UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 20, 2011
SLM CORPORATION
(Exact name of registrant as specified in its charter)
 	 	 	 	 	
DELAWARE	 	001-13251	 	52-2013874	
(State or other jurisdiction	 	(Commission File Number)	 	(I.R.S. Employer	
of incorporation)	 	 	 	Identification No.)	
300 Continental Drive, Newark, Delaware 19713
(Address of principal executive offices)(zip code)
Registrant’s telephone number, including area code: (302) 283-8000
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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 July 20, 2011, SLM Corporation (the “Company”) issued a press release announcing its financial results for the quarter ended June 30, 2011. A copy of this press release is furnished as Exhibit 99.1 to this report.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
 	99.1*	 	SLM Corporation Press Release dated July 20, 2011.	

*	 	Furnished herewith.	
2

 
SIGNATURES
     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 	 	 	 	 	
 	SLM CORPORATION
 	 	
Date: July 20, 2011	By:  	/s/ JONATHAN C. CLARK  	 	
 	 	Jonathan C. Clark 	 	
 	 	Executive Vice President and Chief Financial Officer 	 	
 	
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EXHIBIT INDEX
 	 	 	
Exhibit
No.	 	Description	
99.1*	 	SLM Corporation Press Release dated July 20, 2011.	

*	 	Furnished herewith.	
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Exhibit 99.1

SALLIE MAE REPORTS SECOND-QUARTER FINANCIAL RESULTS
 
NEWARK, Del., July 20, 2011 — Sallie Mae (NYSE: SLM) today released second-quarter 2011 financial results that reflected increased student loan originations and improved student loan delinquencies.
 
“We today report solid second quarter performance. I am particularly pleased we continue to reduce credit costs and operating expenses as expected. I am also encouraged by private credit growth in a subdued economy,” said Albert L. Lord, vice chairman and CEO. “Sallie Mae is focused on our customers’ financial needs and enthusiastically builds new products to help students and families save and pay for college.”
 
GAAP second-quarter 2011 net loss was $6 million ($.02 diluted loss per share), compared to net income of $338 million ($.63 diluted earnings per share) in the same quarter last year. The decrease was due to a pre-tax $414 million unrealized, mark-to-market loss on certain derivative contracts recognized in GAAP but not in core earnings results, compared to a $211 million unrealized, mark-to-market gain in the year-ago quarter.
 
Core earnings were $260 million ($.48 diluted earnings per share) in second-quarter 2011, compared to $211 million ($.39 diluted earnings per share) in the year-ago period. Improved credit quality and operating expenses combined more than offset lower debt repurchase gains. The company manages its business segments on a core earnings basis, as described further below.
 
Consumer Lending
 
In the consumer lending segment, Sallie Mae originates, finances and services private education loans.
 
Core earnings were $49 million, compared to a net loss of $12 million in the second quarter last year. The improvement was primarily due to a decreased loan loss provision. Loan delinquencies and charge-offs both improved.
 
Highlights vs. second-quarter 2010 included:

 	• 	Loan originations were $264 million, up 21 percent from $219 million. The portfolio totaled $35.8 billion at June 30, 2011, compared to $35.2 billion one year earlier.	
 	 	 	
 	• 	Net interest margin was 4.05 percent, compared to 3.79 percent.	
 	 	 	
 	• 	The provision for loan losses declined to $265 million, compared to $349 million.	
 	 	 	
 	• 	Delinquencies of 90 days or more (as a percentage of loans in repayment) were 4.7 percent, compared to 5.8 percent.	
 	 	 	
 	• 	The annual charge-off rate (as a percentage of loans in repayment) improved to 3.7 percent, compared to 5.3 percent.	
 
Business Services
 
Sallie Mae’s business services segment includes fees from servicing, collections and college savings businesses.
 
Core earnings were $140 million in second-quarter 2011, compared to $127 million in the year-ago quarter. The improvement was driven by substantial FFELP loan acquisitions last year that increased FFELP loan servicing revenue.
 
Federally Guaranteed Loans (FFELP)
 
This segment represents earnings from Sallie Mae’s amortizing FFELP portfolio.

 
Core earnings were $108 million in second-quarter 2011, compared to $95 million in the year-ago quarter. Second-quarter 2011 net interest margin was 0.98 percent, compared to 0.95 percent in the year-ago quarter. These increases were primarily driven by last year’s substantial FFELP loan portfolio acquisitions.
 
Operating Expenses
 
Operating expenses were $268 million in second-quarter 2011, compared to $303 million in first-quarter 2011 and $309 million in the year-ago quarter.
 
Operating expenses in second-quarter 2011 included $13 million of servicing costs related to the $25 billion student loan portfolio acquisition at the end of last year and $2 million for litigation contingencies. The company expects these servicing costs to decline as the acquired portfolio converts to the company’s loan servicing system in 2011.
 
Funding and Liquidity
 
During the quarter, the company issued an $821 million FFELP asset-backed securitization and two private loan securitizations totaling $1.4 billion.
 
The company also repurchased $60 million of debt and realized $0.3 million of gains in second-quarter 2011, compared with $1.4 billion and $91 million in the year-ago quarter.
 
Dividend and Common Share Repurchase Program
 
In second-quarter 2011, Sallie Mae paid a common stock dividend of $.10 per share and repurchased 9.6 million common shares for $156 million as part of its previously announced $300 million share repurchase program.
 
Guidance
 
The company expects its results to be as follows:

 	• 	Full year 2011 private education loan originations of $2.5 billion.	
 	 	 	
 	• 	Quarterly operating expense of $250 million in fourth-quarter 2011.	
 	 	 	
 	• 	Fully diluted 2011 core earnings per share of $1.80.	
 
***
 
Sallie Mae reports financial results on a GAAP basis and also presents certain core earnings performance measures. The primary difference between the company’s pre-tax core earnings and GAAP results for the quarter was unrealized, mark-to-market losses on certain derivative contracts. 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 — Definition and Limitations” for a further discussion and a complete reconciliation between GAAP net income and core earnings. Given the significant variability of valuations of derivative instruments on expected GAAP net income, the company does not provide a GAAP equivalent for its core earnings per share guidance.
 
Definitions for capitalized terms in this document can be found in the company’s Annual Report on Form 10-K for the year ended Dec. 31, 2010 (filed with the SEC on Feb. 28, 2011).
 
***
 
Presentation slides for the conference call discussed below, as well as additional information about the company’s 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, July 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
2

 
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 75902491 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 August 4, by dialing (800) 642-1687 (USA and Canada) or (706) 645-9291 (international) with access code 75902491.
 
This press release contains “forward-looking statements” and information based on management’s current expectations as of the date of this release.  Statements that are not historical facts, including statements about the company’s beliefs or expectations and statements that assume or are dependent upon future events, are forward-looking statements. Forward-looking statements are subject to risks, uncertainties, assumptions and other factors that may cause actual results to be materially different from those reflected in such forward-looking statements. These factors include, among others, the risks and uncertainties set forth in Item 1A “Risk Factors” and elsewhere in the company’s Annual Report on Form 10-K for the year ended Dec. 31, 2010, and subsequent filings with the SEC; increases in financing costs; limits on liquidity; increases in costs associated with compliance with laws and regulations; changes in accounting standards and the impact of related changes in significant accounting estimates; any adverse outcomes in any significant litigation to which the company is a party; credit risk associated with the company’s exposure to third parties, including counterparties to the company’s derivative transactions; and changes in the terms of student loans and the educational credit marketplace (including changes resulting from new laws and the implementation of existing laws). The company could also be affected by, among other things: changes in its funding costs and availability; reductions to its credit ratings; failures of its operating systems or infrastructure, including those of third-party vendors; damage to its reputation; failures to successfully implement cost-cutting and restructuring initiatives and adverse effects of such initiatives on its business; changes in the demand for educational financing or in financing preferences of lenders, educational institutions, students and their families; changes in law and regulations with respect to the student lending business and financial institutions generally; increased competition from banks and other consumer lenders; the creditworthiness of its customers; changes in the general interest rate environment, including the rate relationships among relevant money-market instruments and those of its earning assets vs. its funding arrangements; changes in general economic conditions; and changes in the demand for debt management services. The preparation of the company’s consolidated financial statements also requires management to make certain estimates and assumptions including estimates and assumptions about future events. These estimates or assumptions may prove to be incorrect. All forward-looking statements contained in this release are qualified by these cautionary statements and are made only as of the date of this release. The company does not undertake any obligation to update or revise these forward-looking statements to conform the statement to actual results or changes in its expectations.
 
***
 
Sallie Mae (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. Through its subsidiaries, the company manages or services $234 billion in education loans and administers $38 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.  SLM Corporation and its subsidiaries, commonly known as Sallie Mae, are not sponsored by or agencies of the United States of America.
 
# # #
 
CONTACTS:

Media	 	Martha Holler, (302) 283-4036, martha.holler@SallieMae.com
Patricia Nash Christel, (302) 283-4076,  patricia.christel@SallieMae.com	
Investors	 	Steve McGarry, (302) 283-4074, steven.mcgarry@SallieMae.com
Joe Fisher, (302) 283-4075,  joe.fisher@SallieMae.com	

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Selected Financial Information and Ratios

 	 	Quarters Ended	 	 	Six Months Ended	 	
 	 	June 30,
	 	 	March 31,
	 	 	June 30,
	 	 	June 30,
	 	 	June 30,
	 	
(Dollars and shares in millions, except per share data)	 	2011	 	 	2011	 	 	2010	 	 	2011	 	 	2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP Basis	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss)	 	$	(6	)	 	$	175	 	 	$	338	 	 	$	169	 	 	$	578	 	
Diluted earnings (loss) per common share(1)	 	$	(.02	)	 	$	.32	 	 	$	.63	 	 	$	.30	 	 	$	1.08	 	
Weighted average shares used to compute diluted earnings (loss) per share	 	 	524	 	 	 	532	 	 	 	527	 	 	 	531	 	 	 	527	 	
Return on assets	 	 	(.01	)%	 	 	.36	%	 	 	.68	%	 	 	.18	%	 	 	.59	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings” Basis(2)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings” net income	 	$	260	 	 	$	260	 	 	$	211	 	 	$	520	 	 	$	425	 	
“Core Earnings” diluted earnings per common share (1)	 	$	.48	 	 	$	.48	 	 	$	.39	 	 	$	.96	 	 	$	.79	 	
Weighted average shares used to compute diluted earnings per share	 	 	530	 	 	 	532	 	 	 	527	 	 	 	531	 	 	 	527	 	
“Core Earnings” return on assets	 	 	.54	%	 	 	.54	%	 	 	.43	%	 	 	.54	%	 	 	.44	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other Operating Statistics	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ending FFELP Loans, net	 	$	142,635	 	 	$	145,558	 	 	$	148,492	 	 	$	142,635	 	 	$	148,492	 	
Ending Private Education Loans, net	 	 	35,753	 	 	 	35,966	 	 	 	35,151	 	 	 	35,753	 	 	 	35,151	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ending total student loans, net	 	$	178,388	 	 	$	181,524	 	 	$	183,643	 	 	$	178,388	 	 	$	183,643	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Average student loans	 	$	180,783	 	 	$	184,387	 	 	$	184,571	 	 	$	182,575	 	 	$	183,060	 	

 	 	 	
(1)	 	Preferred dividends of $15 million and $29 million, applicable to our convertible Series C Preferred Stock, were added back to the numerator in the three and six months ended June 30, 2010, 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.	

4

 
 
Results of Operations
 
We present the results of operations below on a consolidated basis in accordance with GAAP. The presentation of our results on a segment basis is not in accordance with GAAP. We have four business segments: 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)

 	 	 	 	 	 	 	 	 	 	 	June 30, 2011 vs.
	 	 	June 30, 2011 vs.
	 	
 	 	 	 	 	 	 	 	 	 	 	March 31, 2011
	 	 	June 30, 2010
	 	
 	 	Quarters Ended	 	 	Increase
	 	 	Increase
	 	
 	 	June 30,
	 	 	March 31,
	 	 	June 30,
	 	 	(Decrease)	 	 	(Decrease)	 	
(Dollars in millions, except per share data)	 	2011	 	 	2011	 	 	2010	 	 	$	 	 	%	 	 	$	 	 	%	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
FFELP Loans	 	$	850	 	 	$	877	 	 	$	876	 	 	$	(27	)	 	 	(3	)%	 	$	(26	)	 	 	(3	)%	
Private Education Loans	 	 	600	 	 	 	604	 	 	 	575	 	 	 	(4	)	 	 	(1	)	 	 	25	 	 	 	4	 	
Other loans	 	 	5	 	 	 	6	 	 	 	7	 	 	 	(1	)	 	 	(17	)	 	 	(2	)	 	 	(29	)	
Cash and investments	 	 	5	 	 	 	5	 	 	 	7	 	 	 	—	 	 	 	—	 	 	 	(2	)	 	 	(29	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total interest income	 	 	1,460	 	 	 	1,492	 	 	 	1,465	 	 	 	(32	)	 	 	(2	)	 	 	(5	)	 	 	—	 	
Total interest expense	 	 	592	 	 	 	594	 	 	 	569	 	 	 	(2	)	 	 	—	 	 	 	23	 	 	 	4	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net interest income	 	 	868	 	 	 	898	 	 	 	896	 	 	 	(30	)	 	 	(3	)	 	 	(28	)	 	 	(3	)	
Less: provisions for loan losses	 	 	291	 	 	 	303	 	 	 	382	 	 	 	(12	)	 	 	(4	)	 	 	(91	)	 	 	(24	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net interest income after provisions for loan losses	 	 	577	 	 	 	595	 	 	 	514	 	 	 	(18	)	 	 	(3	)	 	 	63	 	 	 	12	 	
Other income (loss):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gains (losses) on sales of loans and securities, net	 	 	—	 	 	 	—	 	 	 	(3	)	 	 	—	 	 	 	—	 	 	 	3	 	 	 	(100	)	
Gains (losses) on derivative and hedging activities, net	 	 	(510	)	 	 	(242	)	 	 	95	 	 	 	(268	)	 	 	111	 	 	 	(605	)	 	 	(637	)	
Servicing revenue	 	 	93	 	 	 	98	 	 	 	99	 	 	 	(5	)	 	 	(5	)	 	 	(6	)	 	 	(6	)	
Contingency revenue	 	 	86	 	 	 	78	 	 	 	88	 	 	 	8	 	 	 	10	 	 	 	(2	)	 	 	(2	)	
Gains on debt repurchases	 	 	—	 	 	 	38	 	 	 	91	 	 	 	(38	)	 	 	(100	)	 	 	(91	)	 	 	(100	)	
Other income (loss)	 	 	3	 	 	 	22	 	 	 	(3	)	 	 	(19	)	 	 	(86	)	 	 	6	 	 	 	200	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total other income (loss)	 	 	(328	)	 	 	(6	)	 	 	367	 	 	 	(322	)	 	 	5,367	 	 	 	(695	)	 	 	(189	)	
Expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating expenses	 	 	268	 	 	 	303	 	 	 	309	 	 	 	(35	)	 	 	(12	)	 	 	(41	)	 	 	(13	)	
Goodwill and acquired intangible assets impairment and amortization expense	 	 	6	 	 	 	6	 	 	 	10	 	 	 	—	 	 	 	—	 	 	 	(4	)	 	 	(40	)	
Restructuring expenses	 	 	2	 	 	 	4	 	 	 	18	 	 	 	(2	)	 	 	(50	)	 	 	(16	)	 	 	(89	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total expenses	 	 	276	 	 	 	313	 	 	 	337	 	 	 	(37	)	 	 	(12	)	 	 	(61	)	 	 	(18	)	
Income (loss) from continuing operations before income tax expense (benefit)	 	 	(27	)	 	 	276	 	 	 	544	 	 	 	(303	)	 	 	(110	)	 	 	(571	)	 	 	(105	)	
Income tax expense (benefit)	 	 	(10	)	 	 	99	 	 	 	199	 	 	 	(109	)	 	 	(110	)	 	 	(209	)	 	 	(105	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss) from continuing operations	 	 	(17	)	 	 	177	 	 	 	345	 	 	 	(194	)	 	 	(110	)	 	 	(362	)	 	 	(105	)	
Income (loss) from discontinued operations, net of tax expense (benefit)	 	 	11	 	 	 	(2	)	 	 	(7	)	 	 	13	 	 	 	650	 	 	 	18	 	 	 	257	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss)	 	 	(6	)	 	 	175	 	 	 	338	 	 	 	(181	)	 	 	(103	)	 	 	(344	)	 	 	(102	)	
Preferred stock dividends	 	 	4	 	 	 	4	 	 	 	19	 	 	 	—	 	 	 	—	 	 	 	(15	)	 	 	(79	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss) attributable to common stock	 	$	(10	)	 	$	171	 	 	$	319	 	 	$	(181	)	 	 	(106	)%	 	$	(329	)	 	 	(103	)%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic earnings (loss) per common share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Continuing operations	 	$	(.04	)	 	$	.32	 	 	$	.67	 	 	$	(.36	)	 	 	(113	)%	 	$	(.71	)	 	 	(106	)%	
Discontinued operations	 	 	.02	 	 	 	—	 	 	 	(.01	)	 	 	.02	 	 	 	100	 	 	 	.03	 	 	 	300	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	(.02	)	 	$	.32	 	 	$	.66	 	 	$	(.34	)	 	 	(106	)%	 	$	(.68	)	 	 	(103	)%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted earnings (loss) per common share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Continuing operations	 	$	(.04	)	 	$	.32	 	 	$	.64	 	 	$	(.36	)	 	 	(113	)%	 	$	(.68	)	 	 	(106	)%	
Discontinued operations	 	 	.02	 	 	 	—	 	 	 	(.01	)	 	 	.02	 	 	 	100	 	 	 	.03	 	 	 	300	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	(.02	)	 	$	.32	 	 	$	.63	 	 	$	(.34	)	 	 	(106	)%	 	$	(.65	)	 	 	(103	)%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Dividends per common share	 	$	.10	 	 	$	—	 	 	$	—	 	 	$	.10	 	 	 	100	%	 	$	.10	 	 	 	100	%	

