$	16,520,786	
 	 	$	15,137,922	
 	 	$	1,382,864	
 	
Cash and cash equivalents	 	1,077,576	
 	 	1,077,576	
 	 	—	
 	 	1,918,793	
 	 	1,918,793	
 	 	—	
 	
Available-for-sale investments	 	216,896	
 	 	216,896	
 	 	—	
 	 	208,603	
 	 	208,603	
 	 	—	
 	
Accrued interest receivable	 	838,461	
 	 	838,461	
 	 	—	
 	 	766,106	
 	 	766,106	
 	 	—	
 	
Tax indemnification receivable	 	261,033	
 	 	261,033	
 	 	—	
 	 	259,532	
 	 	259,532	
 	 	—	
 	
Derivative instruments	 	200	
 	 	200	
 	 	—	
 	 	7,808	
 	 	7,808	
 	 	—	
 	
Total earning assets	 	$	20,837,788	
 	 	$	18,956,376	
 	 	$	1,881,412	
 	 	$	19,681,628	
 	 	$	18,298,764	
 	 	$	1,382,864	
 	
Interest-bearing liabilities	 	 	 	 	 	 	 	 	 	 	 	 	
Money-market and savings accounts	 	$	8,045,494	
 	 	$	8,045,494	
 	 	$	—	
 	 	$	7,963,925	
 	 	$	7,963,925	
 	 	$	—	
 	
Certificates of deposit	 	5,348,545	
 	 	5,315,221	
 	 	(33,324	)	 	5,510,504	
 	 	5,471,065	
 	 	(39,439	)	
Short-term borrowings	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	
Long-term borrowings	 	2,337,342	
 	 	2,837,347	
 	 	500,005	
 	 	2,160,105	
 	 	2,167,979	
 	 	7,874	
 	
Accrued interest payable	 	27,359	
 	 	27,359	
 	 	—	
 	 	21,058	
 	 	21,058	
 	 	—	
 	
Derivative instruments	 	7,881	
 	 	7,881	
 	 	—	
 	 	25,937	
 	 	25,937	
 	 	—	
 	
Total interest-bearing liabilities	 	$	15,766,621	
 	 	$	16,233,302	
 	 	$	466,681	
 	 	$	15,681,529	
 	 	$	15,649,964	
 	 	$	(31,565	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Excess of net asset fair value over carrying value	 	 	 	 	 	$	2,348,093	
 	 	 	 	 	 	$	1,351,299	

Please refer to Note 15, “Fair Value Measurements” in our 2016 Form 10-K for a full discussion of the methods and assumptions used to estimate the fair value of each class of financial instruments.

35

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

10. Arrangements with Navient Corporation

In connection with the separation of Navient Corporation (“Navient”) from SLM (“the Spin-Off”), we entered into a separation and distribution agreement (the “Separation and Distribution Agreement”) and other ancillary agreements with Navient. Please refer to Note 16, “Arrangements with Navient Corporation” in our 2016 Form 10-K for a full discussion of these agreements.

Indemnification Obligations

Navient is responsible for, and has agreed to indemnify us against, all claims, actions, damages, losses or expenses that may arise from the conduct of all activities of pre-Spin-Off SLM Corporation (“pre-Spin-Off SLM”) occurring prior to the Spin-Off other than those specifically excluded in the Separation and Distribution Agreement. Some significant examples of the types of indemnification obligations Navient has under the Separation and Distribution Agreement and related ancillary agreements include:
 	 	
•	Navient will indemnify the Company and the Sallie Mae Bank, a Utah industrial bank subsidiary of the Company (the “Bank”), for any liabilities, costs or expenses they may incur arising from any action or threatened action related to the servicing, operations and collections activities of pre-Spin-Off SLM and its subsidiaries with respect to Private Education Loans and FFELP Loans that were assets of the Bank or Navient at the time of the Spin-Off; provided that written notice is provided to Navient on or prior to April 30, 2017, the third anniversary date of the Spin-Off. Navient will not indemnify for changes in law or changes in prior existing interpretations of law that occur on or after April 30, 2014.	

•	Pursuant to a tax sharing agreement, Navient has agreed to indemnify us for $283 million in deferred taxes that the Company will be legally responsible for but that relate to gains recognized by the Company’s predecessor on debt repurchases made prior to the Spin-Off. The remaining amount of this indemnification at March 31, 2017 was $116 million. In connection with the Spin-Off, we also recorded a liability related to uncertain tax positions of $27 million for which we are indemnified by Navient. As of March 31, 2017, the remaining balance of the indemnification receivable related to those uncertain tax positions was $28 million. In addition, we believe we are indemnified by Navient for uncertain tax positions relating to historical transactions among entities that are now subsidiaries of Navient that should have been recorded at the time of the Spin-Off. The remaining balance of the indemnification receivable related to these uncertain tax positions was $117 million at March 31, 2017.	

36

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

11. Regulatory Capital
    
The Bank is subject to various regulatory capital requirements administered by the FDIC and the Utah Department of Financial Institutions. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material adverse effect on our business, results of operation and financial condition. Under the FDIC’s regulations implementing the Basel III capital framework (“U.S. Basel III”) and the regulatory framework for prompt corrective action, the Bank must meet specific capital standards that involve quantitative measures of its assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and its classification under the prompt corrective action framework are also subject to qualitative judgments by the regulators about components of capital, risk weightings and other factors.

The Bank is required to report regulatory capital and ratios in accordance with U.S. Basel III. Among other things, U.S. Basel III establishes Common Equity Tier 1 as a new tier of capital, modifies methods for calculating risk-weighted assets, introduces a new capital conservation buffer (which is being phased in over several years), and revises the capital thresholds of the prompt corrective action framework, including the “well capitalized” standard.

“Well capitalized” regulatory requirements are the quantitative measures established by regulation to ensure capital adequacy. To qualify as “well capitalized,” the Bank must maintain minimum amounts and ratios (set forth in the table below) of Common Equity Tier 1, Tier 1 and Total capital to risk-weighted assets and of Tier 1 capital to average assets. The following capital amounts and ratios are based upon the Bank’s assets.

 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Actual	 	“Well Capitalized”
Regulatory Requirements	
 	 	Amount	Ratio	 	Amount	 	Ratio	
As of March 31, 2017:	 	 	 	 	 	 	 	
Common Equity Tier 1 Capital (to Risk-Weighted Assets)	 	$	2,117,957	
 	12.3	%	 	$	1,123,799	
 	>	6.5	%	
Tier 1 Capital (to Risk-Weighted Assets)	 	$	2,117,957	
 	12.3	%	 	$	1,383,137	
 	>	8.0	%	
Total Capital (to Risk-Weighted Assets)	 	$	2,305,261	
 	13.3	%	 	$	1,728,922	
 	>	10.0	%	
Tier 1 Capital (to Average Assets)	 	$	2,117,957	
 	11.2	%	 	$	945,325	
 	>	5.0	%	
 	 	 	 	 	 	 	 	
As of December 31, 2016:	 	 	 	 	 	 	 	
Common Equity Tier 1 Capital (to Risk-Weighted Assets)	 	$	2,011,583	
 	12.6	%	 	$	1,038,638	
 	>	6.5	%	
Tier 1 Capital (to Risk-Weighted Assets)	 	$	2,011,583	
 	12.6	%	 	$	1,278,323	
 	>	8.0	%	
Total Capital (to Risk-Weighted Assets)	 	$	2,197,997	
 	13.8	%	 	$	1,597,904	
 	>	10.0	%	
Tier 1 Capital (to Average Assets)	 	$	2,011,583	
 	11.1	%	 	$	907,565	
 	>	5.0	%	

Bank Dividends

The Bank is chartered under the laws of the State of Utah and its deposits are insured by the FDIC. The Bank’s ability to pay dividends is subject to the laws of Utah and the regulations of the FDIC. Generally, under Utah’s industrial bank laws and regulations as well as FDIC regulations, the Bank may pay dividends from its net profits without regulatory approval if, following the payment of the dividend, the Bank’s capital and surplus would not be impaired. The Bank paid no dividends for the three months ended March 31, 2017 and March 31, 2016.

37

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

12. Commitments, Contingencies and Guarantees
Commitments
When we approve a Private Education Loan at the beginning of an academic year, that approval may cover the borrowing for the entire academic year. As such, we do not always disburse the full amount of the loan at the time of such approval, but instead have a commitment to fund a portion of the loan at a later date (usually at the start of the second semester or subsequent trimesters). At March 31, 2017, we had $0.4 billion of outstanding contractual loan commitments which we expect to fund during the remainder of the 2016/2017 academic year. At March 31, 2017, we had a $0.2 million reserve recorded in “Other Liabilities” to cover expected losses that we conclude are probable to occur during the one year loss emergence period on these unfunded commitments.
Regulatory Matters
On May 13, 2014, the Bank reached settlements with (a) the FDIC regarding disclosures and assessments of certain late fees, as well as compliance with the Servicemembers’ Civil Relief Act (“SCRA”) and (b) the Department of Justice (the “DOJ”) regarding compliance with the SCRA. In connection with the settlements, the Bank became subject to a Consent Order, Order to Pay Restitution, and Order to Pay Civil Money Penalty dated May 13, 2014 issued by the FDIC (“the FDIC Consent Order”) and a DOJ Consent Order (“the DOJ Consent Order”), which was approved by the U.S. District Court for the District of Delaware on September 29, 2014. Under the terms of the Separation and Distribution Agreement, Navient is responsible for funding all liabilities under the regulatory orders and, as of the date hereof, has funded all liabilities other than fines directly levied against the Bank in connection with these matters which the Bank is required to pay.
On March 27, 2017, the Bank received confirmation from the FDIC that effective March 23, 2017, the FDIC terminated the FDIC Consent Order. The termination was issued with no conditions.
The Bank continues to be in full compliance with the DOJ Order, including policy and procedure updates. Pursuant to the terms of the DOJ Consent Order, the Bank will remain subject to certain DOJ reporting and record-keeping requirements until September 29, 2018.
In May 2014, the Bank received a Civil Investigative Demand (“CID”) from the Consumer Financial Protection Bureau (“the CFPB”) as part of the CFPB’s separate investigation relating to customer complaints, fees and charges assessed in connection with the servicing of student loans and related collection practices of pre-Spin-Off SLM by entities now subsidiaries of Navient during a time period prior to the Spin-Off. Two state attorneys general provided the Bank identical CIDs and other state attorneys general have become involved in the inquiry over time. To the extent requested, the Bank has been cooperating fully with the CFPB and the attorneys general but is not in a position at this time to predict the duration or outcome of these matters. Given the timeframe covered by the CIDs and the focus on practices and procedures previously conducted by Navient and its servicing subsidiaries prior to the Spin-Off, as contemplated by the Separation and Distribution Agreement relating to, and the structure of, the Spin-Off, Navient is leading the response to these investigations, is legally responsible for, and has accepted responsibility to indemnify the Company against, all costs, expenses, losses and remediation that may arise from these matters. Additionally, on January 18, 2017, the Illinois Attorney General filed a separate lawsuit against Navient - its subsidiaries Navient Solutions, Inc., Pioneer Credit Recovery, Inc., and General Revenue Corporation - and the Bank arising out of the aforementioned multi-state investigation of various lending, servicing, and collection practices. As contemplated by the Separation and Distribution Agreement relating to, and the structure of, the Spin-Off, Navient is legally responsible for, and has accepted responsibility to indemnify the Company against, all costs, expenses, losses and remediation that may arise from these matters.
On January 18, 2017, the CFPB filed a complaint in federal court in Pennsylvania against Navient, along with its subsidiaries, Navient Solutions, Inc., and Pioneer Credit Recovery, Inc. The complaint alleges these Navient entities, among other things, engaged in deceptive practices with respect to its historic servicing and debt collection practices. Neither SLM, the

38

SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, unless otherwise noted)

12.	Commitments, Contingencies and Guarantees (Continued)	 	

Bank, nor any of their current subsidiaries are named in, or otherwise a party to, the lawsuit and are not alleged to have engaged in any wrongdoing.
Contingencies
In the ordinary course of business, we and our subsidiaries are routinely defendants in or parties to pending and threatened legal actions and proceedings, including actions brought on behalf of various classes of claimants. These actions and proceedings may be based on alleged violations of consumer protection, securities, employment and other laws. In certain of these actions and proceedings, claims for substantial monetary damage may be asserted against us and our subsidiaries.
It is common for the Company, our subsidiaries and affiliates to receive information and document requests and investigative demands from state attorneys general, legislative committees, and administrative agencies. These requests may be for informational or regulatory purposes and may relate to our business practices, the industries in which we operate, or other companies with whom we conduct business. Our practice has been and continues to be to cooperate with these bodies and be responsive to any such requests.
We are required to establish reserves for litigation and regulatory matters where those matters present loss contingencies that are both probable and estimable. When loss contingencies are not both probable and estimable, we do not establish reserves.
Based on current knowledge, management does not believe there are loss contingencies, if any, arising from pending investigations, litigation or regulatory matters for which reserves should be established.

13. Subsequent Event
On April 5, 2017, we issued our unsecured debt offering of $200 million of 5.125 percent Senior Notes due April 5, 2022 at par. We intend to use the net proceeds from this debt offering to redeem all of our 6.97 percent Series A preferred stock and for general corporate purposes. This transaction will be reflected in our second quarter 2017 results.

39

 	 	
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	

The following information is current as of April 19, 2017 (unless otherwise noted) and should be read in connection with SLM Corporation’s Annual Report on Form 10-K for the year ended December 31, 2016 (filed with the Securities and Exchange Commission (the “SEC”) on February 24, 2017) (the “2016 Form 10-K”), and subsequent reports filed with the SEC. Definitions for capitalized terms used in this report not defined herein can be found in the 2016 Form 10-K.

References in this Form 10-Q to “we,” “us,” “our,” “Sallie Mae,” “SLM” and the “Company” refer to SLM Corporation and its subsidiaries, except as otherwise indicated or unless the context otherwise requires.
    
This report contains “forward-looking” statements and information based on management’s current expectations as of the date of this report. Statements that are not historical facts, including statements about the Company’s beliefs, opinions 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 2016 Form 10-K and subsequent filings with the SEC; increases in financing costs; limits on liquidity; increases in costs associated with compliance with laws and regulations; failure to comply with consumer protection, banking and other laws; 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 education 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; failures or breaches of its operating systems or infrastructure, including those of third-party vendors; damage to its reputation; risks associated with restructuring initiatives, including failures to successfully implement cost-cutting programs and the adverse effects of such initiatives on the Company’s 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; changes in banking rules and regulations, including increased capital requirements; increased competition from banks and other consumer lenders; the creditworthiness of the Company’s customers; changes in the general interest rate environment, including the rate relationships among relevant money-market instruments and those of the Company’s earning assets versus the Company’s funding arrangements; rates of prepayment on the loans that the Company makes; changes in general economic conditions and the Company’s ability to successfully effectuate any acquisitions; and other strategic initiatives. 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 quarterly report on Form 10-Q are qualified by these cautionary statements and are made only as of the date of this report. The Company does not undertake any obligation to update or revise these forward-looking statements to conform such statements to actual results or changes in its expectations.

The Company 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 the unrealized, mark-to-market gains/losses on derivative contracts (excluding current period accruals on the derivative instruments), net of tax. These 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. The Company’s “Core Earnings” are not defined terms within GAAP and may not be comparable to similarly titled measures reported by other companies. For additional information, see “Key Financial Measures” and “GAAP Consolidated Earnings Summary - ‘Core Earnings’ ” in this Form 10-Q for the quarter ended March 31, 2017 for a further discussion and a complete reconciliation between GAAP net income and “Core Earnings.”

Through this discussion and analysis, we intend to provide the reader with some narrative context for how our management views our consolidated financial statements, additional context within which to assess our operating results, and information on the quality and variability of our earnings, liquidity and cash flows.

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Selected Financial Information and Ratios

 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended 
 March 31,	
(In thousands, except per share data and percentages) 	 	2017	 	2016	
 	 	 	 	 	
Net income attributable to SLM Corporation common stock	 	$	89,368	
 	 	$	60,776	
 	
Diluted earnings per common share attributable to SLM Corporation	 	$	0.20	
 	 	$	0.14	
 	
Weighted average shares used to compute diluted earnings per share	 	438,735	
 	 	430,903	
 	
Return on assets	 	2.0	%	 	1.7	%	
Non-GAAP operating efficiency ratio - old method(1)	 	37.5	%	 	40.4	%	
Non-GAAP operating efficiency ratio - new method(2)	 	36.8	%	 	40.2	%	
 	 	 	 	 	
Other Operating Statistics	 	 	 	 	
Ending Private Education Loans, net	 	$	15,516,443	
 	 	$	12,021,022	
 	
Ending FFELP Loans, net	 	990,611	
 	 	1,087,403	
 	
Ending total education loans, net	 	$	16,507,054	
 	 	$	13,108,425	

Average education loans	 	$	16,452,683	
 	 	$	12,920,961	

(1) In 2016, our non-GAAP operating efficiency ratio was calculated for the periods presented as the ratio of (a) the total non-interest expense numerator to (b) the net revenue denominator (which consisted of net interest income, before provision for credit losses, plus non-interest income).

