SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 20, 2011
SLM CORPORATION
(Exact name of registrant as specified in its charter)
 	 	 	 	 	
DELAWARE	 	File No. 001-13251	 	52-2013874	
(State or other jurisdiction	 	(Commission File Number)	 	(IRS Employer	
of incorporation)	 	 	 	Identification No.)	
300 Continental Drive, Newark, Delaware 19713
(Address if principal executive offices)(zip code)
Registrant’s telephone number, including area code: (302) 283-8000
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 	 	 	
o	 	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)	

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

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

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

 
Item 2.02 Results of Operations and Financial Condition
     On April 20, 2011, SLM Corporation (the “Company”) issued a press release with respect to its earnings for the fiscal quarter ended March 31, 2011, which is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is available on the Company’s Web site at  www.salliemae.com/about/investors/stockholderinfo/earningsinfo . Presentation slides used during the Company’s investor conference call, set for April 21, 2011, at 8:00 a.m. EDT., may be accessed at www.salliemae.com/about/investors/stockholderinfo/webcast  no later than the starting time of the conference call.
Item 8.01 Other Events.
      On April 20, 2011, the Company issued a press release announcing: (i) a declaration of a quarterly dividend of $0.10 per share on the Company’s common stock, payable June 17, 2011, to shareholders of record at the close of business on June 3, 2011, and (ii) an authorization to repurchase up to $300 million of outstanding common stock in open-market transactions and the termination of all previous share repurchase authorizations. A copy of the press release is attached hereto as Exhibit 99.1.
2

 
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
 	 	
 	By:  	/s/ JONATHAN C. CLARK 	 	
 	 	Jonathan C. Clark	 	
 	 	Title:  	Executive Vice President and Chief Financial Officer	 	
 	
Dated: April 20, 2011
3

 
SLM CORPORATION
Form 8-K
CURRENT REPORT
EXHIBIT INDEX
 	 	 	
Exhibit	 	 	
No.	 	Description	
99.1	 	Press Release dated April 20, 2011	
4

Exhibit 99.1

CONTACTS:

Media	 	Martha Holler, (703) 984-5178, martha.holler@SallieMae.com
Patricia Nash Christel, (703) 984-5382,  patricia.christel@SallieMae.com	
Investors	 	Steve McGarry, (703) 984-6746, steven.mcgarry@SallieMae.com
Joe Fisher, (703) 984-5755,  joe.fisher@SallieMae.com	
 
SALLIE MAE POSTS QUARTERLY EARNINGS, REINSTATES DIVIDEND,
APPROVES $300 MILLION SHARE REPURCHASE PROGRAM
 
NEWARK, Del., April 20, 2011 — Sallie Mae (NYSE: SLM) today reported first-quarter GAAP and core earnings, declared its first common stock dividend since 2007 and announced a $300 million share repurchase program.
 
GAAP first-quarter 2011 net income was $175 million ($.32 diluted earnings per share), vs. $240 million ($.45 diluted earnings per share) in the same quarter last year. The company manages its business segments on a core earnings basis, as described further below. The primary difference between the company’s core earnings and GAAP results is a $133 million unrealized, mark-to-market, loss on certain derivative contracts recognized in GAAP but not in core earnings results.
 
Core earnings were $260 million ($.48 diluted earnings per share) for the first-quarter 2011, compared with $215 million ($.40 diluted earnings per share) for the year-ago period. These results include $40 million and $57 million of after-tax debt repurchase gains, respectively. Year-to-year improvement reflects increased net interest income and a lower loan loss provision.
 
Dividend and Share Repurchase Program
 
Sallie Mae declared a quarterly dividend of $.10 per share on the company’s common stock, the first since early 2007. The dividend is payable June 17, 2011, to shareholders of record at the close of business on June 3, 2011. The company also authorized the repurchase of up to $300 million of outstanding common stock in open-market transactions and terminated all previous authorizations.
 
“These results reflect progress,” said Albert L. Lord, vice chairman and CEO, Sallie Mae. “The trends we see across the franchise are improving: private loan demand, ABS market tone, and asset quality together with a better Department of Education loan servicing scorecard. Reinstitution of the dividend and share repurchase program reflects the strength of our capital, liquidity and cash flow.”
 
Consumer Lending
 
In the consumer lending segment, Sallie Mae originates, finances and services private education loans. Loan originations were $940 million, up 12 percent from the year-ago quarter’s $840 million. The portfolio totaled $36 billion at March 31, 2011.
 
First-quarter core earnings from this segment improved to $44 million from $5 million in the year-ago quarter. Loan delinquencies and charge-offs (each as a percentage of loans in repayment) improved during the quarter to the lowest levels since Dec. 31, 2008. Highlights vs. first-quarter 2010 included:

 	• 	Net interest margin of 4.11 percent compared to 3.84 percent.	

 

 	• 	A provision for loan losses of $275 million, compared to $325 million.	

 	○ 	Delinquencies of 90 days or more (as a percentage of loans in repayment) declined to 5.1 percent from 6.4 percent.	
 	 	 	
 	○ 	An annualized charge-off rate of 3.9 percent vs. 4.7 percent.	
 
Business Services
 
The business services segment includes fees from servicing, collections and college savings businesses.
 
During the quarter, the company announced a Sallie Mae Bank No-Fee Student Checking Account with Debit as an enhanced refund disbursement choice for schools and students to help higher education institutions rapidly process financial aid and tuition refunds. This new option complements existing refund disbursement choices that include electronic deposit to the bank account of the student’s choice, or a check.
 
Core earnings from the business services segment were $132 million in the first-quarter 2011, compared with $141 million in the year-ago quarter, the decrease primarily due to reduced revenue from the servicing of FFELP loans.
 
Federally Guaranteed Loans
 
The Federal Family Education Loan Program (FFELP) loan business segment represents earnings from Sallie Mae’s federal student loan portfolio. The company no longer originates FFELP loans.
 
Core earnings from the FFELP loan segment were $109 million in the first-quarter 2011, compared with $64 million in the year-ago quarter, with the increase primarily driven by the purchase of $25 billion of loans at the end of last year.
 
Operating Expenses
 
Operating expenses were $303 million in the first quarter of 2011, compared to $308 million in fourth quarter 2010 and $287 million in the year-ago period. Operating expenses in the 2011 first quarter included the following $33 million: $10 million for litigation contingencies, $11 million for accelerated stock compensation expense, and $12 million of servicing costs related to the $25 billion student loan portfolio acquisition at the end of last year. These charges notwithstanding, the company expects to achieve its quarterly operating expense target of $250 million by the fourth-quarter 2011.
 
Funding and Liquidity
 
During the 2011 first quarter, the company raised $2 billion of unsecured debt and issued $812 million of FFELP asset-backed securities. Also, the company repurchased $825 million of debt and realized gains of $64 million, compared to $1.3 billion and $90 million in the year-ago quarter, respectively.
 
Subsequent to quarter end, the company priced $562 million in private education loan asset-backed securities below LIBOR plus 2 percent.
 
***
 
Sallie Mae reports financial results on a GAAP basis and also presents certain core earnings performance measures. The company’s management, equity investors, credit rating agencies and debt capital providers use these core earnings measures to monitor the company’s business performance. See “Core Earnings — Definitions and Limitations” for a further discussion and a complete reconciliation between GAAP net income and core earnings.
 
Definitions for capitalized terms in this document can be found in the company’s 2010 Form 10-K filed with the SEC on February 28, 2011. Certain reclassifications have been made to the balances as of and for the quarters ended December 31, 2010 and March 31, 2010, to be consistent with classifications adopted for the quarter ended March 31, 2011, and had no effect on net income, total assets, or total liabilities.
 
***
2

 
Selected Financial Information and Ratios

 	 	Quarters Ended	 	
 	 	March 31,
	 	 	December 31,
	 	 	March 31,
	 	
(Dollars and shares in millions, except per share data)	 	2011	 	 	2010	 	 	2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP Basis	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	$	175	 	 	$	447	 	 	$	240	 	
Diluted earnings per common share(1)	 	$	.32	 	 	$	.84	 	 	$	.45	 	
Weighted average shares used to compute diluted earnings per share	 	 	532	 	 	 	529	 	 	 	527	 	
Return on assets	 	 	.36	%	 	 	1.01	%	 	 	.50	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings” Basis(2)	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings” net income	 	$	260	 	 	$	401	 	 	$	215	 	
“Core Earnings” diluted earnings per common share (1)	 	$	.48	 	 	$	.75	 	 	$	.40	 	
Weighted average shares used to compute diluted earnings per share	 	 	532	 	 	 	529	 	 	 	527	 	
“Core Earnings” return on assets	 	 	.54	%	 	 	.90	%	 	 	.45	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Other Operating Statistics(3)	 	 	 	 	 	 	 	 	 	 	 	 	
Ending FFELP Loans, net	 	$	145,558	 	 	$	148,649	 	 	$	146,524	 	
Ending Private Education Loans, net	 	 	35,966	 	 	 	35,656	 	 	 	35,362	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Ending total student loans, net	 	$	181,524	 	 	$	184,305	 	 	$	181,886	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Average student loans	 	$	184,387	 	 	$	164,196	 	 	$	181,533	 	

 	 	 	
(1)	 	Preferred dividends of $12 million and $15 million, applicable to our convertible Series C Preferred Stock, were added back to the numerator in the prior and year-ago quarters, respectively, in computing diluted earnings per share, as the Series C Preferred Stock was dilutive. The Series C Preferred Stock was fully converted to common shares on December 15, 2010.	
 	 	 	
(2)	 	“Core Earnings” are non-GAAP measures and do not represent a comprehensive basis of accounting. For a greater explanation of “Core Earnings,” see the section titled “ ‘Core Earnings’ — Definition and Limitations” and subsequent sections.	
 	 	 	
(3)	 	Subsequent to the adoption of the new consolidation accounting guidance on January 1, 2010, our GAAP and “Core Earnings” loan portfolios are identical, as all of our securitization trusts are treated as on-balance sheet for GAAP now. Hence, in referencing the total loan portfolio, ending and average loan balances, provision for loan loss and charge-offs we no longer distinguish between the two as they are the same, unless otherwise noted.	

3

 
 
Results of Operations
 
We present the results of operations below first on a consolidated basis in accordance with GAAP. Following our discussion of consolidated earnings results on a GAAP basis, we present our results on a segment basis. We have four business segments: FFELP Loans, Consumer Lending, Business Services and Other. Since these segments operate in distinct business environments and we manage and evaluate the financial performance of these segments using non-GAAP financial measures, these segments are presented on a “Core Earnings” basis (see “ ‘Core Earnings’ Definitions and Limitations”).
 
GAAP Statements of Income (Unaudited)

 	 	Quarters Ended	 	 	Increase (Decrease)	 	
 	 	 	 	 	 	 	 	 	 	 	March 31, 2011 vs.
	 	 	March 31, 2011 vs.
	 	
 	 	March 31,
	 	 	Dec. 31,
	 	 	March 31,
	 	 	Dec. 31, 2010	 	 	March 31, 2010	 	
(Dollars in millions, except per share data)	 	2011	 	 	2010	 	 	2010	 	 	$	 	 	%	 	 	$	 	 	%	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
FFELP Loans	 	$	877	 	 	$	777	 	 	$	807	 	 	$	100	 	 	 	13	%	 	$	70	 	 	 	9	%	
Private Education Loans	 	 	604	 	 	 	602	 	 	 	565	 	 	 	2	 	 	 	—	 	 	 	39	 	 	 	7	 	
Other loans	 	 	6	 	 	 	6	 	 	 	9	 	 	 	—	 	 	 	—	 	 	 	(3	)	 	 	(33	)	
Cash and investments	 	 	5	 	 	 	8	 	 	 	5	 	 	 	(3	)	 	 	(38	)	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total interest income	 	 	1,492	 	 	 	1,393	 	 	 	1,386	 	 	 	99	 	 	 	7	 	 	 	106	 	 	 	8	 	
Total interest expense	 	 	594	 	 	 	536	 	 	 	532	 	 	 	58	 	 	 	11	 	 	 	62	 	 	 	12	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net interest income	 	 	898	 	 	 	857	 	 	 	854	 	 	 	41	 	 	 	5	 	 	 	44	 	 	 	5	 	
Less: provisions for loan losses	 	 	303	 	 	 	320	 	 	 	359	 	 	 	(17	)	 	 	(5	)	 	 	(56	)	 	 	(16	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net interest income after provisions for loan losses	 	 	595	 	 	 	537	 	 	 	495	 	 	 	58	 	 	 	11	 	 	 	100	 	 	 	20	 	
Other income (loss):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gains on sales of loans and securities, net	 	 	—	 	 	 	318	 	 	 	9	 	 	 	(318	)	 	 	(100	)	 	 	(9	)	 	 	(100	)	
Losses on derivative and hedging activities, net	 	 	(242	)	 	 	(29	)	 	 	(82	)	 	 	(213	)	 	 	734	 	 	 	(160	)	 	 	195	 	
Servicing revenue	 	 	98	 	 	 	91	 	 	 	122	 	 	 	7	 	 	 	8	 	 	 	(24	)	 	 	(20	)	
Contingency revenue	 	 	78	 	 	 	78	 	 	 	80	 	 	 	—	 	 	 	—	 	 	 	(2	)	 	 	(3	)	
Gains on debt repurchases	 	 	38	 	 	 	118	 	 	 	90	 	 	 	(80	)	 	 	(68	)	 	 	(52	)	 	 	(58	)	
Other income (loss)	 	 	22	 	 	 	(2	)	 	 	14	 	 	 	24	 	 	 	1,200	 	 	 	8	 	 	 	57	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total other income (loss)	 	 	(6	)	 	 	574	 	 	 	233	 	 	 	(580	)	 	 	(101	)	 	 	(239	)	 	 	(103	)	
Expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating expenses	 	 	303	 	 	 	308	 	 	 	287	 	 	 	(5	)	 	 	(2	)	 	 	16	 	 	 	6	 	
Goodwill and acquired intangible assets impairment and amortization expense	 	 	6	 	 	 	10	 	 	 	10	 	 	 	(4	)	 	 	(40	)	 	 	(4	)	 	 	(40	)	
Restructuring expenses	 	 	4	 	 	 	33	 	 	 	25	 	 	 	(29	)	 	 	(88	)	 	 	(21	)	 	 	(84	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total expenses	 	 	313	 	 	 	351	 	 	 	322	 	 	 	(38	)	 	 	(11	)	 	 	(9	)	 	 	(3	)	
Income from continuing operations, before income tax expense	 	 	276	 	 	 	760	 	 	 	406	 	 	 	(484	)	 	 	(64	)	 	 	(130	)	 	 	(32	)	
Income tax expense	 	 	99	 	 	 	261	 	 	 	159	 	 	 	(162	)	 	 	(62	)	 	 	(60	)	 	 	(38	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income from continuing operations	 	 	177	 	 	 	499	 	 	 	247	 	 	 	(322	)	 	 	(65	)	 	 	(70	)	 	 	(28	)	
Loss from discontinued operations, net of tax	 	 	(2	)	 	 	(52	)	 	 	(7	)	 	 	50	 	 	 	(96	)	 	 	5	 	 	 	(71	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	 	175	 	 	 	447	 	 	 	240	 	 	 	(272	)	 	 	(61	)	 	 	(65	)	 	 	(27	)	
Preferred stock dividends	 	 	4	 	 	 	16	 	 	 	19	 	 	 	(12	)	 	 	(75	)	 	 	(15	)	 	 	(79	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income attributable to common stock	 	$	171	 	 	$	431	 	 	$	221	 	 	$	(260	)	 	 	(60	)%	 	$	(50	)	 	 	(23	)%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic earnings (loss) per common share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Continuing operations	 	$	.32	 	 	$	.99	 	 	$	.47	 	 	$	(.67	)	 	 	(68	)%	 	$	(.15	)	 	 	(32	)%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Discontinued operations	 	$	—	 	 	$	(.11	)	 	$	(.01	)	 	$	.11	 	 	 	100	%	 	$	.01	 	 	 	100	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	.32	 	 	$	.88	 	 	$	.46	 	 	$	(.56	)	 	 	(64	)%	 	$	(.14	)	 	 	(30	)%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted earnings (loss) per common share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Continuing operations	 	$	.32	 	 	$	.94	 	 	$	.46	 	 	$	(.62	)	 	 	(66	)%	 	$	(.14	)	 	 	(30	)%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Discontinued operations	 	$	—	 	 	$	(.10	)	 	$	(.01	)	 	$	.10	 	 	 	100	%	 	$	.01	 	 	 	100	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	.32	 	 	$	.84	 	 	$	.45	 	 	$	(.52	)	 	 	(62	)%	 	$	(.13	)	 	 	(29	)%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Dividends per common share	 	$	—	 	 	$	—	 	 	$	—	 	 	$	—	 	 	 	—	%	 	$	—	 	 	 	—	%	

