Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

 

Link to searchable text of slide shown above


 


 

Searchable text section of graphics shown above

 



 

[LOGO]

 

Debt Investor Presentation
First Quarter ended March 31, 2006

 

April 21, 2006

 



Forward Looking Statements

 

Forward Looking Statements - This report 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, 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 costs of 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 SLM Corporation, more commonly known as Sallie Mae, and its subsidiaries (collectively, “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; a significant decrease in our common stock price, which may result in counterparties terminating equity forward positions with us, which, in turn, could have a materially dilutive effect on our common stock; 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; losses from loan defaults; 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.

 

 

 

[LOGO]

 

2



 

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 U.S. Department of Education regulations. In addition, unless a loan default results from the borrower’s death, disability or bankruptcy, the federal government guarantees only 98 percent of the principal balance (97 percent on loans disbursed after July 1, 2006) plus accrued interest and the holder of the loan generally must absorb the two percent (three percent after July 1, 2006) not guaranteed as a loss on the loan (“Risk Sharing”). FFELP loans serviced by a servicer that has an Exceptional Performer designation from the U.S. Department of Education are not subject to Risk Sharing and receive 100% reimbursement on default claims (99 percent reimbursement on default claims filed after July 1, 2006).

 

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.

 

3



Non-GAAP “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 exclude from “core earnings” (i) gains on sales from securitizations, (ii) derivatives mark-to-market adjustments, (iii) floor income, and (iv) 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 “core earnings” 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-K.

 

4



SLM Corporation Overview

 

5



SLM Corporation

 

[LOGO]

 

      #1 originator, servicer and collector of student loans in the vital and growing U.S. education lending market

 

      Fully independent private sector company, traded on the NYSE with a market capitalization of $21 billion(1)

 

      $127 billion managed student loan portfolio, 86% of which is U.S. Government guaranteed(1)

 

      Profitable every year in existence, since 1972

 

      Issued $10 billion of ‘A2/A/A+’ corporate debt and $27 billion of predominantly ‘Aaa/AAA/AAA’ asset-backed securities during 2005

 

      Scored a perfect ‘10’ out of 10 for corporate governance in a recent evaluation by Governance Metrics International

 


(1) As of March 31, 2006.

 

6



A Brief Corporate History

 

SLM Corporate Debt Ratings

 

 

 

Moody’s

 

S&P

 

Fitch

 

Long-Term

 

A2

 

A

 

A+

 

Short-Term

 

P-1

 

A-1

 

F1+

 

Outlook

 

Stable

 

Stable

 

Stable

 

 

Managed Loan Portfolio
(as of March 31, 2006)

 

Loan Type

 

$B

 

%

 

FFELP Loans

 

$

109.0

 

86

%

Private Education

 

17.9

 

14

%

Total Portfolio

 

$

126.9

 

100

%

 

1965

 

Congress creates the Guaranteed Student Loan Program (1)

 

 

 

1972

 

Congress establishes, as a GSE, the Student Loan Marketing Association or “Sallie Mae”

 

 

 

1995

 

Sallie Mae completes its first ‘AAA-rated’ guaranteed student loan securitization

 

 

 

1997

 

Privatization of Sallie Mae approved by Congress, SLM Corporation holding company created

 

 

 

2000

 

SLM Corporation issues ‘single-A’ rated unsecured corporate debt

 

 

 

2004

 

GSE dissolved... SLM Corporation becomes a fully independent, private sector corporation

 


 

 

(1) Currently known as the Federal Family Education Loan Program (FFELP).

 

7



Pre- and Post-GSE Wind-Down

 

Pre- and Post GSE Wind-Down -

 

Pre- Wind-Down
1999

 

Post- Wind-Down
2005

Moodys/S&P/Fitch Senior Debt Rating

 

A3/A+/A

 

A2/A/A+

Market Share of Federal Student Loan Originations(1)

 

15%

 

27%

% of Loans Funded by the GSE

 

63%

 

0%

Wtd. Average Life to Call of Managed Liabilities

 

2.0 yrs

 

5.6 yrs

Wtd. Average US$ LIBOR Debt Issuance Costs(2)

 

L + 20 bp

 

L + 18 bp

“Core Earnings” Net Income

 

$405 mil

 

$1.1B(3)

“Core Earnings” Student Loan Spread

 

1.78%

 

1.76%(3)

“Core Earnings” Fee & Other Income as a % of Revenue

 

9%

 

30%(3)

Total Managed Assets

 

$64B

 

$139B

Shareholders’ Equity

 

$0.8B

 

$3.8B

Tangible Equity/Total Managed Assets

 

1.2%

 

1.9%

 


(1)   SLM Preferred Channel market share based on federal fiscal year 1999 and 2005 total FFELP and FDLP net commitment figures. Source: U.S. Department of Education.