5

 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Six Months
	 	 	 	 	
 	 	Ended
	 	 	Increase
	 	
 	 	June 30,	 	 	(Decrease)	 	
(Dollars in millions, except per share data)	 	2011	 	 	2010	 	 	$	 	 	%	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
FFELP Loans	 	$	1,727	 	 	$	1,682	 	 	$	45	 	 	 	3	%	
Private Education Loans	 	 	1,204	 	 	 	1,141	 	 	 	63	 	 	 	6	 	
Other loans	 	 	11	 	 	 	16	 	 	 	(5	)	 	 	(31	)	
Cash and investments	 	 	10	 	 	 	11	 	 	 	(1	)	 	 	(9	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total interest income	 	 	2,952	 	 	 	2,850	 	 	 	102	 	 	 	4	 	
Total interest expense	 	 	1,186	 	 	 	1,100	 	 	 	86	 	 	 	8	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net interest income	 	 	1,766	 	 	 	1,750	 	 	 	16	 	 	 	1	 	
Less: provisions for loan losses	 	 	594	 	 	 	741	 	 	 	(147	)	 	 	(20	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net interest income after provisions for loan losses	 	 	1,172	 	 	 	1,009	 	 	 	163	 	 	 	16	 	
Other income (loss):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gains (losses) on sales of loans and securities, net	 	 	—	 	 	 	5	 	 	 	(5	)	 	 	(100	)	
Gains (losses) on derivative and hedging activities, net	 	 	(752	)	 	 	13	 	 	 	(765	)	 	 	(5,885	)	
Servicing revenue	 	 	191	 	 	 	221	 	 	 	(30	)	 	 	(14	)	
Contingency revenue	 	 	164	 	 	 	168	 	 	 	(4	)	 	 	(2	)	
Gains on debt repurchases	 	 	38	 	 	 	181	 	 	 	(143	)	 	 	(79	)	
Other income	 	 	25	 	 	 	12	 	 	 	13	 	 	 	108	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total other income (loss)	 	 	(334	)	 	 	600	 	 	 	(934	)	 	 	(156	)	
Expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating expenses	 	 	572	 	 	 	597	 	 	 	(25	)	 	 	(4	)	
Goodwill and acquired intangible assets impairment and amortization expense	 	 	12	 	 	 	19	 	 	 	(7	)	 	 	(37	)	
Restructuring expenses	 	 	5	 	 	 	43	 	 	 	(38	)	 	 	(88	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total expenses	 	 	589	 	 	 	659	 	 	 	(70	)	 	 	(11	)	
Income from continuing operations before income tax expense	 	 	249	 	 	 	950	 	 	 	(701	)	 	 	(74	)	
Income tax expense	 	 	90	 	 	 	358	 	 	 	(268	)	 	 	(75	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income from continuing operations	 	 	159	 	 	 	592	 	 	 	(433	)	 	 	(73	)	
Net income (loss) from discontinued operations, net of tax benefit	 	 	10	 	 	 	(14	)	 	 	24	 	 	 	171	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	 	169	 	 	 	578	 	 	 	(409	)	 	 	(71	)	
Preferred stock dividends	 	 	8	 	 	 	37	 	 	 	(29	)	 	 	(78	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income attributable to common stock	 	$	161	 	 	$	541	 	 	$	(380	)	 	 	(70	)%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic earnings (loss) per common share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Continuing operations	 	$	.29	 	 	$	1.15	 	 	$	(.86	)	 	 	(75	)%	
Discontinued operations	 	 	.02	 	 	 	(.03	)	 	 	.05	 	 	 	167	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	.31	 	 	$	1.12	 	 	$	(.81	)	 	 	(72	)%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted earnings (loss) per common share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Continuing operations	 	$	.28	 	 	$	1.11	 	 	$	(.83	)	 	 	(75	)%	
Discontinued operations	 	 	.02	 	 	 	(.03	)	 	 	.05	 	 	 	167	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	.30	 	 	$	1.08	 	 	$	(.78	)	 	 	(72	)%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Dividends per common share	 	$	.10	 	 	$	—	 	 	$	.10	 	 	 	100	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
6

 
GAAP Balance Sheet (Unaudited)

 	 	June 30,
	 	 	March 31,
	 	 	June 30,
	 	
(Dollars in millions, except per share data)	 	2011	 	 	2011	 	 	2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Assets	 	 	 	 	 	 	 	 	 	 	 	 	
FFELP Loans (net of allowance for losses of $189; $190 and $189, respectively)	 	$	142,635	 	 	$	145,558	 	 	$	128,315	 	
FFELP Stafford Loans Held-For-Sale	 	 	—	 	 	 	—	 	 	 	20,177	 	
Private Education Loans (net of allowance for losses of $2,043; $2,034 and $2,042, respectively)	 	 	35,753	 	 	 	35,966	 	 	 	35,151	 	
Cash and investments	 	 	5,284	 	 	 	4,763	 	 	 	7,680	 	
Restricted cash and investments	 	 	6,075	 	 	 	6,393	 	 	 	6,253	 	
Goodwill and acquired intangible assets, net	 	 	480	 	 	 	472	 	 	 	1,158	 	
Other assets	 	 	10,130	 	 	 	10,203	 	 	 	8,585	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total assets	 	$	200,357	 	 	$	203,355	 	 	$	207,319	 	

Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	
Short-term borrowings	 	$	30,766	 	 	$	32,317	 	 	$	46,472	 	
Long-term borrowings	 	 	160,765	 	 	 	161,886	 	 	 	152,251	 	
Other liabilities	 	 	3,814	 	 	 	3,945	 	 	 	3,509	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total liabilities	 	 	195,345	 	 	 	198,148	 	 	 	202,232	 	

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:	 	 	 	 	 	 	 	 	 	 	 	 	
529 million; 527 million; and 554 million shares, respectively, issued	 	 	106	 	 	 	105	 	 	 	111	 	
Additional paid-in capital	 	 	4,114	 	 	 	4,092	 	 	 	5,123	 	
Accumulated other comprehensive loss, net of tax benefit	 	 	(30	)	 	 	(35	)	 	 	(43	)	
Retained earnings	 	 	418	 	 	 	480	 	 	 	391	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total SLM Corporation stockholders’ equity before treasury stock	 	 	5,173	 	 	 	5,207	 	 	 	6,957	 	
Common stock held in treasury: 10 million; 0 and 68 million shares, respectively	 	 	170	 	 	 	—	 	 	 	1,870	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total SLM Corporation stockholders’ equity	 	 	5,003	 	 	 	5,207	 	 	 	5,087	 	
Noncontrolling interest	 	 	9	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total equity	 	 	5,012	 	 	 	5,207	 	 	 	5,087	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total liabilities and equity	 	$	200,357	 	 	$	203,355	 	 	$	207,319	 	

7

 
Consolidated Earnings Summary — GAAP-basis
 
Three Months Ended June 30, 2011 Compared with Three Months Ended June 30, 2010
 
For the three months ended June 30, 2011 and 2010, net income (loss) was $(6) million, or $(.02) diluted loss per common share, and $338 million, or $.63 diluted earnings per common share, respectively. The decrease in net income was primarily due to a $605 million increase in net losses on derivative and hedging activities and a $91 million decrease in gains on debt repurchases. These reductions were partially offset by a $63 million increase in net interest income after provisions for loan losses and a $61 million decrease in total expenses.
 
The primary contributors to each of the identified drivers of changes in net income for the current quarter compared with the year-ago quarter are as follows:

 	• 	Net interest income decreased by $28 million primarily as a result of a $3.8 billion decline in the average balance of our student loan portfolio and higher funding costs.	
 	 	 	
 	• 	Provisions for loan losses decreased by $91 million as a result of the improving performance of the Private Education Loan portfolio.	
 	 	 	
 	• 	Net losses on derivatives and hedging activities increased by $605 million. The primary factors affecting the change in losses were interest rate and foreign currency fluctuations, which primarily affected the valuations of our Floor Income Contracts, basis swaps and foreign currency hedges during the period. Valuations of derivative instruments vary based upon many factors including changes in interest rates, credit risk, foreign currency fluctuations and other market factors. As a result, net gains and losses on derivatives and hedging activities may vary significantly in future periods.	
 	 	 	
 	• 	Servicing revenue decreased by $6 million primarily due to 2010 legislation that eliminated the origination of new FFELP Loans, thereby eliminating Guarantor issuance fees on new FFELP Loans. Outstanding FFELP Loans for which we earn additional fees also declined.	
 	 	 	
 	• 	Gains on debt repurchases decreased $91 million year-over-year as we repurchased less debt in the current period. Debt repurchase activity will fluctuate based on market fundamentals and our liability management strategy.	
 	 	 	
 	• 	Operating expenses decreased $41 million primarily due to our ongoing cost savings initiative and an $18 million reduction in litigation contingency expenses. The second quarter of 2011 included $13 million of third-party servicing expenses related to the $25 billion loan portfolio acquisition on December 31, 2010 and $2 million of litigation contingency expenses. The second quarter of 2010 included $6 million of restructuring-related asset impairments and $20 million in litigation contingency expenses.	
 	 	 	
 	• 	Restructuring expenses decreased $16 million primarily as a result of the substantial completion of our plan for restructuring the Company initiated during 2010 in response to legislation ending FFELP. Restructuring our operations in response to the elimination of FFELP required us to significantly reduce our operations and related operating costs associated with the origination of FFELP Loans. Restructuring expenses associated with continuing operations under this plan were $2 million in the second quarter of 2011 and $18 million in the second quarter of 2010. We currently expect to incur an estimated $9 million of additional restructuring costs in 2011. The majority of these expenses will be severance costs.	
 	 	 	
 	• 	The effective tax rates for the second quarters of 2011 and 2010 were 36 percent and 37 percent, respectively.	
 	 	 	
 	• 	Net income from discontinued operations, net in the three months ended June 30, 2011 increased $18 million primarily due to a higher yield on our Purchased Paper — Non-Mortgage portfolio as a result of higher than expected collections. At the end of 2010, we began actively marketing our Purchased Paper — Non-Mortgage business for sale and concluded it was probable this business would be sold within one year at which time we would exit the business. As a result, the results of operations	

8

 
 	 	 	
 	 	of this business were required to be presented as discontinued operations beginning in the fourth quarter of 2010. Our Purchased Paper businesses are presented as discontinued operations for the current and prior periods. We are currently seeking bids for this portfolio and anticipate closing on the sale of the portfolio in the second half of 2011.	
 
Six Months Ended June 30, 2011 Compared with Six Months Ended June 30, 2010
 
For the six months ended June 30, 2011 and 2010, net income was $169 million, or $.30 diluted earnings per common share, and $578 million, or $1.08 diluted earnings per common share, respectively. The decrease in net income for the six months ended June 30, 2011 as compared with the prior year period was primarily due to a $765 million increase in net losses on derivative and hedging activities and a $143 million decrease in gains on debt repurchases. These were partially offset by a $163 million increase in net interest income after provisions for loans losses and a $70 million decrease in total expenses.
 
The primary contributors to each of the identified drivers of changes in net income for the current six-month period compared with the year-ago six-month period are as follows:

 	• 	Net interest income increased by $16 million primarily the result of incremental net interest income from the acquisition of $25 billion of securitized student loans on December 31, 2010, which was partially offset by higher funding costs.	
 	 	 	
 	• 	Provisions for loan losses decreased by $147 million as a result of the improving performance of the Private Education Loan portfolio which was primarily driven by the improving credit quality of the portfolio as well as an overall improvement in the economy.	
 	 	 	
 	• 	Net losses on derivatives and hedging activities increased by $765 million primarily due to interest rate and foreign currency fluctuations, which primarily affected the valuations of our Floor Income Contracts, basis swaps and foreign currency hedges during the period. Valuations of derivative instruments vary based upon many factors including changes in interest rates, credit risk, foreign currency fluctuations and other market factors. As a result, net gains and losses on derivatives and hedging activities may vary significantly in future periods.	
 	 	 	
 	• 	Servicing revenue decreased by $30 million primarily due to 2010 legislation that eliminated the origination of new FFELP Loans, thereby eliminating Guarantor issuance fees on new FFELP Loans. Outstanding FFELP Loans for which we earn additional fees also declined.	
 	 	 	
 	• 	Gains on debt repurchases decreased $143 million as we repurchased less debt in the current period. Debt repurchase activity will fluctuate based on market fundamentals and our liability management strategy.	
 	 	 	
 	• 	Other income increased by $13 million primarily due to an 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 $25 million primarily as a result of our cost saving initiative. The first half of 2011 included $25 million of third-party servicing expenses related to the $25 billion loan portfolio acquisition on December 31, 2010, $12 million of litigation contingency expenses and $11 million from the acceleration of stock compensation. The first half of 2010 included $10 million of restructuring related impairments and $20 million of litigation contingency expenses.	
 	 	 	
 	• 	Restructuring expenses decreased $38 million primarily the result of the substantial completion of our plan for restructuring the Company initiated during 2010 in response to legislation ending the FFELP.	
 	 	 	
 	• 	The effective tax rates for six months ended June 30, 2011 and 2010 were 36 percent and 38 percent, respectively. The change in the effective tax rate for the six months ended June 30, 2011 was primarily driven by the impact of state tax rate changes recorded in the first half of 2010.	

9

 

 	• 	Net income from discontinued operations, net for the six months ended June 30, 2011 was $10 million compared with a net loss from discontinued operations of $14 million for the six months ended June 30, 2010. The change was primarily driven by a higher yield on our Purchased Paper — Non-Mortgage portfolio as a result of higher than expected collections.	
 
