Slide 1: Debt Investor Presentation First Quarter 2009
Debt Investor Presentation First Quarter 2009 SLM Corporation
Slide 2: Forward Looking Statements
2 Forward Looking Statements This Presentation contains forward-looking statements and information based on management's current expectations as of the date of this presentation. Statements that are not historical facts, including, financial projections, statements about our beliefs or expectations
Slide 3: SLM Corporation Overview
SLM Corporation Overview 3 SallieMae udiilEMde
Slide 4: SLM Corporation
4 SLM Corporation #1 originator of student loans in the U.S. education lending market #1 servicer and collector of students loans in the U.S. currently servicing $184 billion in assets including $9 billion for third parties Fully independent private sector company with scale and a broad franchise, t
Slide 5: Life-stage Customer Strategy
Life-stage Customer Strategy Life-stage Customer Strategy Life-stage Customer Strategy Early awareness and saving School selection, understanding ways to pay with Education Investment Planner Complete 1-2-3 financing solutions for schools and families Life-of-loan guidance and products to encourage
Slide 6: SLM Corporation Update
6 SLM Corporation Update Managed student loans outstanding increased to $185 billion in Q1, up 2.7% from year-end 2008 Originated a record $6.6 billion of FFELP loans in Q1, a 10% increase over prior year Private Credit originations decline 40% in Q1 2009 to $1.5 billion from the prior year due to a
Slide 7: A Brief Corporate History
7 A Brief Corporate History (1) Currently known as the Federal Family Education Loan Program (FFELP). SLM Corporate Debt Ratings SLM Corporate Debt Ratings SLM Corporate Debt Ratings SLM Corporate Debt Ratings SLM Corporate Debt Ratings Moody's Moody's S&P Fitch Long-Term Ba1 Ba1 BBB- BBB Short-Term
Slide 8: What Makes SLM Corporation Unique
8 What Makes SLM Corporation Unique Credit Risk 81% of managed student loans carry an explicit U.S. government guarantee of at least 97% Managed student loan losses were 0.49% in Q1 2009 Interest Rate and Economic Cycles Interest rate sensitivities of floating rate assets closely matched with floati
Slide 9: Q109 "Core Earnings" Summary
9 Q109 "Core Earnings" Summary
Slide 10: Fee Income & Other Income
10 Fee Income & Other Income Contingency Inventory of $11.0 Billion Collecting on behalf of the Dept of Education for close to ten years Upromise - largest private source of 529 plans Guarantor Servicing for student loans APG is re-focused on student loan contingency and collections 2009 Q1 Fee & Ot
Slide 11: Lending Segment Earnings Detail
11 Lending Segment Earnings Detail "Core Earnings" basis before 2008 Asset-Backed Financing Facilities Fees
Slide 12: Dept. of Education / Government Programs
Dept. of Education / Government Programs Kennedy-Miller Legislation - Signed by President 05/07/08 ECASLA - Broad authority to purchase loans from 10/01/03 - 07/01/09 ECASLA Extension - Signed by President 10/07/08 Extended purchase authority for 2009 - 2010 Academic Year Loan Purchase Commitment Pr
Slide 13: Federal Student Loan Policy Alternatives
Federal Student Loan Policy Alternatives President's Budget Proposal Convert all federal student loans to federal funding by July 2010 Use savings to substantially increase Pell Grants Use private sector firms to originate and service 13
Slide 14: Federal Student Loan Market Outstanding
Federal Student Loan Market Outstanding Government Student Loan Market Distribution 2/28/09 Top 10 Holders of FFELP Loans FFYE 9/30/08 Lender Name $ Outstanding (in Billions) Ranking Sallie Mae $141 1 Citibank /Student Loan Corp 31 2 NELNET 26 3 Wells Fargo 14 4 Brazos Group 14 5 Wachovia 12 6 PA Hi
Slide 15: Office of the Chief Executive Officer
Office of the Chief Executive Officer 15 Al Lord , Chief Executive Officer Jack Hewes , Sr .. EVP & Chief Lending Officer Jim Truitt , SVP Chief Compliance Officer David West , SVP Chief Credit Officer Jack Remondi , Vice Chair & Chief Financial Officer Joe DePaulo, EVP & Chief Marketing Officer Kar