(2) In 2017, we will begin calculating and reporting our non-GAAP operating efficiency ratio as the ratio of (a) the total non-interest expense numerator to (b) the net revenue denominator (which consists of the sum of net interest income, before provision for credit losses, and non-interest income, less the net impact of derivative accounting as defined in our “Core Earnings” adjustments to GAAP table in “- GAAP Consolidated Earnings Summary - ‘Core Earnings’’’ in this Form 10-Q). We believe this change will improve visibility into our management of operating expenses over time and eliminate the variability in this ratio that may be related to the changes in fair value of our derivative contracts that we consider economic hedges and which do not affect how we manage operating expenses. This change conforms the treatment of our hedging activities in our operating efficiency ratio to our non-GAAP “Core Earnings” measure. The impact of this change on the non-GAAP operating efficiency ratio reported in each of our prior quarterly and annual periods is immaterial. This ratio provides useful information to investors because it is a measure used by our management team to monitor our effectiveness in managing operating expenses. Other companies may use similarly titled non-GAAP financial measures that are calculated differently from our ratio. Accordingly, our non-GAAP operating efficiency ratio may not be comparable to similar measures used by other companies.	
 
Recent Development
On April 5, 2017, we issued our unsecured debt offering of $200 million of 5.125 percent Senior Notes due April 5, 2022 at par. We intend to use the net proceeds from this debt offering to redeem all of our 6.97 percent Series A preferred stock and for general corporate purposes. This transaction will be reflected in our second quarter 2017 results.
Overview
The following discussion and analysis presents a review of our business and operations as of and for the three months ended March 31, 2017.
Key Financial Measures
Our operating results are primarily driven by net interest income from our Private Education Loan portfolio, provision expense for credit losses, and operating expenses. The growth of our business and the strength of our financial condition are primarily driven by our ability to achieve our annual Private Education Loan origination goals while sustaining credit quality and maintaining cost-efficient funding sources to support our originations. A brief summary of our key financial measures (net

41

interest income; loan sales and secured financings, net; allowance for loan losses; charge-offs and delinquencies; operating expenses; “Core Earnings;” Private Education Loan originations; and funding sources) can be found in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2016 Form 10-K. As described below, we have recently updated the method of computing of our non-GAAP operating efficiency ratio.
Operating Expenses
The cost of operating our business directly affects our profitability. Our operating expenses include those that are directly attributable to running our business, as well as the costs of building out our servicing and origination platforms and establishing the Company as a stand-alone entity. We will continue to measure our effectiveness in managing operating expenses by monitoring our non-GAAP operating efficiency ratio.
In 2016, our non-GAAP operating efficiency ratio was calculated for the periods presented as the ratio of (a) the total non-interest expense numerator to (b) the net revenue denominator (which consisted of net interest income, before provision for credit losses, plus non-interest income).
In 2017, we will begin calculating and reporting our non-GAAP operating efficiency ratio as the ratio of (a) the total non-interest expense numerator to (b) the net revenue denominator (which consists of the sum of net interest income, before provision for credit losses, and non-interest income, less the net impact of derivative accounting as defined in our “Core Earnings” adjustments to GAAP table in “- GAAP Consolidated Earnings Summary - ‘Core Earnings’’’ in this Form 10-Q). We believe this change will improve visibility into our management of operating expenses over time and eliminate the variability in this ratio that may be related to the changes in fair value of our derivative contracts that we consider economic hedges and which do not affect how we manage operating expenses. This change conforms the treatment of our hedging activities in our operating efficiency ratio to our non-GAAP “Core Earnings” measure. The impact of this change on the non-GAAP operating efficiency ratio reported in each of our prior quarterly and annual periods is immaterial. This ratio provides useful information to investors because it is a measure used by our management team to monitor our effectiveness in managing operating expenses. Other companies may use similarly titled non-GAAP financial measures that are calculated differently from our ratio. Accordingly, our non-GAAP operating efficiency ratio may not be comparable to similar measures used by other companies.
The operating efficiency ratio calculated using the old method was 37.5 percent for the three months ended March 31, 2017, compared with 40.4 percent for the three months ended March 31, 2016. The ratio calculated using the new method was 36.8 percent for the three months ended March 31, 2017, compared with 40.2 percent for the three months ended March 31, 2016.
2017 Management Objectives
For 2017, we have set out the following major goals for ourselves: (1) prudently grow our Private Education Loan assets and revenues while continuing to diversify the mix of our funding sources; (2) maintain our strong capital position; (3) enhance our customers’ experience by further improving the delivery of our products and services; (4) sustain the consumer protection improvements we have made since the Spin-off and maintain our strong governance, risk oversight and compliance infrastructure; (5) continue our disciplined expansion of new products to increase the level of engagement we have with our existing customers and attract new customers; (6) manage operating expenses while improving efficiency; and (7) continue to promote a culture centered on our core values (collaboration, mutual respect, honesty, integrity, performance, and accountability), sustained through ongoing employee engagement, recognition, and development and aligned with our mission and business plan for growth. Here is how we plan to achieve these objectives:
Prudently Grow Private Education Loan Assets and Revenues
We continue to pursue managed growth in our Private Education Loan portfolio in 2017 by leveraging our Sallie Mae brand, our relationship with more than two thousand colleges and universities, and our direct consumer marketing efforts. To help facilitate the expected increase in our Private Education Loan originations, we are diversifying the mix of our funding sources in 2017. We are determined to maintain overall credit quality and cosigner rates in our Smart Option Student Loan originations. Originations were two percent higher in the first three months of 2017 compared with the year-ago period. The average FICO scores at approval and the cosigner rates for originations in the three months ended March 31, 2017 were 748 and 90.2 percent, compared with 748 and 90.1 percent in the three months ended March 31, 2016, respectively. Although the growth rate in originations in the first quarter of 2017 was lower than in the prior-year period, we continue to expect total

42

originations of our Smart Option Student Loans to be approximately $4.9 billion in 2017. The lower growth rate in the first quarter of 2017 was primarily due to disbursement timing to schools and change in credit strategies.
Maintain Our Strong Capital Position
We intend to maintain levels of capital at the Bank that significantly exceed those necessary to be considered “well capitalized” by the FDIC. The Company is a source of strength for the Bank and will obtain or provide additional capital as, and if, necessary to the Bank. We regularly evaluate the quality of assets, stability of earnings, and adequacy of our allowance for loan losses, and we continue to believe our existing capital levels are sufficient to support the Bank’s plan for significant growth over the next several years while remaining “well capitalized.” As our balance sheet grows in 2017, these ratios will decline but will remain significantly in excess of the capital levels required to be considered “well capitalized” by our regulators. As of March 31, 2017, the Bank had a Common Equity Tier 1 risk-based capital ratio of 12.3 percent, a Tier 1 risk-based capital ratio of 12.3 percent, a Total risk-based capital ratio of 13.3 percent and a Tier 1 leverage ratio of 11.2 percent, all exceeding the current regulatory guidelines for “well capitalized” institutions by a significant amount. We do not plan to pay a common stock dividend or repurchase shares in 2017 (except to repurchase common stock acquired as a result of taxes withheld in connection with award exercises and vesting under our employee stock-based compensation plans).  
On April 5, 2017, we issued our unsecured debt offering of $200 million of 5.125 percent Senior Notes due April 5, 2022 at par. We intend to use the net proceeds from this debt offering to redeem all of our 6.97 percent Series A preferred stock and for general corporate purposes.
Enhance Customers’ Experience By Further Improving Delivery of Products and Services
We have made significant improvements in our customers’ experience over the last two years, and we will continue to implement strategies and tactics to fulfill our brand and customer experience visions. In 2017, we will focus on initiatives that will further simplify the application, fulfillment and servicing experience for our customers, including:
 	 	
•	Creating an integrated online origination and servicing experience with a single point of entry and improved customer messaging;	
 	 	
•	Providing enhanced functionality to our customers that will give them more flexibility to service their accounts online and over the phone; and	
 	 	
•	Continuing to support customers throughout the Private Education Loan experience with enhanced communication and tools.	
Sustain Consumer Protection Improvements Made Since the Spin-Off and Maintain our Strong Governance, Risk Oversight and Compliance Infrastructure
We have continued to undertake significant work to establish that all customer protection policies, procedures and compliance management systems are sufficient to meet or exceed currently applicable regulatory standards. On March 27, 2017, the Bank received confirmation from the FDIC that effective March 23, 2017, the FDIC terminated the FDIC Consent Order. The termination was issued with no conditions.
In the first quarter of 2017, we also began conducting our own audits of consumer protection processes and procedures, including our compliance management system, using internal audit staff supplemented with staff from the same third-party firm that had conducted the compliance audits since 2014. Our goal is to sustain the improvements implemented to date and consistently comply with or exceed regulatory standards while continuing to improve our customers’ experience and satisfaction levels.
We continually evaluate and strengthen our overall governance processes, including oversight, education, policies, procedures and programs, all supported by strong enterprise risk management, compliance and internal audit functions. 
Continue Disciplined Expansion of New Products to Increase Level of Engagement With Our Existing Customers and Attract New Customers
In 2016, we began to expand the suite of products we provide to customers. We did so by leveraging our core competencies and capabilities, rather than requiring the development or acquisition of new or alternative ones. For example, we

43

leveraged our experience with our Smart Option Student Loan products to launch a Parent Loan program designed for parents who wish to separately finance their children’s education, rather than cosign loans with their children.
In March 2017, through an affiliation with another lender, we launched a credit card program for young professionals. We do not expect this product to have a material impact on 2017 earnings. We are also continuing to develop our infrastructure in 2017 so that in early 2018 we have the capability to originate and service unsecured personal loans to be used for non-educational purposes. We will also continue to explore other product opportunities in 2017. In this process, we will place a high premium on designing and launching products that meet the needs of our existing customers, attract new customers, and assist both populations in achieving their financial goals. Any 2017 activity will focus on implementation success. We are not forecasting significant contributions to our originations, revenues or net income from any potential new products in 2017.
Manage Operating Expenses While Improving Efficiency
We will continue to measure our effectiveness in managing operating expenses by monitoring our non-GAAP operating efficiency ratio. See “- Key Financial Measures - Operating Expenses” in this Form 10-Q for a discussion of the old method and new method for calculating this ratio. This ratio provides useful information to investors because it is a measure used by our management team to monitor our effectiveness in managing operating expenses. Other companies may use similarly titled non-GAAP financial measures that are calculated differently from our ratio. Accordingly, our non-GAAP operating efficiency ratio may not be comparable to similar measures used by other companies.
 The operating efficiency ratio calculated using the old method was 37.5 percent for the three months ended March 31, 2017, compared with 40.4 percent for the three months ended March 31, 2016. The ratio calculated using the new method was 36.8 percent for the three months ended March 31, 2017, compared with 40.2 percent for the three months ended March 31, 2016. The improvement in the non-GAAP operating efficiency ratio in the three months ended March 31, 2017 compared with the year-ago quarter was primarily due to the growth rate in net interest income, which was 28 percent, exceeding the growth rate in our expense base of 11 percent.  The first-quarter 2016 operating efficiency ratio also benefited from a one-time change in reserve estimates related to our Upromise rewards business.   Excluding this item, the non-GAAP operating efficiency ratio for the three months ended March 31, 2016 would have been 42.2 percent and 42.0 percent using the old method and new method, respectively.
We expect this ratio to decline steadily over the next several years as the number of loans on which we earn either net interest income or servicing revenue grows to a level commensurate with our loan origination platform and we control the growth of our expense base.

Continue to Promote a Culture Centered on Our Core Values (Collaboration, Mutual Respect, Honesty, Integrity, Performance, and Accountability), Sustained Through Ongoing Employee Engagement, Recognition, and Development and Aligned with our Mission and Business Plan for Growth
In 2017, we plan to further promote a culture centered on our core values - collaboration, mutual respect, honesty, integrity, performance, and accountability - as we seek to grow our business. When evaluating employee performance, we will review not only what was accomplished by employees, but whether and how they demonstrated our core values in achieving those accomplishments. We will continue to encourage and enable high performance in a variety of ways, including by encouraging employee engagement, and differentiating, recognizing, and rewarding high performing employees. In addition, we plan to invest in our employees by identifying and providing development opportunities that align with our business plan and support succession plans throughout our organization.
In the first quarter of 2017, to ensure continued focus and commitment to our culture and core values, we cascaded level-appropriate goals to employees across the Company. As part of our investment in employee development, we finalized our talent development strategy, and established a roadmap to execute on our three key talent priorities: (i) the development of a competency model; (ii) the design and deployment of talent development programs that support leadership development priorities; and (iii) the enhancement of our talent assessment process. To further link employee compensation to performance, we implemented an incentive compensation program that is based both on corporate and individual goals for over 300 employees who did not previously participate in an incentive compensation program. We also supported employee engagement through the establishment of inter-departmental and multi-site employee activities committees, and established a series of engagement events and volunteer opportunities for all employees.

44

GAAP Results of Operations
We present the results of operations below first on a consolidated basis in accordance with GAAP.
 
GAAP Statements of Income (Unaudited)

 	 	Three Months Ended 
 March 31,	 	Increase
(Decrease) 	
(In millions, except per share data)	 	2017	 	2016	 	$	 	%	
Interest income:	 	 	 	 	 	 	 	 	
Loans	 	$	325	
 	 	$	245	
 	 	$	80	
 	 	33	 %	
Investments	 	2	
 	 	3	
 	 	(1	)	 	(33	)	
Cash and cash equivalents	 	2	
 	 	2	
 	 	—	
 	 	—	
 	
Total interest income	 	329	
 	 	250	
 	 	79	
 	 	32	
 	
Total interest expense	 	61	
 	 	40	
 	 	21	
 	 	53	
 	
Net interest income	 	268	
 	 	210	
 	 	58	
 	 	28	
 	
Less: provisions for credit losses	 	25	
 	 	33	
 	 	(7	)	 	(21	)	
Net interest income after provisions for credit losses	 	243	
 	 	177	
 	 	66	
 	 	37	
 	
Non-interest income:	 	 	 	 	 	 	 	 	
Losses on derivatives and hedging activities, net	 	(5	)	 	—	
 	 	(5	)	 	100	
 	
Other income	 	11	
 	 	21	
 	 	(10	)	 	(48	)	
Total non-interest income	 	6	
 	 	21	
 	 	(15	)	 	(71	)	
Non-interest expenses:	 	 	 	 	 	 	 	 	
Total operating expenses	 	103	
 	 	93	
 	 	10	
 	 	11	
 	
Acquired intangible asset amortization expense	 	—	
 	 	—	
 	 	—	
 	 	—	
 	
Total non-interest expenses	 	103	
 	 	93	
 	 	10	
 	 	11	

Income before income tax expense	 	146	
 	 	105	
 	 	41	
 	 	39	
 	
Income tax expense	 	51	
 	 	39	
 	 	12	
 	 	31	
 	
Net income	 	95	
 	 	66	
 	 	29	
 	 	44	
 	
Preferred stock dividends	 	6	
 	 	5	
 	 	1	
 	 	20	
 	
Net income attributable to SLM Corporation common stock	 	$	89	
 	 	$	61	
 	 	$	28	
 	 	46	 %	
 	 	 	 	 	 	 	 	 	
Basic earnings per common share attributable to SLM Corporation	 	$	0.21	
 	 	$	0.14	
 	 	$	0.07	
 	 	50	 %	
 	 	 	 	 	 	 	 	 	
Diluted earnings per common share attributable to SLM Corporation	 	$	0.20	
 	 	$	0.14	
 	 	$	0.06	
 	 	43	 %	

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 GAAP Consolidated Earnings Summary
Three Months Ended March 31, 2017 Compared with Three Months Ended March 31, 2016 
For the three months ended March 31, 2017, net income was $95 million, or $.20 diluted earnings per common share, compared with net income of $66 million, or $.14 diluted earnings per common share for the three months ended March 31, 2016. Net income was affected by a $58 million increase in net interest income and a $7 million decrease in provisions for credit losses, which benefited from an update to our life-of-loan loss forecasting model for TDRs, which was offset by a $15 million decrease in total non-interest income (that included the effect of a one-time $10 million change in reserve estimates related to our Upromise rewards business in the first quarter of 2016), a $10 million increase in total non-interest expenses, a $12 million increase in income tax expense, and a mark-to-market loss on derivatives and hedging activities of $5 million.
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 increased by $58 million in the current quarter compared with the year-ago quarter primarily due to a $3.6 billion increase in average Private Education Loans outstanding. Net interest margin increased by 19 basis points primarily as a result of an increase in the ratio of higher yielding Private Education Loans relative to our other interest earning assets and the benefit from an increase in LIBOR rates that occurred in late 2016 which increased the yield on our variable rate Private Education Loan portfolio more than it increased our cost of funds.
•Provisions for credit losses decreased $7 million compared with the year-ago quarter. This decrease was primarily the result of an update to our life-of-loan loss forecasting model for TDRs that resulted in an $8 million reduction of expected future credit losses in the first quarter of 2017.
•Losses on derivatives and hedging activities, net, resulted in a net loss of $5.4 million in the first quarter of 2017, compared with a net loss of $0.3 million in the year-ago quarter.
•Other income decreased $10 million due to a one-time $10 million change in reserve estimates related to our Upromise rewards business that was recorded in the first quarter of 2016.
•First-quarter 2017 operating expenses (including acquired intangible asset amortization expense) were $103 million, compared with $93 million in the year-ago quarter. The increase in operating expenses was primarily the result of increased FDIC assessment fees and personnel and technology costs, largely driven by growth in our loan portfolio.
•Income tax expense increased $12 million compared with the year-ago quarter. The effective tax rate decreased in the first-quarter 2017 to 35.0 percent from 37.1 percent in the year-ago quarter. The change was primarily due to a $6 million benefit from the new stock compensation accounting standard, which changed the treatment of excess tax benefits/deficiencies related to the settlement of employee stock-based awards.
 “Core Earnings”
We prepare financial statements in accordance with GAAP. However, we also produce and report our after-tax earnings on a separate basis that we refer to as “Core Earnings.” While pre-Spin-Off SLM also reported a metric by that name, what we now report and what we describe below is significantly different and should not be compared to any Core Earnings reported by pre-Spin-Off SLM. The difference between our “Core Earnings” and GAAP results for periods presented generally is driven by the unrealized, mark-to-market gains (losses) on derivatives contracts recognized in GAAP, but not in “Core Earnings.”
“Core Earnings” recognizes the difference in accounting treatment based upon whether a derivative qualifies for hedge accounting treatment and eliminates the earnings impact associated with hedge ineffectiveness and derivatives we use as an economic hedge but which do not qualify for hedge accounting treatment. We enter into derivatives instruments to economically hedge interest rate and cash flow risk associated with our portfolio. We believe that our derivatives are effective economic hedges, and as such, are a critical element of our interest rate risk management strategy. Those derivative instruments that qualify for hedge accounting treatment have their related cash flows recorded in interest income or interest expense along with the hedged item. Hedge ineffectiveness related to these derivatives is recorded in “Gains (losses) on derivatives and hedging activities, net.” Some of our derivatives do not qualify for hedge accounting treatment and the stand-alone derivative must be marked-to-fair value in the income statement with no consideration for the corresponding change in fair value of the hedged item. These gains and losses, recorded in “Gains (losses) on derivative and hedging activities, net,” are primarily caused by interest rate volatility and changing credit spreads during the period as well as the volume and term of derivatives not