4

 
GAAP Balance Sheet (Unaudited)

 	 	March 31,
	 	 	December 31,
	 	 	March 31,
	 	
(Dollars in millions, except per share data)	 	2011	 	 	2010	 	 	2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Assets	 	 	 	 	 	 	 	 	 	 	 	 	
FFELP Loans (net of allowance for losses of $190; $189 and $186 respectively)	 	$	145,558	 	 	$	148,649	 	 	$	130,106	 	
FFELP Stafford Loans Held-For-Sale	 	 	—	 	 	 	—	 	 	 	16,418	 	
Private Education Loans (net of allowance for losses of $2,034; $2,021 and $2,019, respectively)	 	 	35,966	 	 	 	35,656	 	 	 	35,362	 	
Cash and investments	 	 	4,763	 	 	 	5,299	 	 	 	8,242	 	
Restricted cash and investments	 	 	6,393	 	 	 	6,255	 	 	 	6,115	 	
Goodwill and acquired intangible assets, net	 	 	472	 	 	 	478	 	 	 	1,168	 	
Other assets	 	 	10,203	 	 	 	8,970	 	 	 	10,102	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total assets	 	$	203,355	 	 	$	205,307	 	 	$	207,513	 	

Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	
Short-term borrowings	 	$	32,317	 	 	$	33,616	 	 	$	41,102	 	
Long-term borrowings	 	 	161,886	 	 	 	163,543	 	 	 	157,983	 	
Other liabilities	 	 	3,945	 	 	 	3,136	 	 	 	3,672	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total liabilities	 	 	198,148	 	 	 	200,295	 	 	 	202,757	 	

Commitments and contingencies	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Equity	 	 	 	 	 	 	 	 	 	 	 	 	
Preferred stock, par value $.20 per share, 20 million shares authorized:	 	 	 	 	 	 	 	 	 	 	 	 	
Series A: 3.3 million; 3.3 million; and 3.3 million shares, respectively, issued at stated value of $50 per share	 	 	165	 	 	 	165	 	 	 	165	 	
Series B: 4 million; 4 million; and 4 million shares, respectively, issued at stated value of $100 per share	 	 	400	 	 	 	400	 	 	 	400	 	
Series C: 7.25% mandatory convertible preferred stock: 0; 0; and 810 thousand shares, respectively, issued at liquidation preference of $1,000 per share	 	 	—	 	 	 	—	 	 	 	810	 	
Common stock, par value $.20 per share, 1.125 billion shares authorized:	 	 	 	 	 	 	 	 	 	 	 	 	
527 million; 595 million; and 553 million shares, respectively, issued	 	 	105	 	 	 	119	 	 	 	111	 	
Additional paid-in capital	 	 	4,092	 	 	 	5,940	 	 	 	5,106	 	
Accumulated other comprehensive loss, net of tax benefit	 	 	(35	)	 	 	(45	)	 	 	(42	)	
Retained earnings	 	 	480	 	 	 	309	 	 	 	72	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total SLM Corporation stockholders’ equity before treasury stock	 	 	5,207	 	 	 	6,888	 	 	 	6,622	 	
Common stock held in treasury: 0; 68 million and 68 million shares, respectively	 	 	—	 	 	 	1,876	 	 	 	1,866	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total equity	 	 	5,207	 	 	 	5,012	 	 	 	4,756	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total liabilities and equity	 	$	203,355	 	 	$	205,307	 	 	$	207,513	 	

5

 
Consolidated Earnings Summary — GAAP-basis
 
Three Months Ended March 31, 2011 Compared with Three Months Ended March 31, 2010
 
For the three months ended March 31, 2011 and 2010, net income was $175 million, or $.32 diluted earnings per common share, and $240 million, or $.45 diluted earnings per common share, respectively. For the three months ended March 31, 2011 and 2010, net income from continuing operations was $177 million, or $.32 diluted earnings per common share, and $247 million, or $.46 diluted earnings per common share, respectively. For the three months ended March 31, 2011 and 2010, net loss from discontinued operations was $2 million, which had minimal effect on diluted loss per common share, and $7 million, or $.01 diluted loss per common share, respectively.
 
Income from Continuing Operations
 
Income from continuing operations before income tax expenses decreased $130 million for the three months ended March 31, 2011, as compared with the year-ago quarter primarily due to a $160 million increase in net losses on derivative and hedging activities, a $52 million decrease in gains on debt repurchases and a $24 million decline in servicing revenue. These reductions were partially offset by a $100 million increase in net interest income after provisions for loan losses.
 
The primary contributors to each of the identified drivers of changes in income from continuing operations before income tax expense for the year-over-year period are as follows:

 	• 	Net interest income increased by $44 million primarily as a result of the replacement of the $20 billion of lower margin loans sold to the Department of Education (“ED”) in the third quarter of 2010, by the $25 billion in higher margin securitized loans acquired on December 31, 2010. Offsetting these items was primarily the impact of the higher funding costs in the first quarter of 2011 compared with the first quarter of 2010.	
 	 	 	
 	• 	Provisions for loan losses decreased by $56 million in the quarter ended March 31, 2011 from the quarter ended March 31, 2010 primarily as a result of the improving performance of the Private Education Loan portfolio.	
 	 	 	
 	• 	Losses on derivatives and hedging activities, net, declined by $160 million in the quarter ended March 31, 2011 compared with the year-ago quarter. The primary factors affecting the change in losses in the first quarter of 2011 were interest rates and foreign currency fluctuations. Valuations of derivative instruments vary based upon many factors including changes in interest rates, credit risk, foreign currency fluctuations and other market factors. As a result, we expect gains and (losses) on derivatives and hedging activities, net, to vary significantly in future periods.	
 	 	 	
 	• 	Servicing revenue decreased by $24 million primarily due to H.R. 4872, HCERA, which included the SAFRA Act, signed into law on March 30, 2010. Effective July 1, 2010, this legislation eliminated the FFELP, thereby eliminating our ability to earn additional guarantor issuance fees on new FFELP Loans. In addition there was a decline in outstanding FFELP Loans for which we were earning additional fees.	
 	 	 	
 	• 	Gains on debt repurchases decreased $52 million year-over-year while the principal amount of debt repurchased decreased to $825 million, as compared with the $1.3 billion repurchased in the quarter ended March 31, 2010.	
 	 	 	
 	• 	Operating expenses increased $16 million from the year-ago quarter primarily due to $33 million of expenses in the first quarter of 2011 related to $10 million in litigation contingency expense, $11 million from the acceleration of stock compensation expense and $12 million third-party servicing expense related to the $25 billion loan portfolio acquired on December 31, 2010. These significant expenses were partially offset by reduced costs as a result of our cost savings initiative.	
 	 	 	
 	• 	Restructuring expenses decreased $22 million in the first quarter of 2011, which is a result of a $21 million decrease in restructuring expenses in continuing operations and a $1 million decrease in restructuring expenses attributable to discontinued operations. The decline in restructuring expenses was	

6

 
 	 	 	
 	 	the result of our having materially completed our plan for restructuring the Company during 2010 in response to the HCERA legislation. The following details our ongoing restructuring efforts:	

 	○ 	Restructuring our operations in response to HCERA and the elimination of the FFELP requires a significant reduction of operating costs from the elimination of positions and facilities associated with the origination of FFELP Loans. Expenses associated with continuing operations under this restructuring plan were $3 million in the first quarter of 2011 and $23 million in the first quarter of 2010. We currently expect to incur an estimated $9 million of additional restructuring costs in 2011. The majority of these expenses are severance costs related to the partially completed and planned elimination of approximately 2,500 positions, approximately 30 percent of our workforce that existed as of the first quarter of 2010.	
 	 	 	
 	○ 	In response to the College Cost Reduction and Access Act of 2007 (“CCRAA”) and challenges in the capital markets, we also initiated a restructuring plan in the fourth quarter of 2007. The majority of these restructuring expenses were also severance costs related to the elimination of approximately 3,000 positions, or approximately 25 percent of our workforce that existed as of the fourth quarter 2007. Under this ongoing plan, restructuring expenses associated with continuing operations was $.3 million and $2 million for the quarters ended March 31, 2011 and March 31, 2010, respectively.	

 	• 	Income tax expense from continuing operations decreased $60 million for the quarter ended March 31, 2011 as compared with the year-ago quarter. The effective tax rates for the first quarters of 2011 and 2010 were 36 percent and 39 percent, respectively. The change in the effective tax rate for the quarter ended March 31, 2011 was primarily driven by the impact of state tax rate changes recorded in the year-ago quarter.	
 
Net Loss from Discontinued Operations
 
Net loss from discontinued operations in the three months ended March 31, 2011 decreased $5 million from the year-ago period. In the fourth quarter of 2010, we began actively marketing our Purchased Paper — Non Mortgage business for sale and have concluded it is probable this business will be sold within one year at which time we would exit the business. As a result, the results of operations of this business were also required to be presented in discontinued operations beginning in the fourth quarter of 2010. Our Purchased Paper businesses are presented in discontinued operations for the current and prior periods.
 
Three Months Ended March 31, 2011 Compared with Three Months Ended December 31, 2010
 
For the three months ended March 31, 2011 and December 31, 2010, net income was $175 million, or $.32 diluted earnings per common share, and $447 million, or $.84 diluted earnings per common share, respectively. For the three months ended March 31, 2011 and December 31, 2010, net income from continuing operations was $177 million, or $.32 diluted earnings per common share, and $499 million, or $.94 diluted earnings per common share, respectively. For the three months ended March 31, 2011 and December 31, 2010, net loss from discontinued operations was $2 million, which had no effect on reported diluted earnings per common share, and $52 million, or $.10 diluted loss per common share, respectively.
 
Income from Continuing Operations
 
Income from continuing operations before income tax expenses decreased for the three months ended March 31, 2011, by $484 million as compared with the prior quarter primarily due to a $318 million decrease in net gains on sales of loans and securities, a $213 million increase in net losses on derivative and hedging activities and a $80 million decline in gains on debt repurchases. These were partially offset by a $58 million increase in net interest income after provisions for loans losses.
7

 
The primary contributors to each of the identified drivers of changes in income from continuing operations before income tax expense for the quarter-over-quarter period are as follows:

 	• 	Net interest income increased by $41 million in the quarter ended March 31, 2011 from the quarter ended December 31, 2010. The increase in net interest income was primarily the result of $80 million of incremental net interest income from the acquisition of $25 billion of securitized student loans on December 31, 2010. Offsetting this increase was primarily the impact of the higher funding costs in the first quarter of 2011 compared with the fourth quarter of 2010, as well as the first quarter of 2011 having two less days than the fourth quarter of 2010.	
 	 	 	
 	• 	Provisions for loan losses decreased by $19 million primarily as a result of the improving performance of the Private Education Loan portfolio.	
 	 	 	
 	• 	Gains on sales of loans and securities were $318 million in the fourth quarter 2010 which primarily related to the gains on sales of FFELP Loans to ED as part of ED’s Loan Purchase Commitment Program (the “Purchase Program”). These gains will not occur in the future as FFELP originations and the Purchase Program ended in 2010.	
 	 	 	
 	• 	Losses on derivatives and hedging activities, net, increased by $213 million in the quarter ended March 31, 2011 compared with the prior quarter. The primary factors affecting the change in losses in the first quarter of 2011 were interest rates and foreign currency fluctuations. Valuations of derivative instruments vary based upon many factors including changes in interest rates, credit risk, foreign currency fluctuations and other market factors. As a result, we expect gains and (losses) on derivatives and hedging activities, net, to vary significantly in future periods.	
 	 	 	
 	• 	Servicing revenue increased by $7 million primarily due to the seasonality of late and forbearance fees. We typically experience higher late and forbearance fees in the first quarter as a result of recent graduates having reached the end of their allowable grace periods and entered active repayment for the first time.	
 	 	 	
 	• 	Gains on debt repurchases decreased $80 million quarter-over-quarter while the principal amount of debt repurchased decreased to $825 million, as compared with the $1.3 billion repurchased in the quarter ended December 31, 2010.	
 	 	 	
 	• 	Other income increased by $24 million primarily due to a $20 million increase in foreign currency translation gains. The foreign currency translation gains relate to a portion of our foreign currency denominated debt that does not receive hedge accounting treatment. These gains were partially offset by the “losses on derivative and hedging activities, net” line item on the income statement related to the derivatives used to economically hedge these debt instruments.	
 	 	 	
 	• 	Operating expenses decreased $5 million quarter-over-quarter primarily as a result of our cost saving initiative. The first quarter of 2011 included $10 million of litigation contingency expenses, $11 million from the acceleration of stock compensation and $12 million of third-party servicing expense related to the $25 billion loan portfolio acquisition on December 31, 2010. The fourth quarter of 2010 included $11 million in transaction fees related to the acquisition of the $25 billion loan portfolio and $10 million in restructuring-related impairments.	
 	 	 	
 	• 	Restructuring expenses decreased $32 million in the first quarter of 2011 compared with the fourth quarter 2010. Restructuring expenses in the first quarter of 2011 were comprised of $4 million related to continuing operations.	
 	 	 	
 	• 	Income tax expense from continuing operations decreased $162 million for the quarter ended March 31, 2011 as compared with the prior quarter. The effective tax rates for first quarter 2011 and fourth quarter 2010 were 36 percent and 34 percent, respectively. The change in the effective tax rate for the first quarter 2011 was primarily driven by reductions to the liability for uncertain tax positions recorded in the prior quarter.	

8

 
 
Net Loss from Discontinued Operations
 
Net loss from discontinued operations in the quarter ended March 31, 2011 was $2 million compared with a net loss from discontinued operations of $52 million for the quarter ended December 31, 2010. In the fourth quarter of 2010, we began actively marketing our Purchased Paper — Non Mortgage business for sale and have concluded it is probable this business will be sold within one year at which time we would exit the business. As a result, the results of operations of this business were also required to be presented in discontinued operations beginning in the fourth quarter of 2010. In connection with this presentation, we are required to carry this business at the lower of fair value or historical cost basis. As a result, we recorded an after-tax loss of $52 million from discontinued operations in the fourth quarter of 2010, primarily due to adjusting the value of this business to its estimated fair value. Our Purchased Paper businesses are presented in discontinued operations for the current and prior periods.
 
“Core Earnings” — Definition and Limitations
 
We prepare financial statements in accordance with GAAP. However, we also evaluate our business segments on a basis that differs from GAAP. We refer to this different basis of presentation as “Core Earnings”. We provide this “Core Earnings” basis of presentation on a consolidated basis for each business segment because this is what we internally review when making management decisions regarding our performance and how we allocate resources. We also refer to this information in our presentations with credit rating agencies, lenders and investors. Because our “Core Earnings” basis of presentation corresponds to our segment financial presentations, we are required by GAAP to provide “Core Earnings” disclosure in the notes to our consolidated financial statements for our business segments.
 