“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.
10

 
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 June 30, 2011	 	
 	 	FFELP
	 	 	Consumer
	 	 	Business
	 	 	 	 	 	 	 	 	Total “Core
	 	 	 	 	 	Total
	 	
(Dollars in millions)	 	Loans	 	 	Lending	 	 	Services	 	 	Other	 	 	Eliminations(1)	 	 	Earnings”	 	 	Adjustments(2)	 	 	GAAP	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Student loans	 	$	721	 	 	$	600	 	 	$	—	 	 	$	—	 	 	$	—	 	 	$	1,321	 	 	$	129	 	 	$	1,450	 	
Other loans	 	 	—	 	 	 	—	 	 	 	—	 	 	 	5	 	 	 	—	 	 	 	5	 	 	 	—	 	 	 	5	 	
Cash and investments	 	 	1	 	 	 	2	 	 	 	2	 	 	 	2	 	 	 	(2	)	 	 	5	 	 	 	—	 	 	 	5	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total interest income	 	 	722	 	 	 	602	 	 	 	2	 	 	 	7	 	 	 	(2	)	 	 	1,331	 	 	 	129	 	 	 	1,460	 	
Total interest expense	 	 	357	 	 	 	201	 	 	 	—	 	 	 	14	 	 	 	(2	)	 	 	570	 	 	 	22	 	 	 	592	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net interest income (loss)	 	 	365	 	 	 	401	 	 	 	2	 	 	 	(7	)	 	 	—	 	 	 	761	 	 	 	107	 	 	 	868	 	
Less: provisions for loan losses	 	 	23	 	 	 	265	 	 	 	—	 	 	 	3	 	 	 	—	 	 	 	291	 	 	 	—	 	 	 	291	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net interest income (loss) after provisions for loan losses	 	 	342	 	 	 	136	 	 	 	2	 	 	 	(10	)	 	 	—	 	 	 	470	 	 	 	107	 	 	 	577	 	
Servicing revenue	 	 	21	 	 	 	15	 	 	 	244	 	 	 	—	 	 	 	(187	)	 	 	93	 	 	 	—	 	 	 	93	 	
Contingency revenue	 	 	—	 	 	 	—	 	 	 	86	 	 	 	—	 	 	 	—	 	 	 	86	 	 	 	—	 	 	 	86	 	
Gains on debt repurchases	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
Other income (loss)	 	 	—	 	 	 	—	 	 	 	11	 	 	 	3	 	 	 	—	 	 	 	14	 	 	 	(521	)	 	 	(507	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total other income (loss)	 	 	21	 	 	 	15	 	 	 	341	 	 	 	3	 	 	 	(187	)	 	 	193	 	 	 	(521	)	 	 	(328	)	
Expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Direct operating expenses	 	 	192	 	 	 	73	 	 	 	121	 	 	 	—	 	 	 	(187	)	 	 	199	 	 	 	—	 	 	 	199	 	
Overhead expenses	 	 	—	 	 	 	—	 	 	 	—	 	 	 	69	 	 	 	—	 	 	 	69	 	 	 	—	 	 	 	69	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating expenses	 	 	192	 	 	 	73	 	 	 	121	 	 	 	69	 	 	 	(187	)	 	 	268	 	 	 	—	 	 	 	268	 	
Goodwill and acquired intangible assets impairment and amortization	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	6	 	 	 	6	 	
Restructuring expenses	 	 	—	 	 	 	1	 	 	 	—	 	 	 	1	 	 	 	—	 	 	 	2	 	 	 	—	 	 	 	2	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total expenses	 	 	192	 	 	 	74	 	 	 	121	 	 	 	70	 	 	 	(187	)	 	 	270	 	 	 	6	 	 	 	276	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations, before income tax expense (benefit)	 	 	171	 	 	 	77	 	 	 	222	 	 	 	(77	)	 	 	—	 	 	 	393	 	 	 	(420	)	 	 	(27	)	
Income tax expense (benefit) (3)	 	 	63	 	 	 	28	 	 	 	82	 	 	 	(29	)	 	 	—	 	 	 	144	 	 	 	(154	)	 	 	(10	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss) from continuing operations	 	 	108	 	 	 	49	 	 	 	140	 	 	 	(48	)	 	 	—	 	 	 	249	 	 	 	(266	)	 	 	(17	)	
Income from discontinued operations, net of taxes	 	 	—	 	 	 	—	 	 	 	—	 	 	 	11	 	 	 	—	 	 	 	11	 	 	 	—	 	 	 	11	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss)	 	$	108	 	 	$	49	 	 	$	140	 	 	$	(37	)	 	$	—	 	 	$	260	 	 	$	(266	)	 	$	(6	)	

 

(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 June 30, 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	 	$	107	 	 	$	—	 	 	$	107	 	
Total other income (loss)	 	 	(521	)	 	 	—	 	 	 	(521	)	
Goodwill and acquired intangible assets impairment and amortization	 	 	—	 	 	 	6	 	 	 	6	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total “Core Earnings” adjustments to GAAP	 	$	(414	)	 	$	(6	)	 	 	(420	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Income tax benefit	 	 	 	 	 	 	 	 	 	 	(154	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net loss	 	 	 	 	 	 	 	 	 	$	(266	)	

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

 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	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 (loss)	 	 	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.	
 
12

 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Quarter Ended June 30, 2010	 	
 	 	FFELP
	 	 	Consumer
	 	 	Business
	 	 	 	 	 	 	 	 	Total “Core
	 	 	 	 	 	Total
	 	
(Dollars in millions)	 	Loans	 	 	Lending	 	 	Services	 	 	Other	 	 	Eliminations(1)	 	 	Earnings”	 	 	Adjustments(2)	 	 	GAAP	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Student loans	 	$	744	 	 	$	575	 	 	$	—	 	 	$	—	 	 	$	—	 	 	$	1,319	 	 	$	132	 	 	$	1,451	 	
Other loans	 	 	—	 	 	 	—	 	 	 	—	 	 	 	7	 	 	 	—	 	 	 	7	 	 	 	—	 	 	 	7	 	
Cash and investments	 	 	2	 	 	 	4	 	 	 	4	 	 	 	1	 	 	 	(4	)	 	 	7	 	 	 	—	 	 	 	7	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total interest income (loss)	 	 	746	 	 	 	579	 	 	 	4	 	 	 	8	 	 	 	(4	)	 	 	1,333	 	 	 	132	 	 	 	1,465	 	
Total interest expense	 	 	382	 	 	 	183	 	 	 	—	 	 	 	11	 	 	 	(4	)	 	 	572	 	 	 	(3	)	 	 	569	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net interest income (loss)	 	 	364	 	 	 	396	 	 	 	4	 	 	 	(3	)	 	 	—	 	 	 	761	 	 	 	135	 	 	 	896	 	
Less: provisions for loan losses	 	 	29	 	 	 	349	 	 	 	—	 	 	 	4	 	 	 	—	 	 	 	382	 	 	 	—	 	 	 	382	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net interest income (loss) after provisions for loan losses	 	 	335	 	 	 	47	 	 	 	4	 	 	 	(7	)	 	 	—	 	 	 	379	 	 	 	135	 	 	 	514	 	
Servicing revenue	 	 	15	 	 	 	21	 	 	 	228	 	 	 	—	 	 	 	(165	)	 	 	99	 	 	 	—	 	 	 	99	 	
Contingency revenue	 	 	—	 	 	 	—	 	 	 	88	 	 	 	—	 	 	 	—	 	 	 	88	 	 	 	—	 	 	 	88	 	
Gains on debt repurchases	 	 	—	 	 	 	—	 	 	 	—	 	 	 	91	 	 	 	—	 	 	 	91	 	 	 	—	 	 	 	91	 	
Other income	 	 	—	 	 	 	—	 	 	 	13	 	 	 	—	 	 	 	—	 	 	 	13	 	 	 	76	 	 	 	89	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total other income (loss)	 	 	15	 	 	 	21	 	 	 	329	 	 	 	91	 	 	 	(165	)	 	 	291	 	 	 	76	 	 	 	367	 	
Expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Direct operating expenses	 	 	187	 	 	 	86	 	 	 	133	 	 	 	2	 	 	 	(165	)	 	 	243	 	 	 	—	 	 	 	243	 	
Overhead expenses	 	 	—	 	 	 	—	 	 	 	—	 	 	 	66	 	 	 	—	 	 	 	66	 	 	 	—	 	 	 	66	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating expenses	 	 	187	 	 	 	86	 	 	 	133	 	 	 	68	 	 	 	(165	)	 	 	309	 	 	 	—	 	 	 	309	 	
Goodwill and acquired intangible assets impairment and amortization	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	10	 	 	 	10	 	
Restructuring expenses	 	 	15	 	 	 	1	 	 	 	2	 	 	 	—	 	 	 	—	 	 	 	18	 	 	 	—	 	 	 	18	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total expenses	 	 	202	 	 	 	87	 	 	 	135	 	 	 	68	 	 	 	(165	)	 	 	327	 	 	 	10	 	 	 	337	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations, before income tax expense (benefit)	 	 	148	 	 	 	(19	)	 	 	198	 	 	 	16	 	 	 	—	 	 	 	343	 	 	 	201	 	 	 	544	 	
Income tax expense (benefit) (3)	 	 	53	 	 	 	(7	)	 	 	71	 	 	 	8	 	 	 	—	 	 	 	125	 	 	 	74	 	 	 	199	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss) from continuing operations	 	 	95	 	 	 	(12	)	 	 	127	 	 	 	8	 	 	 	—	 	 	 	218	 	 	 	127	 	 	 	345	 	
Loss from discontinued operations, net of taxes	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(7	)	 	 	—	 	 	 	(7	)	 	 	—	 	 	 	(7	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss)	 	$	95	 	 	$	(12	)	 	$	127	 	 	$	1	 	 	$	—	 	 	$	211	 	 	$	127	 	 	$	338	 	

 
 	 	 	
(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 June 30, 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	 	$	135	 	 	$	—	 	 	$	135	 	
Total other income	 	 	76	 	 	 	—	 	 	 	76	 	
Goodwill and acquired intangible assets impairment and amortization	 	 	—	 	 	 	10	 	 	 	10	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total “Core Earnings” adjustments to GAAP	 	$	211	 	 	$	(10	)	 	 	201	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Income tax expense	 	 	 	 	 	 	 	 	 	 	74	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	 	 	 	 	 	 	 	 	$	127	 	

 	 	 	
(3)	 	Income taxes are based on a percentage of net income before tax for the individual reportable segment.	
 
13

 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Six Months Ended June 30, 2011	 	
 	 	FFELP
	 	 	Consumer
	 	 	Business
	 	 	 	 	 	 	 	 	Total “Core
	 	 	 	 	 	Total
	 	
(Dollars in millions)	 	Loans	 	 	Lending	 	 	Services	 	 	Other	 	 	Eliminations(1)	 	 	Earnings”	 	 	Adjustments(2)	 	 	GAAP	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Student loans	 	$	1,457	 	 	$	1,204	 	 	$	—	 	 	$	—	 	 	$	—	 	 	$	2,661	 	 	$	270	 	 	$	2,931	 	
Other loans	 	 	—	 	 	 	—	 	 	 	—	 	 	 	11	 	 	 	—	 	 	 	11	 	 	 	—	 	 	 	11	 	
Cash and investments	 	 	2	 	 	 	5	 	 	 	5	 	 	 	3	 	 	 	(5	)	 	 	10	 	 	 	—	 	 	 	10	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total interest income (loss)	 	 	1,459	 	 	 	1,209	 	 	 	5	 	 	 	14	 	 	 	(5	)	 	 	2,682	 	 	 	270	 	 	 	2,952	 	
Total interest expense	 	 	726	 	 	 	399	 	 	 	—	 	 	 	29	 	 	 	(5	)	 	 	1,149	 	 	 	37	 	 	 	1,186	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net interest income (loss)	 	 	733	 	 	 	810	 	 	 	5	 	 	 	(15	)	 	 	—	 	 	 	1,533	 	 	 	233	 	 	 	1,766	 	
Less: provisions for loan losses	 	 	46	 	 	 	540	 	 	 	—	 	 	 	8	 	 	 	—	 	 	 	594	 	 	 	—	 	 	 	594	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net interest income (loss) after provisions for loan losses	 	 	687	 	 	 	270	 	 	 	5	 	 	 	(23	)	 	 	—	 	 	 	939	 	 	 	233	 	 	 	1,172	 	
Servicing revenue	 	 	46	 	 	 	32	 	 	 	489	 	 	 	—	 	 	 	(376	)	 	 	191	 	 	 	—	 	 	 	191	 	
Contingency revenue	 	 	—	 	 	 	—	 	 	 	164	 	 	 	—	 	 	 	—	 	 	 	164	 	 	 	—	 	 	 	164	 	
Gains on debt repurchases	 	 	—	 	 	 	—	 	 	 	—	 	 	 	64	 	 	 	—	 	 	 	64	 	 	 	(26	)	 	 	38	 	
Other income	 	 	—	 	 	 	—	 	 	 	21	 	 	 	6	 	 	 	—	 	 	 	27	 	 	 	(754	)	 	 	(727	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total other income (loss)	 	 	46	 	 	 	32	 	 	 	674	 	 	 	70	 	 	 	(376	)	 	 	446	 	 	 	(780	)	 	 	(334	)	
Expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Direct operating expenses	 	 	387	 	 	 	155	 	 	 	249	 	 	 	9	 	 	 	(376	)	 	 	424	 	 	 	—	 	 	 	424	 	
Overhead expenses	 	 	—	 	 	 	—	 	 	 	—	 	 	 	148	 	 	 	—	 	 	 	148	 	 	 	—	 	 	 	148	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating expenses	 	 	387	 	 	 	155	 	 	 	249	 	 	 	157	 	 	 	(376	)	 	 	572	 	 	 	—	 	 	 	572	 	
Goodwill and acquired intangible assets impairment and amortization	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	12	 	 	 	12	 	
Restructuring expenses	 	 	1	 	 	 	2	 	 	 	1	 	 	 	1	 	 	 	—	 	 	 	5	 	 	 	—	 	 	 	5	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total expenses	 	 	388	 	 	 	157	 	 	 	250	 	 	 	158	 	 	 	(376	)	 	 	577	 	 	 	12	 	 	 	589	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations, before income tax expense (benefit)	 	 	345	 	 	 	145	 	 	 	429	 	 	 	(111	)	 	 	—	 	 	 	808	 	 	 	(559	)	 	 	249	 	
Income tax expense (benefit) (3)	 	 	127	 	 	 	54	 	 	 	158	 	 	 	(41	)	 	 	—	 	 	 	298	 	 	 	(208	)	 	 	90	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss) from continuing operations	 	 	218	 	 	 	91	 	 	 	271	 	 	 	(70	)	 	 	—	 	 	 	510	 	 	 	(351	)	 	 	159	 	
Income from discontinued operations, net of taxes	 	 	—	 	 	 	—	 	 	 	—	 	 	 	10	 	 	 	—	 	 	 	10	 	 	 	—	 	 	 	10	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss)	 	$	218	 	 	$	91	 	 	$	271	 	 	$	(60	)	 	$	—	 	 	$	520	 	 	$	(351	)	 	$	169	 	

 
 	 	 	
(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:	

 	 	Six Months Ended June 30, 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	 	$	233	 	 	$	—	 	 	$	233	 	
Total other income (loss)	 	 	(780	)	 	 	—	 	 	 	(780	)	
Goodwill and acquired intangible assets impairment and amortization	 	 	—	 	 	 	12	 	 	 	12	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total “Core Earnings” adjustments to GAAP	 	$	(547	)	 	$	(12	)	 	 	(559	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Income tax benefit	 	 	 	 	 	 	 	 	 	 	(208	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net loss	 	 	 	 	 	 	 	 	 	$	(351	)	

 	 	 	
(3)	 	Income taxes are based on a percentage of net income before tax for the individual reportable segment.	
 