46

receiving hedge accounting treatment. Cash flows on derivative instruments that do not qualify for hedge accounting are not recorded in interest income and interest expense; they are recorded in non-interest income: “Gains (losses) on derivative and hedging activities, net.”
The adjustments required to reconcile from our “Core Earnings” results to our GAAP results of operations, net of tax, relate to differing treatments for our derivative instruments used to hedge our economic risks that do not qualify for hedge accounting treatment or that do qualify for hedge accounting treatment but result in ineffectiveness, net of tax. The amount recorded in “Gains (losses) on derivative and hedging activities, net” includes (a) the accrual of the current payment on the interest rate swaps that do not qualify for hedge accounting treatment, (b) the change in fair values related to future expected cash flows for derivatives that do not qualify for hedge accounting treatment and (c) ineffectiveness on derivatives that receive hedge accounting treatment. For purposes of “Core Earnings”, we are including in GAAP earnings the current period accrual amounts (interest reclassification) on the swaps and excluding the remaining ineffectiveness (and change in fair values for those derivatives not qualifying for hedge accounting treatment). “Core Earnings” is meant to represent what earnings would have been had these derivatives qualified for hedge accounting and there was no ineffectiveness.
“Core Earnings” are not a substitute for reported results under GAAP. We provide a “Core Earnings” basis of presentation because (i) earnings per share computed on a “Core Earnings” basis is one of several measures we utilize in establishing management incentive compensation and (ii) we believe it better reflects the financial results for derivatives that are economic hedges of interest rate risk but which do not qualify for hedge accounting treatment.
GAAP provides a uniform, comprehensive basis of accounting. Our “Core Earnings” basis of presentation differs from GAAP in the way it treats derivatives as described above.
The following table shows the amount in “Losses on derivatives and hedging activities, net” that relates to the interest reclassification on the derivative contracts.

 	 	Three Months Ended 
 March 31,	 	
(Dollars in thousands)	 	2017	 	2016	 	
 	 	 	 	 	 	
Hedge ineffectiveness gains (losses)	 	(4,239	)	 	$	(2,695	)	 	
Unrealized (losses) gains on instruments not in a hedging relationship	 	(1,219	)	 	1,653	
 	 	
Interest reclassification	 	80	
 	 	688	
 	 	
Gains (losses) on derivatives and hedging activities, net	 	$	(5,378	)	 	$	(354	)	 	

47

The following table reflects adjustments associated with our derivative activities.

 	 	Three Months Ended 
 March 31,	 	
(Dollars in thousands, except per share amounts)	 	2017	 	2016	 	
 	 	 	 	 	 	
“Core Earnings” adjustments to GAAP:	 	 	 	 	 	
 	 	 	 	 	 	
GAAP net income attributable to SLM Corporation	 	$	94,943	
 	 	$	65,915	
 	 	
Preferred stock dividends	 	5,575	
 	 	5,139	
 	 	
GAAP net income attributable to SLM Corporation common stock	 	$	89,368	
 	 	$	60,776	

Adjustments:	 	 	 	 	 	
Net impact of derivative accounting(1)	 	5,458	
 	 	1,042	
 	 	
Net tax effect(2)	 	2,084	
 	 	399	
 	 	
Total “Core Earnings” adjustments to GAAP	 	3,374	
 	 	643	

“Core Earnings” attributable to SLM Corporation common stock	 	$	92,742	
 	 	$	61,419	

GAAP diluted earnings per common share	 	$	0.20	
 	 	$	0.14	
 	 	
Derivative adjustments, net of tax	 	0.01	
 	 	—	
 	 	
“Core Earnings” diluted earnings per common share	 	$	0.21	
 	 	$	0.14	
 	 	
______
(1) Derivative Accounting: “Core Earnings” exclude periodic unrealized gains and losses caused by the mark-to-market valuations on derivatives that do not qualify for hedge accounting treatment under GAAP, as well as the periodic unrealized gains and losses that are a result of ineffectiveness recognized related to effective hedges under GAAP. Under GAAP, for our derivatives held to maturity, the cumulative net unrealized gain or loss over the life of the contract will equal $0.

(2) “Core Earnings” tax rate is based on the effective tax rate at the Bank where the derivative instruments are held.

48

Financial Condition
Average Balance Sheets - GAAP
The following table reflects the rates earned on interest-earning assets and paid on interest-bearing liabilities and reflects our net interest margin on a consolidated basis.   

 	 	Three Months Ended March 31, 	 	
 	 	2017	 	2016	 	
(Dollars in thousands)	 	Balance	 	Rate	 	Balance	 	Rate	 	
Average Assets	 	 	 	 	 	 	 	 	 	
Private Education Loans	 	$	15,449,555	
 	 	8.26	%	 	$	11,817,708	
 	 	8.03	%	 	
FFELP Loans	 	1,003,128	
 	 	3.69	
 	 	1,103,253	
 	 	3.42	
 	 	
Other loans	 	36,744	
 	 	9.04	
 	 	—	
 	 	—	
 	 	
Taxable securities	 	352,164	
 	 	2.47	
 	 	385,005	
 	 	2.71	
 	 	
Cash and other short-term investments	 	1,397,007	
 	 	0.75	
 	 	1,318,320	
 	 	0.50	

Total interest-earning assets	 	18,238,598	
 	 	7.33	%	 	14,624,286	
 	 	6.86	%	 	
 	 	 	 	 	 	 	 	 	 	
Non-interest-earning assets	 	922,377	
 	 	 	 	704,602	

Total assets	 	$	19,160,975	
 	 	 	 	$	15,328,888	

Average Liabilities and Equity	 	 	 	 	 	 	 	 	 	
Brokered deposits	 	$	7,015,338	
 	 	1.46	%	 	$	7,095,826	
 	 	1.28	%	 	
Retail and other deposits	 	6,569,535	
 	 	1.21	
 	 	4,470,357	
 	 	1.01	
 	 	
Other interest-bearing liabilities(1)	 	2,562,535	
 	 	2.61	
 	 	1,091,725	
 	 	2.14	
 	 	
Total interest-bearing liabilities	 	16,147,408	
 	 	1.54	%	 	12,657,908	
 	 	1.26	%	 	
 	 	 	 	 	 	 	 	 	 	
Non-interest-bearing liabilities	 	628,147	
 	 	 	 	556,153	
 	 	 	 	
Equity	 	2,385,420	
 	 	 	 	2,114,827	
 	 	 	 	
Total liabilities and equity	 	$	19,160,975	
 	 	 	 	$	15,328,888	

Net interest margin	 	 	 	5.96	%	 	 	 	5.77	%	 	

_________________
 	 	
(1) 	Includes the average balance of our secured borrowings and amortization expense of transaction costs related to our ABCP Facility.	

49

Rate/Volume Analysis - GAAP

The following rate/volume analysis shows the relative contribution of changes in interest rates and asset volumes.

 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Dollars in thousands)	 	Increase	 	Change Due To(1)	 	
 	 	 	 	Rate 	 	Volume	 	 	 	 	 	
Three Months Ended March 31, 2017 vs. 2016	 	 	 	 	 	 	 	 	 	 	 	
Interest income	 	$	80,033	
 	 	$	17,690	
 	 	$	62,343	
 	 	 	 	 	 	
Interest expense	 	21,820	
 	 	9,960	
 	 	11,860	
 	 	 	 	 	 	
Net interest income	 	$	58,213	
 	 	$	7,023	
 	 	$	51,190	

_________________
 	 	
(1) 	Changes in income and expense due to both rate and volume have been allocated in proportion to the relationship of the absolute dollar amounts of the change in each. The changes in income and expense are calculated independently for each line in the table. The totals for the rate and volume columns are not the sum of the individual lines.	
Summary of Our Loan Portfolio
Ending Loan Balances, net

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	March 31, 2017	
(Dollars in thousands)	 	Private
Education
Loans 	 	FFELP
Loans	 	Personal
Loans	 	Total Portfolio	
Total loan portfolio:	 	 	 	 	 	 	 	 	
In-school(1)	 	$	3,854,252	
 	 	$	398	
 	 	$	—	
 	 	$	3,854,650	
 	
Grace, repayment and other(2)	 	11,800,602	
 	 	988,995	
 	 	55,502	
 	 	12,845,099	
 	
Total, gross	 	15,654,854	
 	 	989,393	
 	 	55,502	
 	 	16,699,749	
 	
Deferred origination costs and unamortized premium	 	46,692	
 	 	2,855	
 	 	—	
 	 	49,547	
 	
Allowance for loan losses	 	(185,103	)	 	(1,637	)	 	(346	)	 	(187,086	)	
Total loan portfolio	 	$	15,516,443	
 	 	$	990,611	
 	 	$	55,156	
 	 	$	16,562,210	

% of total	 	94	%	 	6	%	 	—	%	 	100	%	

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	December 31, 2016	
(Dollars in thousands)	 	Private
Education
Loans	 	FFELP
Loans	 	Personal
Loans	 	Total
Portfolio	
Total loan portfolio:	 	 	 	 	 	 	 	 	
In-school(1)	 	$	3,371,870	
 	 	$	377	
 	 	$	—	
 	 	$	3,372,247	
 	
Grace, repayment and other(2)	 	10,879,805	
 	 	1,010,531	
 	 	12,893	
 	 	11,903,229	
 	
Total, gross	 	14,251,675	
 	 	1,010,908	
 	 	12,893	
 	 	15,275,476	
 	
Deferred origination costs and unamortized premium	 	44,206	
 	 	2,941	
 	 	 	 	47,147	
 	
Allowance for loan losses	 	(182,472	)	 	(2,171	)	 	(58	)	 	(184,701	)	
Total loan portfolio	 	$	14,113,409	
 	 	$	1,011,678	
 	 	$	12,835	
 	 	$	15,137,922	

% of total	 	93	%	 	7	%	 	—	%	 	100	%	
____________ 
(1)  Loans for customers still attending school and who are not yet required to make payments on the loan.
(2)  Includes loans in deferment or forbearance.

50

Average Loan Balances (net of unamortized premium/discount)

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended 
 March 31,	
(Dollars in thousands)	 	2017	 	2016	
Private Education Loans	 	$	15,449,555	
 	 	94	%	 	$	11,817,708	
 	 	91	%	
FFELP Loans	 	1,003,128	
 	 	6	
 	 	1,103,253	
 	 	9	
 	
Personal Loans	 	35,830	
 	 	—	
 	 	—	
 	 	—	
 	
Total portfolio	 	$	16,488,513	
 	 	100	%	 	$	12,920,961	
 	 	100	%	

Loan Activity

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended March 31, 2017	
(Dollars in thousands)	 	 Private
Education
Loans	 	FFELP
Loans	 	Personal
Loans	 	Total
Portfolio	
Beginning balance	 	$	14,113,409	
 	 	$	1,011,678	
 	 	$	12,835	
 	 	$	15,137,922	
 	
Acquisitions and originations	 	1,848,447	
 	 	—	
 	 	44,250	
 	 	1,892,697	
 	
Capitalized interest and deferred origination cost premium amortization	 	70,434	
 	 	8,489	
 	 	—	
 	 	78,923	
 	
Sales	 	(1,972	)	 	—	
 	 	—	
 	 	(1,972	)	
Loan consolidation to third parties	 	(103,691	)	 	(10,668	)	 	—	
 	 	(114,359	)	
Repayments and other	 	(410,184	)	 	(18,888	)	 	(1,929	)	 	(431,001	)	
Ending balance	 	$	15,516,443	
 	 	$	990,611	
 	 	$	55,156	
 	 	$	16,562,210	

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended March 31, 2016	
(Dollars in thousands)	 	Private
Education
Loans	 	FFELP
Loans	 	Total
Portfolio	
Beginning balance	 	$	10,515,505	
 	 	$	1,115,086	
 	 	$	11,630,591	
 	
Acquisitions and originations	 	1,806,583	
 	 	—	
 	 	1,806,583	
 	
Capitalized interest and deferred origination cost premium amortization	 	50,527	
 	 	9,219	
 	 	59,746	
 	
Sales	 	(3,365	)	 	—	
 	 	(3,365	)	
Loan consolidation to third parties	 	(42,086	)	 	(10,304	)	 	(52,390	)	
Repayments and other	 	(306,142	)	 	(26,598	)	 	(332,740	)	
Ending balance	 	$	12,021,022	
 	 	$	1,087,403	
 	 	$	13,108,425	

51

Private Education Loan Originations
The following table summarizes our Private Education Loan originations. Originations represent loans that were funded or acquired during the period presented.

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended 
 March 31,	
(Dollars in thousands)	 	2017	 	%	 	2016	 	%	
Smart Option - interest only(1)	 	$	481,154	
 	 	26	%	 	$	462,932	
 	 	26	%	
Smart Option - fixed pay(1)	 	527,072	
 	 	29	
 	 	565,862	
 	 	31	
 	
Smart Option - deferred(1)	 	810,856	
 	 	44	
 	 	774,395	
 	 	43	
 	
Smart Option - principal and interest	 	2,501	
 	 	—	
 	 	715	
 	 	—	
 	
Parent Loan	 	25,877	
 	 	1	
 	 	—	
 	 	—	
 	
Total Private Education Loan originations	 	$	1,847,460	
 	 	100	%	 	$	1,803,904	
 	 	100	%	
 	 	 	 	 	 	 	 	 	
Percentage of loans with a cosigner	 	90.2	%	 	 	 	90.1	%	 	 	
Average FICO at approval	 	748	
 	 	 	 	748	
 	 	 	
     _____________
(1) Interest only, fixed pay and deferred describe the payment option while in school or in grace period.

52

Allowance for Loan Losses

Education Loan Allowance for Loan Losses Activity

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended March 31,	
 	 	2017	 	2016	
(Dollars in thousands)	 	Private
Education
Loans	 	FFELP
Loans	 	Total
Portfolio	 	Private
Education
Loans	 	FFELP
Loans	 	Total
Portfolio	
Beginning balance	 	$	182,472	
 	 	$	2,171	
 	 	$	184,643	
 	 	$	108,816	
 	 	$	3,691	
 	 	$	112,507	
 	
Less:	 	 	 	 	 	 	 	 	 	 	 	 	
Charge-offs	 	(26,227	)	 	(218	)	 	(26,445	)	 	(19,004	)	 	(383	)	 	(19,387	)	
Loan sales(1)	 	(1,221	)	 	—	
 	 	(1,221	)	 	(2,075	)	 	—	
 	 	(2,075	)	
Plus:	 	 	 	 	 	 	 	 	 	 	 	 	
Recoveries	 	3,259	
 	 	—	
 	 	3,259	
 	 	1,044	
 	 	—	
 	 	1,044	
 	
Provision for loan losses	 	26,820	
 	 	(316	)	 	26,504	
 	 	33,839	
 	 	321	
 	 	34,160	
 	
Ending balance	 	$	185,103	
 	 	$	1,637	
 	 	$	186,740	
 	 	$	122,620	
 	 	$	3,629	
 	 	$	126,249	

Troubled debt restructurings (2)	 	$	701,860	
 	 	$	—	
 	 	$	701,860	
 	 	$	318,094	
 	 	$	—	
 	 	$	318,094	
 	
_________
 	 	
(1) 	Represents fair value adjustments on loans sold.	
 	 	
(2) 	Represents the unpaid principal balance of loans classified as troubled debt restructurings.	

Private Education Loan Allowance for Loan Losses
In establishing the allowance for Private Education Loan losses as of March 31, 2017, we considered several factors with respect to our Private Education Loan portfolio, in particular, credit quality and delinquency, forbearance and charge-off trends.
Private Education Loan provision for loan losses decreased $7 million in the first quarter of 2017 compared with the year-ago period. This decrease was primarily the result of an update to our life-of-loan loss forecasting model for TDRs that resulted in an $8 million reduction of expected future credit losses in the first quarter of 2017.
Private Education Loans in full principal and interest repayment status were 33 percent of our total portfolio at March 31, 2017 and 28 percent of our total portfolio at March 31, 2016.
For a more detailed discussion of our policy for determining the collectability of Private Education Loans and maintaining our allowance for Private Education Loan losses, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates — Allowance for Loan Losses” in the 2016 Form 10-K.

53

The table below presents our Private Education Loan delinquency trends. Loans in repayment include loans making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period.