 

(2)   Weighted average cost of US$ LIBOR issuance for the period, including amortized issuance costs. 1999 figure includes 30 b.p. federal offset fee on GSE loans.

 

(3)   Adjusted for items disclosed separately, as described in the Company’s first quarter 2006 earnings release.

 

8



What Makes SLM Unique

 

Limited Credit Risk

 

      86% of student loans carried a U.S. government guarantee as of March 31, 2006

      Total student loan losses were only 0.12% of managed student loans for the full year 2005

 

Limited Exposure to Interest Rate and Economic Cycles

 

      Interest rate sensitivities of floating rate assets closely matched with floating rate liabilities

      Growth and earnings not historically tied to interest rate or economic cycles

 

Conservative Risk-Adjusted Leverage

 

      Tangible equity covered loan losses by 16x at year end 2005 vs. a median of 12x for ‘Aa’ U.S. Banks

      Pre-tax income covered loan losses by 12x in 2005 vs. a median of only 5x for ‘Aa’ U.S. banks

 

Frequent Issuer with Stable Spreads

 

      Frequent issuer, with active secondary markets made in both its corporate bonds and ABS

      Issues ‘AAA’ ABS or ‘A’ corporate, 1 to 30 years, floating or fixed, US$, Euro and other

      Highly stable spreads

 

Note: All figures as of December 31, 2005 unless otherwise noted. ‘Aa’ bank comparisons based on full year 2005 median ratios for Citigroup, Bank of America, JPMorgan Chase, Wachovia and Wells Fargo. Source: SNL Securities database and SEC filings.

 

9



The U.S. Student Loan Market

 

10



Sources of Funding for Higher Education

 

Sources of Funding for College Attendance
Academic Year 2005-2006 ($billions)

 

Total Cost - $222 Billion

 

[CHART]

 

Source:  Based on estimates by Octameron Associates, “Don’t Miss Out,” 29th Edition; College Board, “2005 Trends in Student Aid”; and Sallie Mae. Includes tuition, room, board, transportation and miscellaneous costs for two and four year college degree granting programs.

 

11



Trends in Higher Education Spending

 

Student Enrollment Projections

 

Average Cost of College Attendance

Degree Granting Institutions

 

Cumulative % Increase

 

 

 

[CHART]

 

[CHART]

 

Source: National Center for Education Statistics, U.S. Census Bureau and The College Board. Average per student cost of attendance in current dollars, including tuition, fees and on-campus room and board.

 

12



Higher Education’s Return on Investment

 

      Income and employment are strongly correlated to educational attainment

 

Relationship between Higher Education, Income and Employment

 

[CHART]

 

Source:       Postsecondary Education Opportunity, U.S. Census Bureau. Unemployment data as of 2003. Average annual income figures for 2004. Represents average earnings for a full time, year-round worker over age 25.

 

13



Education and Unemployment Over Time

 

      The relationship between education and unemployment has remained relatively constant over time

 

Historical U.S. Unemployment Rate for

College Graduates versus the Overall U.S. Population

 

[CHART]

 

Source:  Bureau of Labor Statistics.

 

14



The Federal Family Education Loan Program or “FFELP”

 

The Federal Family Education Loan Program (“FFELP”) –

 

      Provides banks and others an explicit U.S. government guarantee on student loans

 

      Loan pricing, terms and maximum borrowing limits set by Congress

 

      Made to undergraduate students, graduate students and their parents

 

      Floating or fixed rate loans, with 10 to 30 year maturities and payments deferred until after graduation

 

      Borrower outstandings typically range from $5,000 to $25,000, although balances can exceed $100,000 for graduate students

 

      U.S. government interest subsidies assure FFELP lenders a yield on newly originated FFELP loans based on daily reset U.S. commercial paper rates

 

15



Growth in FFELP Loan Originations

 

Stable, Long-Term Growth –

 

      In 2005, 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(1), increased by 9% in 2005, following a 13% increase in 2004

 

      The U.S. Department of Education is projecting 8% average annual growth in federal student loan volume through 2012, without consideration for pending increases in FFELP loan limits

 

Growth in Federal Education Loan
Originations FY 1999 - 2007E

 

[CHART]

 


(1)   Source: U.S. Department of Education. Based on net commitments, fiscal year ended September 30. Includes both FFELP and FDLP loans.