14

 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Six Months Ended June 30, 2010	 	
 	 	FFELP
	 	 	Consumer
	 	 	Business
	 	 	 	 	 	 	 	 	Total “Core
	 	 	 	 	 	Total
	 	
(Dollars in millions)	 	Loans	 	 	Lending	 	 	Services	 	 	Other	 	 	Eliminations(1)	 	 	Earnings”	 	 	Adjustments(2)	 	 	GAAP	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Student loans	 	$	1,386	 	 	$	1,141	 	 	$	—	 	 	$	—	 	 	$	—	 	 	$	2,527	 	 	$	296	 	 	$	2,823	 	
Other loans	 	 	—	 	 	 	—	 	 	 	—	 	 	 	16	 	 	 	—	 	 	 	16	 	 	 	—	 	 	 	16	 	
Cash and investments	 	 	4	 	 	 	6	 	 	 	8	 	 	 	1	 	 	 	(8	)	 	 	11	 	 	 	—	 	 	 	11	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total interest income (loss)	 	 	1,390	 	 	 	1,147	 	 	 	8	 	 	 	17	 	 	 	(8	)	 	 	2,554	 	 	 	296	 	 	 	2,850	 	
Total interest expense	 	 	718	 	 	 	356	 	 	 	—	 	 	 	21	 	 	 	(8	)	 	 	1,087	 	 	 	13	 	 	 	1,100	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net interest income (loss)	 	 	672	 	 	 	791	 	 	 	8	 	 	 	(4	)	 	 	—	 	 	 	1,467	 	 	 	283	 	 	 	1,750	 	
Less: provisions for loan losses	 	 	52	 	 	 	674	 	 	 	—	 	 	 	15	 	 	 	—	 	 	 	741	 	 	 	—	 	 	 	741	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net interest income (loss) after provisions for loan losses	 	 	620	 	 	 	117	 	 	 	8	 	 	 	(19	)	 	 	—	 	 	 	726	 	 	 	283	 	 	 	1,009	 	
Servicing revenue	 	 	36	 	 	 	41	 	 	 	473	 	 	 	—	 	 	 	(329	)	 	 	221	 	 	 	—	 	 	 	221	 	
Contingency revenue	 	 	—	 	 	 	—	 	 	 	168	 	 	 	—	 	 	 	—	 	 	 	168	 	 	 	—	 	 	 	168	 	
Gains on debt repurchases	 	 	—	 	 	 	—	 	 	 	—	 	 	 	181	 	 	 	—	 	 	 	181	 	 	 	 	 	 	 	181	 	
Other income	 	 	—	 	 	 	—	 	 	 	24	 	 	 	11	 	 	 	—	 	 	 	35	 	 	 	(5	)	 	 	30	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total other income (loss)	 	 	36	 	 	 	41	 	 	 	665	 	 	 	192	 	 	 	(329	)	 	 	605	 	 	 	(5	)	 	 	600	 	
Expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Direct operating expenses	 	 	375	 	 	 	166	 	 	 	252	 	 	 	4	 	 	 	(329	)	 	 	468	 	 	 	—	 	 	 	468	 	
Overhead expenses	 	 	—	 	 	 	—	 	 	 	—	 	 	 	129	 	 	 	—	 	 	 	129	 	 	 	—	 	 	 	129	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating expenses	 	 	375	 	 	 	166	 	 	 	252	 	 	 	133	 	 	 	(329	)	 	 	597	 	 	 	—	 	 	 	597	 	
Goodwill and acquired intangible assets impairment and amortization	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	19	 	 	 	19	 	
Restructuring expenses	 	 	33	 	 	 	3	 	 	 	5	 	 	 	2	 	 	 	—	 	 	 	43	 	 	 	—	 	 	 	43	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total expenses	 	 	408	 	 	 	169	 	 	 	257	 	 	 	135	 	 	 	(329	)	 	 	640	 	 	 	19	 	 	 	659	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations, before income tax expense (benefit)	 	 	248	 	 	 	(11	)	 	 	416	 	 	 	38	 	 	 	—	 	 	 	691	 	 	 	259	 	 	 	950	 	
Income tax expense (benefit) (3)	 	 	89	 	 	 	(4	)	 	 	149	 	 	 	18	 	 	 	—	 	 	 	252	 	 	 	106	 	 	 	358	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss) from continuing operations	 	 	159	 	 	 	(7	)	 	 	267	 	 	 	20	 	 	 	—	 	 	 	439	 	 	 	153	 	 	 	592	 	
Loss from discontinued operations, net of taxes	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(14	)	 	 	—	 	 	 	(14	)	 	 	—	 	 	 	(14	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss)	 	$	159	 	 	$	(7	)	 	$	267	 	 	$	6	 	 	$	—	 	 	$	425	 	 	$	153	 	 	$	578	 	

 
 	 	 	
(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:	

 	 	Six Months Ended June 30, 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	 	$	283	 	 	$	—	 	 	$	283	 	
Total other income (loss)	 	 	(5	)	 	 	—	 	 	 	(5	)	
Goodwill and acquired intangible assets impairment and amortization	 	 	—	 	 	 	19	 	 	 	19	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total “Core Earnings” adjustments to GAAP	 	$	278	 	 	$	(19	)	 	 	259	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Income tax benefit	 	 	 	 	 	 	 	 	 	 	106	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net loss	 	 	 	 	 	 	 	 	 	$	153	 	

 	 	 	
(3)	 	Income taxes are based on a percentage of net income before tax for the individual reportable segment.	
15

 
 
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	 	 	Six Months Ended	 	
 	 	June 30,
	 	 	March 31,
	 	 	June 30,
	 	 	June 30,
	 	 	June 30,
	 	
(Dollars in millions)	 	2011	 	 	2011	 	 	2010	 	 	2011	 	 	2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings”	 	$	260	 	 	$	260	 	 	$	211	 	 	$	520	 	 	$	425	 	
“Core Earnings” adjustments:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net impact of derivative accounting	 	 	(414	)	 	 	(133	)	 	 	211	 	 	 	(547	)	 	 	278	 	
Net impact of goodwill and acquired intangibles	 	 	(6	)	 	 	(6	)	 	 	(10	)	 	 	(12	)	 	 	(19	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total “Core Earnings” adjustments before income tax effect	 	 	(420	)	 	 	(139	)	 	 	201	 	 	 	(559	)	 	 	259	 	
Net income tax effect	 	 	154	 	 	 	54	 	 	 	(74	)	 	 	208	 	 	 	(106	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total “Core Earnings” adjustments	 	 	(266	)	 	 	(85	)	 	 	127	 	 	 	(351	)	 	 	153	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP net income (loss)	 	$	(6	)	 	$	175	 	 	$	338	 	 	$	169	 	 	$	578	 	

 	 	 	
 	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 our derivatives that are held to maturity, the cumulative net unrealized gain or loss over the life of the contract will equal $0 except for Floor Income Contracts where the cumulative unrealized gain will equal the amount for which we sold the contract. In our “Core Earnings” presentation, we recognize the economic effect of these hedges, which generally results in any net settlement cash paid or received being recognized ratably as an interest expense or revenue over the hedged item’s life.	
 
The table below quantifies the adjustments for derivative accounting on our net income for the quarters ended June 30, 2011, March 31, 2011 and June 30, 2010 and for the six months ended June 30, 2011 and 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	 	 	Six Months Ended	 	
 	 	June 30,
	 	 	March 31,
	 	 	June 30,
	 	 	June 30,
	 	 	June 30,
	 	
(Dollars in millions)	 	2011	 	 	2011	 	 	2010	 	 	2011	 	 	2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings” derivative adjustments:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gains (losses) on derivative and hedging activities, net, included in other income (1)	 	$	(510	)	 	$	(242	)	 	$	95	 	 	$	(752	)	 	$	13	 	
Plus: Realized losses on derivative and hedging activities, net (1)	 	 	185	 	 	 	186	 	 	 	226	 	 	 	371	 	 	 	431	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unrealized gains (losses) on derivative and hedging activities, net	 	 	(325	)	 	 	(56	)	 	 	321	 	 	 	(381	)	 	 	444	 	
Amortization of net premiums on Floor Income contracts in net interest income	 	 	(74	)	 	 	(85	)	 	 	(90	)	 	 	(159	)	 	 	(144	)	
Other derivative accounting adjustments to reflect economic impact	 	 	(15	)	 	 	8	 	 	 	(20	)	 	 	(7	)	 	 	(22	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total net impact derivative accounting (2)	 	$	(414	)	 	$	(133	)	 	$	211	 	 	$	(547	)	 	$	278	 	

 
 	 	 	
(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.	

16

 
 
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 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 June 30, 2011, March 31, 2011 and June 30, 2010 and for the six months ended June 30, 2011 and 2010.

 	 	Quarters Ended	 	 	Six Months Ended	 	
 	 	June 30,
	 	 	March 31,
	 	 	June 30,
	 	 	June 30,
	 	 	June 30,
	 	
(Dollars in millions)	 	2011	 	 	2011	 	 	2010	 	 	2011	 	 	2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Reclassification of realized gains (losses) on derivative and hedging activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net settlement expense on Floor Income Contracts reclassified to net interest income	 	$	(202	)	 	$	(226	)	 	$	(222	)	 	$	(428	)	 	$	(433	)	
Net settlement income on interest rate swaps reclassified to net interest income	 	 	17	 	 	 	16	 	 	 	(5	)	 	 	33	 	 	 	2	 	
Foreign exchange derivatives losses reclassified to other income	 	 	—	 	 	 	(1	)	 	 	1	 	 	 	(1	)	 	 	1	 	
Net realized gains (losses) on terminated derivative contracts reclassified to other income	 	 	—	 	 	 	25	 	 	 	—	 	 	 	25	 	 	 	(1	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total reclassifications of realized losses on derivative and hedging activities	 	 	(185	)	 	 	(186	)	 	 	(226	)	 	 	(371	)	 	 	(431	)	
Add: Unrealized gains (losses) on derivative and hedging activities, net (1)	 	 	(325	)	 	 	(56	)	 	 	321	 	 	 	(381	)	 	 	444	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Losses on derivative and hedging activities, net	 	$	(510	)	 	$	(242	)	 	$	95	 	 	$	(752	)	 	$	13	 	

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

 	 	Quarters Ended	 	Six Months Ended	
 	 	June 30,
	 	March 31,
	 	June 30,
	 	June 30,
	 	June 30,
	
(Dollars in millions)	 	2011	 	2011	 	2010	 	2011	 	2010	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Floor Income Contracts	 	$	(277	)	 	$	151	 	 	$	(42	)	 	$	(126	)	 	$	(23	)	
Basis swaps	 	 	25	 	 	 	(6	)	 	 	263	 	 	 	19	 	 	 	326	 	
Foreign currency hedges	 	 	(110	)	 	 	(194	)	 	 	99	 	 	 	(304	)	 	 	107	 	
Other	 	 	37	 	 	 	(7	)	 	 	1	 	 	 	30	 	 	 	34	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total unrealized gains (losses) on derivative and hedging activities, net	 	$	(325	)	 	$	(56	)	 	$	321	 	 	$	(381	)	 	$	444	 	

 	 	 	
 	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 June 30, 2011, March 31, 2011 and June 30, 2010 and for the six months ended June 30, 2011 and 2010.	

 	 	Quarters Ended	 	 	Six Months Ended	 	
 	 	June 30,
	 	 	March 31,
	 	 	June 30,
	 	 	June 30,
	 	 	June 30,
	 	
(Dollars in millions)	 	2011	 	 	2011	 	 	2010	 	 	2011	 	 	2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings” goodwill and acquired intangibles adjustments (1) :	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Amortization of acquired intangibles from continuing operations	 	$	(6	)	 	$	(6	)	 	$	(10	)	 	$	(12	)	 	$	(19	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total “Core Earnings” goodwill and acquired intangibles adjustments	 	$	(6	)	 	$	(6	)	 	$	(10	)	 	$	(12	)	 	$	(19	)	

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

17

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

 	 	 	 	 	 	 	 	 	 	 	% Increase
	 	
 	 	Quarters Ended	 	 	% Increase (Decrease)	 	 	Six Months Ended	 	 	(Decrease)	 	
 	 	 	 	 	 	 	 	 	 	 	June 30, 2011
	 	 	June 30, 2011
	 	 	 	 	 	 	 	 	June 30, 2011
	 	
 	 	June 30,
	 	 	March 31,
	 	 	June 30,
	 	 	vs.
	 	 	vs.
	 	 	June 30,
	 	 	June 30,
	 	 	vs.
	 	
(Dollars in millions)	 	2011	 	 	2011	 	 	2010	 	 	Mar. 31, 2011	 	 	June 30, 2010	 	 	2011	 	 	2010	 	 	June 30, 2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings” interest income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
FFELP Loans	 	$	721	 	 	$	736	 	 	$	744	 	 	 	(2	)%	 	 	(3	)%	 	$	1,457	 	 	$	1,386	 	 	 	5	%	
Cash and investments	 	 	1	 	 	 	1	 	 	 	2	 	 	 	—	 	 	 	(50	)	 	 	2	 	 	 	4	 	 	 	(50	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total “Core Earnings” interest income	 	 	722	 	 	 	737	 	 	 	746	 	 	 	(2	)	 	 	(3	)	 	 	1,459	 	 	 	1,390	 	 	 	5	 	
Total “Core Earnings” interest expense	 	 	357	 	 	 	370	 	 	 	382	 	 	 	(4	)	 	 	(7	)	 	 	726	 	 	 	718	 	 	 	1	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net “Core Earnings” interest income	 	 	365	 	 	 	367	 	 	 	364	 	 	 	(1	)	 	 	—	 	 	 	733	 	 	 	672	 	 	 	9	 	
Less: provisions for loan losses	 	 	23	 	 	 	23	 	 	 	29	 	 	 	—	 	 	 	(21	)	 	 	46	 	 	 	52	 	 	 	(12	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net “Core Earnings” interest income after provisions for loan losses	 	 	342	 	 	 	344	 	 	 	335	 	 	 	(1	)	 	 	2	 	 	 	687	 	 	 	620	 	 	 	11	 	
Servicing revenue	 	 	21	 	 	 	25	 	 	 	15	 	 	 	(16	)	 	 	40	 	 	 	46	 	 	 	36	 	 	 	28	 	
Direct operating expenses	 	 	192	 	 	 	195	 	 	 	187	 	 	 	(2	)	 	 	3	 	 	 	387	 	 	 	375	 	 	 	3	 	
Restructuring expenses	 	 	—	 	 	 	1	 	 	 	15	 	 	 	(100	)	 	 	(100	)	 	 	1	 	 	 	33	 	 	 	(97	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total expenses	 	 	192	 	 	 	196	 	 	 	202	 	 	 	(2	)	 	 	(5	)	 	 	388	 	 	 	408	 	 	 	(5	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income from continuing operations, before income tax expense	 	 	171	 	 	 	173	 	 	 	148	 	 	 	(1	)	 	 	16	 	 	 	345	 	 	 	248	 	 	 	39	 	
Income tax expense	 	 	63	 	 	 	64	 	 	 	53	 	 	 	(2	)	 	 	19	 	 	 	127	 	 	 	89	 	 	 	43	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings”	 	$	108	 	 	$	109	 	 	$	95	 	 	 	(1	)%	 	 	14	%	 	$	218	 	 	$	159	 	 	 	37	%	

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

 	 	Quarters Ended	 	 	Six Months Ended	 	
 	 	June 30,
	 	 	March 31,
	 	 	June 30,
	 	 	June 30,
	 	 	June 30,
	 	
 	 	2011	 	 	2011	 	 	2010	 	 	2011	 	 	2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings” basis FFELP student loan yield	 	 	2.57	%	 	 	2.63	%	 	 	2.64	%	 	 	2.60	%	 	 	2.57	%	
Hedged Floor Income	 	 	.20	 	 	 	.23	 	 	 	.24	 	 	 	.22	 	 	 	.21	 	
Unhedged Floor Income	 	 	.19	 	 	 	.08	 	 	 	.01	 	 	 	.13	 	 	 	.01	 	
Consolidation Loan Rebate Fees	 	 	(.66	)	 	 	(.66	)	 	 	(.57	)	 	 	(.66	)	 	 	(.58	)	
Repayment Borrower Benefits	 	 	(.12	)	 	 	(.10	)	 	 	(.10	)	 	 	(.11	)	 	 	(.10	)	
Premium amortization	 	 	(.17	)	 	 	(.15	)	 	 	(.20	)	 	 	(.16	)	 	 	(.20	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings” basis FFELP student loan net yield	 	 	2.01	 	 	 	2.03	 	 	 	2.02	 	 	 	2.02	 	 	 	1.91	 	
“Core Earnings” basis FFELP student loan cost of funds	 	 	(.96	)	 	 	(.96	)	 	 	(.97	)	 	 	(.96	)	 	 	(.93	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings” basis FFELP student loan spread	 	 	1.05	 	 	 	1.07	 	 	 	1.05	 	 	 	1.06	 	 	 	.98	 	
“Core Earnings” basis FFELP other asset spread impact	 	 	(.07	)	 	 	(.09	)	 	 	(.10	)	 	 	(.08	)	 	 	(.09	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings” basis FFELP Loans net interest margin (1)	 	 	.98	%	 	 	.98	%	 	 	.95	%	 	 	.98	%	 	 	.89	%	

 	
 	
“Core Earnings” basis FFELP Loans net interest margin (1)	 	 	.98	%	 	 	.98	%	 	 	.95	%	 	 	.98	%	 	 	.89	%	
Adjustment for GAAP accounting treatment	 	 	.32	 	 	 	.35	 	 	 	.34	 	 	 	.34	 	 	 	.38	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP-basis FFELP Loans net interest margin	 	 	1.30	%	 	 	1.33	%	 	 	1.29	%	 	 	1.32	%	 	 	1.27	%	

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

(Dollars in millions)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
FFELP Loans	 	$	143,999	 	 	$	147,381	 	 	$	148,101	 	 	$	145,681	 	 	$	146,486	 	
Other interest-earning assets	 	 	4,982	 	 	 	5,016	 	 	 	5,649	 	 	 	4,999	 	 	 	5,655	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total FFELP “Core Earnings” basis interest-earning assets	 	$	148,981	 	 	$	152,397	 	 	$	153,750	 	 	$	150,680	 	 	$	152,141	 	

18

 
The “Core Earnings” basis FFELP Loans net interest margin for the six months ended June 30, 2011 compared with the prior year period increased nine basis points which was primarily the result of an increase in Floor Income.
 