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Private Education Loans	
 	 	March 31,	
 	 	2017	 	2016	
(Dollars in thousands)	 	Balance	 	%	 	Balance	 	%	
Loans in-school/grace/deferment(1)	 	$	4,778,295	
 	 	 	 	$	4,027,332	
 	 	 	
Loans in forbearance(2)	 	349,777	
 	 	 	 	241,462	
 	 	 	
Loans in repayment and percentage of each status:	 	 	 	 	 	 	 	 	
Loans current	 	10,327,843	
 	 	98.1	%	 	7,678,446	
 	 	97.9	%	
Loans delinquent 31-60 days(3)	 	112,167	
 	 	1.1	
 	 	78,242	
 	 	1.0	
 	
Loans delinquent 61-90 days(3)	 	54,128	
 	 	0.5	
 	 	56,906	
 	 	0.7	
 	
Loans delinquent greater than 90 days(3)	 	32,644	
 	 	0.3	
 	 	29,482	
 	 	0.4	
 	
Total Private Education Loans in repayment	 	10,526,782	
 	 	100.0	%	 	7,843,076	
 	 	100.0	%	
Total Private Education Loans, gross	 	15,654,854	
 	 	 	 	12,111,870	
 	 	 	
Private Education Loan deferred origination costs	 	46,692	
 	 	 	 	31,772	
 	 	 	
Total Private Education Loans	 	15,701,546	
 	 	 	 	12,143,642	
 	 	 	
Private Education Loan allowance for losses	 	(185,103	)	 	 	 	(122,620	)	 	 	
Total Private Education Loans, net	 	$	15,516,443	
 	 	 	 	$	12,021,022	

Percentage of Private Education Loans in repayment	 	 	 	67.2	%	 	 	 	64.8	%	
 	 	 	 	 	 	 	 	 	
Delinquencies as a percentage of Private Education Loans in repayment	 	 	 	1.9	%	 	 	 	2.1	%	
 	 	 	 	 	 	 	 	 	
Loans in forbearance as a percentage of Private Education Loans in repayment and forbearance	 	 	 	3.2	%	 	 	 	3.0	%	
________
 	 	
(1) 	Deferment includes customers 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 customers who have requested extension of grace period generally during employment transition or who have temporarily ceased making full payments due to hardship or other factors, consistent with established loan program servicing policies and procedures.	
 	 	
(3) 	The period of delinquency is based on the number of days scheduled payments are contractually past due.	

54

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

 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended 
 March 31,	
(Dollars in thousands)	 	2017	 	2016	
Allowance at beginning of period	 	$	182,472	
 	 	$	108,816	
 	
Provision for Private Education Loan losses	 	26,820	
 	 	33,839	
 	
Net charge-offs:	 	 	 	 	
Charge-offs	 	(26,227	)	 	(19,004	)	
Recoveries	 	3,259	
 	 	1,044	
 	
Net charge-offs	 	(22,968	)	 	(17,960	)	
Loan sales(1)	 	(1,221	)	 	(2,075	)	
Allowance at end of period	 	$	185,103	
 	 	$	122,620	

Allowance as a percentage of ending total loans	 	1.18	%	 	1.01	%	
Allowance as a percentage of ending loans in repayment(2)	 	1.76	%	 	1.56	%	
Allowance coverage of net charge-offs (annualized)	 	2.01	
 	 	1.71	
 	
Net charge-offs as a percentage of average loans in repayment (annualized) (2)	 	0.89	%	 	0.95	%	
Delinquencies as a percentage of ending loans in repayment(2)	 	1.89	%	 	2.10	%	
Loans in forbearance as a percentage of ending loans in repayment and forbearance (2)	 	3.22	%	 	2.99	%	
Ending total loans, gross	 	$	15,654,854	
 	 	$	12,111,870	
 	
Average loans in repayment(2)	 	$	10,265,530	
 	 	$	7,534,234	
 	
Ending loans in repayment(2)	 	$	10,526,782	
 	 	$	7,843,076	
 	
     _______
 	 	
(1) 	Represents fair value adjustments on loans sold.	
 	 	
(2) 	Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period.	
 
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 ending loans in repayment; and delinquency and forbearance percentages. The allowance as a percentage of ending total loans and of ending loans in repayment increased at March 31, 2017 compared with March 31, 2016 because of an increase in our TDRs (for which we hold a life-of-loan allowance) and an increase in the percentage of loans in full principal and interest repayment status.

55

Use of Forbearance as a Private Education Loan Collection Tool
Forbearance involves granting the customer a temporary cessation of payments (or temporary acceptance of smaller than scheduled payments) for a specified period of time. Using forbearance extends the original term of the loan. Forbearance does not grant any reduction in the total repayment obligation (principal or interest). While in forbearance status, interest continues to accrue and is capitalized to principal when the loan re-enters repayment status. Our forbearance policies include limits on the number of forbearance months granted consecutively and the total number of forbearance months granted over the life of the loan. We grant forbearance in our servicing centers if a borrower who is current requests it for increments of three months at a time, for up to 12 months. Forbearance as a collection tool is used most effectively when applied based on a customer’s unique situation, including historical information and judgments. We leverage updated customer information and other decision support tools to best determine who will be granted forbearance based on our expectations as to a customer’s ability and willingness to repay their obligation. This strategy is aimed at mitigating the overall risk of the portfolio as well as encouraging cash resolution of delinquent loans. In some instances, we require good faith payments before granting forbearance. Exceptions to forbearance policies are permitted when such exceptions are judged to increase the likelihood of collection of the loan.
Forbearance may be granted to customers who are exiting their grace period to provide additional time to obtain employment and income to support their obligations, or to current customers who are faced with a hardship and request forbearance time to provide temporary payment relief. In these circumstances, a customer’s loan is placed into a forbearance status in limited monthly increments and is reflected in the forbearance status at month-end during this time. At the end of their granted forbearance period, the customer will enter repayment status as current and is expected to begin making scheduled monthly payments on a go-forward basis.
Forbearance may also be granted to customers who are delinquent in their payments. If specific requirements are met, the forbearance can cure the delinquency and the customer is returned to a current repayment status. In more limited instances, delinquent customers will also be granted additional forbearance time.
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). Active repayment status includes loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period. Our experience shows that the percentage of loans in forbearance status decreases the longer the loans have been in active repayment status. At March 31, 2017, loans in forbearance status as a percentage of total loans in repayment and forbearance were 2.4 percent for Private Education Loans that have been in active repayment status for fewer than 25 months. Approximately 75 percent of our Private Education Loans in forbearance status have been in active repayment status fewer than 25 months.

56

 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Dollars in millions)
March 31, 2017	 	Private Education Loans Monthly Scheduled Payments Due	 	Not Yet in
Repayment	 	Total	 	
 	 	0 to 12	 	13 to 24	 	25 to 36	 	37 to 48	 	More than 48	 	 	 	 	 	
Loans in-school/grace/deferment	 	$	—	
 	 	$	—	
 	 	$	—	
 	 	$	—	
 	 	$	—	
 	 	$	4,778	
 	 	$	4,778	
 	 	
Loans in forbearance	 	210	
 	 	54	
 	 	42	
 	 	25	
 	 	19	
 	 	—	
 	 	350	
 	 	
Loans in repayment - current	 	3,922	
 	 	2,844	
 	 	1,882	
 	 	938	
 	 	742	
 	 	—	
 	 	10,328	
 	 	
Loans in repayment - delinquent 31-60 days	 	52	
 	 	24	
 	 	17	
 	 	10	
 	 	9	
 	 	—	
 	 	112	
 	 	
Loans in repayment - delinquent 61-90 days	 	30	
 	 	10	
 	 	7	
 	 	4	
 	 	3	
 	 	—	
 	 	54	
 	 	
Loans in repayment - delinquent greater than 90 days	 	20	
 	 	5	
 	 	4	
 	 	2	
 	 	2	
 	 	—	
 	 	33	
 	 	
Total	 	$	4,234	
 	 	$	2,937	
 	 	$	1,952	
 	 	$	979	
 	 	$	775	
 	 	$	4,778	
 	 	15,655	
 	 	
Unamortized discount	 	 	 	 	 	 	 	 	 	 	 	 	 	46	
 	 	
Allowance for loan losses	 	 	 	 	 	 	 	 	 	 	 	 	 	(185	)	 	
Total Private Education Loans, net	 	 	 	 	 	 	 	 	 	 	 	 	 	$	15,516	

Loans in forbearance as a percentage of total Private Education Loans in repayment and forbearance	 	1.93	%	 	0.50	%	 	0.39	%	 	0.23	%	 	0.17	%	 	—	%	 	3.22	%	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Dollars in millions)
March 31, 2016	 	Private Education Loans Monthly Scheduled Payments Due	 	Not Yet in
Repayment	 	Total	 	
 	 	0 to 12	 	13 to 24	 	25 to 36	 	37 to 48	 	More than 48	 	 	 	 	 	
Loans in-school/grace/deferment	 	$	—	
 	 	$	—	
 	 	$	—	
 	 	$	—	
 	 	$	—	
 	 	$	4,027	
 	 	$	4,027	
 	 	
Loans in forbearance	 	149	
 	 	39	
 	 	26	
 	 	16	
 	 	11	
 	 	—	
 	 	241	
 	 	
Loans in repayment - current	 	3,427	
 	 	2,186	
 	 	1,124	
 	 	522	
 	 	420	
 	 	—	
 	 	7,679	
 	 	
Loans in repayment - delinquent 31-60 days	 	40	
 	 	17	
 	 	10	
 	 	5	
 	 	6	
 	 	—	
 	 	78	
 	 	
Loans in repayment - delinquent 61-90 days	 	31	
 	 	10	
 	 	7	
 	 	5	
 	 	4	
 	 	—	
 	 	57	
 	 	
Loans in repayment - delinquent greater than 90 days	 	18	
 	 	4	
 	 	4	
 	 	2	
 	 	2	
 	 	—	
 	 	30	
 	 	
Total	 	$	3,665	
 	 	$	2,256	
 	 	$	1,171	
 	 	$	550	
 	 	$	443	
 	 	$	4,027	
 	 	12,112	
 	 	
Unamortized discount	 	 	 	 	 	 	 	 	 	 	 	 	 	32	
 	 	
Allowance for loan losses	 	 	 	 	 	 	 	 	 	 	 	 	 	(123	)	 	
Total Private Education Loans, net	 	 	 	 	 	 	 	 	 	 	 	 	 	$	12,021	

 	

 	 	

 	 	
 	 	
Loans in forbearance as a percentage of total Private Education Loans in repayment and forbearance	 	1.85	%	 	0.48	%	 	0.32	%	 	0.20	%	 	0.14	%	 	—	%	 	2.99	%	 	

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Private Education Loan Types
The following table provides information regarding the repayment balance by product type at March 31, 2017 and December 31, 2016.

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	March 31, 2017	
(Dollars in thousands)	 	Signature and
Other	 	Parent Loan	 	Smart Option	 	Career
Training	 	Total	
$ in repayment(1)	 	$	182,146	
 	 	$	52,110	
 	 	$	10,279,013	
 	 	$	13,513	
 	 	$	10,526,782	
 	
$ in total	 	$	335,862	
 	 	$	52,519	
 	 	$	15,252,442	
 	 	$	14,031	
 	 	$	15,654,854	

 

 	 	December 31, 2016	
(Dollars in thousands)	 	Signature and
Other	 	Parent Loan	 	Smart Option	 	Career
Training	 	Total	
$ in repayment(1)	 	$	164,725	
 	 	$	29,212	
 	 	$	9,501,040	
 	 	$	14,781	
 	 	$	9,709,758	
 	
$ in total	 	$	334,512	
 	 	$	29,430	
 	 	$	13,872,378	
 	 	$	15,355	
 	 	$	14,251,675	
 	
_______
 	 	
(1) 	Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period.	

Accrued Interest Receivable
The following table provides information regarding accrued interest receivable on our Private Education Loans. The table also discloses the amount of accrued interest on loans greater than 90 days past due as compared to our allowance for uncollectible interest. The allowance for uncollectible interest exceeds the amount of accrued interest on our 90 days past due portfolio for all periods presented.

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Private Education Loan	
 	 	Accrued Interest Receivable 	
(Dollars in thousands)	 	Total Interest Receivable	 	Greater Than
90 Days
Past Due	 	Allowance for
Uncollectible
Interest	
March 31, 2017	 	$	825,680	
 	 	$	1,108	
 	 	$	2,868	
 	
December 31, 2016	 	$	739,847	
 	 	$	845	
 	 	$	2,898	
 	
March 31, 2016	 	$	619,226	
 	 	$	1,034	
 	 	$	3,074	

     

58

Liquidity and Capital Resources
Funding and Liquidity Risk Management
Our primary liquidity needs include our ongoing ability to fund our businesses throughout market cycles, including during periods of financial stress, our ongoing ability to fund originations of Private Education Loans and servicing our Bank deposits. To achieve these objectives, we analyze and monitor our liquidity needs, maintain excess liquidity and access diverse funding sources, such as deposits at the Bank, issuance of secured debt primarily through asset-backed securitizations and other financing facilities. It is our policy to manage operations so liquidity needs are fully satisfied through normal operations to avoid unplanned asset sales under emergency conditions. Our liquidity management is governed by policies approved by our Board of Directors. Oversight of these policies is performed in the Asset and Liability Committee, a management-level committee.
These policies take into account the volatility of cash flow forecasts, expected maturities, anticipated loan demand and a variety of other factors to establish minimum liquidity guidelines.
Key risks associated with our liquidity relate to our ability to access the capital markets and the markets for bank deposits at reasonable rates. This ability may be affected by our performance, competitive pressures, the macroeconomic environment and the impact they have on the availability of funding sources in the marketplace.
Sources of Liquidity and Available Capacity
Ending Balances

 	 	 	 	 	 	 	 	 	
(Dollars in thousands)	 	March 31, 2017	 	December 31, 2016	
Sources of primary liquidity:	 	 	 	 	
Unrestricted cash and liquid investments:	 	 	 	 	
Holding Company and other non-bank subsidiaries	 	$	25,436	
 	 	$	18,133	
 	
Sallie Mae Bank(1)	 	1,052,140	
 	 	1,900,660	
 	
Available-for-sale investments	 	216,896	
 	 	208,603	
 	
Total unrestricted cash and liquid investments	 	$	1,294,472	
 	 	$	2,127,396	
 	
____
(1) This amount will be used primarily to originate Private Education Loans at the Bank.

Average Balances

 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended 
 March 31,	
(Dollars in thousands)	 	2017	 	2016	
Sources of primary liquidity:	 	 	 	 	
Unrestricted cash and liquid investments:	 	 	 	 	
Holding Company and other non-bank subsidiaries	 	$	25,019	
 	 	$	16,040	
 	
Sallie Mae Bank(1)	 	1,254,254	
 	 	1,275,679	
 	
Available-for-sale investments	 	211,018	
 	 	198,290	
 	
Total unrestricted cash and liquid investments	 	$	1,490,291	
 	 	$	1,490,009	
 	
      ____
(1) This amount will be used primarily to originate Private Education Loans at the Bank.

59

Deposits

The following table summarizes total deposits.

 	 	March 31,	 	December 31,	
(Dollars in thousands)	 	2017	 	2016	
Deposits - interest bearing	 	$	13,360,698	
 	 	$	13,434,990	
 	
Deposits - non-interest bearing	 	1,173	
 	 	677	
 	
Total deposits	 	$	13,361,871	
 	 	$	13,435,667	

Our total deposits of $13.4 billion were comprised of $6.7 billion in brokered deposits and $6.7 billion in retail and other deposits at March 31, 2017, compared to total deposits of $13.4 billion, which were comprised of $7.1 billion in brokered deposits and $6.3 billion in retail and other deposits, at December 31, 2016.
Interest bearing deposits as of March 31, 2017 and December 31, 2016 consisted of retail non-maturity savings deposits, retail and brokered non-maturity MMDAs and brokered and retail CDs. Interest bearing deposits include deposits from Educational 529 and Health Savings plans that diversify our funding sources and add deposits we consider to be core. These and other large omnibus accounts, aggregating the deposits of many individual depositors, represented $5.4 billion of our deposit total as of March 31, 2017.
Some of our deposit products are serviced by third-party providers. Placement fees associated with the brokered CDs are amortized into interest expense using the effective interest rate method. We recognized placement fee expense of $2.1 million and $2.6 million in the three months ended March 31, 2017 and 2016, respectively. Fees paid to third-party brokers related to brokered CDs were $2.1 million and $2.8 million for the three months ended March 31, 2017 and 2016, respectively.
Interest bearing deposits at March 31, 2017 and December 31, 2016 are summarized as follows:

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	March 31, 2017	 	December 31, 2016	 	
(Dollars in thousands)	 	Amount	 	Qtr.-End
Weighted
Average
Stated Rate(1)	 	Amount	 	Year-End
Weighted
Average
Stated Rate(1)	 	
 	 	 	 	 	 	 	 	 	 	
Money market	 	$	7,187,495	
 	 	1.37	%	 	$	7,129,404	
 	 	1.22	%	 	
Savings	 	857,980	
 	 	0.94	
 	 	834,521	
 	 	0.84	
 	 	
Certificates of deposit	 	5,315,223	
 	 	1.58	
 	 	5,471,065	
 	 	1.41	
 	 	
Deposits - interest bearing	 	$	13,360,698	
 	 	 	 	$	13,434,990	

 	 	
____________
(1)  Includes the effect of interest rate swaps in effective hedge relationships.

 As of March 31, 2017 and December 31, 2016, there were $304.6 million and $304.5 million, respectively, of deposits exceeding FDIC insurance limits. Accrued interest on deposits was $22.9 million and $18.9 million at March 31, 2017 and December 31, 2016, respectively.