“Core Earnings” are not a substitute for reported results under GAAP. We use “Core Earnings” to manage each business segment because “Core Earnings” reflect adjustments to GAAP financial results for two items, discussed below, that create significant volatility mostly due to timing factors generally beyond the control of management. Accordingly, we believe that “Core Earnings” provide management with a useful basis from which to better evaluate results from ongoing operations against the business plan or against results from prior periods. Consequently, we disclose this information as we believe it provides investors with additional information regarding the operational and performance indicators that are most closely assessed by management. The two items adjusted for in our “Core Earnings” presentations are: (1) our use of derivatives instruments to hedge our economic risks that do not qualify for hedge accounting treatment or do qualify for hedge accounting treatment but result in ineffectiveness and (2) the accounting for goodwill and acquired intangible assets.
 
While GAAP provides a uniform, comprehensive basis of accounting, for the reasons described above, our “Core Earnings” basis of presentation does not. “Core Earnings” are subject to certain general and specific limitations that investors should carefully consider. For example, there is no comprehensive, authoritative guidance for management reporting. Our “Core Earnings” are not defined terms within GAAP and may not be comparable to similarly titled measures reported by other companies. Accordingly, our “Core Earnings” presentation does not represent a comprehensive basis of accounting. Investors, therefore, may not be able to compare our performance with that of other financial services companies based upon “Core Earnings.” “Core Earnings” results are only meant to supplement GAAP results by providing additional information regarding the operational and performance indicators that are most closely used by management, our board of directors, rating agencies, lenders and investors to assess performance.
 
Specific adjustments that management makes to GAAP results to derive our “Core Earnings” basis of presentation are described in detail in the section entitled “ ‘Core Earnings’ — Definition and Limitations —  Differences between ‘Core Earnings’ and GAAP ” below.
9

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

 	 	Quarter Ended March 31, 2011	 	
 	 	FFELP
	 	 	Consumer
	 	 	Business
	 	 	 	 	 	 	 	 	Total “Core
	 	 	 	 	 	Total
	 	
(Dollars in millions)	 	Loans	 	 	Lending	 	 	Services	 	 	Other	 	 	Eliminations(1)	 	 	Earnings”	 	 	Adjustments(2)	 	 	GAAP	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Student loans	 	$	736	 	 	$	604	 	 	$	—	 	 	$	—	 	 	$	—	 	 	$	1,340	 	 	$	141	 	 	$	1,481	 	
Other loans	 	 	—	 	 	 	—	 	 	 	—	 	 	 	6	 	 	 	—	 	 	 	6	 	 	 	—	 	 	 	6	 	
Cash and investments	 	 	1	 	 	 	3	 	 	 	3	 	 	 	1	 	 	 	(3	)	 	 	5	 	 	 	—	 	 	 	5	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total interest income	 	 	737	 	 	 	607	 	 	 	3	 	 	 	7	 	 	 	(3	)	 	 	1,351	 	 	 	141	 	 	 	1,492	 	
Total interest expense	 	 	370	 	 	 	197	 	 	 	—	 	 	 	15	 	 	 	(3	)	 	 	579	 	 	 	15	 	 	 	594	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net interest income	 	 	367	 	 	 	410	 	 	 	3	 	 	 	(8	)	 	 	—	 	 	 	772	 	 	 	126	 	 	 	898	 	
Less: provisions for loan losses	 	 	23	 	 	 	275	 	 	 	—	 	 	 	5	 	 	 	—	 	 	 	303	 	 	 	—	 	 	 	303	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net interest income (loss) after provisions for loan losses	 	 	344	 	 	 	135	 	 	 	3	 	 	 	(13	)	 	 	—	 	 	 	469	 	 	 	126	 	 	 	595	 	
Servicing revenue	 	 	25	 	 	 	17	 	 	 	245	 	 	 	—	 	 	 	(189	)	 	 	98	 	 	 	—	 	 	 	98	 	
Contingency revenue	 	 	—	 	 	 	—	 	 	 	78	 	 	 	—	 	 	 	—	 	 	 	78	 	 	 	—	 	 	 	78	 	
Gains on debt repurchases	 	 	—	 	 	 	—	 	 	 	—	 	 	 	64	 	 	 	—	 	 	 	64	 	 	 	(26	)	 	 	38	 	
Other income (loss)	 	 	—	 	 	 	—	 	 	 	11	 	 	 	2	 	 	 	—	 	 	 	13	 	 	 	(233	)	 	 	(220	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total other income (loss)	 	 	25	 	 	 	17	 	 	 	334	 	 	 	66	 	 	 	(189	)	 	 	253	 	 	 	(259	)	 	 	(6	)	
Expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Direct operating expenses	 	 	195	 	 	 	82	 	 	 	128	 	 	 	8	 	 	 	(189	)	 	 	224	 	 	 	—	 	 	 	224	 	
Overhead expenses	 	 	—	 	 	 	—	 	 	 	—	 	 	 	79	 	 	 	—	 	 	 	79	 	 	 	—	 	 	 	79	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating expenses	 	 	195	 	 	 	82	 	 	 	128	 	 	 	87	 	 	 	(189	)	 	 	303	 	 	 	—	 	 	 	303	 	
Goodwill and acquired intangible assets impairment and amortization	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	6	 	 	 	6	 	
Restructuring expenses	 	 	1	 	 	 	1	 	 	 	1	 	 	 	1	 	 	 	—	 	 	 	4	 	 	 	—	 	 	 	4	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total expenses	 	 	196	 	 	 	83	 	 	 	129	 	 	 	88	 	 	 	(189	)	 	 	307	 	 	 	6	 	 	 	313	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations, before income tax expense (benefit)	 	 	173	 	 	 	69	 	 	 	208	 	 	 	(35	)	 	 	—	 	 	 	415	 	 	 	(139	)	 	 	276	 	
Income tax expense (benefit) (3)	 	 	64	 	 	 	25	 	 	 	76	 	 	 	(12	)	 	 	—	 	 	 	153	 	 	 	(54	)	 	 	99	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss) from continuing operations	 	 	109	 	 	 	44	 	 	 	132	 	 	 	(23	)	 	 	—	 	 	 	262	 	 	 	(85	)	 	 	177	 	
Loss from discontinued operations, net of taxes	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(2	)	 	 	—	 	 	 	(2	)	 	 	—	 	 	 	(2	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss)	 	$	109	 	 	$	44	 	 	$	132	 	 	$	(25	)	 	$	—	 	 	$	260	 	 	$	(85	)	 	$	175	 	

 

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

(2)	 	“Core Earnings” adjustments to GAAP:	

 	 	Quarter Ended March 31, 2011	
 	 	 	 	Net Impact of
	 	 	
 	 	Net Impact of
	 	Goodwill and
	 	 	
 	 	Derivative
	 	Acquired
	 	 	
(Dollars in millions)	 	Accounting	 	Intangibles	 	Total	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net interest income after provisions for loan losses	 	$	126	 	 	$	—	 	 	$	126	 	
Total other income (loss)	 	 	(259	)	 	 	—	 	 	 	(259	)	
Goodwill and acquired intangible assets impairment and amortization	 	 	—	 	 	 	6	 	 	 	6	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total “Core Earnings” adjustments to GAAP	 	$	(133	)	 	$	(6	)	 	 	(139	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Income tax benefit	 	 	 	 	 	 	 	 	 	 	(54	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net loss	 	 	 	 	 	 	 	 	 	$	(85	)	

 	 	 	
(3)	 	Income taxes are based on a percentage of net income before tax for the individual reportable segment.	
 
10

 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Quarter Ended December 31, 2010	 	
 	 	FFELP
	 	 	Consumer
	 	 	Business
	 	 	 	 	 	 	 	 	Total “Core
	 	 	 	 	 	Total
	 	
(Dollars in millions)	 	Loans	 	 	Lending	 	 	Services	 	 	Other	 	 	Eliminations(1)	 	 	Earnings”	 	 	Adjustments(2)	 	 	GAAP	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Student loans	 	$	631	 	 	$	602	 	 	$	—	 	 	$	—	 	 	$	—	 	 	$	1,233	 	 	$	146	 	 	$	1,379	 	
Other loans	 	 	—	 	 	 	—	 	 	 	—	 	 	 	6	 	 	 	—	 	 	 	6	 	 	 	—	 	 	 	6	 	
Cash and investments	 	 	3	 	 	 	3	 	 	 	4	 	 	 	1	 	 	 	(4	)	 	 	7	 	 	 	1	 	 	 	8	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total interest income	 	 	634	 	 	 	605	 	 	 	4	 	 	 	7	 	 	 	(4	)	 	 	1,246	 	 	 	147	 	 	 	1,393	 	
Total interest expense	 	 	303	 	 	 	196	 	 	 	—	 	 	 	12	 	 	 	(4	)	 	 	507	 	 	 	29	 	 	 	536	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net interest income	 	 	331	 	 	 	409	 	 	 	4	 	 	 	(5	)	 	 	—	 	 	 	739	 	 	 	118	 	 	 	857	 	
Less: provisions for loan losses	 	 	22	 	 	 	294	 	 	 	—	 	 	 	4	 	 	 	—	 	 	 	320	 	 	 	—	 	 	 	320	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net interest income (loss) after provisions for loan losses	 	 	309	 	 	 	115	 	 	 	4	 	 	 	(9	)	 	 	—	 	 	 	419	 	 	 	118	 	 	 	537	 	
Servicing revenue	 	 	15	 	 	 	15	 	 	 	216	 	 	 	—	 	 	 	(155	)	 	 	91	 	 	 	—	 	 	 	91	 	
Contingency revenue	 	 	—	 	 	 	—	 	 	 	78	 	 	 	—	 	 	 	—	 	 	 	78	 	 	 	—	 	 	 	78	 	
Gains on debt repurchases	 	 	—	 	 	 	—	 	 	 	—	 	 	 	118	 	 	 	—	 	 	 	118	 	 	 	—	 	 	 	118	 	
Other income (loss)	 	 	318	 	 	 	—	 	 	 	14	 	 	 	(2	)	 	 	—	 	 	 	330	 	 	 	(43	)	 	 	287	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total other income	 	 	333	 	 	 	15	 	 	 	308	 	 	 	116	 	 	 	(155	)	 	 	617	 	 	 	(43	)	 	 	574	 	
Expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Direct operating expenses	 	 	180	 	 	 	85	 	 	 	127	 	 	 	4	 	 	 	(155	)	 	 	241	 	 	 	—	 	 	 	241	 	
Overhead expenses	 	 	—	 	 	 	—	 	 	 	—	 	 	 	67	 	 	 	—	 	 	 	67	 	 	 	—	 	 	 	67	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating expenses	 	 	180	 	 	 	85	 	 	 	127	 	 	 	71	 	 	 	(155	)	 	 	308	 	 	 	—	 	 	 	308	 	
Goodwill and acquired intangible assets impairment and amortization	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	10	 	 	 	10	 	
Restructuring expenses	 	 	12	 	 	 	7	 	 	 	2	 	 	 	12	 	 	 	—	 	 	 	33	 	 	 	—	 	 	 	33	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total expenses	 	 	192	 	 	 	92	 	 	 	129	 	 	 	83	 	 	 	(155	)	 	 	341	 	 	 	10	 	 	 	351	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income from continuing operations, before income tax expense	 	 	450	 	 	 	38	 	 	 	183	 	 	 	24	 	 	 	—	 	 	 	695	 	 	 	65	 	 	 	760	 	
Income tax expense(3)	 	 	161	 	 	 	14	 	 	 	65	 	 	 	2	 	 	 	—	 	 	 	242	 	 	 	19	 	 	 	261	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income from continuing operations	 	 	289	 	 	 	24	 	 	 	118	 	 	 	22	 	 	 	—	 	 	 	453	 	 	 	46	 	 	 	499	 	
Loss from discontinued operations, net of taxes	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(52	)	 	 	—	 	 	 	(52	)	 	 	—	 	 	 	(52	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss)	 	$	289	 	 	$	24	 	 	$	118	 	 	$	(30	)	 	$	—	 	 	$	401	 	 	$	46	 	 	$	447	 	

 
 	 	 	
(1)	 	The eliminations in servicing revenue and direct operating expense represent the elimination of intercompany servicing revenue where the Business Services segment performs the loan servicing function for the FFELP Loans segment.	
 	 	 	
(2)	 	“Core Earnings” adjustments to GAAP:	

 	 	Quarter Ended December 31, 2010	 	
 	 	 	 	 	Net Impact of
	 	 	 	 	
 	 	Net Impact of
	 	 	Goodwill and
	 	 	 	 	
 	 	Derivative
	 	 	Acquired
	 	 	 	 	
(Dollars in millions)	 	Accounting	 	 	Intangibles	 	 	Total	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net interest income after provisions for loan losses	 	$	118	 	 	$	—	 	 	$	118	 	
Total other income (loss)	 	 	(43	)	 	 	—	 	 	 	(43	)	
Goodwill and acquired intangible assets impairment and amortization	 	 	—	 	 	 	10	 	 	 	10	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total “Core Earnings” adjustments to GAAP	 	$	75	 	 	$	(10	)	 	 	65	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Income tax expense	 	 	 	 	 	 	 	 	 	 	19	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	 	 	 	 	 	 	 	 	$	46	 	

 	 	 	
(3)	 	Income taxes are based on a percentage of net income before tax for the individual reportable segment.	
 