As of June 30, 2011, our FFELP Loan portfolio totaled approximately $142.6 billion, comprised of $52.8 billion of FFELP Stafford and $89.8 billion of FFELP Consolidation Loans. The weighted-average life of these portfolios is 4.9 years and 9.3 years, respectively, assuming a Constant Prepayment Rate (“CPR”) of 6 percent and 3 percent, respectively.
 
FFELP Provisions for Loan Losses and Loan Charge-Offs
 
The following tables summarize the FFELP Loan provisions for loan losses and FFELP Loan charge-offs for the quarters ended June 30, 2011, March 31, 2011 and June 30, 2010 and for the six months ended June 30, 2011 and 2010.

 	 	Quarters Ended	 	Six Months Ended	
 	 	June 30,
	 	March 31,
	 	June 30,
	 	June 30,
	 	June 30,
	
(Dollars in millions)	 	2011	 	2011	 	2010	 	2011	 	2010	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
FFELP Loan provisions for loan losses	 	$	23	 	 	$	23	 	 	$	29	 	 	$	46	 	 	$	52	 	
FFELP Loan charge-offs	 	 	21	 	 	 	20	 	 	 	24	 	 	 	41	 	 	 	46	 	
 
Operating Expenses — FFELP Loans Segment
 
Operating expenses for our FFELP Loans segment primarily include the contractual rates we pay to service loans in term asset-backed securitization trusts or a similar rate if a loan is not in a term financing facility (which is presented as an intercompany charge from the Business Services segment who services the loans), the fees we pay for third-party loan servicing and costs incurred to acquire loans. The increases in operating expenses in the three and six months ended June 30, 2011 compared with the three and six months ended June 30, 2010 were primarily the result of the increase in servicing costs related to the $25 billion loan portfolio acquisition on December 31, 2010. Operating expenses, excluding restructuring-related asset impairments, were 53 basis points and 49 basis points of average FFELP Loans in the quarters ended June 30, 2011 and June 30, 2010, respectively, and 54 basis points and 51 basis points for the six months ended June 30, 2011 and 2010, respectively.
19

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

 	 	 	 	 	 	 	 	 	 	 	% Increase
	 	
 	 	Quarters Ended	 	 	% Increase (Decrease)	 	 	Six Months Ended	 	 	(Decrease)	 	
 	 	June 30,
	 	 	March 31,
	 	 	June 30,
	 	 	June 30, 2011 vs.
	 	 	June 30, 2011 vs.
	 	 	June 30,
	 	 	June 30,
	 	 	June 30, 2011 vs.
	 	
(Dollars in millions)	 	2011	 	 	2011	 	 	2010	 	 	Mar. 31, 2011	 	 	June 30, 2010	 	 	2011	 	 	2010	 	 	June 30, 2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings” interest income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Private Education Loans	 	$	600	 	 	$	604	 	 	$	575	 	 	 	(1	)%	 	 	4	%	 	$	1,204	 	 	$	1,141	 	 	 	6	%	
Cash and investments	 	 	2	 	 	 	3	 	 	 	4	 	 	 	(33	)	 	 	(50	)	 	 	5	 	 	 	6	 	 	 	(17	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total “Core Earnings” interest income	 	 	602	 	 	 	607	 	 	 	579	 	 	 	(1	)	 	 	4	 	 	 	1,209	 	 	 	1,147	 	 	 	5	 	
Total “Core Earnings” interest expense	 	 	201	 	 	 	197	 	 	 	183	 	 	 	2	 	 	 	10	 	 	 	399	 	 	 	356	 	 	 	12	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net “Core Earnings” interest income	 	 	401	 	 	 	410	 	 	 	396	 	 	 	(2	)	 	 	1	 	 	 	810	 	 	 	791	 	 	 	2	 	
Less: provisions for loan losses	 	 	265	 	 	 	275	 	 	 	349	 	 	 	(4	)	 	 	(24	)	 	 	540	 	 	 	674	 	 	 	(20	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net “Core Earnings” interest income after provisions for loan losses	 	 	136	 	 	 	135	 	 	 	47	 	 	 	1	 	 	 	189	 	 	 	270	 	 	 	117	 	 	 	131	 	
Servicing revenue	 	 	15	 	 	 	17	 	 	 	21	 	 	 	(12	)	 	 	(29	)	 	 	32	 	 	 	41	 	 	 	(22	)	
Direct operating expenses	 	 	73	 	 	 	82	 	 	 	86	 	 	 	(11	)	 	 	(15	)	 	 	155	 	 	 	166	 	 	 	(7	)	
Restructuring expenses	 	 	1	 	 	 	1	 	 	 	1	 	 	 	—	 	 	 	—	 	 	 	2	 	 	 	3	 	 	 	(33	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total expenses	 	 	74	 	 	 	83	 	 	 	87	 	 	 	(11	)	 	 	(15	)	 	 	157	 	 	 	169	 	 	 	(7	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations, before income tax expense (benefit)	 	 	77	 	 	 	69	 	 	 	(19	)	 	 	12	 	 	 	505	 	 	 	145	 	 	 	(11	)	 	 	1,418	 	
Income tax expense (benefit)	 	 	28	 	 	 	25	 	 	 	(7	)	 	 	12	 	 	 	500	 	 	 	54	 	 	 	(4	)	 	 	1,450	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings” (loss)	 	$	49	 	 	$	44	 	 	$	(12	)	 	 	11	%	 	 	508	%	 	$	91	 	 	$	(7	)	 	 	1,400	%	

Consumer Lending “Core Earnings” Basis 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	 	 	Six Months Ended	 	
 	 	June 30,
	 	 	March 31,
	 	 	June 30,
	 	 	June 30,
	 	 	June 30,
	 	
 	 	2011	 	 	2011	 	 	2010	 	 	2011	 	 	2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings” basis Private Education Student Loan yield	 	 	6.29	%	 	 	6.36	%	 	 	6.05	%	 	 	6.32	%	 	 	6.02	%	
Discount amortization	 	 	.26	 	 	 	.26	 	 	 	.28	 	 	 	.26	 	 	 	.27	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings” basis Private Education Loan net yield	 	 	6.55	 	 	 	6.62	 	 	 	6.33	 	 	 	6.58	 	 	 	6.29	 	
“Core Earnings” basis Private Education Loan cost of funds	 	 	(2.02	)	 	 	(1.97	)	 	 	(1.72	)	 	 	(1.99	)	 	 	(1.70	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings” basis Private Education Loan spread	 	 	4.53	 	 	 	4.65	 	 	 	4.61	 	 	 	4.59	 	 	 	4.59	 	
“Core Earnings” basis other asset spread impact	 	 	(.48	)	 	 	(.54	)	 	 	(.82	)	 	 	(.51	)	 	 	(.78	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings” basis Consumer Lending net interest margin (1)	 	 	4.05	%	 	 	4.11	%	 	 	3.79	%	 	 	4.08	%	 	 	3.81	%	

 	
 	
“Core Earnings” basis Consumer Lending net interest margin (1)	 	 	4.05	%	 	 	4.11	%	 	 	3.79	%	 	 	4.08	%	 	 	3.81	%	
Adjustment for GAAP accounting treatment	 	 	(.05	)	 	 	(.04	)	 	 	.04	 	 	 	(.05	)	 	 	.02	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP-basis Consumer Lending net interest margin (1)	 	 	4.00	%	 	 	4.07	%	 	 	3.83	%	 	 	4.03	%	 	 	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	 	$	36,784	 	 	$	37,006	 	 	$	36,470	 	 	$	36,894	 	 	$	36,574	 	
Other interest-earning assets	 	 	2,910	 	 	 	3,360	 	 	 	5,506	 	 	 	3,134	 	 	 	5,290	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Consumer Lending “Core Earnings” basis interest-earning assets	 	$	39,694	 	 	$	40,366	 	 	$	41,976	 	 	$	40,028	 	 	$	41,864	 	

20

 
The Private Education Loan spread remained relatively consistent across all periods presented. The increase in the net interest margin for both the comparable prior year quarter and six month period was primarily the result of a decline in the average balance of our Other asset portfolio. The size of the Other asset portfolio, which is primarily securitization trust restricted cash and cash held at Sallie Mae Bank (the “Bank”), has decreased significantly 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.
 
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 June 30, 2011, March 31, 2011 and June 30, 2010 and for the six months ended June 30, 2011 and 2010.

 	 	Quarters Ended	 	Six Months Ended	
 	 	June 30,
	 	March 31,
	 	June 30,
	 	June 30,
	 	June 30,
	
(Dollars in millions)	 	2011	 	2011	 	2010	 	2011	 	2010	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Private Education Loans provision for loan losses	 	$	265	 	 	$	275	 	 	$	349	 	 	$	540	 	 	$	674	 	
Private Education Loans charge-offs	 	 	263	 	 	 	273	 	 	 	336	 	 	 	537	 	 	 	620	 	
 
The continuing improvements for all periods presented above are primarily a result of the improving credit quality of the portfolio as well as an overall improvement to the U.S. economy. 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 10.0 percent at June 30, 2011. Private Education Loans in forbearance as a percentage of loans in repayment and forbearance increased to 4.7 percent from the prior quarter’s 4.6 percent and decreased from the year-ago quarter’s 5.3 percent. Charge-offs as a percentage of loans in repayment have declined significantly from 5.3 percent in the second quarter 2010 to 3.7 percent in the second quarter of 2011. The Private Education Loan allowance coverage of annual charge-offs ratio was 1.9 at June 30, 2011 compared with 1.5 at June 30, 2010. The allowance for loan losses as a percentage of ending Private Education Loans in repayment decreased from 7.9 percent at June 30, 2010 to 7.1 percent at June 30, 2011. We analyzed changes in the key ratios when determining the appropriate Private Education Loan allowance for loan losses.
 
Operating Expenses — Consumer Lending Segment
 
Operating expenses for our Consumer Lending segment include costs incurred to originate Private Education Loans and to service and collect on our Private Education Loan portfolio. The decreases in operating expenses in the three and six months ended June 30, 2011 compared with the three and six months ended June 30, 2010 were primarily the result of our cost cutting initiatives. Operating expenses, excluding restructuring-related asset impairments, were 80 basis points and 95 basis points of average Private Education Loans in the quarters ended June 30, 2011 and June 30, 2010, respectively, and 85 basis points and 92 basis points of average Private Education Loans in the six months ended June 30, 2011 and 2010, respectively.
21

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

 	 	 	 	 	 	 	 	 	 	 	% Increase
	 	
 	 	Quarters Ended	 	 	% Increase (Decrease)	 	 	Six Months Ended	 	 	(Decrease)	 	
 	 	June 30,
	 	 	March 31,
	 	 	June 30,
	 	 	June 30, 2011 vs.
	 	 	June 30, 2011 vs.
	 	 	June 30,
	 	 	June 30,
	 	 	June 30, 2011 vs.
	 	
(Dollars in millions)	 	2011	 	 	2011	 	 	2010	 	 	Mar. 31, 2011	 	 	June 30, 2010	 	 	2011	 	 	2010	 	 	June 30, 2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net interest income after provision	 	$	2	 	 	$	3	 	 	$	4	 	 	 	(33	)%	 	 	(50	)%	 	$	5	 	 	$	8	 	 	 	(38	)%	
Servicing revenue:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Intercompany loan servicing	 	 	187	 	 	 	189	 	 	 	165	 	 	 	(1	)	 	 	13	 	 	 	376	 	 	 	329	 	 	 	14	 	
Third-party loan servicing	 	 	20	 	 	 	21	 	 	 	17	 	 	 	(5	)	 	 	18	 	 	 	40	 	 	 	36	 	 	 	11	 	
Account asset servicing	 	 	19	 	 	 	19	 	 	 	19	 	 	 	—	 	 	 	—	 	 	 	38	 	 	 	35	 	 	 	9	 	
Campus Solutions	 	 	3	 	 	 	7	 	 	 	4	 	 	 	(57	)	 	 	(25	)	 	 	10	 	 	 	12	 	 	 	(17	)	
Guarantor servicing	 	 	15	 	 	 	9	 	 	 	23	 	 	 	67	 	 	 	(35	)	 	 	25	 	 	 	61	 	 	 	(59	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total servicing revenue	 	 	244	 	 	 	245	 	 	 	228	 	 	 	—	 	 	 	7	 	 	 	489	 	 	 	473	 	 	 	3	 	
Contingency revenue	 	 	86	 	 	 	78	 	 	 	88	 	 	 	10	 	 	 	(2	)	 	 	164	 	 	 	168	 	 	 	(2	)	
Transaction fees	 	 	11	 	 	 	11	 	 	 	12	 	 	 	—	 	 	 	(8	)	 	 	20	 	 	 	23	 	 	 	(13	)	
Other	 	 	—	 	 	 	—	 	 	 	1	 	 	 	—	 	 	 	(100	)	 	 	1	 	 	 	1	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total other income	 	 	341	 	 	 	334	 	 	 	329	 	 	 	2	 	 	 	4	 	 	 	674	 	 	 	665	 	 	 	1	 	
Direct operating expenses	 	 	121	 	 	 	128	 	 	 	133	 	 	 	(5	)	 	 	(9	)	 	 	249	 	 	 	252	 	 	 	(1	)	
Restructuring expenses	 	 	—	 	 	 	1	 	 	 	2	 	 	 	(100	)	 	 	(100	)	 	 	1	 	 	 	5	 	 	 	(80	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total expenses	 	 	121	 	 	 	129	 	 	 	135	 	 	 	(6	)	 	 	(10	)	 	 	250	 	 	 	257	 	 	 	(3	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income from continuing operations, before income tax expense	 	 	222	 	 	 	208	 	 	 	198	 	 	 	7	 	 	 	12	 	 	 	429	 	 	 	416	 	 	 	3	 	
Income tax expense	 	 	82	 	 	 	76	 	 	 	71	 	 	 	8	 	 	 	15	 	 	 	158	 	 	 	149	 	 	 	6	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings”	 	$	140	 	 	$	132	 	 	$	127	 	 	 	6	%	 	 	10	%	 	$	271	 	 	$	267	 	 	 	1	%	

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 $142 billion and $134 billion for the quarters ended June 30, 2011 and June 30, 2010 and $143 billion and $133 billion for the six months ended June 30, 2011 and 2010, respectively. The increase in intercompany loan servicing revenue from the year-ago periods 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 million accounts under the ED Servicing Contract as of June 30, 2011. Loan servicing fees in the second quarter of 2011 and the second quarter of 2010 included $15 million and $10 million, respectively, of servicing revenue related to 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. Assets under administration in our 529 college savings plans totaled $38 billion as of June 30, 2011, a 59 percent increase from the year-ago quarter.
 
Campus Solutions revenue is earned from our Campus Solutions business whose services include comprehensive financing and transaction processing solutions that we provide to college financial aid offices and students to streamline the financial aid process.
22

 
The decrease in Guarantor servicing revenue compared with the year-ago quarter and six-month period was primarily due to the elimination of the FFELP in 2010 and our no longer earning Guarantor issuance fees as well as the lower balance of outstanding FFELP Loans on which we earn additional fees.
 
The following table presents the outstanding inventory of contingent collections receivables that our Business Services segment will collect on behalf of others.