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Counterparty Exposure
Counterparty exposure related to financial instruments arises from the risk that a lending, investment or derivative counterparty will not be able to meet its obligations to us.
Excess cash is generally invested with the FRB on an overnight basis or in the FRB’s Term Deposit Facility, minimizing counterparty exposure on cash balances.
Our investment portfolio includes a small portfolio of mortgage-backed securities issued by government agencies and government-sponsored enterprises that are purchased to meet Community Reinvestment Act targets. Additionally, our investing activity is governed by Board-approved limits on the amount that is allowed to be invested with any one issuer based on the credit rating of the issuer, further minimizing our counterparty exposure. Counterparty credit risk is considered when valuing investments and considering impairment.
Related to derivative transactions, protection against counterparty risk is generally provided by International Swaps and Derivatives Association, Inc. Credit Support Annexes (“CSAs”), or clearinghouses for over-the-counter derivatives. CSAs require a counterparty to post collateral if a potential default would expose the other party to a loss. All derivative contracts entered into by the Bank are covered under CSAs or clearinghouse agreements and require collateral to be exchanged based on the net fair value of derivatives with each counterparty. Our exposure is limited to the value of the derivative contracts in a gain position, less any collateral held by us and plus collateral posted with the counterparty.
Title VII of the Dodd-Frank Act requires all standardized derivatives, including most interest rate swaps, to be submitted for clearing to central counterparties to reduce counterparty risk. The CME and the LCH made amendments to their respective rules that resulted in the prospective accounting treatment of certain daily variation margin payments being considered as the legal settlement of the outstanding exposure of the derivative instead of the posting of collateral. The CME rule changes, which became effective in January 2017, result in all variation margin payments on derivatives cleared through the CME being accounted for as legal settlement, while the LCH allows the clearing member institution the option to adopt the rule changes on an individual contract or portfolio basis. As of March 31, 2017, $4.5 billion notional of our derivative contracts were cleared on the CME and $0.7 billion were cleared on the LCH. The derivative contracts cleared through the CME and LCH represent 79.8 percent and 13.1 percent, respectively, of our total notional derivative contracts of $5.6 billion at March 31, 2017.
Under this new rule, for derivatives cleared through the CME, the net gain (loss) position includes the variation margin amounts as settlement of the derivative and not collateral against the fair value of the derivative. Interest income (expense) related to variation margin on derivatives that are not designated as hedging instruments or are designated as fair value relationships is recognized as a gain (loss) rather than as interest income (expense). Changes in fair value for derivatives not designated as hedging instruments will be presented as realized gains (losses).
Our LCH clearing member institution has elected not to adopt the new rule change. Therefore, there has been no change to the accounting for the derivatives cleared through the LCH, and variation margin payments required to be exchanged based on the fair value of those derivatives remain accounted for as collateral.
Our exposure is limited to the value of the derivative contracts in a gain position less any collateral held and plus any collateral posted. When there is a net negative exposure, we consider our exposure to the counterparty to be zero. At March 31, 2017 and December 31, 2016, we had a net positive exposure (derivative gain positions to us, less collateral held by us and plus collateral posted with counterparties) related to derivatives of $43.2 million and $44.6 million, respectively.
We have liquidity exposure related to collateral movements between us and our derivative counterparties. Movements in the value of the derivatives, which are primarily affected by changes in interest rates, may require us to return cash collateral held or may require us to access primary liquidity to post collateral to counterparties.

61

The table below highlights exposure related to our derivative counterparties as of March 31, 2017.

(Dollars in thousands)	 	SLM Corporation
and Sallie Mae Bank
Contracts	
Exposure, net of collateral	 	$	43,249	
 	
Percent of exposure to counterparties with credit ratings below S&P AA- or Moody’s Aa3	 	35.99	%	
Percent of exposure to counterparties with credit ratings below S&P A- or Moody’s Baa	 	—	%	

Regulatory Capital
The Bank is subject to various regulatory capital requirements administered by federal and state banking authorities. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material adverse effect on our business, results of operation and financial condition. Under the FDIC’s regulations implementing the U. S Basel III capital framework and the regulatory framework for prompt corrective action, the Bank must meet specific capital standards that involve quantitative measures of its assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and its classification under the prompt corrective action framework are also subject to qualitative judgments by the regulators about components of capital, risk weightings and other factors.
“Well capitalized” regulatory requirements are the quantitative measures established by regulation to ensure capital adequacy. To qualify as “well capitalized,” the Bank must maintain minimum amounts and ratios (set forth in the table below) of Common Equity Tier 1, Tier 1 and Total capital to risk-weighted assets and of Tier 1 capital to average assets. The following capital amounts and ratios are based upon the Bank’s assets.

 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Actual	 	“Well Capitalized” Regulatory Requirements	
(Dollars in thousands)	 	Amount	Ratio	 	Amount	 	Ratio	
As of March 31, 2017	 	 	 	 	 	 	 	
Common Equity Tier 1 Capital (to Risk-Weighted Assets)	 	$	2,117,957	
 	12.3	%	 	$	1,123,799	
 	>	6.5	%	
Tier 1 Capital (to Risk-Weighted Assets)	 	$	2,117,957	
 	12.3	%	 	$	1,383,137	
 	>	8.0	%	
Total Capital (to Risk-Weighted Assets)	 	$	2,305,261	
 	13.3	%	 	$	1,728,922	
 	>	10.0	%	
Tier 1 Capital (to Average Assets)	 	$	2,117,957	
 	11.2	%	 	$	945,325	
 	>	5.0	%	
 	 	 	 	 	 	 	 	
As of December 31, 2016:	 	 	 	 	 	 	 	
Common Equity Tier 1 Capital (to Risk-Weighted Assets)	 	$	2,011,583	
 	12.6	%	 	$	1,038,638	
 	>	6.5	%	
Tier 1 Capital (to Risk-Weighted Assets)	 	$	2,011,583	
 	12.6	%	 	$	1,278,323	
 	>	8.0	%	
Total Capital (to Risk-Weighted Assets)	 	$	2,197,997	
 	13.8	%	 	$	1,597,904	
 	>	10.0	%	
Tier 1 Capital (to Average Assets)	 	$	2,011,583	
 	11.1	%	 	$	907,565	
 	>	5.0	%	
    
 Capital Management
The Bank seeks to remain “well capitalized” at all times with sufficient capital to support asset growth, operating needs, unexpected credit risks and to protect the interests of depositors and the FDIC - administered Deposit Insurance Fund. The Bank is required by its regulators, the Utah Department of Financial Institutions and the FDIC, to comply with mandated capital ratios. We intend to maintain levels of capital at the Bank that significantly exceed the levels of capital necessary to be considered “well capitalized” by the FDIC. The Company is a source of strength for the Bank and will provide additional capital if necessary. The Board of Directors and management periodically evaluate the quality of assets, the stability of

62

earnings, and the adequacy of the allowance for loan losses for the Bank. We currently believe that current and projected capital levels are appropriate for 2017. As our balance sheet continues to grow in 2017, these ratios will decline but will remain significantly in excess of the capital levels required to be considered “well capitalized” by our regulators. We do not plan to pay dividends on our common stock. We do not intend to initiate share repurchase programs to return capital to shareholders. We only expect to repurchase common stock acquired in connection with taxes withheld as a result of award exercises and vesting under our employee stock-based compensation plans. Our Board of Directors will periodically reconsider these matters.
The Bank is required to comply with U.S. Basel III, which is aimed at increasing both the quantity and quality of regulatory capital and, among other things, establishes Common Equity Tier 1 as a new tier of capital and modifies methods for calculating risk-weighted assets. Certain aspects of U.S. Basel III, including new deductions from and adjustments to regulatory capital and a new capital conservation buffer, are being phased in over several years. The Bank’s Capital Policy requires management to monitor the new capital standards. The Bank is subject to the following minimum capital ratios under U.S. Basel III: a Common Equity Tier 1 risk-based capital ratio of 4.5 percent, a Tier 1 risk-based capital ratio of 6.0 percent, a Total risk-based capital ratio of 8.0 percent, and a Tier 1 leverage ratio of 4.0 percent. In addition, the Bank is subject to a Common Equity Tier 1 capital conservation buffer, which will be phased in over three years beginning January 1, 2016: 0.625 percent of risk-weighted assets for 2016, 1.25 percent for 2017, and 1.875 percent for 2018, with the fully phased-in level of greater than 2.5 percent effective as of January 1, 2019. Failure to maintain the buffer will result in restrictions on the Bank’s ability to make capital distributions, including the payment of dividends, and to pay discretionary bonuses to executive officers. Including the buffer, by January 1, 2019, the Bank will be required to maintain the following minimum capital ratios: a Common Equity Tier 1 risk-based capital ratio of greater than 7.0 percent, a Tier 1 risk-based capital ratio of greater than 8.5 percent and a Total risk-based capital ratio of greater than 10.5 percent.
U.S. Basel III also revised the capital thresholds for the prompt corrective action framework for insured depository institutions. To qualify as “well capitalized,” the Bank must maintain a Common Equity Tier 1 risk-based capital ratio of at least 6.5 percent, a Tier 1 risk-based capital ratio of at least 8.0 percent, a Total risk-based capital ratio of at least 10.0 percent, and a Tier 1 leverage ratio of at least 5.0 percent.
As of March 31, 2017, the Bank had a Common Equity Tier 1 risk-based capital ratio of 12.3 percent, a Tier 1 risk-based capital ratio of 12.3 percent, a Total risk-based capital ratio of 13.3 percent and a Tier 1 leverage ratio of 11.2 percent, which are each in excess of the current “well capitalized” standard for insured depository institutions. If calculated today based on the fully phased-in U.S. Basel III standards, our ratios would also exceed the capital levels required under U.S. Basel III and the “well capitalized” standard.
Dividends

The Bank is chartered under the laws of the State of Utah and its deposits are insured by the FDIC. The Bank’s ability to pay dividends is subject to the laws of Utah and the regulations of the FDIC. Generally, under Utah’s industrial bank laws and regulations as well as FDIC regulations, the Bank may pay dividends from its net profits without regulatory approval if, following the payment of the dividend, the Bank’s capital and surplus would not be impaired. The Bank paid no dividends for the three months ended March 31, 2017 and March 31, 2016. For the foreseeable future, we expect the Bank to only pay dividends to the Company as may be necessary to provide for regularly scheduled dividends payable on the Company’s Series A and Series B Preferred Stock.
Borrowings

Outstanding borrowings consist of secured borrowings executed through our term ABS program and our ABCP Facility. The issuing entities for those secured borrowings are VIEs and are consolidated for accounting purposes. The following table summarizes our secured borrowings at March 31, 2017 and December 31, 2016, respectively.

63

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	March 31, 2017	 	December 31, 2016	
(Dollars in thousands)	 	Short-Term	 	Long-Term	 	Total	 	Short-Term	 	Long-Term	 	Total	
Secured borrowings:	 	 	 	 	 	 	 	 	 	 	 	 	
Private Education Loan term securitizations	 	$	—	
 	 	$	2,837,347	
 	 	$	2,837,347	
 	 	$	—	
 	 	$	2,167,979	
 	 	$	2,167,979	
 	
ABCP Facility	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	
Total	 	$	—	
 	 	$	2,837,347	
 	 	$	2,837,347	
 	 	$	—	
 	 	$	2,167,979	
 	 	$	2,167,979	

Borrowed Funds
The Bank maintains discretionary uncommitted Federal Funds lines of credit with various correspondent banks, which totaled $125 million at March 31, 2017. The interest rate charged to the Bank on these lines of credit is priced at Fed Funds plus a spread at the time of borrowing, and is payable daily. The Bank did not utilize these lines of credit in the three months ended March 31, 2017 or in the year ended December 31, 2016.
The Bank established an account at the FRB to meet eligibility requirements for access to the Primary Credit borrowing facility at the FRB’s Window. The Primary Credit borrowing facility is a lending program available to depository institutions that are in generally sound financial condition. All borrowings at the Window must be fully collateralized. We can pledge to the FRB asset-backed and mortgage-backed securities, as well as FFELP Loans and Private Education Loans, as collateral for borrowings at the Window. Generally, collateral value is assigned based on the estimated fair value of the pledged assets. At March 31, 2017 and December 31, 2016, the value of our pledged collateral at the FRB totaled $2.6 billion and $2.6 billion, respectively. The interest rate charged to us is the discount rate set by the FRB. We did not utilize this facility in the three months ended March 31, 2017 or in the year ended December 31, 2016.
Subsequent Event
On April 5, 2017, we issued our unsecured debt offering of $200 million of 5.125 percent Senior Notes due April 5, 2022 at par. We intend to use the net proceeds from this debt offering to redeem all of our 6.97 percent Series A preferred stock and for general corporate purposes.
Contractual Loan Commitments
When we approve a Private Education Loan at the beginning of an academic year, that approval may cover the borrowing for the entire academic year. As such, we do not always disburse the full amount of the loan at the time of such approval, but instead have a commitment to fund a portion of the loan at a later date (usually at the start of the second semester or subsequent trimesters). At March 31, 2017, we had $0.4 billion of outstanding contractual loan commitments which we expect to fund during the remainder of the 2016/2017 academic year. At March 31, 2017, we had a $0.2 million reserve recorded in “Other Liabilities” to cover expected losses that may occur during the one year loss emergence period on these unfunded commitments.

64

 Critical Accounting Policies and Estimates
Management’s Discussion and Analysis of Financial Condition and Results of Operations addresses our consolidated financial statements, which have been prepared in accordance with GAAP. A discussion of our critical accounting policies, which include allowance for loan losses, fair value measurement, transfers of financial assets and the VIE consolidation model, and derivative accounting, can be found in our 2016 Form 10-K. There were no significant changes to these critical accounting policies during the first quarter of 2017. However, related to derivative accounting, we did change the accounting treatment of variation margin payments as a result of changes to the rules of certain of our central clearing parties, as described below.
Derivative Accounting
The most significant judgments related to derivative accounting are: (1) concluding the derivative is an effective hedge and qualifies for hedge accounting and (2) determining the fair value of certain derivatives and hedged items. To qualify for hedge accounting, a derivative must be a highly effective hedge upon designation and on an ongoing basis. There are no “bright line” tests on what is considered a highly effective hedge. We use a historical regression analysis to prove ongoing and prospective hedge effectiveness. Although some of our valuations are more judgmental than others, we compare the fair values of our derivatives that we calculate to those fair values provided by our counterparties on a monthly basis. We view this as a critical control which helps validate these judgments. Any significant differences with our counterparties are identified and resolved appropriately.
The CME and the LCH made amendments to their respective rules that resulted in the prospective accounting treatment of certain daily variation margin payments being considered as the legal settlement of the outstanding exposure of the derivative instead of the posting of collateral. The CME rule changes, which became effective in January 2017, result in all variation margin payments on derivatives cleared through the CME being accounted for as legal settlement, while the LCH allows the clearing member institution the option to adopt the rule changes on an individual contract or portfolio basis. As of March 31, 2017, $4.5 billion notional of our derivative contracts were cleared on the CME and $0.7 billion were cleared on the LCH. The derivative contracts cleared through the CME and LCH represent 79.8 percent and 13.1 percent, respectively, of our total notional derivative contracts of $5.6 billion at March 31, 2017.
Under this new rule, for derivatives cleared through the CME, the net gain (loss) position includes the variation margin amounts as settlement of the derivative and not collateral against the fair value of the derivative. Interest income (expense) related to variation margin on derivatives that are not designated as hedging instruments or are designated as fair value relationships is recognized as a gain (loss) rather than as interest income (expense). Changes in fair value for derivatives not designated as hedging instruments will be presented as realized gains (losses).
Our LCH clearing member institution has elected not to adopt the new rule change. Therefore, there has been no change to the accounting for the derivatives cleared through the LCH, and variation margin payments required to be exchanged based on the fair value of those derivatives remain accounted for as collateral.

65

 	 	
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	
Interest Rate Sensitivity Analysis
Our interest rate risk management program seeks to manage and control interest rate risk, thereby reducing our exposure to fluctuations in interest rates and achieving consistent and acceptable levels of profit in any rate environment and sustainable growth in net interest income over the long term. We evaluate and monitor interest rate risk through two primary methods:
•Earnings at Risk (“EAR”), which measures the impact of hypothetical changes in interest rates on net interest income; and
•Economic Value of Equity (“EVE”), which measures the sensitivity or change in the economic value of equity to changes in interest rates.
A number of potential interest rate scenarios are simulated using our asset liability management system. The Bank is the primary source of interest rate risk within the Company. The majority of the Bank’s assets are priced off of 1-month LIBOR. Therefore, 1-month LIBOR is considered a core rate in our interest rate risk analysis. Other interest rate changes are correlated to changes in 1-month LIBOR, with higher or lower correlations based on historical relationships. In addition, key rates may be modeled with a floor, which indicates how low each specific rate is likely to move in practice. Rates are adjusted up or down via a set of scenarios that includes both rate shocks and ramps. Rate shocks represent an immediate and sustained change in 1-month LIBOR plus the resulting changes in other indices correlated accordingly. Interest rate ramps represent a linear increase in 1-month LIBOR over the course of 12 months plus the resulting changes in other indices correlated accordingly.
The following table summarizes the potential effect on earnings over the next 24 months and the potential effect on market values of balance sheet assets and liabilities at March 31, 2017 and 2016, based upon a sensitivity analysis performed by management assuming a hypothetical increase or decrease in market interest rates of 100 basis points and a hypothetical increase in market interest rates of 300 basis points while funding spreads remain constant. The EVE sensitivity is applied only to financial assets and liabilities, including hedging instruments, that existed at the balance sheet date, and does not take into account new assets, liabilities, commitments or hedging instruments that may arise in the future.
With recent increases in the level of interest rates, it became possible in the first quarter of 2017 to measure meaningfully the impact of a downward rate shock of 100 basis points. As the results of this interest rate scenario project a more negative impact to both earnings and to the economic value of equity than the upward shock of 100 basis points, the results of the downward rate shock of 100 basis points have been reflected in the table below. At today’s levels of interest rates, a 300 basis point downward rate shock does not provide a meaningful indication of interest rate sensitivity. These results indicate a market risk profile that has changed only slightly from the prior year’s results.