 

16



The Private Education Loan Market

 

Private Education Loans –

 

      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 education

 

      Supplement U.S. Government guaranteed student loans, but not guaranteed by the U.S. Government

 

      Typically offered with floating interest rates, with loan margins set based on the credit quality of the borrower

 

      Generally 5 to 15 years in maturity, with terms similar to those offered under the guaranteed student loan program

 

      Typically non-dischargeable in bankruptcy

 

17



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 1995-1996

 

Cost of College AY 2005-2006

Based on a Four-Year Term

 

Based on a Four-Year Term

 

 

 

[CHART]

 

[CHART]

 

Source: College Board. Cost of college includes tuition, fees, room and board, transportation and other expenses for degree granting institutions. FFELP loan limits as of year ended December 31, 2005. FFELP loan limits increase to $19,000 on July 1, 2007.

 

18



Private Education Loan Market Growth

 

      As a result of strong demand for alternative sources of funding for higher education, private education loan originations have experienced consistent growth

 

Private Education Loan Market

 

Growth in Non-Federal Student Loan Originations (1)

 

[CHART]

 


(1)   Source: Estimates by The College Board, “Trends in Student Aid”, and Sallie Mae. Figures for academic years ended June 30.

 

19



Higher Education Act

Reauthorization

 

20



Higher Education Act Reauthorization

 

      New student loan legislation effective July 1, 2006 is not expected to have a material impact on SLM’s business

 

      Changes include…

 

      Modest increase in FFELP loan borrowing limits effective July 1, 2007

 

      Eligibility of graduate students for PLUS Loans

 

      Borrower rates fixed at 6.8% for Stafford and 8.5% for PLUS loans; loans’ effective yield to lenders remains the same

 

      Lender reinsurance reduced from 100% to 99% for servicers designated as Exceptional Performers and 98% to 97% for all others

 

      Lenders required to rebate floor income on new loans, recycling of 9.5% loans ended, in-school and “Super 2-Step” consolidation loans eliminated

 

      New student loan provisions are expected to be in place through the next Reauthorization, currently set for the year 2012

 

21



Political Change and SLM Earnings Growth

 

      Past legislation, no matter how radical, has not had a long-term impact on SLM’s earnings

 

Impact of Changes in Student Loan Legislation
on SLM Net Income

 

[CHART]

 


(1)   Based on SLM Corporation “core earnings” net income 1996-2005, “core” net income 1993-1995 and GAAP net income for earlier periods. 2004 figure adjusted for costs associated with the wind-down of the GSE and other items disclosed separately.

 

(2)   Permitted FFELP loan yield spread subsequent to 1995 represents an estimated weighted average of in-school and repayment yields on FFELP loans.

 

22



SLM Business Fundamentals

 

23



SLM’s Loan Origination Model

 

      Sallie Mae originates student loans primarily through schools’ financial aid offices, and services and collects those loans throughout their life cycle

 

Sallie Mae’s Primary Loan Origination Model

 

 

 

 

Preferred

 

 

 

 

 

Channel

 

 

 

 

 

 

Lending

 

 

 

 

 

 

Partners

 

 

 

 

 

[LOGO]

Students

Loan

College

Loans

      Origination

and Parents

Applications

Financial

--------------->

      Servicing

 

--------------->

Aid Office

<---------------

      Collections

 

 

Proceeds

 

 

 

 

 

 

 

 

 

 

 

 

 

Services

 

 

24



SLM’s Competitive Advantage

 

      SLM has a distinct competitive advantage in all facets of the education loan market

 

 

 

Economies of Scale
$127B of managed loans
Over 9 million borrowers
Over 6,000 schools

 

 

 

 

 

 

 

State-of-the-Art
Loan Delivery Platform

 

Singular
Focus and
Scale

 

Vertically Integrated
Origination/
Servicing/Collections

 

 

 

 

Largest and Most
Experienced
Sales Team

 

 

Strong National and
Regional Brands

 

 

 

 

 

 

 

Breadth of
Products and
Services

 

 

 

Note: Figures as of first quarter ended March 31, 2006.