Slide 16: The U.S. Student Loan Market
16 The U.S. Student Loan Market
Slide 17: Favorable Student Loan Market Trends
17 Higher Education Enrollment (millions) Source: National Center for Education Statistics Note: Total enrollment in all degree-granting institutions; middle alternative projections for 2007 onward Annual Cost of Education ($ thousands) Source: College Board Note: Academic years, average published t
Slide 18: Recessions Have Smaller Impact On College Grads
Recessions Have Smaller Impact On College Grads 18 Source: U.S. Department of Labor, Bureau of Labor Statistics
Slide 19: The Federal Family Education Loan Program (FFELP)
19 The Federal Family Education Loan Program or "FFELP" Provides lenders an explicit U.S. government guarantee of at least 97% and a fixed yield on student loans made pursuant to the FFELP program Loan pricing, terms and maximum borrowing limits set by Congress Available to undergraduate students, g
Slide 20: Growth in Federal Student Loan Originations
20 Growth in Federal Student Loan Originations In 2008, more borrowers took out more FFELP loans with higher loan balances than ever before Total federal student loan originations, including both FFELP and FDLP loans, increased by 9% in 2008, following a 15% increase in 2007 (1) The U.S. Department
Slide 21: FFELP Student Loan Market Share
21 FFELP Student Loan Market Share *Notes: Sallie Mae includes all Preferred Channel volume Wells Fargo includes Wachovia volumes Bank of America includes Fleet and LaSalle Bank volumes JP Morgan Chase includes Bank One volumes PNC Bank includes National City Bank volumes Source: http://www.fp.ed.go
Slide 22: FFELP Loan Originations
22 FFELP Loan Originations Sallie Mae FFELP originations increased 61% representing 87% of total FFELP originations Originated $1 Billion of loans for third party servicing clients in the quarter
Slide 23: The Private Education Loan Market
23 The Private Education Loan Market Consumer loans made to students and parents specifically to fund the cost of undergraduate, graduate and other forms of post-secondary education Typically used to bridge the funding gap between grants, aid and FFELP loans, and the increasing cost of higher educat
Slide 24: SLM's Private Education Loan Portfolio
24 SLM's Private Education Loan Portfolio $37 billion of managed outstandings at Q1 2009 20% of SLM's managed student loan portfolio Risk-based pricing Approximately 55% of portfolio has a co-borrower, typically a parent Higher education loans typically non-dischargeable in bankruptcy Integrated und
Slide 25: SLM's New Private Education Loan Product
25 SLM's New Private Education Loan Product Launched 3/23/09 Eliminates negative amortization during the school and grace period while reducing the average life from 9.5 years to 5 years Strategies to achieve a 90% cosigned rate have been deployed Repayment term is driven by cumulative amount borrow
Slide 26: Private Education Loan Market Demand
26 Private Education Loan Market Demand Private education loans help bridge the gap between funding available through government- sponsored programs and the rapidly increasing cost of education Cost of College AY 2008-2009 Based on a Four-Year Term FFELP Limit $31,000 Cost of attendance gap FFELP Li
Slide 27: Private Credit Originations
27 Private Credit Originations * Source: College Board, Trends in Higher Education Series (2007), 2008 industry data estimated by SLM *
Slide 28: Credit Quality
Credit Quality 2s sallieMae Kael LIS,
Slide 29: Loan Losses
29 Loan Losses + = Private Education Loans 19% U.S. Government Guaranteed Loans 81% Charge-Offs (1) = 0.06% Charge-Offs (1) = 2.29% Total Charge-Offs (1) = 0.49% (1) Managed FFELP charge-offs as a percentage of average managed FFELP assets. Managed Private Education Loan charge-offs as a percentage
Slide 30: FFELP Education Loan Portfolio
FFELP Education Loan Portfolio 30 "Core Earnings" FFELP Loan Spread vs. Charge-Offs (1) "Core Earnings" FFELP Loan spread, before provision. Annualized charge-offs as a percentage of average Managed FFELP Loans in repayment.