11

 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Quarter Ended March 31, 2010	 	
 	 	FFELP
	 	 	Consumer
	 	 	Business
	 	 	 	 	 	 	 	 	Total “Core
	 	 	 	 	 	Total
	 	
(Dollars in millions)	 	Loans	 	 	Lending	 	 	Services	 	 	Other	 	 	Eliminations(1)	 	 	Earnings”	 	 	Adjustments(2)	 	 	GAAP	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Student loans	 	$	643	 	 	$	565	 	 	$	—	 	 	$	—	 	 	$	—	 	 	$	1,208	 	 	$	164	 	 	$	1,372	 	
Other loans	 	 	—	 	 	 	—	 	 	 	—	 	 	 	9	 	 	 	—	 	 	 	9	 	 	 	—	 	 	 	9	 	
Cash and investments	 	 	2	 	 	 	3	 	 	 	5	 	 	 	—	 	 	 	(5	)	 	 	5	 	 	 	—	 	 	 	5	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total interest income	 	 	645	 	 	 	568	 	 	 	5	 	 	 	9	 	 	 	(5	)	 	 	1,222	 	 	 	164	 	 	 	1,386	 	
Total interest expense	 	 	336	 	 	 	173	 	 	 	—	 	 	 	11	 	 	 	(5	)	 	 	515	 	 	 	17	 	 	 	532	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net interest income (loss)	 	 	309	 	 	 	395	 	 	 	5	 	 	 	(2	)	 	 	—	 	 	 	707	 	 	 	147	 	 	 	854	 	
Less: provisions for loan losses	 	 	23	 	 	 	325	 	 	 	—	 	 	 	11	 	 	 	—	 	 	 	359	 	 	 	—	 	 	 	359	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net interest income (loss) after provisions for loan losses	 	 	286	 	 	 	70	 	 	 	5	 	 	 	(13	)	 	 	—	 	 	 	348	 	 	 	147	 	 	 	495	 	
Servicing revenue	 	 	21	 	 	 	19	 	 	 	245	 	 	 	1	 	 	 	(164	)	 	 	122	 	 	 	—	 	 	 	122	 	
Contingency revenue	 	 	—	 	 	 	—	 	 	 	80	 	 	 	—	 	 	 	—	 	 	 	80	 	 	 	—	 	 	 	80	 	
Gains on debt repurchases	 	 	—	 	 	 	—	 	 	 	—	 	 	 	90	 	 	 	—	 	 	 	90	 	 	 	—	 	 	 	90	 	
Other income	 	 	—	 	 	 	—	 	 	 	11	 	 	 	10	 	 	 	—	 	 	 	21	 	 	 	(80	)	 	 	(59	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total other income	 	 	21	 	 	 	19	 	 	 	336	 	 	 	101	 	 	 	(164	)	 	 	313	 	 	 	(80	)	 	 	233	 	
Expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Direct operating expenses	 	 	188	 	 	 	80	 	 	 	118	 	 	 	2	 	 	 	(164	)	 	 	224	 	 	 	—	 	 	 	224	 	
Overhead expenses	 	 	—	 	 	 	—	 	 	 	—	 	 	 	63	 	 	 	—	 	 	 	63	 	 	 	—	 	 	 	63	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating expenses	 	 	188	 	 	 	80	 	 	 	118	 	 	 	65	 	 	 	(164	)	 	 	287	 	 	 	—	 	 	 	287	 	
Goodwill and acquired intangible assets impairment and amortization	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	10	 	 	 	10	 	
Restructuring expenses	 	 	19	 	 	 	2	 	 	 	3	 	 	 	1	 	 	 	—	 	 	 	25	 	 	 	—	 	 	 	25	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total expenses	 	 	207	 	 	 	82	 	 	 	121	 	 	 	66	 	 	 	(164	)	 	 	312	 	 	 	10	 	 	 	322	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income from continuing operations, before income tax expense	 	 	100	 	 	 	7	 	 	 	220	 	 	 	22	 	 	 	—	 	 	 	349	 	 	 	57	 	 	 	406	 	
Income tax expense(3)	 	 	36	 	 	 	2	 	 	 	79	 	 	 	10	 	 	 	—	 	 	 	127	 	 	 	32	 	 	 	159	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income from continuing operations	 	 	64	 	 	 	5	 	 	 	141	 	 	 	12	 	 	 	—	 	 	 	222	 	 	 	25	 	 	 	247	 	
Loss from discontinued operations, net of taxes	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(7	)	 	 	—	 	 	 	(7	)	 	 	—	 	 	 	(7	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	$	64	 	 	$	5	 	 	$	141	 	 	$	5	 	 	$	—	 	 	$	215	 	 	$	25	 	 	$	240	 	

 
 	 	 	
(1)	 	The eliminations in servicing revenue and direct operating expense represent the elimination of intercompany servicing revenue where the Business Services segment performs the loan servicing function for the FFELP Loans segment.	
 	 	 	
(2)	 	“Core Earnings” adjustments to GAAP:	

 	 	Quarter Ended March 31, 2010	 	
 	 	 	 	 	Net Impact of
	 	 	 	 	
 	 	Net Impact of
	 	 	Goodwill and
	 	 	 	 	
 	 	Derivative
	 	 	Acquired
	 	 	 	 	
(Dollars in millions)	 	Accounting	 	 	Intangibles	 	 	Total	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net interest income after provisions for loan losses	 	$	147	 	 	$	—	 	 	$	147	 	
Total other income (loss)	 	 	(80	)	 	 	—	 	 	 	(80	)	
Goodwill and acquired intangible assets impairment and amortization	 	 	—	 	 	 	10	 	 	 	10	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total “Core Earnings” adjustments to GAAP	 	$	67	 	 	$	(10	)	 	 	57	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Income tax expense	 	 	 	 	 	 	 	 	 	 	32	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	 	 	 	 	 	 	 	 	$	25	 	

 	 	 	
(3)	 	Income taxes are based on a percentage of net income before tax for the individual reportable segment.	
12

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

 	 	Quarters Ended	 	
 	 	March 31,
	 	 	December 31,
	 	 	March 31,
	 	
(Dollars in millions)	 	2011	 	 	2010	 	 	2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings”	 	$	260	 	 	$	401	 	 	$	215	 	
“Core Earnings” adjustments:	 	 	 	 	 	 	 	 	 	 	 	 	
Net impact of derivative accounting	 	 	(133	)	 	 	75	 	 	 	67	 	
Net impact of goodwill and acquired intangibles	 	 	(6	)	 	 	(10	)	 	 	(10	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total “Core Earnings” adjustments before income tax effect	 	 	(139	)	 	 	65	 	 	 	57	 	
Net income tax effect	 	 	54	 	 	 	(19	)	 	 	(32	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total “Core Earnings” adjustments	 	 	(85	)	 	 	46	 	 	 	25	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP net income	 	$	175	 	 	$	447	 	 	$	240	 	

 	 	 	
 	1) 	Derivative Accounting: “Core Earnings” exclude periodic unrealized gains and losses that are caused primarily by the mark-to-market valuations on derivatives that do not qualify for hedge accounting treatment under GAAP. To a lesser extent, these periodic unrealized gains and losses are also a result of ineffectiveness recognized related to effective hedges. These unrealized gains and losses occur in our FFELP Loans, Consumer Lending and Other business segments. Under GAAP, for derivatives that are held to maturity, the cumulative net unrealized gain or loss at the time of maturity will equal $0 except for Floor Income Contracts where the cumulative unrealized gain will equal the amount for which we sold the contract. In our “Core Earnings” presentation, we recognize the economic effect of these hedges, which generally results in any net settlement cash paid or received being recognized ratably as an interest expense or revenue over the hedged item’s life.	
 
The table below quantifies the adjustments for derivative accounting on our net income for the quarters ended March 31, 2011, December 31, 2010 and March 31, 2010 when compared with the accounting principles employed in all years prior to the adoption of ASC 815 related to accounting for derivative financial instruments.

 	 	Quarters Ended	 	
 	 	March 31,
	 	 	December 31,
	 	 	March 31,
	 	
(Dollars in millions)	 	2011	 	 	2010	 	 	2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings” derivative adjustments:	 	 	 	 	 	 	 	 	 	 	 	 	
Gains (losses) on derivative and hedging activities, net, included in other income (1)	 	$	(242	)	 	$	(29	)	 	$	(82	)	
Plus: Realized losses on derivative and hedging activities, net (1)	 	 	186	 	 	 	202	 	 	 	204	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Unrealized gains (losses) on derivative and hedging activities, net	 	 	(56	)	 	 	173	 	 	 	122	 	
Amortization of net premiums on Floor Income contracts in net interest income	 	 	(85	)	 	 	(86	)	 	 	(53	)	
Other derivative accounting adjustments to reflect economic impact	 	 	8	 	 	 	(12	)	 	 	(2	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total net impact derivative accounting(2)	 	$	(133	)	 	$	75	 	 	$	67	 	

 
 	 	 	
(1)	 	See “Reclassification of Realized Gains (Losses) on Derivative and Hedging Activities” below for a detailed breakdown of the components of realized losses on derivative and hedging activities.	
 	 	 	
(2)	 	Negative amounts are subtracted from “Core Earnings” net income to arrive at GAAP net income and positive amounts are added to “Core Earnings” net income to arrive at GAAP net income.	
 
Reclassification of Realized Gains (Losses) on Derivative and Hedging Activities
 
The derivative accounting requires net settlement income/expense on derivatives and realized gains/losses related to derivative dispositions (collectively referred to as “realized (gains) losses on derivative and hedging activities”) that do not qualify as hedges to be recorded in a separate income statement
13

 
line item below net interest income. The table below summarizes the realized losses on derivative and hedging activities and the associated reclassification on a “Core Earnings” basis for the quarters ended March 31, 2011, December 31, 2010 and March 31, 2010.

 	 	Quarters Ended	 	
 	 	March 31,
	 	 	December 31,
	 	 	March 31,
	 	
(Dollars in millions)	 	2011	 	 	2010	 	 	2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Reclassification of realized gains (losses) on derivative and hedging activities:	 	 	 	 	 	 	 	 	 	 	 	 	
Net settlement expense on Floor Income Contracts reclassified to net interest income	 	$	(226	)	 	$	(233	)	 	$	(210	)	
Net settlement income on interest rate swaps reclassified to net interest income	 	 	16	 	 	 	28	 	 	 	6	 	
Foreign exchange derivatives losses reclassified to other income	 	 	(1	)	 	 	—	 	 	 	—	 	
Net realized gains (losses) on terminated derivative contracts reclassified to other income	 	 	25	 	 	 	3	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total reclassifications of realized losses on derivative and hedging activities	 	 	(186	)	 	 	(202	)	 	 	(204	)	
Add: Unrealized gains (losses) on derivative and hedging activities, net (1)	 	 	(56	)	 	 	173	 	 	 	122	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Losses on derivative and hedging activities, net	 	$	(242	)	 	$	(29	)	 	$	(82	)	

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

 	 	Quarters Ended	 	
 	 	March 31,
	 	 	December 31,
	 	 	March 31,
	 	
(Dollars in millions)	 	2011	 	 	2010	 	 	2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Floor Income Contracts	 	$	151	 	 	$	267	 	 	$	19	 	
Basis swaps	 	 	(6	)	 	 	(23	)	 	 	63	 	
Foreign currency hedges	 	 	(194	)	 	 	(54	)	 	 	8	 	
Other	 	 	(7	)	 	 	(17	)	 	 	32	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total unrealized gains (losses) on derivative and hedging activities, net	 	$	(56	)	 	$	173	 	 	$	122	 	

 	 	 	
 	2) 	Goodwill and Acquired Intangibles: Our “Core Earnings” exclude goodwill and intangible impairment and the amortization of acquired intangibles. The following table summarizes the acquired intangible adjustments for the quarters ended March 31, 2011, December 31, 2010 and March 31, 2010.	

 	 	Quarters Ended	 	
 	 	March 31,
	 	 	December 31,
	 	 	March 31,
	 	
(Dollars in millions)	 	2011	 	 	2010	 	 	2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings” goodwill and acquired intangibles adjustments (1) :	 	 	 	 	 	 	 	 	 	 	 	 	
Amortization of acquired intangibles from continuing operations	 	$	(6	)	 	$	(10	)	 	$	(10	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total “Core Earnings” goodwill and acquired intangibles adjustments	 	$	(6	)	 	$	(10	)	 	$	(10	)	

 
 	 	 	
(1)	 	Negative amounts are subtracted from “Core Earnings” net income to arrive at GAAP net income.	

14

 
Segment Earnings Summary — “Core Earnings” Basis
 
FFELP Loans Segment
 
The following table includes “Core Earnings” results for our FFELP Loans segment.

 	 	Quarters Ended	 	 	% Increase (Decrease)	 	
 	 	March 31,
	 	 	December 31,
	 	 	March 31,
	 	 	March 31, 2011 vs.
	 	 	March 31, 2011 vs.
	 	
(Dollars in millions)	 	2011	 	 	2010	 	 	2010	 	 	Dec. 31, 2010	 	 	March 31, 2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings” interest income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
FFELP Loans	 	$	736	 	 	$	631	 	 	$	643	 	 	 	17	%	 	 	14	%	
Cash and investments	 	 	1	 	 	 	3	 	 	 	2	 	 	 	(67	)	 	 	(50	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total “Core Earnings” interest income	 	 	737	 	 	 	634	 	 	 	645	 	 	 	16	 	 	 	14	 	
Total “Core Earnings” interest expense	 	 	370	 	 	 	303	 	 	 	336	 	 	 	22	 	 	 	10	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net “Core Earnings” interest income	 	 	367	 	 	 	331	 	 	 	309	 	 	 	11	 	 	 	19	 	
Less: provisions for loan losses	 	 	23	 	 	 	22	 	 	 	23	 	 	 	5	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net “Core Earnings” interest income after provisions for loan losses	 	 	344	 	 	 	309	 	 	 	286	 	 	 	11	 	 	 	20	 	
Servicing revenue	 	 	25	 	 	 	15	 	 	 	21	 	 	 	67	 	 	 	19	 	
Other income	 	 	—	 	 	 	318	 	 	 	—	 	 	 	(100	)	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total other income	 	 	25	 	 	 	333	 	 	 	21	 	 	 	(92	)	 	 	19	 	
Direct operating expenses	 	 	195	 	 	 	180	 	 	 	188	 	 	 	8	 	 	 	4	 	
Restructuring expenses	 	 	1	 	 	 	12	 	 	 	19	 	 	 	(92	)	 	 	(95	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total expenses	 	 	196	 	 	 	192	 	 	 	207	 	 	 	2	 	 	 	(5	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income from continuing operations, before income tax expense	 	 	173	 	 	 	450	 	 	 	100	 	 	 	(62	)	 	 	73	 	
Income tax expense	 	 	64	 	 	 	161	 	 	 	36	 	 	 	(60	)	 	 	78	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings”	 	$	109	 	 	$	289	 	 	$	64	 	 	 	(62	)%	 	 	70	%	

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

 	 	Quarters Ended	 	
 	 	March 31,
	 	 	December 31,
	 	 	March 31,
	 	
 	 	2011	 	 	2010	 	 	2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings” basis FFELP student loan yield	 	 	2.63	%	 	 	2.61	%	 	 	2.50	%	
Hedged Floor Income	 	 	.23	 	 	 	.27	 	 	 	.18	 	
Unhedged Floor Income	 	 	.08	 	 	 	.02	 	 	 	.01	 	
Consolidation Loan Rebate Fees	 	 	(.66	)	 	 	(.64	)	 	 	(.60	)	
Repayment Borrower Benefits	 	 	(.10	)	 	 	(.11	)	 	 	(.09	)	
Premium amortization	 	 	(.15	)	 	 	(.19	)	 	 	(.20	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings” basis FFELP student loan net yield	 	 	2.03	 	 	 	1.96	 	 	 	1.80	 	
“Core Earnings” basis FFELP student loan cost of funds	 	 	(.96	)	 	 	(.86	)	 	 	(.89	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings” basis FFELP student loan spread	 	 	1.07	 	 	 	1.10	 	 	 	.91	 	
“Core Earnings” basis FFELP other asset spread impact	 	 	(.09	)	 	 	(.11	)	 	 	(.08	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings” basis FFELP Loans net interest margin (1)	 	 	.98	%	 	 	.99	%	 	 	.83	%	

 	
 	
“Core Earnings” basis FFELP Loans net interest margin (1)	 	 	.98	%	 	 	.99	%	 	 	.83	%	
Adjustment for GAAP accounting treatment	 	 	.35	 	 	 	.34	 	 	 	.41	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP-basis FFELP Loans net interest margin	 	 	1.33	%	 	 	1.33	%	 	 	1.24	%	

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

(Dollars in millions)	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
FFELP Loans	 	$	147,381	 	 	$	127,522	 	 	$	144,854	 	
Other interest-earning assets	 	 	5,016	 	 	 	5,420	 	 	 	5,661	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total FFELP “Core Earnings” basis interest-earning assets	 	$	152,397	 	 	$	132,942	 	 	$	150,515	 	

15

 
The “Core Earnings” basis FFELP Loans net interest margin for the quarter ended March 31, 2011 decreased by 1 basis point from the prior quarter. This was primarily the result of higher cost of funds primarily caused by our issuance of $2 billion of unsecured debt in the first quarter of 2011 which offset a higher margin earned on the acquisition of $25 billion in securitized FFELP loans on December 31, 2010. The “Core Earnings” basis FFELP Loans net interest margin for the quarter ended March 31, 2011 increased by 15 basis points from the year-ago quarter. This was primarily the result of the replacement of the $20 billion lower margin loans sold to ED in third quarter 2010 by the $25 billion in higher margin loans acquired on December 31, 2010 and an increase in Floor Income. These increases were partially offset by a higher cost of funds in the current quarter as higher cost debt has been issued in the past year compared to the historical funding portfolio.
 