 

25



Federal Student Loan Market Share

 

Federal Student Loan Originations
(FFY 2004-2005)

 

Rank

 

Lender

 

2005
Market
Share

 

1999
Market
Share

 

1

 

Sallie Mae

 

27

%

15

%

2

 

Federal Govt

 

22

%

32

%

3

 

Citibank

 

5

%

6

%

4

 

Bank of America

 

4

%

5

%

5

 

Wells Fargo

 

4

%

 

 

SLM Historical Market Share of
Federal Student Loan Originations

 

[CHART]

 


(1)  SLM Preferred Channel market share based on federal fiscal year 1999 and 2005 total FFELP and FDLP net commitment figures. All figures for federal fiscal year ended September 30. Source: U.S. Department of Education and SLSA Servicing Volume Survey.

 

26



SLM’s Private Education Loan Business

 

SLM’s Private Education

Loan Portfolio

as of December 31, 2005(1)

 

[CHART]

 

Private Education Loan Attributes(2) -

 

      High average FICO scores

 

      ~ 50% of loans with co-borrowers, typically parents

 

      Higher education loans non-dischargeable in bankruptcy

 

      Graduate students – 34% of higher education loans

 

      Integrated underwriting, servicing and collections

 

      Risk-based pricing

 

      Managed net charge-offs represented 1.89% of loans in repayment

 


(1) Based on gross loans outstanding, before provision.

 

(2) All figures for the year ended December 31, 2005.

 

27



Debt Management, Guarantor Servicing and Other Income

 

Fee & Other Income –

 

      Debt Management & Collections Operations –

 

      17% of operating revenue (1)

      Variable cost, low overhead business

      Consistent, recurring earnings stream

 

      Guarantor Servicing –

 

      4% of operating revenue (1)

      29% share of the FFELP guarantor servicing market, with 9 of 36 guarantors as customers

      Consistent, recurring earnings stream

 

      Other Fee Income –

 

      9% of operating revenue (1)

      Late fees, third party servicing fees and other

 

Fee & Other Income Growth

2001 - 2005 (2)

 

[CHART]

 


(1)   Year ended December 31, 2005. Operating revenue as a percentage of net interest income before provision plus other operating revenue.

 

(2)   Years 2002 - 2005 operating revenue and fee and other income adjusted for items disclosed separately in the Company’s quarterly earnings releases.

 

28



Historically Stable

and Predictable Earnings

 

29



Extremely Low Loan Losses

 

      SLM’s net charge-offs represented 0.12% of managed student loans for the full year 2005, compared to the 2005 median of 0.83% for ‘Aa’ banks and 4.20% for highly rated finance companies (1)(2)

 

[CHART]

 


(1)   Managed FFELP and Private Education Loan net charge-offs as a percentage of average managed FFELP and Private Education Loan assets. Managed Private Education Loan net charge-offs as a percentage of average managed Private Education Loans in repayment was 1.89% for the year ended December 31, 2005.

 

(2)   U.S. ‘Aa’ banks include Citicorp, JP Morgan Chase, Bank of America, Wells Fargo and Wachovia. Non-bank financials include American Express, CIT, Countrywide, MBNA and Capital One. MBNA data as of September 30, 2005, all others as of December 31, 2005. Source: SNL Securities database and SEC filings.

 

30



Private Education Loan Portfolio Trends

 

      Private Education Loan portfolio performance trends are very stable, in part as a result of sound underwriting, pricing, servicing and default management practices

 

Private Education Loan Spread vs. Net Charge-Offs (1)

 

[CHART]

 


(1)   Represents Managed Private Education Loan spread, before provision, and net charge-offs as a percentage of average Managed Private Education Loans in repayment.