Slide 31: Private Education Loan Portfolio
Private Education Loan Portfolio 31 "Core Earnings" Private Education Loan Spread vs. Charge-Offs(1) (1) "Core Earnings" Private Education Loan spread, before provision. Annualized charge-offs as a percentage of average Managed Private Education Loans in repayment.
Slide 32: SLM Private Credit Default Emergence Profile
32 SLM Private Credit Default Emergence Profile - Payments Made
Slide 33: Charge-offs driven by Non-Traditional loans
Charge-offs driven by Non-Traditional loans Non-Traditional loans represent less than 14% of the Private Education Loan portfolio Higher quality loans entering repayment in 2009 and 2010 Charge-off Trends - Mix of Traditional vs. Non-Traditional 33
Slide 34: Private Education Loan Portfolio Performance
34 Private Education Loan Portfolio Performance
Slide 35: Portfolio Quality Improving
Portfolio Quality Improving Non-Traditional charge-off rate is 7x to 8x greater than Traditional 74% of Q109 loan originations had co-borrowers, up from 56% in Q108. Non-cosigned loans charge off at more than twice the rate of cosigned loans Amounts shown above represent the dollar amount of loans t
Slide 36: Private Education Loan Portfolio Performance
Private Education Loan Portfolio Performance 36
Slide 37: Servicing: A Competitive Advantage
37 Servicing: A Competitive Advantage
Slide 38: SLM's Competitive Advantage
38 SLM's Competitive Advantage Vertically Integrated Origination/ Servicing/Collections Strong National and Regional Brands State-of-the-Art Loan Delivery Platform Largest and Most Experienced Sales Team Breadth of Products and Services $185B of managed loans 10 million customers Economies of Scale
Slide 39: Operations Overview
Loan Originations Servicing Collections Underwriting Mt. Laurel, NJ Lynn Haven, FL Newark, DE Salt Lake City, UT Loan Acquisitions, Consolidations, and Post- Disbursement Processing Fishers, IN FFELP Due Diligence Fishers, IN Wilkes-Barre, PA Baguio, Philippines Pune, India Application Processing an
Slide 40: Operations Locations
Operations Locations Operations Locations Killeen, TX Fishers & Muncie, IN Lynn Haven, FL Wilkes-Barre, PA Mt. Laurel, NJ Newark, DE 40 Salt Lake City, UT
Slide 41: Funding Diversity and Liquidity
41 Funding Diversity and Liquidity
Slide 42: Capital Markets Developments
42 Capital Markets Developments Completed $5.1 billion FFELP ABS in April Non-DOE conduit eligible collateral Non-TALF eligible collateral Reduced and extended ABCP program Term Extension of 1 year for $22 billion FFELP facility Terminated and paid in full Private Credit facility Extended $1.5 billi
Slide 43: Outline of Recent ABS Transactions
Transaction: SLT 2009-I SLT 2009-1 SLT 2009-2 SLT 2009-B Issuance Size: $1.027 B $2.179 B $1.845 B $2.593 Registration Type: Private Public Public 144A Indicative Pricing: L+280 L+225 L+225 L+600/ L+366 to call 43 Outline of Recent ABS Transactions April and May Transactions
Slide 44: Liquidity Position Update
44 Liquidity Position Update Includes $911 million, $1.6 billion and $2.2 billion at 3/31/09, 12/31/08, and 3/31/08 respectively of cash collateral pledged by derivative counterparties and held by the company in Unrestricted Cash At both March 31, 2009 and December 31, 2008, excludes commitments of
Slide 45: Liquidity Position Detail
45 Liquidity Position Detail Includes $64 million due from The Reserve Primary Fund Includes $911 million of cash collateral pledged by derivative counterparties and held by the Company in Unrestricted cash SLM has $5.5 bn in unsecured revolving credit facilities. The Company has never drawn on thes
Slide 46: Funding Sources
46 Funding Sources Employ conservative long-term funding model * Term Funded includes 7% or $13.6 Billion of advances outstanding under the ED Purchase and Participation Program
Slide 47: Funding Distribution
Funding Distribution 47 At March 31, 2009, total managed debt borrowings was $197 billion.