As of March 31, 2011, our FFELP Loan portfolio totaled approximately $145.6 billion, comprised of $54.4 billion of FFELP Stafford and $91.2 billion of FFELP Consolidation Loans. The weighted average life of these portfolios is 4.9 years and 9.4 years, respectively, assuming a CPR of 6 percent and 3 percent, respectively.
 
FFELP Provisions for Loan Losses and Loan Charge-Offs
 
The following tables summarize the FFELP provisions for loan losses and FFELP loan charge-offs for the quarters ended March 31, 2011, December 31, 2010 and March 31, 2010.

 	 	Quarters Ended	 	
 	 	March 31,
	 	 	December 31,
	 	 	March 31,
	 	
(Dollars in millions)	 	2011	 	 	2010	 	 	2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
FFELP Loan provisions for loan losses	 	$	23	 	 	$	22	 	 	$	23	 	
FFELP Loan charge-offs	 	$	20	 	 	$	21	 	 	$	21	 	
 
Servicing Revenue and Other Income — FFELP Loans Segment
 
The following table summarizes the components of “Core Earnings” other income for our FFELP Loans segment for the quarters ended March 31, 2011, December 31, 2010 and March 31, 2010.

 	 	Quarters Ended	 	
 	 	March 31,
	 	 	December 31,
	 	 	March 31,
	 	
(Dollars in millions)	 	2011	 	 	2010	 	 	2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Servicing revenue	 	$	25	 	 	$	15	 	 	$	21	 	
Gains (losses) on sales of loans and securities, net	 	 	—	 	 	 	318	 	 	 	(2	)	
Other	 	 	—	 	 	 	—	 	 	 	2	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total other income, net	 	$	25	 	 	$	333	 	 	$	21	 	

Servicing revenue for our FFELP Loans segment primarily consists of late fees.
 
The gain on sale of loans and securities primarily relates to gains on sales of loans to ED as part of the Purchase Program. In the fourth quarter of 2010 we sold $20.4 billion face amount of FFELP Loans to ED which resulted in a $321 million gain. These gains will not occur in the future as FFELP originations and the Purchase Program ended in 2010.
 
Operating Expenses — FFELP Loans Segment
 
Operating expenses for our FFELP Loans segment primarily include the contractual rates we are paid to service loans in term asset-backed securitization trusts or a similar rate if a loan is not in a term financing facility (which is presented as an intercompany charge from the Business Services segment who services the loans), the fees we pay for third party loan servicing and costs incurred to acquire loans. For the quarters ended March 31, 2011, December 31, 2010 and March 31, 2010, operating expenses for our FFELP Loans segment totaled $195 million, $180 million and $188 million, respectively. The increase in operating expenses in the first quarter of 2011 compared with the prior quarter and year-ago quarter was primarily the increase in servicing costs related to the $25 billion loan portfolio acquisition on December 31, 2010. The intercompany
16

 
servicing revenue charged from the Business Services segment and included in those amounts was $189 million, $155 million and $164 million for the quarters ended March 31, 2011, December 31, 2010 and March 31, 2010, respectively. Operating expenses, excluding restructuring-related asset impairments, were 54 basis points, 54 basis points and 52 basis points of average FFELP Loans in the quarters ended March 31, 2011, December 31, 2010 and March 31, 2010, respectively.
 
Consumer Lending Segment
 
The following table includes “Core Earnings” results for our Consumer Lending segment.

 	 	Quarters Ended	 	 	% Increase (Decrease)	 	
 	 	March 31,
	 	 	December 31,
	 	 	March 31,
	 	 	March 31, 2011 vs.
	 	 	March 31, 2011 vs.
	 	
(Dollars in millions)	 	2011	 	 	2010	 	 	2010	 	 	Dec. 31, 2010	 	 	March 31, 2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings” interest income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Private Education Loans	 	$	604	 	 	$	602	 	 	$	565	 	 	 	—	%	 	 	7	%	
Cash and investments	 	 	3	 	 	 	3	 	 	 	3	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total “Core Earnings” interest income	 	 	607	 	 	 	605	 	 	 	568	 	 	 	—	 	 	 	7	 	
Total “Core Earnings” interest expense	 	 	197	 	 	 	196	 	 	 	173	 	 	 	1	 	 	 	14	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net “Core Earnings” interest income	 	 	410	 	 	 	409	 	 	 	395	 	 	 	—	 	 	 	4	 	
Less: provisions for loan losses	 	 	275	 	 	 	294	 	 	 	325	 	 	 	(6	)	 	 	(15	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net “Core Earnings” interest income after provisions for loan losses	 	 	135	 	 	 	115	 	 	 	70	 	 	 	17	 	 	 	93	 	
Servicing revenue	 	 	17	 	 	 	15	 	 	 	19	 	 	 	13	 	 	 	(11	)	
Direct operating expenses	 	 	82	 	 	 	85	 	 	 	80	 	 	 	(4	)	 	 	3	 	
Restructuring expenses	 	 	1	 	 	 	7	 	 	 	2	 	 	 	(86	)	 	 	(50	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total expenses	 	 	83	 	 	 	92	 	 	 	82	 	 	 	(10	)	 	 	1	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income before income tax expense	 	 	69	 	 	 	38	 	 	 	7	 	 	 	82	 	 	 	886	 	
Income tax expense	 	 	25	 	 	 	14	 	 	 	2	 	 	 	79	 	 	 	1,150	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings”	 	$	44	 	 	$	24	 	 	$	5	 	 	 	83	%	 	 	780	%	

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

 	 	Quarters Ended December 31,	 	
 	 	March 31,
	 	 	December 31,
	 	 	March 31,
	 	
 	 	2011	 	 	2010	 	 	2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings” basis Private Education Student Loan yield	 	 	6.36	%	 	 	6.29	%	 	 	5.99	%	
Discount amortization	 	 	.26	 	 	 	.22	 	 	 	.26	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings” basis Private Education Loan net yield	 	 	6.62	 	 	 	6.51	 	 	 	6.25	 	
“Core Earnings” basis Private Education Loan cost of funds	 	 	(1.97	)	 	 	(1.83	)	 	 	(1.69	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings” basis Private Education Loan spread	 	 	4.65	 	 	 	4.68	 	 	 	4.56	 	
“Core Earnings” basis other asset spread impact	 	 	(.54	)	 	 	(.76	)	 	 	(.72	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings” basis Consumer Lending net interest margin (1)	 	 	4.11	%	 	 	3.92	%	 	 	3.84	%	

 	
 	
“Core Earnings” basis Consumer Lending net interest margin (1)	 	 	4.11	%	 	 	3.92	%	 	 	3.84	%	
Adjustment for GAAP accounting treatment	 	 	(.04	)	 	 	.03	 	 	 	(.01	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP-basis Consumer Lending net interest margin(1)	 	 	4.07	%	 	 	3.95	%	 	 	3.83	%	

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

(Dollars in millions)	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Private Education Loans	 	$	37,006	 	 	$	36,674	 	 	$	36,679	 	
Other interest-earning assets	 	 	3,360	 	 	 	4,699	 	 	 	5,071	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Consumer Lending “Core Earnings” basis interest-earning assets	 	$	40,366	 	 	$	41,373	 	 	$	41,750	 	

17

 
The Consumer Lending net interest margin for the quarter ended March 31, 2011 increased 19 basis points from the prior quarter and 27 basis points from the year-ago quarter. The Private Education Loan spread remained relatively unchanged. The size of the Other asset portfolio (which is primarily securitization trust restricted cash and cash held at our bank) has decreased significantly since the first quarter 2010. This Other asset portfolio earns a negative yield and as a result, when its relative weighting decreases compared to the Private Education Loan portfolio, the overall net interest margin increases. This is the primary driver of the increase in the net interest margin compared to prior periods.
 
Private Education Loans Provisions for Loan Losses and Loan Charge-Offs
 
The following tables summarize the total Private Education Loans provisions for loan losses and charge-offs for the quarters ended March 31, 2011, December 31, 2010 and March 31, 2010.

 	 	Quarters Ended	
 	 	March 31,
	 	December 31,
	 	March 31,
	
(Dollars in millions)	 	2011	 	2010	 	2010	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Private Education Loans provision for loan losses	 	$	275	 	 	$	294	 	 	$	325	 	
Private Education Loans charge-offs	 	$	273	 	 	$	322	 	 	$	284	 	
 
The first-quarter 2011 provision expense and charge-offs are down from the prior quarter and year-ago quarter as the portfolio’s credit performance continued to improve since the weakening in the U.S. economy that began in 2008, with the expected future performance continuing to improve as well. The Private Education Loan portfolio experienced a significant increase in delinquencies through the first quarter of 2010 (delinquencies as a percentage of loans in repayment were 12.2 percent at March 31, 2010); since then delinquencies as a percentage of loans in repayment have declined to 10.4 percent at March 31, 2011. Private Education Loans in forbearance as a percentage of loans in repayment and forbearance remained unchanged from the prior quarter at 4.6 percent and decreased from 5.1 percent at March 31, 2010. Charge-offs as a percentage of loans in repayment have declined significantly from 4.7 percent in the first quarter 2010 to 3.9 percent in the first quarter of 2011. The Private Education Loan allowance coverage of annual charge-offs ratio was 1.8 at March 31, 2011 compared with 1.6 at December 31, 2010, and 1.7 at March 31, 2010. The allowance for loan losses as a percentage of ending Private Education Loans in repayment decreased from 8.2 percent at March 31, 2010 to 7.2 percent at March 31, 2011. We analyzed changes in the key ratios when determining the appropriate Private Education Loan allowance for loan losses.
 
Servicing Revenue and Other Income — Consumer Lending Segment
 
Servicing revenue for our Consumer Lending segment primarily includes late fees and forbearance fees. For the quarters ended March 31, 2011, December 31, 2010 and March 31, 2010, servicing revenue for our Consumer Lending segment totaled $17 million, $15 million and $19 million, respectively.
 
Operating Expenses — Consumer Lending Segment
 
Operating expenses for our Consumer Lending segment include costs incurred to originate Private Education Loans and to service and collect on our Private Education Loan portfolio. For the quarters ended March 31, 2011, December 31, 2010, and March 31, 2010, operating expenses for our Consumer Lending segment totaled $82 million, $85 million and $80 million, respectively. Operating expenses declined in the first quarter of 2011 compared with the prior quarter primarily as a result of our cost cutting initiatives. Operating expenses, excluding restructuring-related asset impairments, were 90 basis points, 92 basis points, and 88 basis points, respectively, of average Private Education Loans in the first quarter of 2011, the fourth quarter of 2010 and the first quarter of 2010, respectively.
18

 
Business Services Segment
 
The following tables include “Core Earnings” results for our Business Services segment.

 	 	Quarters Ended	 	 	% Increase (Decrease)	 	
 	 	March 31,
	 	 	December 31,
	 	 	March 31,
	 	 	March 31, 2011 vs.
	 	 	March 31, 2011 vs.
	 	
(Dollars in millions)	 	2011	 	 	2010	 	 	2010	 	 	Dec. 31, 2010	 	 	March 31, 2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net interest income after provision	 	$	3	 	 	$	4	 	 	$	5	 	 	 	(25	)%	 	 	(40	)%	
Servicing revenue:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Intercompany loan servicing	 	 	189	 	 	 	155	 	 	 	164	 	 	 	22	 	 	 	15	 	
Third-party loan servicing	 	 	22	 	 	 	22	 	 	 	19	 	 	 	—	 	 	 	16	 	
Account asset servicing	 	 	19	 	 	 	16	 	 	 	17	 	 	 	19	 	 	 	12	 	
Campus Payment Solutions	 	 	6	 	 	 	8	 	 	 	8	 	 	 	(25	)	 	 	(25	)	
Guarantor servicing	 	 	9	 	 	 	15	 	 	 	37	 	 	 	(40	)	 	 	(76	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total servicing revenue	 	 	245	 	 	 	216	 	 	 	245	 	 	 	13	 	 	 	—	 	
Contingency revenue	 	 	78	 	 	 	78	 	 	 	80	 	 	 	—	 	 	 	(3	)	
Transaction fees	 	 	11	 	 	 	14	 	 	 	11	 	 	 	(21	)	 	 	—	 	
Other	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total other income	 	 	334	 	 	 	308	 	 	 	336	 	 	 	8	 	 	 	(1	)	
Direct operating expenses	 	 	128	 	 	 	127	 	 	 	118	 	 	 	1	 	 	 	8	 	
Restructuring expenses	 	 	1	 	 	 	2	 	 	 	3	 	 	 	(50	)	 	 	(67	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total expenses	 	 	129	 	 	 	129	 	 	 	121	 	 	 	—	 	 	 	7	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income from continuing operations, before income tax expense	 	 	208	 	 	 	183	 	 	 	220	 	 	 	14	 	 	 	(5	)	
Income tax expense	 	 	76	 	 	 	65	 	 	 	79	 	 	 	17	 	 	 	(4	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings”	 	$	132	 	 	$	118	 	 	$	141	 	 	 	12	%	 	 	(6	)%	

Our Business Services segment earns intercompany loan servicing fees from servicing the FFELP Loans in our FFELP Loans segment. The average balance of this portfolio was $144 billion, $119 billion and $129 billion for the quarters ended March 31, 2011, December 31, 2010 and March 31, 2010, respectively. The increase in Intercompany loan servicing revenue from the prior and year-ago quarters is primarily the result of the acquisition of the $25 billion FFELP Loan portfolio on December 31, 2010 which was partially offset by the amortization of the underlying portfolio as well as the FFELP Loans sold to ED as part of the Participation Program in 2010.
 
We are servicing approximately 3.2 million accounts under the ED Servicing Contract as of March 31, 2011. Loan servicing fees in the first quarter of 2011, the fourth quarter of 2010 and first quarter of 2010 included $15 million, $16 million and $9 million, respectively, of servicing revenue related to the loans we are servicing under the ED Servicing Contract.
 
Account asset servicing revenue represents fees earned on program management, transfer and servicing agent services and administration services for our various 529 college-savings plans.
 
Campus Payment Solutions revenue is earned from our Campus Payment Solutions business whose services include comprehensive financing and transaction processing solutions that we provide to college financial aid offices and students to streamline the financial aid process.
 
The decrease in Guarantor servicing revenue compared with the year-ago period was primarily due to HCERA being effective as of July 1, 2010 and our no longer earning Guarantor issuance fees and the lower balance of outstanding FFELP Loans on which we earn other fees.
19

 
The following table presents the outstanding inventory of contingent collections receivables that our Business Services segment will collect on behalf of others.

 	 	March 31,
	 	 	December 31,
	 	 	March 31,
	 	
(Dollars in millions)	 	2011	 	 	2010	 	 	2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Contingency:	 	 	 	 	 	 	 	 	 	 	 	 	
Student loans	 	$	10,393	 	 	$	10,362	 	 	$	9,846	 	
Other	 	 	1,883	 	 	 	1,730	 	 	 	1,573	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	12,276	 	 	$	12,092	 	 	$	11,419	 	

Transaction fees are earned in conjunction with our rewards program from participating companies based on member purchase activity, either online or in stores, depending on the contractual arrangement with the participating company. Typically, a percentage of the purchase price of the consumer members’ eligible purchases with participating companies is set aside in an account maintained by us on behalf of our members.
 
Revenues related to services performed on FFELP Loans accounted for 77 percent, 75 percent and 79 percent, respectively, of total segment revenues for the quarters ended March 31, 2011, December 31, 2010 and March 31, 2010.
 
Operating Expenses — Business Services Segment
 
For the quarters ended March 31, 2011, December 31, 2010 and March 31, 2010, operating expenses for the Business Services segment totaled $128 million, $127 million and $118 million, respectively. Operating expenses increased from the prior periods primarily as a result of the increase in servicing costs associated with the loan portfolio acquisition on December 31, 2010.
 