 

31



Limited Interest Rate Risk

 

SLM’s Interest Rate and Currency Hedging Philosophy –

 

      Fund floating rate assets with floating rate liabilities of comparable duration

 

      Convert newly issued debt to US$ floating rates at the time of issue with interest rate swaps, currency swaps and interest rate caps

 

      Manage a limited amount of basis risk only, primarily between CP and LIBOR

 

      Monetize floor income using floor contracts

 

32



Stable Net Interest Margin

 

      Extremely low loan losses and match funding of interest rate sensitivities of floating rate assets and floating rate liabilities make SLM’s net interest margin highly stable

 

[CHART]

 

33



Low Operating Expenses

 

Unmatched Operating Efficiency -

 

      SLM’s operating expenses stood at only 38% of operating revenue in 2005(1), following three years of steady improvement

 

      SLM’s operating efficiency ratio far outdistanced that of its peers from 2001 through 2005 (1)(2)

 

SLM vs. ‘Aa’ Banks and

Specialty Finance Companies

Operating Efficiency Ratio (1)(2)

 

[CHART]

 


(1)   SLM figures based on operating expense as a percentage of net interest income after provision plus fee and other income, adjusted for items disclosed separately in the Company’s quarterly earnings releases.

 

(2)   Based on ratio of operating expenses as a percentage of operating revenue for Citibank, Bank of America, Wells Fargo, Wachovia and JP Morgan and for specialty finance companies American Express, CIT, Countrywide, MBNA and Capital One. MBNA data as of September 30, 2005, all other as of December 30, 2005.
Source: SNL Securities database and SEC filings.

 

34



Highly Predictable Earnings

 

Highly Predictable Earnings -

 

      SLM has generated highly consistent earnings and cash flow since its inception in 1973

 

      Steady growth in the student loan market, the guaranteed nature of SLM’s assets and strict asset and liability management policy protect SLM from economic and interest rate cycles

 

SLM Net Income(1) through

Interest Rate and Economic Cycles

1990 - 2005

 

[CHART]

 


(1)   “Core earnings” net income 1996-2005, “core” net income 1993-1995 and GAAP net income for earlier years. 2004 “core earnings” net income adjusted for costs associated with the wind-down of the GSE and other items disclosed separately in the Company’s quarterly earnings releases.

 

35



Highly Stable Earnings

 

Highly Stable “Core Earnings” -

 

      Between 2001 and 2005, SLM’s “core earnings” ROA displayed less than 1/3 the average volatility of leading ‘Aa’ banks and 1/5 the average of highly rated finance companies(1)

 

      SLM’s earnings have not in the past been subject to the significant operating risks – trading losses, loan write-offs, restructuring charges or litigation expenses – experienced by others

 

Return on Assets (1)

 

Return on Assets (1)

SLM vs. Highly Rated Finance Cos

 

SLM vs. Selected ‘Aa’ Banks

(Indexed to 2001 = 100)

 

(Indexed to 2001 = 100)

 

 

 

[CHART]

 

[CHART]

 


(1)   SLM ROA based on “core earnings” net income and average managed assets. Comparative ROA based on GAAP net income and total assets. Volatility calculation based on standard deviation of ROA. MBNA data as of September 30, 2005, all others as of December 31, 2005. Source: Bloomberg and SLM.

 

36



Strong Risk-Adjusted Capitalization

 

37



Strong Risk-Adjusted Capitalization

 

      SLM’s leverage compares extremely favorably to ‘Aa’ banks and other non-bank financials when measured relative to actual loss experience

 

 

 

SLM Corp

 

2005 Medians for
‘Aa’ U.S. Banks /
Investment Grade

 

 

 

2003

 

2004

 

2005

 

Finance Cos.(4)

 

Not a risk adjusted capital ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tangible Equity/Managed Assets(1)

 

2.0

%

1.6

%

1.9

%

4.9% / 7.3%

 

 

 

 

 

 

 

 

 

 

 

Tangible Equity/Net Charge-Offs(2)

 

19

x

15

x

16

x

12x / 6x

 

 

 

 

 

 

 

 

 

 

 

Pre-Tax Income/Net Charge-Offs(3)

 

13

x

12

x

12

x

5x / 2x

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk adjusted
ratios

 

 

 

 

 

 


(1)   GAAP tangible stockholders’ equity as a percentage of total managed assets.

(2)   Average GAAP tangible equity including preferred stock to net charge-offs. SLM figures based on total managed loans.

(3)   SLM ratios based on “core earnings” pre-tax income, adjusted for items disclosed separately in the Company’s quarterly earnings releases.