Slide 48: SLM Corporate Debt and ABS Issuance
48 SLM has issued $178 billion of long-term, corporate debt and asset-backed securities since 2004, across a broad range of maturities New Issuance Volume 2004 2005 2006 2007 2008 2009Q1 Corporate Debt Issuance $15B $10B $12B $1.6B $2.5B $0.0B Term ABS Issuance (1) $30B $27B $34B $26B $19B $1.5B Tot
Slide 49: SLM ABS Term Issuance Volume
49 SLM ABS Issuance Volume 2005 2006 2007 2008 2009Q1 Non-Consolidation FFELP ABS $6.6 $5.1 $9.1 $18.5 $0.0 Consolidation FFELP ABS 17.1 22.9 15.0 0.0 0.0 Private Credit ABS 3.4 5.7 2.2 0.0 1.5 Total ABS Issuance $27.0 $33.7 $26.3 $18.5 $1.5 SLM ABS Term Issuance Volume ($ billions) (1) (1) Excludes
Slide 50: SLM Corporate Term Debt Issuance Volume
50 SLM Corporate Debt Issuance Volume Issuance Type 2004 2005 2006 2007 2008 2009Q1 US$ Global & Medium Term Notes $6.4 $4.5 $5.8 $1.4 $2.5 $0.0 Foreign Currency Denominated(1) 4.2 4.0 3.9 0.2 0.0 0.0 Extendible Notes 2.5 1.0 1.5 0.0 0.0 0.0 Retail Note Program 1.8 0.8 0.5 0.0 0.0 0.0 Total Corporat
Slide 51: Sources of Free Cash Flow
51 Sources of Free Cash Flow Securitization Trusts generate free cash flow through servicing fees and the residual Student loan repayments are consistent and predictable Other sources of free cash flow include net income, floor income and other cash payments
Slide 52: Sallie Mae Bank
52 Sallie Mae Bank Bank charter Utah based ILC regulated by FDIC and Utah Department of Financial Institutions (UDFI) Charter granted October 2005 Current bank activity Originates Sallie Mae's private education loans Funded through affiliate and brokered deposits 30.2% Total Risk-based Capital at Ma
Slide 53: Sallie Mae Bank Brokered Deposits
Sallie Mae Bank Brokered Deposits 53 Deposits in Millions Avg. Remaining Life in months As of 3/31/09
Slide 54: Sallie Mae Bank - Deposits
54 Sallie Mae Bank - Deposits Bank Deposits ($ millions) Bank Deposits ($ millions) Bank Deposits ($ millions) Bank Deposits ($ millions) Bank Deposits ($ millions) Dec 07 Sep 08 Dec 08 Mar 09 Brokered Deposits $254 $744 $2,256 $3,281 Other Deposits* $431 $491 $458 $433 Total Deposits $685 $1,235 $2
Slide 55: Sallie Mae Bank - Capital
55 Sallie Mae Bank - Capital Regulatory Capital Ratios Regulatory Capital Ratios Regulatory Capital Ratios Regulatory Capital Ratios Regulatory Capital Ratios Regulatory Capital Ratios Regulatory Capital Ratios Ratio Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 Mar 09 Tier 1 Leverage 23.2% 18.6% 17.3% 16.7% 4
Slide 56: Unsecured Debt Maturities
56 Unsecured Debt Maturities Note: Does not include SLM Bank or Subsidiary funding Repurchased $144 million of debt in Q109 Remaining unsecured debt maturities in 2009 total $3.8 billion
Slide 57: Risk-Adjusted Capitalization
57 Risk-Adjusted Capitalization
Slide 58: Capitalization
58 Capitalization 2006 2007 2008 2009 Q1 Tangible Equity/Managed Assets(1) 1.8% 2.0% 1.8% 1.8% Tangible Equity/Charge-Offs(2) 18x 9X 7x 4x SLM Corp (1) GAAP tangible stockholders' equity as a percentage of total managed assets. Average GAAP tangible equity including preferred stock to charge-offs. S
Slide 59: Capital Allocation
59 Capital Allocation 0.50% 8.00% ~2.0% of Managed Assets Total Managed Assets = SLM allocates capital internally based on the risk of the assets it supports SLM Corp + Assets Capital Allocation As of March 31, 2009 0% - 25% Cash, Investments, Other Assets & Intangibles 10% of Total Managed Assets P