 	March 31,	
 	2017	 	2016	
 	+300
Basis Points	 	+100
Basis Points	 	-100
Basis Points	 	+300
Basis Points	 	+100
Basis Points	
 	 	 	 	 	 	 	 	 	 	
EAR - Shock	+7.6%	 	+2.5%	 	-2.4%	 	+6.3%	 	+2.0%	
EAR - Ramp	+6.3%	 	+2.3%	 	-1.4%	 	+5.2%	 	+1.6%	
EVE	+1.8%	 	+0.5%	 	-0.3%	 	-3.4%	 	-1.6%	
            
A primary objective in our funding is to manage our sensitivity to changing interest rates by generally funding our assets with liabilities of similar interest rate repricing characteristics. This funding objective is frequently obtained through the use of derivatives. Uncertainty in loan repayment cash flows and the pricing behavior of our non-maturity retail deposits pose challenges in achieving our interest rate risk objectives. In addition to these considerations, we can have a mismatch in the index (including the frequency of reset) of floating rate debt versus floating rate assets.
As part of its suite of financial products, the Bank offers fixed-rate Private Education Loans. As with other Private Education Loans, the term to maturity is lengthy, and the customer has the option to repay the loan faster than the promissory

66

note requires. Asset securitization provides long-term fixed-rate funding for some of these assets. Additionally, a portion of the fixed-rate loans have been hedged with derivatives, which have been used to convert a portion of variable rate funding to fixed-rate to match the anticipated cash flows of these loans. Any unhedged position arising from the fixed-rate loan portfolio is monitored and modeled to ensure that the interest rate risk does not cause the Company to exceed its policy limits for earnings at risk or for the value of equity at risk.
In the preceding tables, the interest rate sensitivity analysis reflects the heavy balance sheet mix of fully variable LIBOR-based loans, which exceeds the mix of fully variable funding, which includes brokered CDs that have been converted to LIBOR through derivative transactions. The analysis does not anticipate that retail MMDAs or retail savings balances, while relatively sensitive to interest rate changes, will reprice to the full extent of interest rate shocks or ramps. Partially offsetting this asset sensitive position, is (i) the impact of FFELP loans, which receive floor income in low interest rate environments, and will therefore not reprice fully with interest rate shocks and (ii) the impact of fixed-rate loans that have not been fully match-funded through derivative transactions and fixed-rate funding from asset securitization. An additional consideration, which does not impact the results for the first quarter, is the implementation of a loan cap of 25% on variable rate loans originated on and after September 25, 2016. As of March 31, 2017, there were $1.1 billion loans with 25% interest rate caps on the balance sheet. The overall slightly asset-sensitive position will generally cause net interest income to increase somewhat when interest rates rise, and decrease somewhat when interest rates fall. However, this sensitivity position will fluctuate somewhat during the year, depending on the funding mix in place at the time of the analysis.
Although we believe that these measurements provide an estimate of our interest rate sensitivity, they do not account for potential changes in credit quality, balance sheet mix and size of our balance sheet. They also do not account for other business developments that could affect net income, or for management actions that could affect net income or could be taken to change our risk profile. Accordingly, we can give no assurance that actual results would not differ materially from the estimated outcomes of our simulations. Further, such simulations do not represent our current view of expected future interest rate movements.

67

Asset and Liability Funding Gap
The table below presents our assets and liabilities (funding) arranged by underlying indices as of March 31, 2017. In the following GAAP presentation, the funding gap only includes derivatives that qualify as effective hedges (those derivatives which are reflected in net interest income, as opposed to those reflected in the “gains (losses) on derivatives and hedging activities, net” line on the consolidated statements of income). The difference between the asset and the funding is the funding gap for the specified index. This represents our exposure to interest rate risk in the form of basis risk and repricing risk, which is the risk that the different indices may reset at different frequencies or may not move in the same direction or at the same magnitude. (Note that all fixed-rate assets and liabilities are aggregated into one line item, which does not capture the differences in time due to maturity.)

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Dollars in millions)
Index	 	Frequency of
Variable
Resets	 	Assets	 	Funding (1) 	 	Funding
Gap	
3-month Treasury bill	 	weekly	 	$	136.4	
 	 	$	—	
 	 	$	136.4	
 	
Prime	 	monthly	 	6.0	
 	 	—	
 	 	6.0	
 	
3-month LIBOR	 	quarterly	 	—	
 	 	399.2	
 	 	(399.2	)	
1-month LIBOR	 	monthly	 	12,771.9	
 	 	8,986.5	
 	 	3,785.4	
 	
1-month LIBOR	 	daily	 	853.0	
 	 	—	
 	 	853.0	
 	
Non-Discrete reset(2)	 	daily/weekly	 	1,171.7	
 	 	2,856.4	
 	 	(1,684.7	)	
Fixed Rate(3)	 	 	 	4,297.5	
 	 	6,994.4	
 	 	(2,696.9	)	
Total	 	 	 	$	19,236.5	
 	 	$	19,236.5	
 	 	$	—	
 	
          ______________________
 	 	
(1) 	Funding (by index) includes the impact of all derivatives that qualify as hedges.	

(2) 	Assets include restricted and unrestricted cash equivalents and other overnight type instruments. Funding includes liquid retail deposits and the obligation to return cash collateral held related to derivatives exposures.	
 	 	
(3) 	Assets include receivables and other assets (including premiums and reserves). Funding includes unswapped time deposits, liquid MMDA's swapped to fixed rates and stockholders' equity.	

The “Funding Gap” in the above table shows primarily mismatches in the 1-month LIBOR, fixed-rate, 3-month LIBOR and Non-Discrete categories. As changes in 1-month and 3-month LIBOR are generally quite highly correlated, the funding gap associated with 3-month LIBOR is expected to partially offset the 1-month LIBOR gaps. We consider the overall risk to be moderate since the funding in the Non-Discrete bucket is our liquid retail portfolio, which we have significant flexibility to reprice at any time, and the funding in the fixed-rate bucket includes $2.0 billion of equity and $0.6 billion of non-interest bearing liabilities.
We use interest rate swaps and other derivatives to achieve our risk management objectives. Our asset liability management strategy is to match assets with debt (in combination with derivatives) that have the same underlying index and reset frequency or have interest rate characteristics that we believe are highly correlated. The use of funding with index types and reset frequencies that are different from our assets exposes us to interest rate risk in the form of basis and repricing risk. This could result in our cost of funds not moving in the same direction or with the same magnitude as the yield on our assets. While we believe this risk is low, as all of these indices are short-term with rate movements that are highly correlated over a long period of time, market disruptions (which have occurred in recent years) can lead to a temporary divergence between indices, resulting in a negative impact to our earnings.

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Weighted Average Life
The following table reflects the weighted average lives of our earning assets and liabilities at March 31, 2017.

 	 	 	
 	Weighted	
 	Average	
(Averages in Years)	Life	
Earning assets	 	
Education loans	6.02	
 	
Personal loans	1.41	
 	
Cash and investments	1.09	
 	
Total earning assets	5.61	

Deposits	 	
Short-term deposits	0.08	
 	
Long-term deposits	2.38	
 	
Total deposits	0.55	

Borrowings	 	
Short-term borrowings	—	
 	
Long-term borrowings	4.39	
 	
Total borrowings	4.39	

69

 	 	
Item 4.	Controls and Procedures	

Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of March 31, 2017. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of March 31, 2017, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (a) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (b) accumulated and communicated to our management, including our principal executive officer and principal financial officer as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended March 31, 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

70

PART II. OTHER INFORMATION
 	 	
Item 1.	Legal Proceedings	

Legal Proceedings
We and our subsidiaries and affiliates are subject to various claims, lawsuits and other actions that arise in the normal course of business. It is common for the Company, our subsidiaries and affiliates to receive information and document requests and investigative demands from state attorneys general, legislative committees and administrative agencies. These requests may be for informational or regulatory purposes and may relate to our business practices, the industries in which we operate, or other companies with whom we conduct business. Our practice has been and continues to be to cooperate with these bodies and be responsive to any such requests.
Pursuant to the terms of the Spin-Off and applicable law, Navient assumed responsibility for all liabilities (whether accrued, contingent or otherwise and whether known or unknown) arising out of or resulting from the conduct of pre-Spin-Off SLM and its subsidiaries’ businesses prior to the Spin-Off, other than certain specifically identified liabilities relating to the conduct of our consumer banking business. Nonetheless, given the prior usage of the Sallie Mae and SLM names by entities now owned by Navient, we and our subsidiaries may from time to time be improperly named as defendants in legal proceedings where the allegations at issue are the legal responsibility of Navient. Most of these legal proceedings involve matters that arose in whole or in part in the ordinary course of business of pre-Spin-Off SLM. Likewise, as the period of time since the Spin-Off increases, so does the likelihood any allegations that may be made may be in part for our own actions in a post-Spin-Off time period and in part for Navient’s conduct in a pre-Spin-Off time period. We will not be providing information on these proceedings unless there are material issues of fact or disagreement with Navient as to the bases of the proceedings or responsibility therefor that we believe could have a material, adverse impact on our business, assets, financial condition, liquidity or outlook if not resolved in our favor.

For a description of these and other litigation or regulatory proceedings to which we are a party, and for which we have no current updates, see our 2016 Form 10-K.
Regulatory Update
On May 13, 2014, the Bank reached settlements with (a) the FDIC regarding disclosures and assessments of certain late fees, as well as compliance with the SCRA, and (b) the DOJ regarding compliance with the SCRA. In connection with the settlements, the Bank became subject to the FDIC Consent Order and the DOJ Consent Order, which was approved by the U.S. District Court for the District of Delaware on September 29, 2014. Under the terms of the Separation and Distribution Agreement, Navient is responsible for funding all liabilities under the regulatory orders and, as of the date hereof, has funded all liabilities other than fines directly levied against the Bank in connection with these matters which the Bank is required to pay.
On March 27, 2017, the Bank received confirmation from the FDIC that effective March 23, 2017, the FDIC terminated the FDIC Consent Order. The termination was issued with no conditions.
The Bank continues to be in full compliance with the DOJ Order, including policy and procedure updates. Pursuant to the terms of the DOJ Consent Order, the Bank will remain subject to certain DOJ reporting and record-keeping requirements until September 29, 2018.
In May 2014, the Bank received a CID from the CFPB as part of the CFPB’s separate investigation relating to customer complaints, fees and charges assessed in connection with the servicing of student loans and related collection practices of pre-Spin-Off SLM Corporation (“pre-Spin-Off SLM”) by entities now subsidiaries of Navient during a time period prior to the Spin-Off. Two state attorneys general provided the Bank identical CIDs and other state attorneys general have become involved in the inquiry over time. To the extent requested, the Bank has been cooperating fully with the CFPB and the attorneys general but is not in a position at this time to predict the duration or outcome of these matters. Given the timeframe covered by the CIDs and the focus on practices and procedures previously conducted by Navient and its servicing subsidiaries prior to the Spin-Off, as contemplated by the Separation and Distribution Agreement relating to, and the structure of, the Spin-Off, Navient

71

is leading the response to these investigations, is legally responsible for, and has accepted responsibility to indemnify the Company, against all costs, expenses, losses and remediation that may arise from these matters. Additionally, on January 18, 2017, the Illinois Attorney General filed a separate lawsuit against Navient - its subsidiaries Navient Solutions, Inc., Pioneer Credit Recovery, Inc., and General Revenue Corporation - and the Bank arising out of the aforementioned multi-state investigation of various lending, servicing, and collection practices. As contemplated by the Separation and Distribution Agreement relating to, and the structure of, the Spin-Off, Navient is legally responsible for, and has accepted responsibility to indemnify the Company against, all costs, expenses, losses and remediation that may arise from these matters.
On January 18, 2017, the CFPB filed a complaint in federal court in Pennsylvania against Navient, along with its subsidiaries, Navient Solutions, Inc., and Pioneer Credit Recovery, Inc. The complaint alleges these Navient entities, among other things, engaged in deceptive practices with respect to its historic servicing and debt collection practices. Neither SLM, the Bank, nor any of their current subsidiaries are named in, or otherwise a party to, the lawsuit and are not alleged to have engaged in any wrongdoing.
Item 1A. Risk Factors
Our business activities involve a variety of risks. Readers should carefully consider the risk factors disclosed in Item 1A. “Risk Factors” of our 2016 Form 10-K.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
Share Repurchases
The following table provides information relating to our purchase of shares of our common stock in the three months ended March 31, 2017.

 	 	 	 	 	 	 	 	 	 	 	 	 	
(In thousands, except per share data)	Total Number
of Shares
Purchased(1)	 	Average Price
Paid per
Share 	 	Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs(2)  	 	Approximate Dollar
Value
of Shares That
May Yet Be
Purchased  Under
Publicly Announced
Plans or
Programs(2)	
Period:	 	 	 	 	 	 	 	
January 1 - January 31, 2017	353	
 	 	$	11.43	
 	 	—	
 	 	—	
 	
February 1 - February 28, 2017	1,248	
 	 	$	12.11	
 	 	—	
 	 	—	
 	
March 1 - March 31, 2017	2	
 	 	$	12.02	
 	 	—	
 	 	—	
 	
Total first-quarter 2017	1,603	
 	 	$	11.96	
 	 	—	
 	 	 	
_________
 	 	
(1) 	All shares purchased are the shares of our common stock tendered to us to satisfy the exercise price in connection with cashless exercises of stock options, and tax withholding obligations in connection with exercises of stock options and vesting of restricted stock and restricted stock units.	
 	 	
(2) 	At the present time, the Company does not have a publicly announced share repurchase plan or program.	
The closing price of our common stock on the Nasdaq Global Select Market on March 31, 2017 was $12.10.
 	 	
Item 3.	Defaults Upon Senior Securities	
Nothing to report.

72

 	 	
Item 4.	Mine Safety Disclosures	
Not applicable.
 	 	
Item 5.	Other Information	
Nothing to report.

Item 6.	Exhibits	
The following exhibits are furnished or filed, as applicable:

4.2	First Supplemental Indenture dated as of April 5, 2017 between SLM Corporation and Deutsche Bank National Trust Company, as Trustee (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed on April 5, 2017)	
 	 	
10.1	Form of SLM Corporation 2012 Omnibus Incentive Plan, Bonus Restricted Stock Unit Term Sheet (Three-Year Restriction), 2016 Management Incentive Plan Award.	
 	 	
10.2	Form of SLM Corporation 2012 Omnibus Incentive Plan, 2017 Restricted Stock Unit Term Sheet.	
 	 	
10.3	Form of SLM Corporation 2012 Omnibus Incentive Plan, 2017 Performance Stock Unit Term Sheet.	
 	 	
12.1	Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends.	
 	 	
31.1	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
 	 	
31.2	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
 	 	
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
 	 	
32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
 	 	
101.INS	XBRL Instance Document.	
 	 	
101.SCH	XBRL Taxonomy Extension Schema Document.	
 	 	
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.	
 	 	
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.	
 	 	
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.	
 	 	
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.	

73

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

 	 	 	 	
 	 	
SLM CORPORATION
(Registrant)	
 	 	
By:	/S/ STEVEN J. MCGARRY	
 	Steven J. McGarry
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)	 	
Date: April 19, 2017 

74

Exhibit 10.1

SLM Corporation 2012 Omnibus Incentive Plan
Bonus Restricted Stock Unit Term Sheet (Three-Year Restriction)
2016 Management Incentive Plan Award

This Bonus Restricted Stock Unit Term Sheet (this “Agreement”) further describes the terms of the Bonus RSUs granted to Grantee pursuant to the Bonus Restricted Stock Unit Grant Notice. The Bonus Restricted Stock Unit Grant Notice and the SLM Corporation 2012 Omnibus Incentive Plan (the “Plan”) are incorporated herein in their entirety.
 	 	
1.	Restrictions on Transfer. The Award is fully vested at grant, but subject to transfer restrictions (“Transfer Restrictions”), with such restrictions to lapse ratably over three years in one-third increments on January 27 in each of 2018, 2019 and 2020. Upon such lapsing the subject portion of the Award shall be settled in shares of the Corporation’s common stock.	
 	 	
2.	Employment Termination; Death; Disability. If not previously lapsed, the Transfer Restrictions will remain, and the Award will be converted into shares of common stock on the original terms and dates set forth above in the event that (i) the Grantee’s employment is terminated by the Corporation (or its subsidiaries) for any reason other than for Misconduct, as determined by the Corporation in its sole discretion, or (ii) the Grantee voluntarily ceases to be an employee of the Corporation (or its subsidiaries) for any reason.	
If not previously lapsed, the Transfer Restrictions will lapse and the Award will be settled in shares of the Corporation’s common stock, upon death or Disability (provided that such Disability qualifies as a “disability” within the meaning of Treasury Regulation Section 1.409A-3(i)(4)).
The Award shall be forfeited upon termination of employment due to Misconduct, as determined by the Corporation in its sole discretion.
Notwithstanding anything stated herein, the Plan or in the SLM Corporation Change in Control Severance Plan for Senior Officers, this Award shall not be subject to the terms set forth in the SLM Corporation Change in Control Severance Plan for Senior Officers.
 	 	
