2. Forward-Looking Statements
This presentation contains forward-looking statements and information that are based on management’s current expectations as of the date of
this document. When used in this report, the words “anticipate,” “believe,” “estimate,” “intend” and “expect” and similar expressions are
intended to identify forward-looking statements. These forward-looking statements are subject to risks, uncertainties, assumptions and other
factors that may cause the actual results to be materially different from those reflected in such forward-looking statements. These factors
include, among others, the occurrence of any event, change or other circumstances that could give rise to our ability to cost-effectively
refinance the interim asset-backed commercial paper facilities extended by Bank of America and JPMorgan Chase in connection with the
Merger Agreement including any potential foreclosure on the student loans under those facilities following their termination, increased
financing costs and more limited liquidity; any adverse outcomes in any significant litigation to which we are a party; our derivative
counterparties may terminate their positions with the Company if its credit ratings fall to certain levels and the Company could incur substantial
additional costs to replace any terminated positions; changes in the terms of student loans and the educational credit marketplace arising from
the implementation of applicable laws and regulations and from changes in these laws and regulations, which may reduce the volume, average
term and yields on student loans under the Federal Family Education Loan Program (“FFELP”) or result in loans being originated or refinanced
under non-FFELP programs or may affect the terms upon which banks and others agree to sell FFELP loans to the Company. In addition, a
larger than expected increase in third party consolidations of our FFELP loans could materially adversely affect our results of operations. The
Company could also be affected by changes in the demand for educational financing or in financing preferences of lenders, educational
institutions, students and their families; incorrect estimates or assumptions by management in connection with the preparation of our
consolidated financial statements; changes in the composition of our Managed FFELP and Private Education Loan portfolios; changes in the
general interest rate environment and in the securitization markets for education loans, which may increase the costs or limit the availability of
financings necessary to initiate, purchase or carry education loans; changes in projections of losses from loan defaults; changes in general
economic conditions; changes in prepayment rates and credit spreads; and changes in the demand for debt management services and new
laws or changes in existing laws that govern debt management services. 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 the Company’s expectations.
2
3. SLM Overview
• Top originator, servicer and collector of student loans in the U.S.
education lending market
2007 “Core Earnings” Sources of Income
FFELP
Loans, 33%
• More than 10 million customers Other, 11%
• Relationships with over 6,000 schools APG, 16%
Guarantor
Services,
• Managed Loans exceed $163 billion 4%
Private
Loans, 36%
After the impact of Interim ABCP Facility Fees, before Provision for Losses and including the Wholesale Consolidation Loans.
3
4. Business Strategy
Student Loan Originations -
Focus on school relationships that generate acceptable returns under
new FFELP economics and increased funding spreads
Curtail unprofitable originations with little strategic value, including
High default rate non-traditional schools and borrowers
Lower tier credit borrowers
Wholesale FFELP Consolidation Loan acquisitions
Adjust pricing of Private Education Loan products to reflect market
conditions
Reduce Borrower Benefits
Regain A rating
4
5. Strong Industry Trends Continue
Growth in Education
Enrollment Projections Annual Cost of Education
Degree Granting Institutions ($ thousands)
21
Public Private
20
Public CAGR: 6.8%
Private CAGR: 5.1%
19 $32.3
$30.4
in m illio n s
$27.5 $28.7
$26.1
$23.9 $24.9
18
$21.5 $22.2
17 $13.6
$9.0 $9.7 $10.6 $11.4 $12.1 $12.8
$8.1 $8.4
16
15
2000 2002 2004 2006 2008 2010 2012 2014 2016
2000 2001 2002 2003 2004 2005 2006 2007 2008
Source: College Board
Source: National Center for Education Statistics
5 Note: Academic years, average published tuition, fees, room and board
Note: Total enrollment in all degree-granting institutions; middle alternative projections for 2006 onward
charges at four-year institutions; enrollment-weighted
6. Earnings & Unemployment by Degree
8%
$120
$100
6%
$ thousands
$80
4%
$60
$40
2%
$20
0%
$0
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Le
Earnings Unemployment Rate
Source: U.S. Census Bureau, Current Population Survey, 2006 Annual Social and Economic Supplement. Represents median earnings for
a full time, year-round worker over age 25. Unemployment data as of 2006. Represents unemployment for civilian noninstitutional
population over age 25.