Slide 60: SLM Corporation FFELP Appendix 2008
SLM Corporation FFELP Appendix 2008 Investor Presentation
Slide 61: SLM FFELP ABS Issue Characteristics
61 SLM FFELP ABS Issue Characteristics Historical issue size of $1.0B to $5.0(+)B Tranches denominated in US$ or Euros 'Aaa/AAA/AAA' rated senior tranches make up 97% of issue structure Floating rate tied to 3 mo. LIBOR, with occasional fixed rate issuance Amortizing tranches, with 1 to 15(+) year a
Slide 62: SLM Stafford/PLUS ABS Trusts Prepayment Analysis
62 SLM Stafford/PLUS ABS Trusts Prepayment Analysis Historical SLM Stafford/PLUS ABS CPRs Annualized CPRs for SLM Stafford/PLUS ABS Trusts have decreased significantly as incentives for borrowers to consolidate have declined * Average CPR is the simple (non-weighted) average of four Quarterly CPR ca
Slide 63: SLM Consolidation ABS Trusts Prepayment Analysis
63 SLM Consolidation ABS Trusts Prepayment Analysis Historical Consolidation ABS CPRs CPRs for SLM Consolidation ABS Trusts have declined significantly following legislation that prevented in-school and re-consolidation of borrowers' loans * Average CPR is the simple (non-weighted) average of four Q
Slide 64: SLM Corporation Private Credit Appendix 2008
SLM Corporation Private Credit Appendix 2008 Investor Presentation
Slide 65: Private Loan Performance (Traditional vs. Non-Traditional)
65 65 65 Private Loan Performance (Traditional vs. Non-Traditional) Reserve coverage of annualized charge-offs totaled 2.4x and 2.3x for Traditional and Non-Traditional loans respectively for Q1 2009. 3/31/2009 12/31/2008 9/30/2008 6/30/2008 3/31/2008 12/31/2007 Traditional (QTD) (QTD) (QTD) (QTD) (
Slide 66: Private Education Loan Portfolio Performance
66 Private Education Loan Portfolio Performance (1) Net charge-offs as a percentage of average loans in repayment annualized for the quarters presented
Slide 67: Rating Actions on SLM Private Credit Student Loan ABS
67 Rating Actions on SLM Private Credit Student Loan ABS There have been a number of upgrades and no downgrades to Sallie Mae's Private Credit ABS since the program's inception in 2002 Moody's(1) - March 2007 S&P - July 2008 Fitch - September 2007 On September 17, 2008, as a result of Lehman's bankr
Slide 68: Private Credit Loan Collections
68 Private Credit Loan Collections Sallie Mae services and collects the loans in its Private Credit ABS Trusts Private credit collections are conducted by a stand-alone consumer credit collections unit, not the company's FFELP collections operations Managed by individuals with prior experience manag
Slide 69: Forbearance
69 Forbearance A collections tool used to provide borrowers time to improve their ability to repay Between graduation and start of first job Economic hardship Provides borrower with time to obtain employment and income to support their obligations Applied most frequently in the first two years of re
Slide 70: SLM Private Credit Delinquency and Forbearance Seasoning Trends
70 SLM Private Credit Delinquency and Forbearance Seasoning Trends Delinquency and forbearance are highest when loans enter repayment, and diminish as loans season As the trust loans season, delinquency and forbearance are expected to decline Note: Based on historical data through March 31, 2009
Slide 71: SLM Private Credit Default Emergence Profile