3.	Taxes; Dividends. The Grantee of the Award shall make such arrangements as may reasonably be required by the Corporation, including transferring a sufficient number of shares of the Corporation’s common stock, to satisfy the income and employment tax withholding requirements that accrue upon the Award becoming vested or, if applicable, settled in shares of the Corporation’s common stock (by approving this Agreement, the Nominations, Governance, and Compensation Committee (the “Committee”) hereby approves the transfer of such shares to the Corporation for purposes of SEC Rule 16b-3). Dividends declared on vested Awards subject to transfer restrictions will not be paid currently. Instead, amounts equal to such dividends will be credited to an account established on behalf of the Grantee and such amounts will be deemed to be invested in additional shares of the Corporation’s common stock (“Dividend Equivalents”). Such Dividend Equivalents will be subject to the same schedule regarding the lapsing of transfer restrictions to which the Award is subject. Upon such lapsing of any portion of the Award, the amount of Dividend Equivalents allocable to such Award (and any fractional share amount) will also vest and will be converted into shares of the Corporation’s common stock (provided that any fractional share amount shall be paid in cash).	
 	 	
4.	Section 409A. For purposes of section 409A of the Internal Revenue Code, the regulations and other guidance thereunder and any state law of similar effect (collectively “Section 409A”), each payment and benefit payable under this Agreement is hereby designated as a separate payment. The parties intend that all Bonus RSUs provided under this Agreement and shares issuable hereunder comply with or be exempt from the requirements of Section 409A so that none of the payments or benefits will be subject to the adverse tax penalties imposed under Section 409A, and any ambiguities herein will be interpreted to so comply. Notwithstanding anything in the Plan or this Agreement to the contrary, if the vesting of the balance, or some lesser portion of the balance, of the Bonus RSUs is to be accelerated in connection with the Grantee’s termination of service, such accelerated Bonus RSUs will not be settled by virtue of such acceleration until and unless the Grantee has a “separation from service” within the meaning of Section Treasury Regulation 1.409A-1(h), as determined by the Corporation, in its sole discretion. Further, and notwithstanding anything in the Plan or this Agreement to the contrary, if (x) any of the Bonus RSUs to be provided in connection with the Grantee’s separation from service do not qualify for any reason to be exempt from Section 409A, (y) the Grantee is, at the time of such separation from service, a “specified employee” (as defined in Treasury Regulation Section 1.409A-1(i)) and (z) the settlement of such Bonus RSUs would result in the imposition of additional tax under Section 409A if such settlement occurs on or within the six (6) month period following the Grantee’s separation from service, then, to the extent necessary to avoid the imposition of such additional taxation, the settlement of any such Bonus RSUs during such six (6) month period will accrue and will not be settled until the date six (6) months and one (1) day following the date of the Grantee’s separation from service and on such date (or, if earlier, the date of the Grantee’s death), such Bonus RSUs will be settled.	
 	 	
5.	Clawback Provision. If the SLM Corporation Board of Directors (the “Board”), or an appropriate committee thereof, determines that, any material misstatement of financial results or a performance metric criteria has occurred as a result of the Grantee’s conduct or the Grantee has committed a material violation of corporate policy or has committed fraud or Misconduct, then the Board or committee shall consider all factors, with particular scrutiny when one of the top 20 members of management are involved, and the Board or such committee, may in its sole discretion require reimbursement of any compensation resulting from the vesting, exercise or settlement of Options and/or Restricted Stock/RSUs/Bonus RSUs and the cancellation of any outstanding Options and/or Restricted Stock/RSUs/ Bonus RSUs from the Grantee (whether or not such individual is currently employed by the Corporation) during the three-year period following the date the Board first learns of the violation, fraud or Misconduct. Notwithstanding anything to the contrary herein, this provision shall be subject to adjustment and amendment to conform with any subsequently adopted policy or amendment relating to the clawback of compensation as may be adopted by the Board or an appropriate committee thereof.	
 	 	
6.	Securities Law Compliance. The Corporation may impose such restrictions, conditions or limitations as it determines appropriate as to the timing and manner of any transfer or sale by the Grantee of any shares of the Corporation’s common stock, including without limitation (a) restrictions under an insider trading policy and (b) restrictions that may be necessary in the absence of an effective registration statement under the Securities Act of 1933, as amended, covering the shares of the Corporation’s common stock. The sale of the shares must also comply with other applicable laws and regulations governing the sale of such shares.	
 	 	
7.	Data Privacy. As an essential term of this award, the Grantee consents to the collection, use and transfer, in electronic or other form, of personal data as described herein for the exclusive purpose of implementing, administering and managing Grantee’s participation in the Plan. By accepting this award, the Grantee acknowledges that the Corporation holds certain personal information about the Grantee, including, but not limited to, name, home address and telephone number, date of birth, social security number or other identification number, salary, tax rates and amounts, nationality, job title, any shares of stock held in the Corporation, details of all options or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding, for the purpose of implementing, administering and managing the Plan (“Data”). Grantee acknowledges that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in jurisdictions that may have different data privacy laws and protections, and Grantee authorizes the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the Plan, including any requisite transfer of such Data as may be required to a broker or other third party with whom the Grantee or the Corporation may elect to deposit any shares of the Corporation’s common stock. Grantee acknowledges that Data may be held to implement, administer and manage the Grantee’s participation in the Plan as determined by the Corporation, and that Grantee may request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, provided however, that refusing or withdrawing Grantee’s consent may adversely affect Grantee’s ability to participate in the Plan.	
 	 	
8.	Electronic Delivery. The Corporation may, in its sole discretion, decide to deliver any documents related to any awards granted under the Plan by electronic means or to request Grantee’s consent to participate in the Plan by electronic means. Grantee hereby consents to receive such documents by electronic delivery and, if requested, to agree to participate in the Plan through an on-line or electronic system established and maintained by the Corporation or another third party designated by the Corporation, and such consent shall remain in effect throughout Grantee’s term of service with the Corporation (or its subsidiaries) and thereafter until withdrawn in writing by Grantee.	
 	 	
9.	Board Interpretation. The Grantee hereby agrees to accept as binding, conclusive, and final all decisions and interpretations of the Board and, where applicable, the Committee concerning any questions arising under this Agreement or the Plan.	
 	 	
10.	No Right to Continued Employment. Nothing in the Plan, in this Agreement or any other instrument executed pursuant thereto or hereto shall confer upon the Grantee any right to continued employment with the Corporation or any of its subsidiaries or affiliates.	
 	 	
11.	Amendments for Accounting Charges. The Committee reserves the right to unilaterally amend this Agreement to reflect any changes in applicable law or financial accounting standards.	
 	 	
12.	Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law.	
 	 	
13.	Notices. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given if personally delivered, telefaxed or telecopied to, or, if mailed, when received by, the other party at the following addresses:	
If to the Corporation to:
Human Resources Department
ATTN: Total Rewards
300 Continental Drive
Newark, DE 19713

If to the Grantee, to (i) the last address maintained in the Corporation’s Human Resources files for the Grantee or (ii) the Grantee’s mail delivery code or place of work at the Corporation (or its subsidiaries).
 	 	
14.	Plan Controls; Entire Agreement; Capitalized Terms. In the event of any conflict between the provisions of this Agreement and the provisions of the Plan, the terms of the Plan control, except as expressly stated otherwise herein. This Agreement, the Plan and the Bonus Restricted Stock Unit Grant Notice together set forth the entire agreement and understanding between the parties as to the subject matter hereof and supersede all prior oral and written and all contemporaneous or subsequent oral discussions, agreements and understandings of any kind or nature. Capitalized terms not defined herein shall have the meanings as described in the Plan or in the Bonus Restricted Stock Unit Grant Notice.	
 	 	
15.	Miscellaneous. In the event that any provision of this Agreement is declared to be illegal, invalid or otherwise unenforceable by a court of competent jurisdiction, such provision shall be reformed, if possible, to the extent necessary to render it legal, valid and enforceable, or otherwise deleted, and the remainder of this Agreement shall not be affected except to the extent necessary to reform or delete such illegal, invalid or unenforceable provision. The headings in this Agreement are solely for convenience of reference, and shall not constitute a part of this Agreement, nor shall they affect its meaning, construction or effect. The Grantee shall cooperate and take such actions as may be reasonably requested by the Corporation in order to carry out the provisions and purposes of the Agreement. The Grantee is responsible for complying with all laws applicable to Grantee, including federal and state securities reporting laws.	
Grantee is deemed to accept this Award of Bonus RSUs under this Agreement and to agree that such Award is subject to the terms and conditions set forth in this Agreement and the Plan unless Grantee provides the Corporation written notification of Grantee’s rejection of this Award of Bonus RSUs not later than 30 days after Grantee’s receipt of notice of the posting of this Agreement on-line or through electronic means (in which case such Award will be forfeited and Grantee shall have no further right or interest therein as of such date).

Page 1

Exhibit 10.2
SLM Corporation 2012 Omnibus Incentive Plan
2017 Restricted Stock Unit Term Sheet
This Restricted Stock Unit Term Sheet (this “Agreement”) further describes the terms of the RSUs granted to Grantee pursuant to the Restricted Stock Unit Grant Notice. The Restricted Stock Unit Grant Notice and the SLM Corporation 2012 Omnibus Incentive Plan (the “Plan”) are incorporated herein in their entirety.
 	 	
1.	Vesting Schedule. Unless vested earlier as set forth below, the Award will vest, and will be converted into shares of common stock, in one-third increments on each of the first, second, and third anniversary of the Grant Date.	
 	 	
2.	Employment Termination; Death; Disability. Except as provided below, if the Grantee voluntarily ceases to be an employee of SLM Corporation (the “Corporation”) (or one of its subsidiaries) for any reason or his or her employment is terminated by the Corporation for Misconduct (as defined below), he/she shall forfeit any portion of the Award that has not vested as of the date of such termination of employment. For purposes of this Agreement, “Misconduct” is defined as an act of embezzlement, fraud, dishonesty, nonpayment of any obligation owed to the Corporation, breach of fiduciary duty or deliberate disregard of Corporation rules; an unauthorized disclosure of any Corporation trade secret or confidential information; any conduct constituting unfair competition; inducing any customer of the Corporation to breach a contract with the Corporation or any principal for whom the Corporation acts as agent to terminate such agency relationship; or engaging in any other act or conduct proscribed by the senior human resources officer as Misconduct.	
If not previously vested, the Award will continue to vest, and will be converted into shares of common stock, on the original vesting terms and vesting dates set forth above in the event that (i) the Grantee’s employment is terminated by the Corporation for any reason other than for Misconduct or (ii) the Grantee voluntarily ceases to be an employee of the Corporation (or one of its subsidiaries) and meets the Corporation’s retirement eligibility requirements under the Corporation’s then current retirement eligibility policy, which shall be determined by the Corporation in its sole discretion.
If not previously vested, the Award will vest, and will be converted into shares of common stock, upon death or Disability (provided that such Disability qualifies as a “disability” within the meaning of Treasury Regulation Section 1.409A-3(i)(4)).
The Award shall be forfeited upon termination of employment due to Misconduct.
Notwithstanding anything stated herein, the Plan or in the SLM Corporation Change in Control Severance Plan for Senior Officers, this Award shall not be subject to the terms set forth in the SLM Corporation Change in Control Severance Plan for Senior Officers.
 	 	
3.	Change in Control. Notwithstanding anything to the contrary in this Agreement:	
 	 	
(a)	In the event of a Change in Control in which the acquiring or surviving company in the transaction does not assume or continue outstanding Awards upon the Change in Control, then any portion of the Award that is not vested shall become 100 percent vested; provided, however, the conversion of the accelerated portion of the RSUs into shares of common stock (i.e., the settlement of the Award) will nevertheless be made at the same time or times as if such RSUs had vested in accordance with the vesting schedule set forth in Section 1 or, if earlier, upon the termination of Grantee’s employment for reasons other than Misconduct.	
 	 	
(b)	If Grantee’s employment shall terminate within twenty-four months following a Change in Control for any reason other than (i) by the Company for Misconduct or (ii) by Grantee’s voluntary termination of employment that is not a Termination of Employment for Good Reason, as defined in the Change in Control Severance Plan for Senior Officers (if applicable to the Grantee), any portion of the Award not previously vested shall immediately become vested, and shall be converted into shares of common stock, upon such employment termination.	
 	 	
4.	Taxes; Dividends. The Grantee of the Award shall make such arrangements as may reasonably be required by the Corporation, including transferring a sufficient number of shares of the Corporation’s common stock, to satisfy the income and employment tax withholding requirements that accrue upon the Award becoming vested or, if applicable, settled in shares of the Corporation’s common stock (by approving this Agreement, the Nominations, Governance, and Compensation Committee (the “Committee”) hereby approves the transfer of such shares to the Corporation for purposes of SEC Rule 16b-3). Dividends declared on an unvested Award will not be paid currently. Instead, amounts equal to such dividends will be credited to an account established on behalf of the Grantee and such amounts will be deemed to be invested in additional shares of the Corporation’s common stock (“Dividend Equivalents”). Such Dividend Equivalents will be subject to the same vesting schedule to which the Award is subject. Upon vesting of any portion of the Award, the amount of Dividend Equivalents allocable to such Award (and any fractional share amount) will also vest and will be converted into shares of the Corporation’s common stock (provided that any fractional share amount shall be paid in cash).	
 	 	
5.	Section 409A. For purposes of section 409A of the Internal Revenue Code, the regulations and other guidance thereunder and any state law of similar effect (collectively “Section 409A”), each payment and benefit payable under this Agreement is hereby designated as a separate payment. The parties intend that all RSUs provided under this Agreement and shares issuable hereunder comply with or be exempt from the requirements of Section 409A so that none of the payments or benefits will be subject to the adverse tax penalties imposed under Section 409A, and any ambiguities herein will be interpreted to so comply. Notwithstanding anything in the Plan or this Agreement to the contrary, if the vesting of the balance, or some lesser portion of the balance, of the RSUs is to be accelerated in connection with the Grantee’s termination of service, such accelerated RSUs will not be settled by virtue of such acceleration until and unless the Grantee has a “separation from service” within the meaning of Section Treasury Regulation 1-409A-1(h), as determined by the Corporation, in its sole discretion. Further, and notwithstanding anything in the Plan or this Agreement to the contrary, if (x) any of the RSUs to be provided in connection with the Grantee’s separation from service do not qualify for any reason to be exempt from Section 409A, (y) the Grantee is, at the time of such separation from service, a “specified employee” (as defined in Treasury Regulation Section 1.409A-1(i)) and (z) the settlement of such RSUs would result in the imposition of additional tax under Section 409A if such settlement occurs on or within the six (6) month period following the Grantee’s separation from service, then, to the extent necessary to avoid the imposition of such additional taxation, the settlement of any such RSUs during such six (6) month period will accrue and will not be settled until the date six (6) months and one (1) day following the date of the Grantee’s separation from service and on such date (or, if earlier, the date of the Grantee’s death), such RSUs will be settled.	
 	 	
6.	Clawback Provision. If the SLM Corporation Board of Directors (the “Board”), or an appropriate committee thereof, determines that, any material misstatement of financial results or a performance metric criteria has occurred as a result of the Grantee’s conduct or the Grantee has committed a material violation of corporate policy or has committed fraud or Misconduct, then the Board or committee shall consider all factors, with particular scrutiny when one of the top 20 members of management are involved, and the Board or such committee, may in its sole discretion require reimbursement of any compensation resulting from the vesting, exercise or settlement of Options and/or Restricted Stock/RSUs and the cancellation of any outstanding Options and/or Restricted Stock/RSUs from the Grantee (whether or not such individual is currently employed by the Corporation) during the three-year period following the date the Board first learns of the violation, fraud or Misconduct. Notwithstanding anything to the contrary herein, this provision shall be subject to adjustment and amendment to conform with any subsequently adopted policy or amendment relating to the clawback of compensation as may be adopted by the Board or an appropriate committee thereof.	
 	 	
7.	Securities Law Compliance. The Corporation may impose such restrictions, conditions or limitations as it determines appropriate as to the timing and manner of any transfer or sale by the Grantee of any shares of the Corporation’s common stock, including without	
limitation (a) restrictions under an insider trading policy and (b) restrictions that may be necessary in the absence of an effective registration statement under the Securities Act of 1933, as amended, covering the shares of the Corporation’s common stock. The sale of the shares must also comply with other applicable laws and regulations governing the sale of such shares.
 	 	
8.	Data Privacy. As an essential term of this award, the Grantee consents to the collection, use and transfer, in electronic or other form, of personal data as described herein for the exclusive purpose of implementing, administering and managing Grantee’s participation in the Plan. By accepting this award, the Grantee acknowledges that the Corporation holds certain personal information about the Grantee, including, but not limited to, name, home address and telephone number, date of birth, social security number or other identification number, salary, tax rates and amounts, nationality, job title, any shares of stock held in the Corporation, details of all options or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding, for the purpose of implementing, administering and managing the Plan (“Data”). Grantee acknowledges that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in jurisdictions that may have different data privacy laws and protections, and Grantee authorizes the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the Plan, including any requisite transfer of such Data as may be required to a broker or other third party with whom the Grantee or the Corporation may elect to deposit any shares of the Corporation’s common stock. Grantee acknowledges that Data may be held to implement, administer and manage the Grantee’s participation in the Plan as determined by the Corporation, and that Grantee may request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, provided however, that refusing or withdrawing Grantee’s consent may adversely affect Grantee’s ability to participate in the Plan.	
 	 	
9.	Electronic Delivery. The Corporation may, in its sole discretion, decide to deliver any documents related to any awards granted under the Plan by electronic means or to request Grantee’s consent to participate in the Plan by electronic means. Grantee hereby consents to receive such documents by electronic delivery and, if requested, to agree to participate in the Plan through an on-line or electronic system established and maintained by the Corporation or another third party designated by the Corporation, and such consent shall remain in effect throughout Grantee’s term of service with the Corporation (or its subsidiaries) and thereafter until withdrawn in writing by Grantee.	
 	 	