Other Segment
 
The following table includes “Core Earnings” results of our Other segment

 	 	Quarters Ended	 	 	% Increase (Decrease)	 	
 	 	March 31,
	 	 	December 31,
	 	 	March 31,
	 	 	March 31, 2011 vs.
	 	 	March 31, 2011 vs.
	 	
(Dollars in millions)	 	2011	 	 	2010	 	 	2010	 	 	Dec. 31, 2010	 	 	March 31, 2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net interest loss after provision	 	$	(13	)	 	$	(9	)	 	$	(13	)	 	 	44	%	 	 	—	%	
Gains on debt repurchases	 	 	64	 	 	 	118	 	 	 	90	 	 	 	(46	)	 	 	(29	)	
Other	 	 	2	 	 	 	(2	)	 	 	11	 	 	 	200	 	 	 	(82	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total income	 	 	66	 	 	 	116	 	 	 	101	 	 	 	(43	)	 	 	(35	)	
Direct operating expenses	 	 	8	 	 	 	4	 	 	 	2	 	 	 	100	 	 	 	300	 	
Overhead expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Corporate overhead	 	 	49	 	 	 	34	 	 	 	32	 	 	 	44	 	 	 	53	 	
Unallocated information technology costs	 	 	30	 	 	 	33	 	 	 	31	 	 	 	(9	)	 	 	(3	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total overhead expenses	 	 	79	 	 	 	67	 	 	 	63	 	 	 	18	 	 	 	25	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating expenses	 	 	87	 	 	 	71	 	 	 	65	 	 	 	23	 	 	 	34	 	
Restructuring expenses	 	 	1	 	 	 	12	 	 	 	1	 	 	 	(92	)	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total expenses	 	 	88	 	 	 	83	 	 	 	66	 	 	 	6	 	 	 	33	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations, before income tax expense	 	 	(35	)	 	 	24	 	 	 	22	 	 	 	(246	)	 	 	(259	)	
Income tax expense (benefit)	 	 	(12	)	 	 	2	 	 	 	10	 	 	 	(700	)	 	 	(220	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss) from continuing operations	 	 	(23	)	 	 	22	 	 	 	12	 	 	 	(205	)	 	 	(292	)	
Loss from discontinued operations, net of tax	 	 	(2	)	 	 	(52	)	 	 	(7	)	 	 	(96	)	 	 	71	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings” net loss	 	$	(25	)	 	$	(30	)	 	$	5	 	 	 	(17	)%	 	 	(600	)%	

20

 
Purchased Paper Business
 
Our Purchased Paper businesses are presented in discontinued operations for the current and prior periods. (See “Consolidated Earnings Summary — GAAP-basis” for further discussion.)
 
The following table summarizes the carrying value of the Purchased Paper — Non-Mortgage portfolio:

 	 	March 31,
	 	 	December 31,
	 	 	March 31,
	 	
(Dollars in millions)	 	2011	 	 	2010	 	 	2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Carrying value of purchased paper	 	$	67	 	 	$	95	 	 	$	245	 	
 
Gains on Debt Repurchases
 
We began repurchasing our outstanding debt in the second quarter of 2008. We repurchased $825 million, $1.3 billion and $1.3 billion face amount of our senior unsecured notes for the quarters ended March 31, 2011, December 31, 2010 and March 31, 2010, respectively. Since the second quarter of 2008, we repurchased $11.1 billion face amount of our senior unsecured notes in the aggregate, with maturity dates ranging from 2008 to 2016.
 
Overhead
 
Corporate overhead is comprised of costs related to executive management, the board of directors, accounting, finance, legal, human resources and stock option expense. Unallocated information technology costs are related to infrastructure and operations.
 
For the quarters ended March 31, 2011, December 31, 2010 and March 31, 2010, operating expenses for the Other segment totaled $87 million, $71 million and $65 million, respectively. The increase in corporate overhead expenses in the first quarter of 2011 compared with the prior quarter and the prior year quarter is primarily the result of a change in the terms of our stock compensation plans. In the first quarter, we changed our stock compensation plans so that retirement eligible employees would not forfeit unvested stock compensation upon their retirement. This change had the effect of accelerating the future stock compensation expenses associated with these unvested stock grants into the current period for those employees that are retirement eligible.
 
Financial Condition
 
This section provides additional information regarding the changes related to our loan portfolio assets and related liabilities as well as credit performance indicators related to our Consumer Lending portfolio.
21

 
Summary of our Student Loan Portfolio
 
Ending Student Loan Balances, net

 	 	March 31, 2011	 	
 	 	FFELP
	 	 	FFELP
	 	 	 	 	 	Private
	 	 	 	 	
 	 	Stafford and
	 	 	Consolidation
	 	 	Total
	 	 	Education
	 	 	 	 	
(Dollars in millions)	 	Other	 	 	Loans	 	 	FFELP	 	 	Loans	 	 	Total	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total student loan portfolio:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
In-school	 	$	6,073	 	 	$	—	 	 	$	6,073	 	 	$	3,412	 	 	$	9,485	 	
Grace and repayment	 	 	47,477	 	 	 	90,366	 	 	 	137,843	 	 	 	34,374	 	 	 	172,217	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total, gross	 	 	53,550	 	 	 	90,366	 	 	 	143,916	 	 	 	37,786	 	 	 	181,702	 	
Unamortized premium/(discount)	 	 	937	 	 	 	895	 	 	 	1,832	 	 	 	(876	)	 	 	956	 	
Receivable for partially charged-off loans	 	 	—	 	 	 	—	 	 	 	—	 	 	 	1,090	 	 	 	1,090	 	
Allowance for losses	 	 	(121	)	 	 	(69	)	 	 	(190	)	 	 	(2,034	)	 	 	(2,224	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total student loan portfolio	 	$	54,366	 	 	$	91,192	 	 	$	145,558	 	 	$	35,966	 	 	$	181,524	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
% of total FFELP	 	 	37	%	 	 	63	%	 	 	100	%	 	 	 	 	 	 	 	 	
% of total	 	 	30	%	 	 	50	%	 	 	80	%	 	 	20	%	 	 	100	%	

 	 	December 31, 2010	 	
 	 	FFELP
	 	 	FFELP
	 	 	 	 	 	Private
	 	 	 	 	
 	 	Stafford and
	 	 	Consolidation
	 	 	Total
	 	 	Education
	 	 	 	 	
(Dollars in millions)	 	Other	 	 	Loans	 	 	FFELP	 	 	Loans	 	 	Total	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total student loan portfolio:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
In-school	 	$	6,333	 	 	$	—	 	 	$	6,333	 	 	$	3,752	 	 	$	10,085	 	
Grace and repayment	 	 	49,068	 	 	 	91,537	 	 	 	140,605	 	 	 	33,780	 	 	 	174,385	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total, gross	 	 	55,401	 	 	 	91,537	 	 	 	146,938	 	 	 	37,532	 	 	 	184,470	 	
Unamortized premium/(discount)	 	 	971	 	 	 	929	 	 	 	1,900	 	 	 	(894	)	 	 	1,006	 	
Receivable for partially charged-off loans	 	 	—	 	 	 	—	 	 	 	—	 	 	 	1,039	 	 	 	1,039	 	
Allowance for losses	 	 	(120	)	 	 	(69	)	 	 	(189	)	 	 	(2,021	)	 	 	(2,210	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total student loan portfolio	 	$	56,252	 	 	$	92,397	 	 	$	148,649	 	 	$	35,656	 	 	$	184,305	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
% of total FFELP	 	 	38	%	 	 	62	%	 	 	100	%	 	 	 	 	 	 	 	 	
% of total	 	 	31	%	 	 	50	%	 	 	81	%	 	 	19	%	 	 	100	%	

 	 	March 31, 2010	 	
 	 	FFELP
	 	 	FFELP
	 	 	 	 	 	Private
	 	 	 	 	
 	 	Stafford and
	 	 	Consolidation
	 	 	Total
	 	 	Education
	 	 	 	 	
(Dollars in millions)	 	Other	 	 	Loans	 	 	FFELP	 	 	Loans	 	 	Total	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total student loan portfolio:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
In-school	 	$	20,018	 	 	$	—	 	 	$	20,018	 	 	$	6,387	 	 	$	26,405	 	
Grace and repayment	 	 	43,279	 	 	 	80,617	 	 	 	123,896	 	 	 	31,109	 	 	 	155,005	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total, gross	 	 	63,297	 	 	 	80,617	 	 	 	143,914	 	 	 	37,496	 	 	 	181,410	 	
Unamortized premium/(discount)	 	 	1,168	 	 	 	1,628	 	 	 	2,796	 	 	 	(912	)	 	 	1,884	 	
Receivable for partially charged-off loans	 	 	—	 	 	 	—	 	 	 	—	 	 	 	797	 	 	 	797	 	
Allowance for losses	 	 	(119	)	 	 	(67	)	 	 	(186	)	 	 	(2,019	)	 	 	(2,205	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total student loan portfolio	 	$	64,346	 	 	$	82,178	 	 	$	146,524	 	 	$	35,362	 	 	$	181,886	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
% of total FFELP	 	 	44	%	 	 	56	%	 	 	100	%	 	 	 	 	 	 	 	 	
% of total	 	 	35	%	 	 	46	%	 	 	81	%	 	 	19	%	 	 	100	%	

22

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

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

 	 	Quarter Ended December 31, 2010	
 	 	FFELP
	 	FFELP
	 	 	 	Private
	 	 	
 	 	Stafford and
	 	Consolidation
	 	 	 	Education
	 	 	
(Dollars in millions)	 	Other	 	Loans	 	Total FFELP	 	Loans	 	Total	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	48,302	 	 	$	79,220	 	 	$	127,522	 	 	$	36,674	 	 	$	164,196	 	
% FFELP	 	 	38	%	 	 	62	%	 	 	100	%	 	 	 	 	 	 	 	 	
% of total	 	 	29	%	 	 	49	%	 	 	78	%	 	 	22	%	 	 	100	%	

 	 	Quarter Ended March 31, 2010	
 	 	FFELP
	 	FFELP
	 	 	 	Private
	 	 	
 	 	Stafford and
	 	Consolidation
	 	 	 	Education
	 	 	
(Dollars in millions)	 	Other	 	Loans	 	Total FFELP	 	Loans	 	Total	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	62,167	 	 	$	82,687	 	 	$	144,854	 	 	$	36,679	 	 	$	181,533	 	
% of FFELP	 	 	43	%	 	 	57	%	 	 	100	%	 	 	 	 	 	 	 	 	
% of total	 	 	34	%	 	 	46	%	 	 	80	%	 	 	20	%	 	 	100	%	
 
Student Loan Activity

 	 	Total Portfolio
	 	
 	 	Three Months Ended March 31, 2011	 	
 	 	FFELP
	 	 	FFELP
	 	 	 	 	 	Total Private
	 	 	 	 	
 	 	Stafford and
	 	 	Consolidation
	 	 	Total
	 	 	Education
	 	 	Total
	 	
(Dollars in millions)	 	Other	 	 	Loans	 	 	FFELP	 	 	Loans	 	 	Portfolio	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Beginning balance	 	$	56,252	 	 	$	92,397	 	 	$	148,649	 	 	$	35,656	 	 	$	184,305	 	
Consolidations to third parties	 	 	(615	)	 	 	(225	)	 	 	(840	)	 	 	(17	)	 	 	(857	)	
Acquisitions and originations	 	 	103	 	 	 	247	 	 	 	350	 	 	 	929	 	 	 	1,279	 	
Capitalized interest and premium/discount amortization	 	 	322	 	 	 	371	 	 	 	693	 	 	 	295	 	 	 	988	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net acquisitions and originations	 	 	(190	)	 	 	393	 	 	 	203	 	 	 	1,207	 	 	 	1,410	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Sales	 	 	(189	)	 	 	—	 	 	 	(189	)	 	 	—	 	 	 	(189	)	
Repayments/defaults/other	 	 	(1,507	)	 	 	(1,598	)	 	 	(3,105	)	 	 	(897	)	 	 	(4,002	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ending balance	 	$	54,366	 	 	$	91,192	 	 	$	145,558	 	 	$	35,966	 	 	$	181,524	 	

23

 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Total Portfolio
	 	
 	 	Three Months Ended December 31, 2010	 	
 	 	FFELP
	 	 	FFELP
	 	 	 	 	 	Total Private
	 	 	 	 	
 	 	Stafford and
	 	 	Consolidation
	 	 	Total
	 	 	Education
	 	 	Total
	 	
(Dollars in millions)	 	Other	 	 	Loans	 	 	FFELP	 	 	Loans	 	 	Portfolio	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Beginning balance	 	$	66,681	 	 	$	79,912	 	 	$	146,593	 	 	$	35,542	 	 	$	182,135	 	
Consolidations to third parties	 	 	(547	)	 	 	(202	)	 	 	(749	)	 	 	(13	)	 	 	(762	)	
Acquisitions and originations	 	 	159	 	 	 	—	 	 	 	159	 	 	 	417	 	 	 	576	 	
Loan acquisition on December 31, 2010	 	 	11,237	 	 	 	13,652	 	 	 	24,889	 	 	 	—	 	 	 	24,889	 	
Capitalized interest and premium/discount amortization	 	 	439	 	 	 	311	 	 	 	750	 	 	 	518	 	 	 	1,268	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net acquisitions and originations	 	 	11,288	 	 	 	13,761	 	 	 	25,049	 	 	 	922	 	 	 	25,971	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Sales	 	 	(20,671	)	 	 	—	 	 	 	(20,671	)	 	 	—	 	 	 	(20,671	)	
Repayments/defaults/other	 	 	(1,046	)	 	 	(1,276	)	 	 	(2,322	)	 	 	(808	)	 	 	(3,130	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ending balance	 	$	56,252	 	 	$	92,397	 	 	$	148,649	 	 	$	35,656	 	 	$	184,305	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Total Portfolio
	 	
 	 	Three Months Ended March 31, 2010	 	
 	 	FFELP
	 	 	FFELP
	 	 	 	 	 	Total Private
	 	 	 	 	
 	 	Stafford and
	 	 	Consolidation
	 	 	Total
	 	 	Education
	 	 	Total
	 	
(Dollars in millions)	 	Other	 	 	Loans	 	 	FFELP	 	 	Loans	 	 	Portfolio	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Beginning balance — GAAP-basis	 	$	52,675	 	 	$	68,379	 	 	$	121,054	 	 	$	22,753	 	 	$	143,807	 	
Consolidation of off-balance sheet loans (1)	 	 	5,500	 	 	 	14,797	 	 	 	20,297	 	 	 	12,341	 	 	 	32,638	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Beginning balance — total portfolio	 	 	58,175	 	 	 	83,176	 	 	 	141,351	 	 	 	35,094	 	 	 	176,445	 	
Consolidations to third parties	 	 	(467	)	 	 	(167	)	 	 	(634	)	 	 	(12	)	 	 	(646	)	
Acquisitions and originations	 	 	8,197	 	 	 	—	 	 	 	8,197	 	 	 	810	 	 	 	9,007	 	
Capitalized interest and premium/discount amortization	 	 	262	 	 	 	335	 	 	 	597	 	 	 	312	 	 	 	909	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net acquisitions and originations	 	 	7,992	 	 	 	168	 	 	 	8,160	 	 	 	1,110	 	 	 	9,270	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Sales	 	 	(76	)	 	 	—	 	 	 	(76	)	 	 	—	 	 	 	(76	)	
Repayments/defaults/other	 	 	(1,745	)	 	 	(1,166	)	 	 	(2,911	)	 	 	(842	)	 	 	(3,753	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ending balance	 	$	64,346	 	 	$	82,178	 	 	$	146,524	 	 	$	35,362	 	 	$	181,886	 	

 
 	 	 	
(1)	 	On January 1, 2010, upon the adoption of the new consolidation accounting guidance, all off-balance sheet loans are included in the GAAP-basis.	
 