 	 	June 30,
	 	 	March 31,
	 	 	June 30,
	 	
(Dollars in millions)	 	2011	 	 	2011	 	 	2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Student loans	 	$	10,475	 	 	$	10,393	 	 	$	9,926	 	
Other	 	 	2,042	 	 	 	1,883	 	 	 	2,358	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	12,517	 	 	$	12,276	 	 	$	12,284	 	

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 79 percent and 80 percent of total segment revenues for the quarters ended June 30, 2011 and June 30, 2010, respectively, and 79 percent and 80 percent, for the six months ended June 30, 2011 and 2010, respectively.
 
We recently launched Sallie Mae Insurances Services, which will offer directly to college students and higher education institutions tuition insurance, renters insurance and student health insurance. In conjunction with this initiative, on June 30, 2011, we acquired a 45 percent stake in Next Generation Insurance Company, a nationally licensed insurance agency. We also include a Tuition Insurance Benefit with our Smart Option Student Loan.
 
Operating Expenses — Business Services Segment
 
Operating expenses for the three and six months ended June 30, 2011 decreased from the three and six months ended June 30, 2011 primarily as a result of our cost cutting initiatives. Included in operating expenses for 2011 are approximately $12 million per quarter in third-party servicing costs associated with our acquisition of $25 billion in loans at the end of 2010. As we transition those loans onto our own servicing platform in second half of 2011 we expect the servicing costs associated with these loans to decline significantly as the loans are converted onto our servicing platform.
23

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

 	 	 	 	 	 	 	 	 	 	 	% Increase
	 	
 	 	Quarters Ended	 	 	% Increase (Decrease)	 	 	Six Months Ended	 	 	(Decrease)	 	
 	 	June 30,
	 	 	March 31,
	 	 	June 30,
	 	 	June 30, 2011 vs.
	 	 	June 30, 2011 vs.
	 	 	June 30,
	 	 	June 30,
	 	 	June 30, 2011 vs.
	 	
(Dollars in millions)	 	2011	 	 	2011	 	 	2010	 	 	Mar. 31, 2011	 	 	June 30, 2010	 	 	2011	 	 	2010	 	 	June 30, 2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net interest loss after provision	 	$	(10	)	 	$	(13	)	 	$	(7	)	 	 	(23	)%	 	 	43	%	 	$	(23	)	 	$	(19	)	 	 	21	%	
Gains on debt repurchases	 	 	—	 	 	 	64	 	 	 	91	 	 	 	(100	)	 	 	(100	)	 	 	64	 	 	 	181	 	 	 	(65	)	
Other	 	 	3	 	 	 	2	 	 	 	—	 	 	 	50	 	 	 	100	 	 	 	6	 	 	 	11	 	 	 	(45	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total income	 	 	3	 	 	 	66	 	 	 	91	 	 	 	(95	)	 	 	(97	)	 	 	70	 	 	 	192	 	 	 	(64	)	
Direct operating expenses	 	 	—	 	 	 	8	 	 	 	2	 	 	 	(100	)	 	 	(100	)	 	 	9	 	 	 	4	 	 	 	125	 	
Overhead expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Corporate overhead	 	 	38	 	 	 	49	 	 	 	34	 	 	 	(22	)	 	 	12	 	 	 	87	 	 	 	66	 	 	 	32	 	
Unallocated information technology costs	 	 	31	 	 	 	30	 	 	 	32	 	 	 	3	 	 	 	(3	)	 	 	61	 	 	 	63	 	 	 	(3	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total overhead expenses	 	 	69	 	 	 	79	 	 	 	66	 	 	 	(13	)	 	 	5	 	 	 	148	 	 	 	129	 	 	 	15	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating expenses	 	 	69	 	 	 	87	 	 	 	68	 	 	 	(21	)	 	 	1	 	 	 	157	 	 	 	133	 	 	 	18	 	
Restructuring expenses	 	 	1	 	 	 	1	 	 	 	—	 	 	 	—	 	 	 	100	 	 	 	1	 	 	 	2	 	 	 	(50	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total expenses	 	 	70	 	 	 	88	 	 	 	68	 	 	 	(20	)	 	 	3	 	 	 	158	 	 	 	135	 	 	 	17	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations, before income tax expense (benefit)	 	 	(77	)	 	 	(35	)	 	 	16	 	 	 	120	 	 	 	(581	)	 	 	(111	)	 	 	38	 	 	 	(392	)	
Income tax expense (benefit)	 	 	(29	)	 	 	(12	)	 	 	8	 	 	 	142	 	 	 	(463	)	 	 	(41	)	 	 	18	 	 	 	(328	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss) from continuing operations	 	 	(48	)	 	 	(23	)	 	 	8	 	 	 	109	 	 	 	(700	)	 	 	(70	)	 	 	20	 	 	 	(450	)	
Income (loss) from discontinued operations, net of tax	 	 	11	 	 	 	(2	)	 	 	(7	)	 	 	650	 	 	 	257	 	 	 	10	 	 	 	(14	)	 	 	171	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
“Core Earnings” (loss)	 	$	(37	)	 	$	(25	)	 	$	1	 	 	 	48	%	 	 	(3,800	)%	 	$	(60	)	 	$	6	 	 	 	(1,100	)%	

Purchased Paper Business
 
Our Purchased Paper businesses are presented as 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:

 	 	June 30,
	 	March 31,
	 	June 30,
	
(Dollars in millions)	 	2011	 	2011	 	2010	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Carrying value of purchased paper	 	$	63	 	 	$	67	 	 	$	207	 	
 
Gains on Debt Repurchases
 
We began repurchasing our outstanding debt in the second quarter of 2008. We repurchased $60 million and $1.4 billion face amount of our senior unsecured notes for the quarters ended June 30, 2011 and June 30, 2010, respectively, and $885 million and $2.7 billion for the six months ended June 30, 2011 and 2010, respectively.
 
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.
 
The increase in corporate overhead for the six-month period ended June 30, 2011 compared with the six-month period ended June 30, 2010, was primarily the result of a change in the terms of our stock compensation plans and restructuring-related consulting expenses incurred in the first half of 2011. In the first
24

 
quarter of 2011, 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. This change in terms was the primary reason for the decrease in corporate overhead of $11 million from the prior quarter.
 
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.
 
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 losses and charge-offs, we no longer distinguish between the two as they are the same, unless otherwise noted.
 
Summary of our Student Loan Portfolio
 
Ending Student Loan Balances, net

 	 	June 30, 2011	 	
 	 	FFELP
	 	 	FFELP
	 	 	 	 	 	Private
	 	 	 	 	
 	 	Stafford and
	 	 	Consolidation
	 	 	Total
	 	 	Education
	 	 	 	 	
(Dollars in millions)	 	Other	 	 	Loans	 	 	FFELP	 	 	Loans	 	 	Total	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total student loan portfolio:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
In-school	 	$	4,109	 	 	$	—	 	 	$	4,109	 	 	$	2,341	 	 	$	6,450	 	
Grace and repayment	 	 	47,933	 	 	 	89,006	 	 	 	136,939	 	 	 	35,176	 	 	 	172,115	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total, gross	 	 	52,042	 	 	 	89,006	 	 	 	141,048	 	 	 	37,517	 	 	 	178,565	 	
Unamortized premium/(discount)	 	 	901	 	 	 	875	 	 	 	1,776	 	 	 	(861	)	 	 	915	 	
Receivable for partially charged-off loans	 	 	—	 	 	 	—	 	 	 	—	 	 	 	1,140	 	 	 	1,140	 	
Allowance for losses	 	 	(119	)	 	 	(70	)	 	 	(189	)	 	 	(2,043	)	 	 	(2,232	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total student loan portfolio	 	$	52,824	 	 	$	89,811	 	 	$	142,635	 	 	$	35,753	 	 	$	178,388	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
% of total FFELP	 	 	37	%	 	 	63	%	 	 	100	%	 	 	 	 	 	 	 	 	
% of total	 	 	30	%	 	 	50	%	 	 	80	%	 	 	20	%	 	 	100	%	

 	 	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	%	
 
25

 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	June 30, 2010	 	
 	 	FFELP
	 	 	FFELP
	 	 	 	 	 	Private
	 	 	 	 	
 	 	Stafford and
	 	 	Consolidation
	 	 	Total
	 	 	Education
	 	 	 	 	
(Dollars in millions)	 	Other	 	 	Loans	 	 	FFELP	 	 	Loans	 	 	Total	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total student loan portfolio:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
In-school	 	$	19,002	 	 	$	—	 	 	$	19,002	 	 	$	4,643	 	 	$	23,645	 	
Grace and repayment	 	 	47,422	 	 	 	79,509	 	 	 	126,931	 	 	 	32,567	 	 	 	159,498	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total, gross	 	 	66,424	 	 	 	79,509	 	 	 	145,933	 	 	 	37,210	 	 	 	183,143	 	
Unamortized premium/(discount)	 	 	1,155	 	 	 	1,593	 	 	 	2,748	 	 	 	(905	)	 	 	1,843	 	
Receivable for partially charged-off loans	 	 	—	 	 	 	—	 	 	 	—	 	 	 	888	 	 	 	888	 	
Allowance for losses	 	 	(122	)	 	 	(67	)	 	 	(189	)	 	 	(2,042	)	 	 	(2,231	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total student loan portfolio	 	$	67,457	 	 	$	81,035	 	 	$	148,492	 	 	$	35,151	 	 	$	183,643	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
% of total FFELP	 	 	45	%	 	 	55	%	 	 	100	%	 	 	 	 	 	 	 	 	
% of total	 	 	37	%	 	 	44	%	 	 	81	%	 	 	19	%	 	 	100	%	
 
Average Student Loan Balances (net of unamortized premium/discount)

 	 	Quarter Ended June 30, 2011	
 	 	FFELP
	 	FFELP
	 	 	 	Private
	 	 	
 	 	Stafford and
	 	Consolidation
	 	Total
	 	Education
	 	 	
(Dollars in millions)	 	Other	 	Loans	 	FFELP	 	Loans	 	Total	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	53,667	 	 	$	90,332	 	 	$	143,999	 	 	$	36,784	 	 	$	180,783	 	
% of FFELP	 	 	37	%	 	 	63	%	 	 	100	%	 	 	 	 	 	 	 	 	
% of total	 	 	30	%	 	 	50	%	 	 	80	%	 	 	20	%	 	 	100	%	

 	 	Quarter Ended March 31, 2011	
 	 	FFELP
	 	FFELP
	 	 	 	Private
	 	 	
 	 	Stafford and
	 	Consolidation
	 	Total
	 	Education
	 	 	
(Dollars in millions)	 	Other	 	Loans	 	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 June 30, 2010	
 	 	FFELP
	 	FFELP
	 	 	 	Private
	 	 	
 	 	Stafford and
	 	Consolidation
	 	Total
	 	Education
	 	 	
(Dollars in millions)	 	Other	 	Loans	 	FFELP	 	Loans	 	Total	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	66,488	 	 	$	81,613	 	 	$	148,101	 	 	$	36,470	 	 	$	184,571	 	
% of FFELP	 	 	45	%	 	 	55	%	 	 	100	%	 	 	 	 	 	 	 	 	
% of total	 	 	36	%	 	 	44	%	 	 	80	%	 	 	20	%	 	 	100	%	

 	 	Six Months Ended June 30, 2011	
 	 	FFELP
	 	FFELP
	 	 	 	Private
	 	 	
 	 	Stafford and
	 	Consolidation
	 	Total
	 	Education
	 	 	
(Dollars in millions)	 	Other	 	Loans	 	FFELP	 	Loans	 	Total	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	54,597	 	 	$	91,084	 	 	$	145,681	 	 	$	36,894	 	 	$	182,575	 	
% of FFELP	 	 	37	%	 	 	63	%	 	 	100	%	 	 	 	 	 	 	 	 	
% of total	 	 	30	%	 	 	50	%	 	 	80	%	 	 	20	%	 	 	100	%	

 	 	Six Months Ended June 30, 2010	
 	 	FFELP
	 	FFELP
	 	 	 	Private
	 	 	
 	 	Stafford and
	 	Consolidation
	 	Total
	 	Education
	 	 	
(Dollars in millions)	 	Other	 	Loans	 	FFELP	 	Loans	 	Total	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	64,339	 	 	$	82,147	 	 	$	146,486	 	 	$	36,574	 	 	$	183,060	 	
% of FFELP	 	 	44	%	 	 	56	%	 	 	100	%	 	 	 	 	 	 	 	 	
% of total	 	 	35	%	 	 	45	%	 	 	80	%	 	 	20	%	 	 	100	%	
26

 
Student Loan Activity

 	 	Three Months Ended June 30, 2011	 	
 	 	FFELP
	 	 	FFELP
	 	 	 	 	 	Total Private
	 	 	 	 	
 	 	Stafford and
	 	 	Consolidation
	 	 	Total
	 	 	Education
	 	 	Total
	 	
(Dollars in millions)	 	Other	 	 	Loans	 	 	FFELP	 	 	Loans	 	 	Portfolio	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Beginning balance	 	$	54,366	 	 	$	91,192	 	 	$	145,558	 	 	$	35,966	 	 	$	181,524	 	
Acquisitions and originations	 	 	190	 	 	 	58	 	 	 	248	 	 	 	292	 	 	 	540	 	
Capitalized interest and premium/discount amortization	 	 	360	 	 	 	370	 	 	 	730	 	 	 	330	 	 	 	1,060	 	
Consolidations to third parties	 	 	(730	)	 	 	(280	)	 	 	(1,010	)	 	 	(15	)	 	 	(1,025	)	
Sales	 	 	(192	)	 	 	—	 	 	 	(192	)	 	 	—	 	 	 	(192	)	
Repayments/defaults/other	 	 	(1,170	)	 	 	(1,529	)	 	 	(2,699	)	 	 	(820	)	 	 	(3,519	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ending balance	 	$	52,824	 	 	$	89,811	 	 	$	142,635	 	 	$	35,753	 	 	$	178,388	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	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	 	
Acquisitions and originations	 	 	103	 	 	 	247	 	 	 	350	 	 	 	929	 	 	 	1,279	 	
Capitalized interest and premium/discount amortization	 	 	322	 	 	 	371	 	 	 	693	 	 	 	294	 	 	 	987	 	
Consolidations to third parties	 	 	(851	)	 	 	(278	)	 	 	(1,129	)	 	 	(17	)	 	 	(1,146	)	
Sales	 	 	(189	)	 	 	—	 	 	 	(189	)	 	 	—	 	 	 	(189	)	
Repayments/defaults/other	 	 	(1,271	)	 	 	(1,545	)	 	 	(2,816	)	 	 	(896	)	 	 	(3,712	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ending balance	 	$	54,366	 	 	$	91,192	 	 	$	145,558	 	 	$	35,966	 	 	$	181,524	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended June 30, 2010	 	
 	 	FFELP
	 	 	FFELP
	 	 	 	 	 	Total Private
	 	 	 	 	
 	 	Stafford and
	 	 	Consolidation
	 	 	Total
	 	 	Education
	 	 	Total
	 	
(Dollars in millions)	 	Other	 	 	Loans	 	 	FFELP	 	 	Loans	 	 	Portfolio	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Beginning balance	 	$	64,346	 	 	$	82,178	 	 	$	146,524	 	 	$	35,362	 	 	$	181,886	 	
Acquisitions and originations	 	 	4,935	 	 	 	—	 	 	 	4,935	 	 	 	252	 	 	 	5,187	 	
Capitalized interest and premium/discount amortization	 	 	336	 	 	 	349	 	 	 	685	 	 	 	365	 	 	 	1,050	 	
Consolidations to third parties	 	 	(480	)	 	 	(207	)	 	 	(687	)	 	 	(10	)	 	 	(697	)	
Sales	 	 	(90	)	 	 	—	 	 	 	(90	)	 	 	—	 	 	 	(90	)	
Repayments/defaults/other	 	 	(1,590	)	 	 	(1,285	)	 	 	(2,875	)	 	 	(818	)	 	 	(3,693	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ending balance	 	$	67,457	 	 	$	81,035	 	 	$	148,492	 	 	$	35,151	 	 	$	183,643	 	

27

 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Six Months Ended June 30, 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	 	
Acquisitions and originations	 	 	293	 	 	 	305	 	 	 	598	 	 	 	1,221	 	 	 	1,819	 	
Capitalized interest and premium/discount amortization	 	 	682	 	 	 	741	 	 	 	1,423	 	 	 	624	 	 	 	2,047	 	
Consolidations to third parties	 	 	(1,581	)	 	 	(558	)	 	 	(2,139	)	 	 	(32	)	 	 	(2,171	)	
Sales	 	 	(381	)	 	 	—	 	 	 	(381	)	 	 	—	 	 	 	(381	)	
Repayments/defaults/other	 	 	(2,441	)	 	 	(3,074	)	 	 	(5,515	)	 	 	(1,716	)	 	 	(7,231	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ending balance	 	$	52,824	 	 	$	89,811	 	 	$	142,635	 	 	$	35,753	 	 	$	178,388	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Six Months Ended June 30, 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	 	
Acquisitions and originations	 	 	13,132	 	 	 	—	 	 	 	13,132	 	 	 	1,062	 	 	 	14,194	 	
Capitalized interest and premium/discount amortization	 	 	598	 	 	 	684	 	 	 	1,282	 	 	 	677	 	 	 	1,959	 	
Consolidations to third parties	 	 	(947	)	 	 	(374	)	 	 	(1,321	)	 	 	(22	)	 	 	(1,343	)	
Sales	 	 	(166	)	 	 	—	 	 	 	(166	)	 	 	—	 	 	 	(166	)	
Repayments/defaults/other	 	 	(3,335	)	 	 	(2,451	)	 	 	(5,786	)	 	 	(1,660	)	 	 	(7,446	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ending balance	 	$	67,457	 	 	$	81,035	 	 	$	148,492	 	 	$	35,151	 	 	$	183,643	 	

 
 	 	 	
(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 21 percent from the year-ago quarter to $264 million in the quarter ended June 30, 2011 and 14 percent in the first six months of 2011 compared with the year-ago period.
 