10.	Board Interpretation. The Grantee hereby agrees to accept as binding, conclusive, and final all decisions and interpretations of the Board and, where applicable, the Committee concerning any questions arising under this Agreement or the Plan.	
 	 	
11.	No Right to Continued Employment. Nothing in the Plan, in this Agreement or any other instrument executed pursuant thereto or hereto shall confer upon the Grantee any right to continued employment with the Corporation or any of its subsidiaries or affiliates.	
 	 	
12.	Amendments for Accounting Charges. The Committee reserves the right to unilaterally amend this Agreement to reflect any changes in applicable law or financial accounting standards.	
 	 	
13.	Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law.	
 	 	
14.	Notices. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given if personally delivered, telefaxed or telecopied to, or, if mailed, when received by, the other party at the following addresses:	
If to the Corporation to:
Human Resources Department
ATTN: Total Rewards
300 Continental Drive
Newark, DE 19713

If to the Grantee, to (i) the last address maintained in the Corporation’s Human Resources files for the Grantee or (ii) the Grantee’s mail delivery code or place of work at the Corporation (or its subsidiaries).
 	 	
15.	Plan Controls; Entire Agreement; Capitalized Terms. In the event of any conflict between the provisions of this Agreement and the provisions of the Plan, the terms of the Plan control, except as expressly stated otherwise herein. This Agreement, the Plan and the Restricted Stock Unit Grant Notice together set forth the entire agreement and understanding between the parties as to the subject matter hereof and supersede all prior oral and written and all contemporaneous or subsequent oral discussions, agreements and understandings of any kind or nature. Capitalized terms not defined herein shall have the meanings as described in the Plan or in the Restricted Stock Unit Grant Notice.	
 	 	
16.	Miscellaneous. In the event that any provision of this Agreement is declared to be illegal, invalid or otherwise unenforceable by a court of competent jurisdiction, such provision shall be reformed, if possible, to the extent necessary to render it legal, valid and enforceable, or otherwise deleted, and the remainder of this Agreement shall not be affected except to the extent necessary to reform or delete such illegal, invalid or unenforceable provision. The headings in this Agreement are solely for convenience of reference, and shall not constitute a part of this Agreement, nor shall they affect its meaning, construction or effect. The Grantee shall cooperate and take such actions as may be reasonably requested by the Corporation in order to carry out the provisions and purposes of the	
Agreement. The Grantee is responsible for complying with all laws applicable to Grantee, including federal and state securities reporting laws.
Grantee is deemed to accept this Award of RSUs under this Agreement and to agree that such Award is subject to the terms and conditions set forth in this Agreement and the Plan unless Grantee provides the Corporation written notification of Grantee’s rejection of this Award of RSUs not later than 30 days after Grantee’s receipt of notice of the posting of this Agreement on-line or through electronic means (in which case such Award will be forfeited and Grantee shall have no further right or interest therein as of such date).

Page 1

Exhibit 10.3

SLM Corporation 2012 Omnibus Incentive Plan
2017 Performance Stock Unit Term Sheet

Pursuant to the terms and conditions of the SLM Corporation 2012 Omnibus Incentive Plan (the “Plan”), the Nominations, Governance, and Compensation Committee (the “Committee”) of the SLM Corporation Board of Directors hereby grants to _____________________ (the “Grantee”) on ____________________ (the “Grant Date”) an award (the “Award”) of ______ shares of Performance Stock Units (“PSUs”), which represent the right to acquire shares of common stock of SLM Corporation (the “Corporation”) subject to the following terms and conditions (this “Agreement”):

1.Vesting Schedule. Unless vested earlier as set forth below, the Award will vest, and will be converted into shares of the Corporation’s common stock, based on the following vesting terms:

•A specified number of the total PSUs granted to each executive shall vest in amounts based on the amount of “Cumulative Charge-offs” (as that term is defined below) achieved by the Corporation for the period from January 1, 2017 through December 31, 2019 in the aggregate, as shown on the attached chart, and on the date specified in this Agreement below. Each vested PSU will be settled in shares of the Corporation’s common stock.
•“Cumulative Charge-offs” shall be defined as the Corporation’s cumulative charge-offs for the period from January 1, 2017 through December 31, 2019 on the fourth quarter 2016 full principal and interest repayment cohort, as produced by the Chief Credit Officer and independently validated by the Chief Risk Officer.
•PSUs shall vest on the date of the certification by the Nominations, Governance, and Compensation Committee of the Company’s Board of Directors as to satisfaction of the Cumulative Charge-offs performance factor.
•The Committee has discretion to decrease the shares issuable pursuant to any PSU Award, but may not increase the shares issuable in a manner inconsistent with the requirements for qualified performance-based compensation under Section 162(m) of the Internal Revenue Code.

Cumulative Charge-offs Performance Chart:

Page 1

 	
 	 	
Cumulative Charge-offs	Percentage of Award –
PSU Payout	
≤4.0%	150%	
4.5%	125%	
5.0%	100%	
5.5%	75%	
6.0%	50%	
6.5%	25%	
>6.5%	0%	
 
If compensation paid to the Grantee might be subject to the tax deduction limitations of Section 162(m) of the Internal Revenue Code (“Section 162(m)”), the vesting of the Award is contingent upon certification by the Committee that the application Section 162(m) performance targets have been met on or prior to the applicable vesting event; provided, however, that in no event will the conversion of the Award into shares of the Corporation’s common stock occur after the end of the calendar year following the calendar year in which ends the performance period described in this Section 1.

2.Employment Termination; Death; Disability. Except as provided below, if the Grantee voluntarily ceases to be an employee of the Corporation (or one of its subsidiaries) for any reason or his or her employment is terminated by the Corporation (or one of its subsidiaries) for misconduct, as determined by the Corporation (or one of its subsidiaries) in its sole discretion, he/she shall forfeit any portion of the Award that has not vested as of the date of such termination of employment.
If not previously vested, the Award will continue to vest, and will be settled in shares of the Corporation’s common stock, subject to the original performance goals and performance period set forth above on the original vesting terms and vesting dates set forth above in the event that (i) the Grantee’s employment is terminated by the Corporation for any reason other than for misconduct, as determined by the Corporation in its sole discretion, or (ii) the Grantee voluntarily ceases to be an employee of the Corporation (or one of its subsidiaries) and meets the Corporation’s retirement eligibility requirements under the Corporation’s then current retirement eligibility policy, which shall be determined by the Corporation in its sole discretion.
If not previously vested, the Award will vest, and will be settled in shares of the Corporation’s common stock, at the target levels set forth above, upon death or disability (provided that such disability qualifies as a “disability” within the meaning of Treasury Regulation Section 1.409A-3(i)(4)).

The Award shall be forfeited upon termination of employment due to misconduct, as determined by the Corporation in its sole discretion.

Page 2

Notwithstanding anything stated herein, the Plan or in the SLM Corporation Change in Control Severance Plan for Senior Officers, this Award shall not be subject to the terms set forth in the SLM Corporation Change in Control Severance Plan for Senior Officers.

3.Change in Control. Notwithstanding anything to the contrary in this Agreement:

(a)In the event of a Change in Control in which the acquiring or surviving company in the transaction does not assume or continue outstanding Awards upon the Change in Control, then any portion of the Award that is not vested shall vest at the 100% target level set forth in the vesting schedule herein; provided, however, the settlement of the accelerated portion of the PSUs into shares of the Corporation’s common stock (i.e., the settlement of the Award) will nevertheless be made at the same time or times as if such PSUs had vested in accordance with the vesting schedule set forth in Section 1 or, if earlier, upon the termination of Grantee’s employment for reasons other than misconduct.

(b)If Grantee’s employment shall terminate within twenty-four months following a Change in Control for any reason other than (i) by the Company for misconduct, as determined by the Corporation in its sole discretion or (ii) by Grantee’s voluntary termination of employment that is not a Termination of Employment for Good Reason, as defined in the Change of Control Severance Plan for Senior Officers (if applicable to Grantee), any portion of the Award not previously vested shall immediately become vested, and shall be settled in shares of the Corporation’s common stock, upon such employment termination.

4.Taxes; Dividends. The Grantee of the Award shall make such arrangements as may reasonably be required by the Corporation, including transferring a sufficient number of shares of the Corporation’s stock, to satisfy the income and employment tax withholding requirements that accrue upon the Award becoming vested or, if applicable, settled in shares of the Corporation’s common stock (by approving this Agreement, the Committee hereby approves the transfer of such shares to the Corporation for purposes of SEC Rule (16b-3). Dividends declared on an unvested Award will not be paid currently. Instead, amounts equal to such dividends will be credited to an account established on behalf of the Grantee and such amounts will be deemed to be invested in additional shares of the Corporation’s common stock (“Dividend Equivalents”). Such Dividend Equivalents will be subject to the same vesting schedule to which the Award is subject. Upon vesting of any portion of the Award, the amount of Dividend Equivalents allocable to such Award (and any fractional share amount) will also vest and will be converted into shares of the Corporation’s common stock (provided that any fractional share amount shall be paid in cash).

Page 3

5.Section 409A. For purposes of Section 409A of the Internal Revenue Code, the regulations and other guidance thereunder and any state law of similar effect (collectively “Section 409A”), each payment and benefit payable under this Agreement is hereby designated as a separate payment. The parties intend that all PSUs provided under this Agreement and shares issuable hereunder comply with the requirements of Section 409A so that none of the payments or benefits will be subject to the adverse tax penalties imposed under Section 409A, and any ambiguities herein will be interpreted to so comply. Notwithstanding anything in the Plan or this Agreement to the contrary, if the vesting of the balance or some lesser portion of the balance, of the PSUs is to be accelerated in connection with the Grantee’s termination of service, such accelerated PSUs will not be settled by virtue of such acceleration until and unless the Grantee has a “separation from service” within the meaning of Section Treasury Regulation 1-409A-1(h), as determined by the Corporation, in its sole discretion. Further, and notwithstanding anything in the Plan or this Agreement to the contrary, if (x) any of the PSUs to be provided in connection with the Grantee’s separation from service do not qualify for any reason to be exempt from Section 409A, (y) the Grantee is, at the time of such separation from service, a “specified employee” (as defined in Treasury Regulation Section 1-409A-1(i) and (z) the settlement of such PSUs would result in the imposition of additional tax under Section 409A if such settlement occurs on or within the six (6) month period following the Grantee’s separation from service, then, to the extent necessary to avoid the imposition of such additional taxation, the settlement of any such PSU during such six (6) month period will accrue and will not be made until the date six (6) months and one (1) day following the date of the Grantee’s separation from service and on such date (or, if earlier, the date of the Grantee’s death), the such PSUs will be settled.

6.Clawback Provision. If the Board, or an appropriate committee thereof, determines that, any material misstatement of financial results or a performance metric criteria has occurred as a result of the Grantee’s conduct or the Grantee has committee a material violation of corporate policy or has committed fraud or misconduct, and the Grantee at the time of such violation, fraud or misconduct (or at any time thereafter) was an officer of the Corporation (or its subsidiaries) at the Senior Vice President level or above, then the Board or committee shall consider all factors, with particular scrutiny when one of the top 20 members of management are involved, and the Board or such committee, may in its sole discretion require reimbursement of any compensation resulting from the vesting, exercise or settlement of Options and/or Restricted Stock/PSUs and the cancellation of any outstanding Options and/or Restricted Stock/PSUs from the Grantee (whether or not such individual is currently employed by the Corporation) during the three-year period following the date the Board first learns of the violation, fraud or misconduct. Notwithstanding anything to the contrary herein, this provision shall be subject to adjustment and amendment to conform with any

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subsequently adopted policy or amendment relating to the clawback of compensation as may be adopted by the Board or an appropriate committee thereof.

7.The Corporation may impose such restrictions, conditions or limitations as it determines appropriate as to the timing and manner of any transfer or sale by the Grantee of any shares of Common Stock, including without limitation (a) restrictions under an insider trading policy and (b) restrictions that may be necessary in the absence of an effective registration statement under the Securities Act of 1933, as amended, covering the shares of the Corporation’s common stock. The sale of the shares must also comply with other applicable laws and regulations governing the sale of such shares.

8.As an essential term of this Award, the Grantee consents to the collection, use and transfer, in electronic or other form, of personal data as described herein for the exclusive purpose of implementing, administering and managing Grantee’s participation in the Plan. By accepting this Award, the Grantee acknowledges that the Corporation holds certain personal information about the Grantee, including, but not limited to, name, home address and telephone number, date of birth, social security number or other identification number, salary, tax rates and amounts, nationality, job title, any shares of stock held in the Corporation, details of all options or other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding, for the purpose of implementing, administering and managing the Plan (“Data”). Grantee acknowledges that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in jurisdictions that may have different data privacy laws and protections, and Grantee authorizes the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the Plan, including any requisite transfer of such Data as may be required to a broker or other third party with whom the Grantee or the Corporation may elect to deposit any shares of the Corporation’s common stock. Grantee acknowledges that Data may be held to implement, administer and manage the Grantee’s participation in the Plan as determined by the Corporation, and that Grantee may request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, provided however, that refusing or withdrawing Grantee’s consent may adversely affect Grantee’s ability to participate in the Plan.

9.The Corporation may, in its sole discretion, decide to deliver any documents related to any Awards granted under the Plan by electronic means or to request Grantee’s consent to participate in the Plan by electronic means. Grantee hereby consents to receive such documents by electronic delivery and, if requested, to agree to participate in the Plan through an on-line or electronic system established and maintained by the Corporation or another third party designated by the Corporation, and such consent shall

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remain in effect throughout Grantee’s term of service with the Corporation (or its subsidiaries) and thereafter until withdrawn in writing by Grantee.

10.Capitalized terms not otherwise defined herein are defined in the plan.

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Exhibit 12.1
SLM CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(Dollars in thousands)

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Years Ended December 31,	 	Three Months Ended March 31,	
 	 	2012	 	2013	 	2014	 	2015	 	2016	 	2016	 	2017	
Income before income tax expense	 	$	341,869	
 	 	$	416,527	
 	 	$	333,752	
 	 	$	439,064	
 	 	$	414,436	
 	 	$	104,790	
 	 	$	145,954	
 	
Add: Fixed charges	 	84,709	
 	 	91,182	
 	 	98,404	
 	 	132,048	
 	 	189,717	
 	 	40,475	
 	 	62,477	

Total earnings	 	$	426,578	
 	 	$	507,709	
 	 	$	432,156	
 	 	$	571,112	
 	 	$	604,153	
 	 	$	145,265	
 	 	$	208,431	

Interest expense	 	$	82,912	
 	 	$	89,085	
 	 	$	95,815	
 	 	$	128,619	
 	 	$	185,908	
 	 	$	39,592	
 	 	$	61,412	
 	
Rental expense, net of income	 	1,797	
 	 	2,097	
 	 	2,589	
 	 	3,429	
 	 	3,809	
 	 	883	
 	 	1,065	

Total fixed charges	 	84,709	
 	 	$	91,182	
 	 	98,404	
 	 	132,048	
 	 	189,717	
 	 	40,475	
 	 	62,477	

Preferred stock dividends	 	—	
 	 	—	
 	 	12,933	
 	 	19,595	
 	 	21,204	
 	 	5,139	
 	 	5,575	
 	
Total fixed charges and preferred stock dividends	 	$	84,709	
 	 	$	91,182	
 	 	$	111,337	
 	 	$	151,643	
 	 	$	210,921	
 	 	$	45,614	
 	 	$	68,052	
 	
Ratio of earnings to fixed charges (1)	 	5.04	
 	 	5.57	
 	 	4.39	
 	 	4.33	
 	 	3.18	
 	 	3.59	
 	 	3.34	

 	 	 	

 	 	 	
 	 	 	 	 	
Ratio of earnings to fixed charges and preferred stock dividends (1)	 	5.04	
 	 	5.57	
 	 	3.88	
 	 	3.77	
 	 	2.86	
 	 	3.18	
 	 	3.06	

 	 	
(1)	For purposes of computing these ratios, earnings represent income before income tax expense plus fixed charges. Fixed charges represent interest expensed and capitalized plus one-third (the proportion deemed representative of the interest factor) of rents, net of income from subleases.	

Exhibit 31.1

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Raymond J. Quinlan, certify that:
 	 	
1.	I have reviewed this quarterly report on Form 10-Q of SLM Corporation;	

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	

b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	

c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	

d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	

b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	

 	
 	
/s/ RAYMOND J. QUINLAN	
Raymond J. Quinlan	
Executive Chairman and Chief Executive Officer	
(Principal Executive Officer)	
April 19, 2017	

Exhibit 31.2

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Steven J. McGarry, certify that:
 	 	
1.	I have reviewed this quarterly report on Form 10-Q of SLM Corporation;	

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	

b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	

c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	

d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	

b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	

 	
 	
/s/ STEVEN J. MCGARRY	
Steven J. McGarry	
Executive Vice President and Chief Financial Officer	
(Principal Financial Officer)	
April 19, 2017	

Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of SLM Corporation (the “Company”) on Form 10-Q for the quarter ended March 31, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Raymond J. Quinlan, Executive Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
 	 	
(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and	

(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.	

 	
 	
/s/ RAYMOND J. QUINLAN	
Raymond J. Quinlan	
Executive Chairman and Chief Executive Officer	
(Principal Executive Officer)	
April 19, 2017	

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of SLM Corporation (the “Company”) on Form 10-Q for the quarter ended March 31, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steven J. McGarry, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
 	 	
(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and	

(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.	

 	
 	
/s/ STEVEN J. MCGARRY	
Steven J. McGarry	
Executive Vice President and Chief Financial Officer	
(Principal Financial Officer)	
April 19, 2017