Private Education Loan Originations
 
Total Private Education Loan originations increased 12 percent from the year-ago quarter to $940 million in the quarter ended March 31, 2011.
 
The following table summarizes our Private Education Loan originations.

 	 	Quarters Ended	 	
 	 	March 31,
	 	 	December 31,
	 	 	March 31,
	 	
(Dollars in millions)	 	2011	 	 	2010	 	 	2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Private Education Loan originations	 	$	940	 	 	$	413	 	 	$	840	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
24

 
Consumer Lending Portfolio Performance
 
Private Education Loan Delinquencies and Forbearance

 	 	Private Education Loan Delinquencies	 	
 	 	March 31,
	 	 	December 31,
	 	 	March 31,
	 	
 	 	2011	 	 	2010	 	 	2010	 	
(Dollars in millions)	 	Balance	 	 	%	 	 	Balance	 	 	%	 	 	Balance	 	 	%	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loans in-school/grace/deferment(1)	 	$	8,323	 	 	 	 	 	 	$	8,340	 	 	 	 	 	 	$	11,452	 	 	 	 	 	
Loans in forbearance(2)	 	 	1,343	 	 	 	 	 	 	 	1,340	 	 	 	 	 	 	 	1,338	 	 	 	 	 	
Loans in repayment and percentage of each status:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loans current	 	 	25,195	 	 	 	89.6	%	 	 	24,888	 	 	 	89.4	%	 	 	21,699	 	 	 	87.9	%	
Loans delinquent 31-60 days(3)	 	 	930	 	 	 	3.3	 	 	 	1,011	 	 	 	3.6	 	 	 	842	 	 	 	3.4	 	
Loans delinquent 61-90 days(3)	 	 	564	 	 	 	2.0	 	 	 	471	 	 	 	1.7	 	 	 	576	 	 	 	2.3	 	
Loans delinquent greater than 90 days (3)	 	 	1,431	 	 	 	5.1	 	 	 	1,482	 	 	 	5.3	 	 	 	1,589	 	 	 	6.4	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Private Education Loans in repayment	 	 	28,120	 	 	 	100.0	%	 	 	27,852	 	 	 	100.0	%	 	 	24,706	 	 	 	100.0	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Private Education Loans, gross	 	 	37,786	 	 	 	 	 	 	 	37,532	 	 	 	 	 	 	 	37,496	 	 	 	 	 	
Private Education Loan unamortized discount	 	 	(876	)	 	 	 	 	 	 	(894	)	 	 	 	 	 	 	(912	)	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Private Education Loans	 	 	36,910	 	 	 	 	 	 	 	36,638	 	 	 	 	 	 	 	36,584	 	 	 	 	 	
Private Education Loan receivable for partially charged-off loans	 	 	1,090	 	 	 	 	 	 	 	1,039	 	 	 	 	 	 	 	797	 	 	 	 	 	
Private Education Loan allowance for losses	 	 	(2,034	)	 	 	 	 	 	 	(2,021	)	 	 	 	 	 	 	(2,019	)	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Private Education Loans, net	 	$	35,966	 	 	 	 	 	 	$	35,656	 	 	 	 	 	 	$	35,362	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Percentage of Private Education Loans in repayment	 	 	 	 	 	 	74.4	%	 	 	 	 	 	 	74.2	%	 	 	 	 	 	 	65.9	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Delinquencies as a percentage of Private Education Loans in repayment	 	 	 	 	 	 	10.4	%	 	 	 	 	 	 	10.6	%	 	 	 	 	 	 	12.2	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loans in forbearance as a percentage of loans in repayment and forbearance	 	 	 	 	 	 	4.6	%	 	 	 	 	 	 	4.6	%	 	 	 	 	 	 	5.1	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loans in repayment greater than 12 months as a percentage of loans in repayment (4)	 	 	 	 	 	 	69.3	%	 	 	 	 	 	 	67.3	%	 	 	 	 	 	 	61.5	%	

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

25

 
 
Allowance for Private Education Loan Losses
 
The following tables summarize changes in the allowance for Private Education Loan losses for the quarters ended March 31, 2011, December 31, 2010 and March 31, 2010.

 	 	Quarters Ended	 	
 	 	Mar. 31,
	 	 	Dec. 31,
	 	 	Mar. 31,
	 	
(Dollars in millions)	 	2011	 	 	2010	 	 	2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Allowance at beginning of period — GAAP Basis	 	$	2,021	 	 	$	2,035	 	 	$	1,443	 	
Consolidation of off-balance sheet loans(1)	 	 	—	 	 	 	—	 	 	 	524	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Allowance at beginning of period — total portfolio	 	 	2,021	 	 	 	2,035	 	 	 	1,967	 	
Provision for Private Education Loan losses	 	 	275	 	 	 	294	 	 	 	325	 	
Charge-offs	 	 	(273	)	 	 	(322	)	 	 	(284	)	
Reclassification of interest reserve	 	 	11	 	 	 	14	 	 	 	11	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Allowance at end of period	 	$	2,034	 	 	$	2,021	 	 	$	2,019	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Charge-offs as a percentage of average loans in repayment (annualized)	 	 	3.9	%	 	 	4.8	%	 	 	4.7	%	
Charge-offs as a percentage of average loans in repayment and forbearance (annualized)	 	 	3.8	%	 	 	4.5	%	 	 	4.4	%	
Allowance as a percentage of the ending total loan balance	 	 	5.2	%	 	 	5.2	%	 	 	5.3	%	
Allowance as a percentage of ending loans in repayment	 	 	7.2	%	 	 	7.3	%	 	 	8.2	%	
Average coverage of charge-offs (annualized)	 	 	1.8	 	 	 	1.6	 	 	 	1.7	 	
Ending total loans(2)	 	$	38,877	 	 	$	38,572	 	 	$	38,293	 	
Average loans in repayment	 	$	28,127	 	 	$	26,916	 	 	$	24,646	 	
Ending loans in repayment	 	$	28,120	 	 	$	27,852	 	 	$	24,706	 	

 	 	 	
(1)	 	On January 1, 2010, upon the adoption of the new consolidation accounting guidance, all off-balance sheet loans are included in the GAAP-basis.	
 	 	 	
(2)	 	Ending total loans represents gross Private Education Loans, plus the receivable for partially charged-off loans.	

26

 
 
The following table provides detail for the traditional and non-traditional Private Education Loans at March 31, 2011, December 31, 2010 and March 31, 2010.

 	 	March 31, 2011	 	December 31, 2010	 	March 31, 2010	
 	 	 	 	Non-
	 	 	 	 	 	Non-
	 	 	 	 	 	Non-
	 	 	
 	 	Traditional	 	Traditional	 	Total	 	Traditional	 	Traditional	 	Total	 	Traditional	 	Traditional	 	Total	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ending total loans (1)	 	$	34,563	 	 	$	4,313	 	 	$	38,876	 	 	$	34,177	 	 	$	4,395	 	 	$	38,572	 	 	$	33,630	 	 	$	4,663	 	 	$	38,293	 	
Ending loans in repayment	 	 	25,401	 	 	 	2,719	 	 	 	28,120	 	 	 	25,044	 	 	 	2,808	 	 	 	27,852	 	 	 	21,883	 	 	 	2,823	 	 	 	24,706	 	
Private Education Loan allowance for losses	 	 	1,298	 	 	 	736	 	 	 	2,034	 	 	 	1,231	 	 	 	790	 	 	 	2,021	 	 	 	1,125	 	 	 	894	 	 	 	2,019	 	
Charge-offs as a percentage of average loans in repayment (annualized)	 	 	2.9	%	 	 	13.4	%	 	 	3.9	%	 	 	3.6	%	 	 	14.9	%	 	 	4.8	%	 	 	3.2	%	 	 	15.9	%	 	 	4.7	%	
Allowance as a percentage of total ending loan balance	 	 	3.8	%	 	 	17.1	%	 	 	5.2	%	 	 	3.6	%	 	 	18.0	%	 	 	5.2	%	 	 	3.3	%	 	 	19.2	%	 	 	5.3	%	
Allowance as a percentage of ending loans in repayment	 	 	5.1	%	 	 	27.1	%	 	 	7.2	%	 	 	4.9	%	 	 	28.2	%	 	 	7.3	%	 	 	5.1	%	 	 	31.7	%	 	 	8.2	%	
Average coverage of charge-offs (annualized)	 	 	1.8	 	 	 	2.0	 	 	 	1.8	 	 	 	1.4	 	 	 	1.9	 	 	 	1.6	 	 	 	1.6	 	 	 	2.0	 	 	 	1.7	 	
Delinquencies as a percentage of Private Education Loans in repayment	 	 	8.7	%	 	 	26.4	%	 	 	10.4	%	 	 	8.8	%	 	 	27.4	%	 	 	10.6	%	 	 	9.8	%	 	 	30.5	%	 	 	12.2	%	
Delinquencies greater than 90 days as a percentage of Private Education Loans in repayment	 	 	4.1	%	 	 	14.4	%	 	 	5.1	%	 	 	4.2	%	 	 	15.0	%	 	 	5.3	%	 	 	4.9	%	 	 	18.1	%	 	 	6.4	%	
Loans in forbearance as a percentage of loans in repayment and forbearance	 	 	4.4	%	 	 	6.5	%	 	 	4.6	%	 	 	4.4	%	 	 	6.1	%	 	 	4.6	%	 	 	4.9	%	 	 	7.0	%	 	 	5.1	%	
Loans that entered repayment during the period (2)	 	$	1,519	 	 	$	86	 	 	$	1,605	 	 	$	2,510	 	 	$	187	 	 	$	2,697	 	 	$	1,531	 	 	$	130	 	 	$	1,661	 	
Percentage of Private Education Loans with a cosigner	 	 	64	%	 	 	29	%	 	 	60	%	 	 	63	%	 	 	28	%	 	 	59	%	 	 	62	%	 	 	28	%	 	 	58	%	
Average FICO at origination	 	 	725	 	 	 	623	 	 	 	716	 	 	 	725	 	 	 	623	 	 	 	715	 	 	 	725	 	 	 	623	 	 	 	714	 	

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

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

27

 
 
The table below shows the composition and status of the Private Education Loan portfolio aged by number of months in active repayment status (months for which a scheduled monthly payment was due). As indicated in the table, the percentage of loans in forbearance status decreases the longer the loans have been in active repayment status. At March 31, 2011, loans in forbearance status as a percentage of loans in repayment and forbearance were 6.3 percent for loans that have been in active repayment status for less than 25 months. The percentage drops to 1.9 percent for loans that have been in active repayment status for more than 48 months. Approximately 77 percent of our “Core Earnings” basis Private Education Loans in forbearance status has been in active repayment status less than 25 months.

(Dollars in millions)
	 	Monthly Scheduled Payments Due	 	 	Not Yet in
	 	 	 	 	
March 31, 2011	 	1 to 12	 	 	13 to 24	 	 	25 to 36	 	 	37 to 48	 	 	More than 48	 	 	Repayment	 	 	Total	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loans in-school/grace/deferment	 	$	—	 	 	$	—	 	 	$	—	 	 	$	—	 	 	$	—	 	 	$	8,323	 	 	$	8,323	 	
Loans in forbearance	 	 	815	 	 	 	220	 	 	 	138	 	 	 	74	 	 	 	96	 	 	 	—	 	 	 	1,343	 	
Loans in repayment — current	 	 	7,271	 	 	 	5,960	 	 	 	4,256	 	 	 	2,942	 	 	 	4,766	 	 	 	—	 	 	 	25,195	 	
Loans in repayment — delinquent 31-60 days	 	 	413	 	 	 	225	 	 	 	132	 	 	 	67	 	 	 	93	 	 	 	—	 	 	 	930	 	
Loans in repayment — delinquent 61-90 days	 	 	290	 	 	 	134	 	 	 	64	 	 	 	33	 	 	 	43	 	 	 	—	 	 	 	564	 	
Loans in repayment — delinquent greater than 90 days	 	 	664	 	 	 	395	 	 	 	175	 	 	 	84	 	 	 	113	 	 	 	—	 	 	 	1,431	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	9,453	 	 	$	6,934	 	 	$	4,765	 	 	$	3,200	 	 	$	5,111	 	 	$	8,323	 	 	 	37,786	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unamortized discount	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(876	)	
Receivable for partially charged-off loans	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,090	 	
Allowance for loan losses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(2,034	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Private Education Loans, net	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	35,966	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loans in forbearance as a percentage of loans in repayment and forbearance	 	 	8.6	%	 	 	3.2	%	 	 	2.9	%	 	 	2.3	%	 	 	1.9	%	 	 	—	%	 	 	4.6	%	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Dollars in millions)
	 	Monthly Scheduled Payments Due	 	 	Not Yet in
	 	 	 	 	
December 31, 2010	 	1 to 12	 	 	13 to 24	 	 	25 to 36	 	 	37 to 48	 	 	More than 48	 	 	Repayment	 	 	Total	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loans in-school/grace/deferment	 	$	—	 	 	$	—	 	 	$	—	 	 	$	—	 	 	$	—	 	 	$	8,340	 	 	$	8,340	 	
Loans in forbearance	 	 	845	 	 	 	211	 	 	 	127	 	 	 	70	 	 	 	87	 	 	 	—	 	 	 	1,340	 	
Loans in repayment — current	 	 	7,716	 	 	 	5,976	 	 	 	4,181	 	 	 	2,764	 	 	 	4,251	 	 	 	—	 	 	 	24,888	 	
Loans in repayment — delinquent 31-60 days	 	 	476	 	 	 	247	 	 	 	127	 	 	 	68	 	 	 	93	 	 	 	—	 	 	 	1,011	 	
Loans in repayment — delinquent 61-90 days	 	 	232	 	 	 	106	 	 	 	60	 	 	 	31	 	 	 	42	 	 	 	—	 	 	 	471	 	
Loans in repayment — delinquent greater than 90 days	 	 	694	 	 	 	411	 	 	 	180	 	 	 	86	 	 	 	111	 	 	 	—	 	 	 	1,482	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	9,963	 	 	$	6,951	 	 	$	4,675	 	 	$	3,019	 	 	$	4,584	 	 	$	8,340	 	 	 	37,532	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unamortized discount	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(894	)	
Receivable for partially charged-off loans	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,039	 	
Allowance for loan losses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(2,021	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Private Education Loans, net	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	35,656	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loans in forbearance as a percentage of loans in repayment and forbearance	 	 	8.5	%	 	 	3.0	%	 	 	2.7	%	 	 	2.3	%	 	 	1.9	%	 	 	—	%	 	 	4.6	%	

28

 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Dollars in millions)
	 	Monthly Scheduled Payments Due	 	 	Not Yet in
	 	 	 	 	
March 31, 2010	 	1 to 12	 	 	13 to 24	 	 	25 to 36	 	 	37 to 48	 	 	More than 48	 	 	Repayment	 	 	Total	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loans in-school/grace/deferment	 	$	—	 	 	$	—	 	 	$	—	 	 	$	—	 	 	$	—	 	 	$	11,452	 	 	$	11,452	 	
Loans in forbearance	 	 	945	 	 	 	187	 	 	 	94	 	 	 	49	 	 	 	63	 	 	 	—	 	 	 	1,338	 	
Loans in repayment — current	 	 	7,781	 	 	 	4,974	 	 	 	3,435	 	 	 	2,201	 	 	 	3,308	 	 	 	—	 	 	 	21,699	 	
Loans in repayment — delinquent 31-60 days	 	 	469	 	 	 	176	 	 	 	86	 	 	 	46	 	 	 	65	 	 	 	—	 	 	 	842	 	
Loans in repayment — delinquent 61-90 days	 	 	353	 	 	 	113	 	 	 	50	 	 	 	26	 	 	 	34	 	 	 	—	 	 	 	576	 	
Loans in repayment — delinquent greater than 90 days	 	 	908	 	 	 	388	 	 	 	137	 	 	 	65	 	 	 	91	 	 	 	—	 	 	 	1,589	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	10,456	 	 	$	5,838	 	 	$	3,802	 	 	$	2,387	 	 	$	3,561	 	 	$	11,452	 	 	 	37,496	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unamortized discount	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(912	)	
Receivable for partially charged-off loans	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	797	 	
Allowance for loan losses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(2,019	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Private Education Loans, net	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	35,362	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loans in forbearance as a percentage of loans in repayment and forbearance	 	 	9.0	%	 	 	3.2	%	 	 	2.5	%	 	 	2.1	%	 	 	1.8	%	 	 	—	%	 	 	5.1	%	

As we have obtained further experience about the effectiveness of forbearance, we have reduced the amount of time a loan will spend in forbearance, thereby increasing our ongoing contact with the borrower to encourage consistent repayment behavior once the loan is returned to a current repayment status. As a result, the balance of loans in a forbearance status as of month-end has decreased since 2008. In addition, the monthly average number of loans granted forbearance as a percentage of loans in repayment and forbearance remained relatively flat at 5.4 percent in the first quarter of 2011 compared with the year-ago quarter of 5.3 percent. As of March 31, 2011, 2.6 percent of loans in current status were delinquent as of the end of the prior month, but were granted a forbearance that made them current as of March 31, 2011 (borrowers made payments on approximately 24 percent of these loans immediately prior to being granted forbearance).
 