71 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Defaults Per Repayment Year 0.017 0.122 0.236 0.177 0.14 0.088 0.069 0.039 0.028 0.023 0.017 0.014 0.012 0.01 0.009 Cumulative Default 0.017 0.139 0.375 0.552 0.691 0.78 0.848 0.887 0.915 0.938 0.955 0.969 0.981 0.991 1 SLM Private Credit Default Emergence Prof
Slide 72: Gross Defaults: Actual-To-Date vs. Current Lifetime Expectations
72 SLM Private Credit Gross Defaults: Actual-To-Date vs. Current Lifetime Expectations 2002-A 2003-A 2003-B 2003-C 2004-A 2004-B 2005-A 2005-B 2006-A 2006-B 2006-C 2007-A Charge-off - 212+ days delinquent (1) 0.047624047 0.045446394 0.044484232 0.048131588 0.05053984 0.033051944 0.037518725 0.021139
Slide 73: Gross Defaults vs. Rating Agency Stress Levels
73 SLM Private Credit Gross Defaults: Current Lifetime Expectations vs. Constraining Rating Agency Stress Levels at Issuance 2002-A 2003-A 2003-B 2003-C 2004-A 2004-B 2005-A 2005-B 2006-A 2006-B 2006-C 2007-A Current Lifetime Gross Current Loss Expectation (1) 0.061 0.067 0.074 0.077 0.085 0.081 0.0
Slide 74: SLM Private Credit ABS Trusts: Forbearance
74 SLM Private Credit ABS Trusts: Forbearance 11/30/2002 2/28/2003 5/31/2003 8/31/2003 11/30/2003 2/29/2004 5/31/2004 8/31/2004 11/30/2004 2/28/2005 5/31/2005 8/31/2005 11/30/2005 2/28/2006 5/31/2006 8/31/2006 11/30/2006 2/28/2007 5/31/2007 8/31/2007 11/30/2007 2/29/2008 5/31/2008 8/31/2008 11/30/20
Slide 75: SLM Private Credit ABS Trusts: 90+ Day Delinquencies
75 SLM Private Credit ABS Trusts: 90+ Day Delinquencies As expected, delinquency has increased in the current economic environment Upward trend in delinquencies for newer trusts is driven by a higher percentage of loans first entering repayment, when borrowers are most likely to become delinquent 11
Slide 76: SLM Private Credit ABS Trusts: Annualized Gross Charge-offs
76 SLM Private Credit ABS Trusts: Annualized Gross Charge-offs 11/30/2002 2/28/2003 5/31/2003 8/31/2003 11/30/2003 2/29/2004 5/31/2004 8/31/2004 11/30/2004 2/28/2005 5/31/2005 8/31/2005 11/30/2005 2/28/2006 5/31/2006 8/31/2006 11/30/2006 2/28/2007 5/31/2007 8/31/2007 11/30/2007 2/29/2008 5/31/2008 8
Slide 77: Historical Cumulative Gross Charge-Offs
77 SLM Private Credit ABS Trusts: Historical Cumulative Gross Charge-Offs(1) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 2002 0 0.0002 0.0006 0.0009 0.0012 0.0014 0.0026 0.0033 0.0049 0.0075 0.0089 0.0123 0.0159 0.0178 0.0192 0.0212 0.0233 0.0279 0.0323 0.0361 0.0388 0.0422
Slide 78: SLM Private Credit ABS Trusts Prepayment Analysis
78 SLM Private Credit ABS Trusts Prepayment Analysis Historical SLM Private Credit ABS CPRs Constant prepayment rates increased in 2007 due to the introduction of Private Credit Consolidation loans, but then declined accordingly following SLM's decision to suspend its consolidation loan program 11/3
Slide 79: Appendix
Appendix 19 sallieMae ames
Slide 80: GAAP to "Core Earnings" EPS Reconciliation
80 GAAP to "Core Earnings" EPS Reconciliation
Slide 81: Additional Information Available at www.salliemae.com
81 Additional Information Available at www.salliemae.com Additional Information Available at www.salliemae.com
Slide 82: Debt Investor Relations Contact Information
82 Debt Investor Relations Contact Information Kenneth Fischbach Senior Vice President, Corporate Finance Sallie Mae, Inc. 12061 Bluemont Way Reston, VA 20190 703-984-6310 kenneth.fischbach@salliemae.com