The following table summarizes our Private Education Loan originations.

 	 	Quarters Ended	 	Six Months Ended	
 	 	June 30,
	 	March 31,
	 	June 30,
	 	June 30,
	 	June 30,
	
(Dollars in millions)	 	2011	 	2011	 	2010	 	2011	 	2010	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Private Education Loan originations	 	$	264	 	 	$	940	 	 	$	219	 	 	$	1,204	 	 	$	1,058	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
28

 
Consumer Lending Portfolio Performance
 
Private Education Loan Delinquencies and Forbearance

 	 	Private Education Loan Delinquencies	 	
 	 	June 30,
	 	 	March 31,
	 	 	June 30,
	 	
 	 	2011	 	 	2011	 	 	2010	 	
(Dollars in millions)	 	Balance	 	 	%	 	 	Balance	 	 	%	 	 	Balance	 	 	%	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loans in-school/grace/deferment(1)	 	$	7,216	 	 	 	 	 	 	$	8,323	 	 	 	 	 	 	$	10,051	 	 	 	 	 	
Loans in forbearance(2)	 	 	1,430	 	 	 	 	 	 	 	1,343	 	 	 	 	 	 	 	1,437	 	 	 	 	 	
Loans in repayment and percentage of each status:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loans current	 	 	25,994	 	 	 	90.0	%	 	 	25,195	 	 	 	89.6	%	 	 	22,669	 	 	 	88.2	%	
Loans delinquent 31-60 days(3)	 	 	963	 	 	 	3.4	 	 	 	930	 	 	 	3.3	 	 	 	948	 	 	 	3.7	 	
Loans delinquent 61-90 days(3)	 	 	575	 	 	 	2.0	 	 	 	564	 	 	 	2.0	 	 	 	604	 	 	 	2.3	 	
Loans delinquent greater than 90 days (3)	 	 	1,339	 	 	 	4.6	 	 	 	1,431	 	 	 	5.1	 	 	 	1,501	 	 	 	5.8	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Private Education Loans in repayment	 	 	28,871	 	 	 	100.0	%	 	 	28,120	 	 	 	100.0	%	 	 	25,722	 	 	 	100.0	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Private Education Loans, gross	 	 	37,517	 	 	 	 	 	 	 	37,786	 	 	 	 	 	 	 	37,210	 	 	 	 	 	
Private Education Loan unamortized discount	 	 	(861	)	 	 	 	 	 	 	(876	)	 	 	 	 	 	 	(905	)	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Private Education Loans	 	 	36,656	 	 	 	 	 	 	 	36,910	 	 	 	 	 	 	 	36,305	 	 	 	 	 	
Private Education Loan receivable for partially charged-off loans	 	 	1,140	 	 	 	 	 	 	 	1,090	 	 	 	 	 	 	 	888	 	 	 	 	 	
Private Education Loan allowance for losses	 	 	(2,043	)	 	 	 	 	 	 	(2,034	)	 	 	 	 	 	 	(2,042	)	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Private Education Loans, net	 	$	35,753	 	 	 	 	 	 	$	35,966	 	 	 	 	 	 	$	35,151	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Percentage of Private Education Loans in repayment	 	 	 	 	 	 	77.0	%	 	 	 	 	 	 	74.4	%	 	 	 	 	 	 	69.1	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Delinquencies as a percentage of Private Education Loans in repayment	 	 	 	 	 	 	10.0	%	 	 	 	 	 	 	10.4	%	 	 	 	 	 	 	11.9	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loans in forbearance as a percentage of loans in repayment and forbearance	 	 	 	 	 	 	4.7	%	 	 	 	 	 	 	4.6	%	 	 	 	 	 	 	5.3	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loans in repayment greater than 12 months as a percentage of loans in repayment (4)	 	 	 	 	 	 	66.0	%	 	 	 	 	 	 	66.2	%	 	 	 	 	 	 	58.4	%	

 
 	 	 	
(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.	

29

 
 
Allowance for Private Education Loan Losses
 
The following table summarizes changes in the allowance for Private Education Loan losses for the quarters ended June 30, 2011, March 31, 2011 and June 30, 2010 and for the six months ended June 30, 2011 and 2010.

 	 	Quarters Ended	 	 	Six Months Ended	 	
 	 	June 30,
	 	 	Mar. 31,
	 	 	June 30,
	 	 	June 30,
	 	 	June 30,
	 	
(Dollars in millions)	 	2011	 	 	2011	 	 	2010	 	 	2011	 	 	2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Allowance at beginning of period — GAAP-basis	 	$	2,034	 	 	$	2,021	 	 	$	2,019	 	 	$	2,022	 	 	$	1,443	 	
Consolidation of off-balance sheet loans (1)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	524	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Allowance at beginning of period — total portfolio	 	 	2,034	 	 	 	2,021	 	 	 	2,019	 	 	 	2,022	 	 	 	1,967	 	
Provision for Private Education Loan losses	 	 	265	 	 	 	275	 	 	 	349	 	 	 	540	 	 	 	674	 	
Charge-offs	 	 	(263	)	 	 	(273	)	 	 	(336	)	 	 	(537	)	 	 	(620	)	
Reclassification of interest reserve	 	 	7	 	 	 	11	 	 	 	10	 	 	 	18	 	 	 	21	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Allowance at end of period	 	$	2,043	 	 	$	2,034	 	 	$	2,042	 	 	$	2,043	 	 	$	2,042	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Charge-offs as a percentage of average loans in repayment (annualized)	 	 	3.7	%	 	 	3.9	%	 	 	5.3	%	 	 	3.8	%	 	 	5.0	%	
Charge-offs as a percentage of average loans in repayment and forbearance (annualized)	 	 	3.5	%	 	 	3.8	%	 	 	5.1	%	 	 	3.6	%	 	 	4.8	%	
Allowance as a percentage of the ending total loan balance	 	 	5.3	%	 	 	5.2	%	 	 	5.4	%	 	 	5.3	%	 	 	5.4	%	
Allowance as a percentage of ending loans in repayment	 	 	7.1	%	 	 	7.2	%	 	 	7.9	%	 	 	7.1	%	 	 	7.9	%	
Average coverage of charge-offs (annualized)	 	 	1.9	 	 	 	1.8	 	 	 	1.5	 	 	 	1.9	 	 	 	1.6	 	
Ending total loans (2)	 	$	38,657	 	 	$	38,876	 	 	$	38,098	 	 	$	38,657	 	 	$	38,098	 	
Average loans in repayment	 	$	28,489	 	 	$	28,127	 	 	$	25,179	 	 	$	28,309	 	 	$	24,914	 	
Ending loans in repayment	 	$	28,871	 	 	$	28,120	 	 	$	25,722	 	 	$	28,871	 	 	$	25,722	 	

 	 	 	
(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.	

30

 
 
The following table provides detail for the traditional and non-traditional Private Education Loans at June 30, 2011, December 31, 2010 and June 30, 2010.

 	 	June 30, 2011	 	 	March 31, 2011	 	 	June 30, 2010	 	
 	 	 	 	 	Non-
	 	 	 	 	 	 	 	 	Non-
	 	 	 	 	 	 	 	 	Non-
	 	 	 	 	
(Dollars in millions)	 	Traditional	 	 	Traditional	 	 	Total	 	 	Traditional	 	 	Traditional	 	 	Total	 	 	Traditional	 	 	Traditional	 	 	Total	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ending total loans(1)	 	$	34,419	 	 	$	4,238	 	 	$	38,657	 	 	$	34,563	 	 	$	4,313	 	 	$	38,876	 	 	$	33,541	 	 	$	4,557	 	 	$	38,098	 	
Ending loans in repayment	 	 	26,134	 	 	 	2,738	 	 	 	28,872	 	 	 	25,401	 	 	 	2,719	 	 	 	28,120	 	 	 	22,898	 	 	 	2,824	 	 	 	25,722	 	
Private Education Loan allowance for losses	 	 	1,363	 	 	 	680	 	 	 	2,043	 	 	 	1,298	 	 	 	736	 	 	 	2,034	 	 	 	1,168	 	 	 	874	 	 	 	2,042	 	
Charge-offs as a percentage of average loans in repayment (annualized)	 	 	2.8	%	 	 	12.5	%	 	 	3.7	%	 	 	2.9	%	 	 	13.4	%	 	 	3.9	%	 	 	3.7	%	 	 	18.7	%	 	 	5.3	%	
Allowance as a percentage of total ending loan balance	 	 	4.0	%	 	 	16.0	%	 	 	5.3	%	 	 	3.8	%	 	 	17.1	%	 	 	5.2	%	 	 	3.5	%	 	 	19.2	%	 	 	5.4	%	
Allowance as a percentage of ending loans in repayment	 	 	5.2	%	 	 	24.8	%	 	 	7.1	%	 	 	5.1	%	 	 	27.1	%	 	 	7.2	%	 	 	5.1	%	 	 	31.0	%	 	 	7.9	%	
Average coverage of charge-offs (annualized)	 	 	1.9	 	 	 	2.0	 	 	 	1.9	 	 	 	1.8	 	 	 	2.0	 	 	 	1.8	 	 	 	1.4	 	 	 	1.7	 	 	 	1.5	 	
Delinquencies as a percentage of Private Education Loans in repayment	 	 	8.3	%	 	 	25.9	%	 	 	10.0	%	 	 	8.7	%	 	 	26.4	%	 	 	10.4	%	 	 	9.7	%	 	 	29.6	%	 	 	11.9	%	
Delinquencies greater than 90 days as a percentage of Private Education Loans in repayment	 	 	3.7	%	 	 	13.2	%	 	 	4.6	%	 	 	4.1	%	 	 	14.4	%	 	 	5.1	%	 	 	4.6	%	 	 	16.1	%	 	 	5.8	%	
Loans in forbearance as a percentage of loans in repayment and forbearance	 	 	4.5	%	 	 	7.0	%	 	 	4.7	%	 	 	4.4	%	 	 	6.5	%	 	 	4.6	%	 	 	5.1	%	 	 	7.2	%	 	 	5.3	%	
Loans that entered repayment during the period (2)	 	$	1,010	 	 	$	103	 	 	$	1,113	 	 	$	1,519	 	 	$	86	 	 	$	1,605	 	 	$	1,339	 	 	$	153	 	 	$	1,492	 	
Percentage of Private Education Loans with a cosigner	 	 	64	%	 	 	29	%	 	 	60	%	 	 	64	%	 	 	29	%	 	 	60	%	 	 	62	%	 	 	28	%	 	 	58	%	
Average FICO at origination	 	 	725	 	 	 	624	 	 	 	716	 	 	 	725	 	 	 	623	 	 	 	716	 	 	 	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.	

31

 
 
The tables below show the composition and status of the Private Education Loan portfolio aged by number of months in active repayment status (months for which a scheduled monthly payment was due). As indicated in the tables, the percentage of loans in forbearance status decreases the longer the loans have been in active repayment status. At June 30, 2011, loans in forbearance status as a percentage of loans in repayment and forbearance were 6.8 percent for loans that have been in active repayment status for less than 25 months. The percentage drops to 1.3 percent for loans that have been in active repayment status for more than 48 months. Approximately 83 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
	 	 	 	 	
June 30, 2011	 	1 to 12	 	 	13 to 24	 	 	25 to 36	 	 	37 to 48	 	 	More than 48	 	 	Repayment	 	 	Total	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loans in-school/grace/deferment	 	$	—	 	 	$	—	 	 	$	—	 	 	$	—	 	 	$	—	 	 	$	7,216	 	 	$	7,216	 	
Loans in forbearance	 	 	990	 	 	 	200	 	 	 	118	 	 	 	57	 	 	 	65	 	 	 	—	 	 	 	1,430	 	
Loans in repayment — current	 	 	8,254	 	 	 	5,844	 	 	 	4,131	 	 	 	3,040	 	 	 	4,725	 	 	 	—	 	 	 	25,994	 	
Loans in repayment — delinquent 31-60 days	 	 	487	 	 	 	192	 	 	 	127	 	 	 	65	 	 	 	92	 	 	 	—	 	 	 	963	 	
Loans in repayment — delinquent 61-90 days	 	 	327	 	 	 	108	 	 	 	66	 	 	 	32	 	 	 	42	 	 	 	—	 	 	 	575	 	
Loans in repayment — delinquent greater than 90 days	 	 	735	 	 	 	281	 	 	 	150	 	 	 	73	 	 	 	100	 	 	 	—	 	 	 	1,339	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	10,793	 	 	$	6,625	 	 	$	4,592	 	 	$	3,267	 	 	$	5,024	 	 	$	7,216	 	 	 	37,517	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unamortized discount	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(861	)	
Receivable for partially charged-off loans	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,140	 	
Allowance for loan losses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(2,043	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Private Education Loans, net	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	35,753	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loans in forbearance as a percentage of loans in repayment and forbearance	 	 	9.2	%	 	 	3.0	%	 	 	2.6	%	 	 	1.8	%	 	 	1.3	%	 	 	—	%	 	 	4.7	%	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(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	 	 	967	 	 	 	172	 	 	 	99	 	 	 	48	 	 	 	57	 	 	 	—	 	 	 	1,343	 	
Loans in repayment — current	 	 	7,912	 	 	 	5,883	 	 	 	4,136	 	 	 	2,864	 	 	 	4,400	 	 	 	—	 	 	 	25,195	 	
Loans in repayment — delinquent 31-60 days	 	 	460	 	 	 	201	 	 	 	122	 	 	 	62	 	 	 	85	 	 	 	—	 	 	 	930	 	
Loans in repayment — delinquent 61-90 days	 	 	336	 	 	 	104	 	 	 	57	 	 	 	28	 	 	 	39	 	 	 	—	 	 	 	564	 	
Loans in repayment — delinquent greater than 90 days	 	 	803	 	 	 	304	 	 	 	150	 	 	 	73	 	 	 	101	 	 	 	—	 	 	 	1,431	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	10,478	 	 	$	6,664	 	 	$	4,564	 	 	$	3,075	 	 	$	4,682	 	 	$	8,323	 	 	 	37,786	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unamortized discount	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(876	)	
Receivable for partially charged-off loans	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,090	 	
Allowance for loan losses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(2,034	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Private Education Loans, net	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	35,966	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loans in forbearance as a percentage of loans in repayment and forbearance	 	 	9.2	%	 	 	2.6	%	 	 	2.2	%	 	 	1.6	%	 	 	1.2	%	 	 	—	%	 	 	4.6	%	

32

 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Dollars in millions)
	 	Monthly Scheduled Payments Due	 	 	Not Yet in
	 	 	 	 	
June 30, 2010	 	1 to 12	 	 	13 to 24	 	 	25 to 36	 	 	37 to 48	 	 	More than 48	 	 	Repayment	 	 	Total	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loans in-school/grace/deferment	 	$	—	 	 	$	—	 	 	$	—	 	 	$	—	 	 	$	—	 	 	$	10,051	 	 	$	10,051	 	
Loans in forbearance	 	 	1,087	 	 	 	175	 	 	 	86	 	 	 	41	 	 	 	48	 	 	 	—	 	 	 	1,437	 	
Loans in repayment — current	 	 	8,761	 	 	 	4,791	 	 	 	3,521	 	 	 	2,311	 	 	 	3,285	 	 	 	—	 	 	 	22,669	 	
Loans in repayment — delinquent 31-60 days	 	 	563	 	 	 	174	 	 	 	94	 	 	 	50	 	 	 	67	 	 	 	—	 	 	 	948	 	
Loans in repayment — delinquent 61-90 days	 	 	395	 	 	 	101	 	 	 	49	 	 	 	26	 	 	 	33	 	 	 	—	 	 	 	604	 	
Loans in repayment — delinquent greater than 90 days	 	 	975	 	 	 	282	 	 	 	112	 	 	 	55	 	 	 	77	 	 	 	—	 	 	 	1,501	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	11,781	 	 	$	5,523	 	 	$	3,862	 	 	$	2,483	 	 	$	3,510	 	 	$	10,051	 	 	 	37,210	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unamortized discount	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(905	)	
Receivable for partially charged-off loans	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	888	 	
Allowance for loan losses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(2,042	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Private Education Loans, net	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	35,151	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loans in forbearance as a percentage of loans in repayment and forbearance	 	 	9.2	%	 	 	3.2	%	 	 	2.2	%	 	 	1.7	%	 	 	1.4	%	 	 	—	%	 	 	5.3	%	

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. The monthly average number of loans granted forbearance as a percentage of loans in repayment and forbearance increased to 5.0 percent in the second quarter of 2011 compared with the year-ago quarter of 4.5 percent. As of June 30, 2011, 2.5 percent of loans in current status were delinquent as of the end of the prior month, but were granted a forbearance that made them current as of June 30, 2011 (borrowers made payments on approximately 20 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 immediately charged off through provision expense with an offsetting reduction in the receivable for partially charged-off Private Education Loans. If actual periodic recoveries are greater than expected, they will be reflected as a recovery through the allowance for Private Education Loan losses once the cumulative recovery amount exceeds the cumulative amount originally expected to be recovered.
33

 
The following table summarizes the activity in the receivable for partially charged-off Private Education Loans for the quarters ended June 30, 2011, March 31, 2011 and June 30, 2010 and the six months ended June 30, 2011 and 2010.