Receivable for Partially Charged-Off Private Education Loans
 
At the end of each month, for loans that are 212 days past due, we charge off the estimated loss of a defaulted loan balance. Actual recoveries are applied against the remaining loan balance that was not charged off. We refer to this remaining loan balance as the “receivable for partially charged-off loans.” If actual periodic recoveries are less than expected, the difference is charged off and immediately included in provision expense.
 
The following tables summarize the activity in the receivable for partially charged-off loans for the quarters ended March 31, 2011, December 31, 2010 and March 31, 2010.

 	 	Quarters Ended	 	
 	 	March 31,
	 	 	Dec. 31,
	 	 	March 31,
	 	
(Dollars in millions)	 	2011	 	 	2010	 	 	2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Receivable at beginning of period — GAAP basis	 	$	1,039	 	 	$	979	 	 	$	499	 	
Consolidation of off-balance sheet trusts(1)	 	 	—	 	 	 	—	 	 	 	229	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Receivable at beginning of period	 	 	1,039	 	 	 	979	 	 	 	728	 	
Expected future recoveries of current period defaults(2)	 	 	91	 	 	 	86	 	 	 	94	 	
Recoveries	 	 	(40	)	 	 	(26	)	 	 	(25	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Receivable at end of period	 	$	1,090	 	 	$	1,039	 	 	$	797	 	

 
 	 	 	
(1)	 	Upon the adoption of the new consolidation accounting guidance on January 1, 2010, we consolidated all of our off-balance sheet securitization trusts.	
 	 	 	
(2)	 	Net of any current period recoveries that were less than expected.	
29

 
 
Funding, Liquidity and Capital
 
The following table details our main sources of primary liquidity and the available capacity at March 31, 2011, December 31, 2010 and March 31, 2010.

 	 	March 31, 2011
	 	 	December 31, 2010
	 	 	March 31, 2010
	 	
(Dollars in millions)	 	Available Capacity	 	 	Available Capacity	 	 	Available Capacity	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Sources of primary liquidity for general corporate purposes:	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Unrestricted cash and liquid investments:	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	3,872	 	 	$	4,342	 	 	$	6,841	 	
Commercial paper and asset-backed commercial paper	 	 	—	 	 	 	—	 	 	 	650	 	
Other	 	 	79	 	 	 	85	 	 	 	98	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total unrestricted cash and liquid investments (1)(2)(3)	 	 	3,951	 	 	 	4,427	 	 	 	7,589	 	
Unused commercial paper and bank lines of credit (4)	 	 	—	 	 	 	—	 	 	 	3,485	 	
Available borrowings to the extent collateral exists:	 	 	 	 	 	 	 	 	 	 	 	 	
FFELP ABCP facilities(5)	 	 	2,336	 	 	 	3,937	 	 	 	1,431	 	
FHLB-DM facility(5)	 	 	9,350	 	 	 	8,664	 	 	 	11,036	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total sources of primary liquidity for general corporate purposes (6)	 	$	15,637	 	 	$	17,028	 	 	$	23,541	 	

 
 	 	 	
(1)	 	At March 31, 2011, December 31, 2010 and March 31, 2010, excludes $812 million, $872 million and $653 million, respectively, of non-liquid investments, classified as investments on our balance sheet in accordance with GAAP.	
 	 	 	
(2)	 	At March 31, 2011, December 31, 2010 and March 31, 2010, includes $724 million, $684 million and $553 million, respectively, of cash collateral pledged by derivative counterparties and held in our unrestricted cash.	
 	 	 	
(3)	 	At March 31, 2011, December 31, 2010 and March 31, 2010, includes $1.1 billion, $2.0 billion and $3.0 billion, respectively, of cash and liquid investments at the Bank. This cash will be used primarily to originate or acquire student loans.	
 	 	 	
(4)	 	On November 24, 2010, our remaining bank line of credit was retired.	
 	 	 	
(5)	 	Borrowing capacity is subject to availability of collateral. As of March 31, 2011, December 31, 2010 and March 31, 2010, we had $2.4 billion, $1.5 billion and $2.6 billion, respectively, of outstanding unencumbered FFELP Loans, net, available for use in either the FFELP ABCP facilities or FHLB-DM facility.	
 	 	 	
(6)	 	General corporate purposes primarily include originating Private Education Loans and repaying unsecured debt as it matures.	
 
In addition to the assets listed in the table above, we hold a number of other unencumbered assets, consisting primarily of Private Education Loans and other assets. At March 31, 2011, we had a total of $24.1 billion of unencumbered assets, excluding goodwill and acquired intangibles. Total student loans, net, comprised $14.3 billion of this unencumbered asset total of which $11.9 billion relates to Private Education Loans, net.
30

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

 	 	March 31,
	 	 	December 31,
	 	 	March 31,
	 	
(Dollars in billions)	 	2011	 	 	2010	 	 	2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net assets of consolidated variable interest entities (encumbered assets)	 	$	12.6	 	 	$	13.1	 	 	$	13.7	 	
Tangible unencumbered assets(1)	 	 	24.1	 	 	 	22.3	 	 	 	28.7	 	
Unsecured debt	 	 	(27.3	)	 	 	(26.9	)	 	 	(33.6	)	
Mark-to-market on unsecured hedged debt(2)	 	 	(1.4	)	 	 	(1.4	)	 	 	(1.6	)	
Other liabilities, net	 	 	(3.3	)	 	 	(2.6	)	 	 	(2.4	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total tangible equity	 	$	4.7	 	 	$	4.5	 	 	$	4.8	 	

 
 	 	 	
(1)	 	Excludes goodwill and acquired intangible assets.	
 	 	 	
(2)	 	At March 31, 2011, December 31, 2010 and March 31, 2010, there were $1.3 billion, $1.4 billion and $1.5 billion, respectively, of net gains on derivatives hedging this debt in unencumbered assets, which partially offset these losses.	
 
On April 14, 2011, we priced a $562 million Private Education Loan ABS transaction at an all-in LIBOR equivalent cost of one-month LIBOR plus 1.99 percent. This issue has a weighted average life of 3.8 years and initial over-collateralization of approximately 21 percent. This issue is expected to close on April 26, 2011.
 
On March 3, 2011, we completed an $812 million FFELP ABS transaction at an all-in LIBOR equivalent cost of one-month LIBOR plus 1.14 percent. This issue has a weighted average life of 5.8 years and initial over-collateralization of approximately 3 percent.
 
On January 14, 2011, we issued a $2 billion five-year 6.25 percent fixed rate unsecured bond. The bond was issued to yield 6.50 percent before underwriting fees. The rate on the bond was swapped from a fixed rate to a floating rate equal to an all-in cost of one-month LIBOR plus 4.46 percent. The proceeds of this bond will be used for general corporate purposes.
 
We also repurchase our outstanding unsecured debt in both open-market repurchases and public tender offers. Repurchasing debt helps us to better manage our short-term and long-term funding needs. In the first quarter of 2011 we repurchased $825 million face amount of our senior unsecured notes in the aggregate, with maturity dates ranging from 2011 to 2014, which resulted in a total gain of $64 million.
31

 
“Core Earnings” Basis Borrowings
 
The following table presents the ending balances of our “Core Earnings” basis borrowings at March 31, 2011, December 31, 2010 and March 31, 2010.

 	 	March 31, 2011	 	 	December 31, 2010	 	 	March 31, 2010	 	
 	 	 	 	 	 	 	 	Total
	 	 	 	 	 	 	 	 	Total
	 	 	 	 	 	 	 	 	Total
	 	
 	 	 	 	 	 	 	 	“Core
	 	 	 	 	 	 	 	 	“Core
	 	 	 	 	 	 	 	 	“Core
	 	
 	 	Short
	 	 	Long
	 	 	Earnings”
	 	 	Short
	 	 	Long
	 	 	Earnings”
	 	 	Short
	 	 	Long
	 	 	Earnings”
	 	
(Dollars in millions)	 	Term	 	 	Term	 	 	Basis	 	 	Term	 	 	Term	 	 	Basis	 	 	Term	 	 	Term	 	 	Basis	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unsecured borrowings:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Senior unsecured debt	 	$	3,741	 	 	$	16,894	 	 	$	20,635	 	 	$	4,361	 	 	$	15,742	 	 	$	20,103	 	 	$	4,831	 	 	$	22,214	 	 	$	27,045	 	
Brokered deposits	 	 	1,324	 	 	 	2,808	 	 	 	4,132	 	 	 	1,387	 	 	 	3,160	 	 	 	4,547	 	 	 	1,208	 	 	 	4,202	 	 	 	5,410	 	
Retail and other deposits	 	 	1,500	 	 	 	—	 	 	 	1,500	 	 	 	1,370	 	 	 	—	 	 	 	1,370	 	 	 	209	 	 	 	—	 	 	 	209	 	
Other(1)	 	 	1,064	 	 	 	—	 	 	 	1,064	 	 	 	887	 	 	 	—	 	 	 	887	 	 	 	860	 	 	 	—	 	 	 	860	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Subtotal unsecured borrowings	 	 	7,629	 	 	 	19,702	 	 	 	27,331	 	 	 	8,005	 	 	 	18,902	 	 	 	26,907	 	 	 	7,108	 	 	 	26,416	 	 	 	33,524	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Secured borrowings:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
FFELP Loans securitizations	 	 	—	 	 	 	111,043	 	 	 	111,043	 	 	 	—	 	 	 	112,425	 	 	 	112,425	 	 	 	—	 	 	 	100,493	 	 	 	100,493	 	
Private Education Loans securitizations	 	 	—	 	 	 	20,983	 	 	 	20,983	 	 	 	—	 	 	 	21,409	 	 	 	21,409	 	 	 	—	 	 	 	21,784	 	 	 	21,784	 	
ED Conduit Program facility	 	 	23,572	 	 	 	—	 	 	 	23,572	 	 	 	24,484	 	 	 	—	 	 	 	24,484	 	 	 	14,682	 	 	 	—	 	 	 	14,682	 	
ED Participation Program facility	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	15,746	 	 	 	—	 	 	 	15,746	 	
ABCP borrowings	 	 	325	 	 	 	4,671	 	 	 	4,996	 	 	 	—	 	 	 	5,853	 	 	 	5,853	 	 	 	3,278	 	 	 	5,000	 	 	 	8,278	 	
Acquisition financing(2)	 	 	—	 	 	 	1,064	 	 	 	1,064	 	 	 	—	 	 	 	1,064	 	 	 	1,064	 	 	 	—	 	 	 	—	 	 	 	—	 	
FHLB-DM facility	 	 	525	 	 	 	—	 	 	 	525	 	 	 	900	 	 	 	—	 	 	 	900	 	 	 	90	 	 	 	—	 	 	 	90	 	
Indentured trusts	 	 	—	 	 	 	1,187	 	 	 	1,187	 	 	 	—	 	 	 	1,246	 	 	 	1,246	 	 	 	60	 	 	 	1,505	 	 	 	1,565	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Subtotal secured borrowings	 	 	24,422	 	 	 	138,948	 	 	 	163,370	 	 	 	25,384	 	 	 	141,997	 	 	 	167,381	 	 	 	33,856	 	 	 	128,782	 	 	 	162,638	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	32,051	 	 	$	158,650	 	 	$	190,701	 	 	$	33,389	 	 	$	160,899	 	 	$	194,288	 	 	$	40,964	 	 	$	155,198	 	 	$	196,162	 	

 
 	 	 	
(1)	 	“Other” primarily consists of cash collateral held related to derivative exposures that are recorded as a short-term debt obligation.	
 	 	 	
(2)	 	Seller financing related to the acquisition of $25 billion of student loans.	
 
In March 2011, we retired all 70 million shares of common stock held in treasury. This retirement decreased the balance in treasury stock by $1.9 billion, with corresponding decreases of $14 million in common stock and $1.9 billion in additional paid-in capital. There was no impact to total equity from this transaction.
 
***
 
Presentation slides for the conference call discussed below, as well as additional information about the our loan portfolios, new operating segments, and other details, may be accessed at www.SallieMae.com/investors under the webcasts tab.
 
The company will host an earnings conference call tomorrow, April 21, at 8 a.m. EDT. Sallie Mae executives will be on hand to discuss various highlights of the quarter and to answer questions related to the company’s performance. Individuals interested in participating in the call should dial (877) 356-5689 (USA and Canada) or dial (706) 679-0623 (international) and use access code 53619598 starting at 7:45 a.m. EDT. A live audio webcast of the conference call may be accessed at www.SallieMae.com/investors . Investors may access a replay of the conference call via the company’s website within one hour after the call’s conclusion. A telephone replay may be accessed two hours after the call’s conclusion through May 5 by dialing (800) 642-1687 (USA and Canada) or (706) 645-9291 (international) with access code 53619598.
 
This press release contains “forward-looking statements” based on management’s current expectations as of the date of this release . These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Because such statements inherently involve risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks include, among others, changes in the terms of student loans and the educational credit marketplace arising from the implementation of applicable laws and regulations, and from changes in such laws and
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regulations, adverse results in legal disputes, changes in the demand for educational financing or in financing preferences of educational institutions, students and their families, limited liquidity, increased financing costs and changes in the general interest rate environment. Additional factors that could cause the company’s results to differ materially from those described in the forward-looking statements can be found under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the company’s Annual Report on Form 10-K for the year ended December 31, 2010 which is filed with the Securities and Exchange Commission (“SEC”) and available at the SEC’s internet site ( http://www.sec.gov ).
 
***
 
Sallie Mae (NYSE: SLM) is the nation’s No. 1 saving, planning and paying for college company. Serving 23 million customers, Sallie Mae offers innovative savings tools, tuition payment plans and education loans that promote responsible financial habits and reward success. The company manages or services $238 billion in education loans and administers $37 billion in 529 college savings plans. Members of its Upromise college savings rewards program have earned $600 million to help pay for college. Sallie Mae is also one of the leading financial service providers for universities and governments at all levels, including supporting $8 billion in ecommerce transactions annually at nearly 1,000 campuses. More information is available at  www.SallieMae.com . Commonly known as Sallie Mae, SLM Corporation and its subsidiaries are not sponsored by or agencies of the United States of America.
 
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