6
7. Managed Private Education Loan Portfolio Performance
Portfolio Performance -
• Defaults are concentrated among a small set of non-traditional schools
and borrowers
• Non-Traditional portfolio accounted for 60% of all charge-offs
• Failure to complete program is major driver of defaults
• More than 65% of borrowers that charged off withdrew from
programs or were less than ½ time status
7
8. Divergent Portfolio Performance
Gross Charge-Offs as a % of Average Repay
90 Days Delinquent as a % of Repay
18% 18%
15% 15%
12% 12%
9% 9%
6% 6%
3%
3%
0%
0%
1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07
1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07
Non-Traditional Total Traditional
Non-Traditional Total Traditional
• Delinquency & charge-off rates at non-traditional schools and
borrowers much higher than portfolio average
• Credit quality at traditional schools and borrowers produces high risk-
adjusted returns
8
9. Loan Loss Provision for Private Education Loans
2007 2006
Non- Non-
Traditional Traditional Total Traditional Traditional Total
Loan Loss Allowance (LLA) 424 796 1,220 179 215 394
Net Charge-Offs as %
Average Loans in Repayment 1.47% 12.15% 3.07% 0.63% 7.17% 1.62%
LLA as % of Ending Loans In
Repayment 3.34% 36.93% 8.21% 1.82% 11.82% 3.38%
LLA as % of Ending Loans 1.64% 17.38% 4.13% 0.89% 5.91% 1.71%
Net Charge-Off Coverage 2.57 3.29 3.00 3.33 2.01 2.44
9
10. FFELP Spread Pro Forma Table
Stafford Loan in Stafford Loan in
Repay Pre-CCRAA Repay Post CCRAA
Repay SAP Spread 2.34% 1.79%
Funding Costs 0.55% 0.55%
Lender Origination Fees 0.10% 0.20%
Borrower Benefits
Zero & Guarantee Fee (2.00% - AY08-09) 0.40% 0.40%
Repayment Benefits 0.09% 0.09%
Total Borrower Benefit Costs 0.49% 0.49%
Net Loan Spread 1.20% 0.55%
Risk Sharing 0.02% 0.06%
Origination and Servicing Costs 0.41% 0.41%
Pre-tax Yield 0.77% 0.08%
10
11. Current vs. Future State – Preferred Channel Originations
$20 $17.6
$16.4
$15
$10 $7.9 $7.6
$5
$0
2007 2008 - Forecast
FFELP Private
• Preferred channel originations at traditional schools expected to
increase 10% FFELP and 15% Private Education
11
12. Fee Income Streams
Fee Based Revenue
• Diverse yet complimentary lines of
$1,173 Million business
Contingency
Fee, $288
• Contingency Inventory of $9.7 Billion
Other, $154
• Collecting on behalf of the Dept of
Education for close to ten years
Late Fees, $134
Collections -
Non-Mortgage,
• Upromise – largest private source of
$217
college funding contributions
Upromise, $124
Collections -
Mortgage, $52
Guarantor • Guarantor Servicing for student loans
Other DMO, $48
Servicing Fees,
$156
12
13. Operations Review
The new economics of student lending require a more efficient
operating structure
Undertake a review of all business activities for justification in
new environment
Achieve appropriate risk-adjusted returns across all business
segments
First steps taken with more to come particularly on the expense
side
13
14. Funding Requirements
Term Funded Portfolio and Spread
FFELP Private
$135.2 Billion $28.3 Billion
Unsecured, Unsecured,
$22.8 $8.0
L + 0.32 L + 0.32
ABCP Term ABS,
Conduit, Term ABS, $15.7
$15.4 $97.0 L + 0.37
L + 0.24 ABCP
L + 0.54
Conduit,
$4.6
L + 0.52
• 88% of portfolio is term funded
14
15. 2008 Funding Plan
• Commitments received for $31 Bn warehouse line of credit
• Funding for both FFELP and Private Education Loans
• Term FFELP ABS issuance of $25+ Bn
• Expected cost of funds L + 50
• Term Private Education ABS issuance of $3 Bn
• Expected cost of funds L + 100
• Term Unsecured debt issuance of $1 Bn
• Expected cost of funds L + 250
• Expected CP – LIBOR spread of 12 bps in 2008
15
16. FFELP ABS – Highest Quality Asset Class
FFELP Student Loan has EXPLICIT
Q407 Issuance by Industry: $55 Billion
Government Guarantee
Equipment
3.7% Student
Loans
Sub-prime
16.2%
Mtge
5.2%
Other
Managed FFELP charge-offs 3 bps
3.8%
Credit Card
in 2007
42.7%
Auto
28.5%
ABS investment dollars are likely to
be redirected into high-quality ABS,
such as “AAA” FFELP ABS
Q406 Issuance by Industry: $180 Billion
Student
Equipment
Loans
1.5%
9.1%
Issued $8.9 Billion in Term FFELP
Other
3.9%
ABS since October
Auto
14.1%
Credit Card
Sub-prime 6.7%
Mtge
64.7%
16
17. Liquidity Position
At December 31, 2007, SLM maintained a primary liquidity position of $26.7B
Dec 31, 2007
Sources of Primary Liquidity:
Unrestricted Cash & Investments $10.3B
$6.5B CP and Bank Lines 6.5B
$6.0B Asset-Backed CP Program 5.9B
$30.0B Interim Asset-Backed CP Program (1) 4.0B
Total Sources of Primary Liquidity $26.7B
Stand-by Liquidity:
Unencumbered FFELP Loans(2) 18.7B
Total Primary and Stand-by Liquidity $45.4B
(1) $30.0 billion Interim ABCP facility effectively terminates on May 16, 2008 but our cost of funding will increase substantially to Prime plus
2% if the facility is not refinanced prior to February 15, 2008.