 	 	Quarters Ended	 	 	Six Months Ended	 	
 	 	June 30,
	 	 	Mar. 31,
	 	 	June 30,
	 	 	June 30,
	 	 	June 30,
	 	
(Dollars in millions)	 	2011	 	 	2011	 	 	2010	 	 	2011	 	 	2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Receivable at beginning of period — GAAP-basis	 	$	1,090	 	 	$	1,039	 	 	$	797	 	 	$	1,039	 	 	$	499	 	
Consolidation of off-balance sheet trusts (1)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	229	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Receivable at beginning of period	 	 	1,090	 	 	 	1,039	 	 	 	797	 	 	 	1,039	 	 	 	728	 	
Expected future recoveries of current period defaults (2)	 	 	94	 	 	 	98	 	 	 	121	 	 	 	192	 	 	 	222	 	
Recoveries(3)	 	 	(37	)	 	 	(40	)	 	 	(24	)	 	 	(77	)	 	 	(49	)	
Charge-offs(4)	 	 	(7	)	 	 	(7	)	 	 	(6	)	 	 	(14	)	 	 	(13	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Receivable at end of period	 	$	1,140	 	 	$	1,090	 	 	$	888	 	 	$	1,140	 	 	$	888	 	

 
 	 	 	
(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)	 	Remaining loan balance expected to be collected from contractual loan balances partially charged off during the period. This is the difference between the defaulted loan balance and the amount of the defaulted loan balance that was charged off.	
 	 	 	
(3)	 	Current period cash collections of amounts originally expected to be recovered.	
 	 	 	
(4)	 	Represents the current period recovery shortfall. This is the difference between what was expected to be collected and what was actually collected.	
 
Funding, Liquidity and Capital
 
We expect to fund our ongoing liquidity needs, including the origination of new Private Education Loans and the repayment of $2.5 billion of senior unsecured notes to mature in the next twelve months, primarily through our current cash and investment position and very predictable operating cash flows provided by earnings and repayment of principal on unencumbered student loan assets, distributions from our securitization trusts (including servicing fees which are priority payments within the trusts), as well as drawdowns under the FFELP ABCP Facilities and the facility with the Federal Home Loan Bank in Des Moines (the “FHLB-DM Facility”), the issuance of term ABS, the collection of additional term bank deposits and the issuance of unsecured debt.
 
Currently, new Private Education Loan originations are initially funded through deposits and subsequently securitized to term on a programmatic basis. We have $1.4 billion of cash at the Bank as of June 30, 2011 available to fund future originations.
34

 
Sources of Liquidity and Available Capacity
 
The following tables detail our main sources of primary liquidity and our main sources of secondary liquidity (unused secured credit facilities contingent upon obtaining eligible collateral) outstanding at June 30, 2011, March 31, 2011 and December 31, 2010 and the average balances for the three months ended June 30, 2011, March 31, 2011 and June 30, 2010 and for the six months ended June 30, 2011 and 2010.

 	 	As of	 	
(Dollars in millions)	 	June 30, 2011	 	 	March, 31, 2011	 	 	December 31, 2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Sources of primary liquidity:	 	 	 	 	 	 	 	 	 	 	 	 	
Unrestricted cash and liquid investments:	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	4,145	 	 	$	3,872	 	 	$	4,342	 	
Investments	 	 	83	 	 	 	79	 	 	 	85	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total unrestricted cash and liquid investments (1)	 	$	4,228	 	 	$	3,951	 	 	$	4,427	 	
Unencumbered FFELP Loans	 	$	855	 	 	$	2,387	 	 	$	1,441	 	
Sources of secondary liquidity contingent on obtaining eligible collateral:	 	 	 	 	 	 	 	 	 	 	 	 	
Unused secured credit facilities: FFELP ABCP Facilities and FHLB-DM Facility (2)	 	$	10,728	 	 	$	11,686	 	 	$	12,601	 	

 	 	 	
(1)	 	At June 30, 2011, March 31, 2011 and December 31, 2010, ending balances include $1.4 billion, $1.1 billion and $2.0 billion, respectively, of cash and liquid investments at the Bank. This cash will be used primarily to originate or acquire student loans.	
 	 	 	
(2)	 	Current borrowing capacity under the FFELP ABCP Facilities and FHLB-DM Facility is determined based on qualifying collateral from the unencumbered FFELP Loans reported in primary liquidity above. Additional borrowing capacity would primarily be used to fund FFELP Loan portfolio acquisitions and to refinance FFELP Loans used as collateral in the ED Conduit Program Facility. The total amount we can borrow is contingent upon obtaining eligible collateral. If we use our unencumbered FFELP Loans as collateral to borrow against these facilities, the remaining amount we could borrow is reduced accordingly.	

 	 	Average Balances
	 	 	 	 	 	 	 	
 	 	Quarters Ended	 	 	Average Balances
	 	
 	 	June 30,
	 	 	March 31,
	 	 	June 30,
	 	 	Six Months Ended June 30,	 	
(Dollars in millions)	 	2011	 	 	2011	 	 	2010	 	 	2011	 	 	2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Sources of primary liquidity:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unrestricted cash and liquid investments:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	3,404	 	 	$	4,231	 	 	$	6,311	 	 	$	3,815	 	 	$	6,162	 	
Investments	 	 	101	 	 	 	78	 	 	 	99	 	 	 	90	 	 	 	101	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total unrestricted cash and liquid investments (1)	 	$	3,505	 	 	$	4,309	 	 	$	6,410	 	 	$	3,905	 	 	$	6,263	 	
Unused bank lines of credit	 	$	—	 	 	$	—	 	 	$	2,298	 	 	$	—	 	 	$	2,889	 	
Unencumbered FFELP Loans	 	$	1,673	 	 	$	2,180	 	 	$	1,995	 	 	$	1,925	 	 	$	2,092	 	
Sources of secondary liquidity contingent on obtaining eligible collateral:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unused secured credit facilities: FFELP ABCP Facilities and FHLB-DM Facility (2)	 	$	11,408	 	 	$	12,046	 	 	$	13,728	 	 	$	11,725	 	 	$	11,983	 	

 	 	 	
(1)	 	For the three months ended June 30, 2011, March 31, 2011 and June 30, 2010, average balances include $1.0 billion, $1.4 billion and $2.7 billion, respectively, of cash and liquid investments at the Bank. For the six months ended June 30, 2011 and 2010, average balances include $1.2 billion and $2.4 billion, respectively, of cash and liquid investments at the Bank.	
 	 	 	
(2)	 	Current borrowing capacity under the FFELP ABCP Facilities and FHLB-DM Facility is based on qualifying collateral from the unencumbered FFELP Loans reported in primary liquidity above. Additional borrowing capacity would primarily be used to fund FFELP Loan portfolio acquisitions and to refinance FFELP Loans used as collateral in the ED Conduit Program Facility. The total amount we can borrow is contingent upon obtaining eligible collateral. If we use our unencumbered FFELP Loans as collateral to borrow against these facilities, the remaining amount we could borrow is reduced accordingly.	

35

 
 
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 June 30, 2011, we had a total of $21.4 billion of unencumbered assets (which includes the assets that comprise our primary liquidity and are available to serve as collateral for our secondary liquidity), excluding goodwill and acquired intangibles. Total student loans, net, comprised $11.4 billion of our unencumbered assets of which $10.5 billion and $.9 billion related to Private Education Loans, net and FFELP Loans, net, respectively.
 
The following table reconciles encumbered and unencumbered assets and their net impact on total tangible equity.

 	 	June 30,
	 	 	March 31,
	 	 	June 30,
	 	
(Dollars in billions)	 	2011	 	 	2011	 	 	2010	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net assets of consolidated variable interest entities (encumbered assets)	 	$	12.4	 	 	$	12.6	 	 	$	13.1	 	
Tangible unencumbered assets(1)	 	 	21.4	 	 	 	24.1	 	 	 	26.7	 	
Unsecured debt	 	 	(24.9	)	 	 	(27.3	)	 	 	(31.7	)	
Mark-to-market on unsecured hedged debt(2)	 	 	(1.6	)	 	 	(1.4	)	 	 	(1.5	)	
Other liabilities, net	 	 	(2.8	)	 	 	(3.3	)	 	 	(1.5	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total tangible equity	 	$	4.5	 	 	$	4.7	 	 	$	5.1	 	

 
 	 	 	
(1)	 	Excludes goodwill and acquired intangible assets.	
 	 	 	
(2)	 	At June 30, 2011, March 31, 2011 and June 30, 2010, there were $1.4 billion, $1.3 billion and $1.3 billion, respectively, of net gains on derivatives hedging this debt in unencumbered assets, which partially offset these losses.	
 
“Core Earnings” Basis Borrowings
 
The following table presents the ending balances of our “Core Earnings” basis borrowings at June 30, 2011, March 31, 2011 and June 30, 2010.

 	 	June 30, 2011	 	 	March 31, 2011	 	 	June 30, 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	 	$	2,464	 	 	$	16,787	 	 	$	19,251	 	 	$	3,741	 	 	$	16,894	 	 	$	20,635	 	 	$	5,544	 	 	$	19,681	 	 	$	25,225	 	
Brokered deposits	 	 	1,550	 	 	 	1,654	 	 	 	3,204	 	 	 	1,324	 	 	 	2,808	 	 	 	4,132	 	 	 	1,687	 	 	 	3,291	 	 	 	4,978	 	
Retail and other deposits	 	 	1,487	 	 	 	—	 	 	 	1,487	 	 	 	1,500	 	 	 	—	 	 	 	1,500	 	 	 	432	 	 	 	—	 	 	 	432	 	
Other(1)	 	 	1,004	 	 	 	—	 	 	 	1,004	 	 	 	1,064	 	 	 	—	 	 	 	1,064	 	 	 	1,095	 	 	 	—	 	 	 	1,095	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total unsecured borrowings	 	 	6,505	 	 	 	18,441	 	 	 	24,946	 	 	 	7,629	 	 	 	19,702	 	 	 	27,331	 	 	 	8,758	 	 	 	22,972	 	 	 	31,730	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Secured borrowings:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
FFELP Loans securitizations	 	 	—	 	 	 	109,524	 	 	 	109,524	 	 	 	—	 	 	 	111,042	 	 	 	111,042	 	 	 	—	 	 	 	99,959	 	 	 	99,959	 	
Private Education Loans securitizations	 	 	—	 	 	 	21,815	 	 	 	21,815	 	 	 	—	 	 	 	20,983	 	 	 	20,983	 	 	 	—	 	 	 	21,414	 	 	 	21,414	 	
ED Conduit Program facility	 	 	22,756	 	 	 	—	 	 	 	22,756	 	 	 	23,573	 	 	 	—	 	 	 	23,573	 	 	 	15,873	 	 	 	—	 	 	 	15,873	 	
ED Participation Program facility	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	19,856	 	 	 	—	 	 	 	19,856	 	
ABCP borrowings	 	 	314	 	 	 	5,000	 	 	 	5,314	 	 	 	325	 	 	 	4,671	 	 	 	4,996	 	 	 	1,238	 	 	 	5,000	 	 	 	6,238	 	
Acquisition financing(2)	 	 	—	 	 	 	1,010	 	 	 	1,010	 	 	 	—	 	 	 	1,064	 	 	 	1,064	 	 	 	—	 	 	 	—	 	 	 	—	 	
FHLB-DM facility	 	 	1,000	 	 	 	—	 	 	 	1,000	 	 	 	525	 	 	 	—	 	 	 	525	 	 	 	575	 	 	 	—	 	 	 	575	 	
Indentured trusts	 	 	—	 	 	 	1,125	 	 	 	1,125	 	 	 	—	 	 	 	1,187	 	 	 	1,187	 	 	 	47	 	 	 	1,415	 	 	 	1,462	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total secured borrowings	 	 	24,070	 	 	 	138,474	 	 	 	162,544	 	 	 	24,423	 	 	 	138,947	 	 	 	163,370	 	 	 	37,589	 	 	 	127,788	 	 	 	165,377	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	30,575	 	 	$	156,915	 	 	$	187,490	 	 	$	32,052	 	 	$	158,649	 	 	$	190,701	 	 	$	46,347	 	 	$	150,760	 	 	$	197,107	 	

 
 	 	 	
(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.	

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Transactions during the Second-Quarter 2011
 
On June 30, 2011, we completed an $825 million Private Education Loan ABS transaction at an all-in LIBOR equivalent cost of one-month LIBOR plus 1.89 percent. This issue has a weighted average life of 4.0 years and an initial overcollateralization of approximately 18 percent.
 
On May 26, 2011, we completed an $821 million FFELP ABS transaction at an all-in LIBOR equivalent cost of one-month LIBOR plus 1.15 percent. This issue has a weighted average life of 5.8 years and an initial overcollateralization of approximately 3 percent.
 
On April 26, 2011, we completed 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 an initial overcollateralization of approximately 21 percent.
 
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 by utilizing current excess liquidity to reduce future obligations related to our unsecured borrowings at favorable pricing. In the second quarter of 2011 we repurchased $60 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 $0.3 million.
 
In the second-quarter 2011, we utilized $156 million to repurchase 9.6 million common shares on the open market as part of our $300 million share repurchase program announced in April. We declared and paid a $.10 per share dividend during the second quarter of 2011.
 
Recently Issued Accounting Standards — Troubled Debt Restructurings
 
In April 2011, the Financial Accounting Standards Board issued Accounting Standards Update No. 2011-02, Receivables (Topic 310), “A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring.” This new guidance clarifies when a loan restructuring constitutes a trouble debt restructuring. Under the new guidance, student loans for which we have granted concessions may now be considered troubled debt restructurings that were previously not and this may require us to increase the amount of our allowance for loan losses. This guidance is effective July 1, 2011, applied retrospectively to January 1, 2011. The most likely effect of implementing this new guidance would be to increase the size of our allowance for losses. At this time we have not completed the estimate of the change in our allowance for loan losses that could result from implementing this new guidance.
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