(2) Total unencumbered assets equal $51.7B and include $11.7B Private Education Loans and $21.3B other assets.
17
18. Outlook
• Grow both Private and FFELP market share at traditional schools
• Expect 10% growth in FFELP originations
• Expect 15+% growth in Private Education Loan originations
• Improve profitability of Lending segment
• Lower Borrower Benefits
• Re-price Private Education Loans
• Increase operating efficiency
• Focus on traditional schools and borrowers leads to improved credit quality
• Significantly lower delinquencies and charge-offs
• Re-establish diversified funding sources
• Unsecured debt markets
• Secured markets
• Bank deposits
• Improve profitability of fee income businesses
• Increase operating efficiency
• Exit low risk return adjusted businesses
18
19. Disclosures
Non-GAAP Financial Measures - The following presentation includes non-GAAP performance measures. A presentation of
the most comparable GAAP financial measures and a reconciliation of the non-GAAP performance measures to the most directly
comparable GAAP financial measures are included in the our most recent quarterly earnings release, quarterly earnings report on
Form 10-Q and annual report on Form 10-K, which are available on our website at
(http://www2.salliemae.com/investors/stockholderinfo/earningsinfo) and
(http://www2.salliemae.com/investors/stockholderinfo/secfilings) and on the SEC’s website (http://www.sec.gov).
U.S. Government Guaranteed Student Loans – The following presentation contains references to U.S. Government
guaranteed student loans. All such references are to loans made in compliance with the Federal Family Education Loan Program
(“FFELP”), under Title IV of the Higher Education Act, to finance educational costs. As more fully described in our most recent
quarterly earnings release, quarterly earnings report on Form 10-Q and annual report on Form 10-K, available on our website at
(http://www2.salliemae.com/investors/stockholderinfo/earningsinfo) and (http://www2.salliemae.com/investors/stockholderinfo) and
on the SEC’s website (http://www.sec.gov), the federal guarantee of FFELP loans is conditioned on loans being originated,
disbursed and serviced in accordance with ED regulations. In addition, unless a loan default results from the borrower’s death,
disability or bankruptcy, the federal government guarantees only 97 percent of the principal balance (95 percent on loans disbursed
after October 1, 2012) plus accrued interest and the holder of the loan generally must absorb the three percent (five percent after
October 1, 2012) not guaranteed as a loss on the loan (“Risk Sharing”).
Additional Information - The following presentation contains certain information about the Company that management believes
is important to investors, but should be read in conjunction with other material information about the Company, including, but not
limited to, the operational, market and interest rate, political and regulatory, liquidity, credit, and consolidation loan refinancing risks
that the Company faces. For a discussion of the risks described above as well as additional information about the Company you
should refer to our most recent quarterly earnings release, quarterly report on Form 10-Q and annual report on Form 10-K, available
on our website at (http://www2.salliemae.com/investors/stockholderinfo/earningsinfo) and
(http://www2.salliemae.com/investors/stockholderinfo/secfilings) and on the SEC’s website (http://www.sec.gov). For a discussion of
the specific characteristics of any specific security, you should refer to the pricing supplement, prospectus supplement and/or
prospectus applicable to that security.
19
20. “Core Earnings” Presentation
“Core Earnings” Performance Measures –
Used by SLM’s management in developing financial plans, tracking results, establishing corporate performance targets and determining incentive
compensation
Used by equity investors, credit rating agencies and debt capital providers to measure the company’s business performance
Treat securitizations as long-term financings and recognize the economic effect of hedges; specifically exclude (i) gains on sales from
securitizations, and the subsequent Retained Interest revenue (ii) derivative unrealized mark-to-market adjustments, (iii) unhedged floor income,
and (iv) goodwill and intangible impairment and the amortization of acquired intangibles
Reflect only current period adjustments to GAAP earnings and are not a substitute for reported results under GAAP
May not be comparable to similarly titled measures reported by other companies
Note: Both a description of SLM’s quot;Core Earningsquot; treatment and a full reconciliation to the GAAP income statement is contained in the supplemental
earnings disclosure to the company’s quarterly earnings releases and most recent Form 10-Q.
20