(4)   2005 medians for major ‘Aa’ rated banks Citicorp, Wells Fargo, Bank of America, Wachovia and JP Morgan, and investment grade specialty finance companies American Express, CIT, Countrywide, MBNA and Capital One. MBNA data as of September 30, 2005, all others as of December 31, 2005. Managed assets and managed net charge-offs used when available. Source: SNL Securities database and SEC filings.

 

38



Funding Diversity and Liquidity

 

39



Funding Sources

 

      At year end 2005, ABS represented 69% and unsecured corporate debt 31% of SLM’s $136 billion of total managed debt outstanding

 

[CHART]

 

Note: Totals may not add due to rounding.

 

40



SLM Corporate Debt and ABS Issuance

 

      SLM has issued $138 billion of long-term, non-GSE corporate debt and asset-backed securities over the past three years, across a broad range of maturities –

 

New Issuance Volume

 

 

 

2003

 

2004

 

2005

 

YTD 1Q
2006

 

Corporate Debt Issuance (1)

 

$

15B

 

$

15B

 

$

10B

 

$

1.7

 

Term Asset-Backed Securities Issuance (1)

 

$

31B

 

$

30B

 

$

27B

 

$

8.2

 

Total Term Debt Issuance

 

$

46B

 

$

45B

 

$

37B

 

$

9.8

 

 

 

 

 

 

 

 

 

 

 

Range of Maturities in Years

 

1 - 40

 

1 - 30

 

1 - 30

 

 

 

Average Life to Call in Years

 

5.6

 

5.8

 

6.5

 

 

 

Average Cost of Funds vs. US$ LIBOR (2)

 

+31 bp

 

+25 bp

 

+18 bp

 

 

 

 


(1)   Excludes issuance under SLM’s $5.5 billion corporate commercial paper and $5 billion asset-backed commercial paper programs.

 

(2)   Swapped equivalent spread, including amortized issuance costs. Includes SLM corporate debt and term asset-backed securities only.

 

41



Funding Diversity

 

      During 2005, SLM issued 38 term ABS and corporate debt securities in eight different currencies to more than 500 institutional investors around the globe

 

SLM 2005 Total Managed Debt Issuance
by Currency, Investor Geography and Issue Type

 

By
Currency

 

By Investor
Geography

 

By Issue
Type

 

 

 

 

 

[CHART]

 

[CHART]

 

[CHART]

 

42



Excess Liquidity

 

      At December 31, 2005, SLM maintained significant excess liquidity…

 

      Enough unused liquidity in cash, investments and committed credit lines to repay 18 months’ debt maturities

 

      Enough additional liquidity in its readily saleable, unencumbered FFELP loan portfolio to repay 8 years’ debt maturities

 

      Short term debt represented only 3% of total managed debt

 

      Cash & investments plus committed credit lines covered short-term debt and CMLTD by 379%

 

Sources of Liquidity ($ billions) -

 

Total
Dec 31, 2005

 

Available
Dec 31, 2005

 

 

 

 

 

 

 

Sources of Primary Liquidity:

 

 

 

 

 

Unrestricted Cash & Investments

 

$

3.9

 

$

3.9

 

CP and Bank Lines

 

5.5

 

5.5

 

Asset-Backed Commercial Paper

 

5.0

 

0.0

 

Total Sources of Primary Liquidity

 

14.4

 

9.4

 

 

 

 

 

 

 

Stand-by Liquidity:

 

 

 

 

 

Unencumbered FFELP Loans

 

24.5

 

24.5

 

Total Primary and Stand-by Liquidity

 

$

38.9

 

$

34.0

 

 

43



Dealers in SLM Corporate Debt and ABS

 

      SLM utilizes a broad base of dealers globally, promoting liquidity in its corporate bonds and ABS

 

[LOGO]

 

44



SLM Corporate Debt Program

 

45



SLM Corporate Debt Issuance Volume

 

SLM Corporate Term Debt Issuance Volume ($ billions) (1) 

 

Issuance Type

 

2003

 

2004

 

2005

 

YTD 1Q
2006

 

US$ Global and Medium Term Notes(1)

 

$

9.1

 

$

6.4

 

$

4.5

 

$

1.1

 

Foreign Currency Denominated(2)

 

0.6

 

4.2

 

4.0

 

0.4

 

Extendible Notes

 

1.7

 

2.5

 

1.0

 

0.0

 

Retail Note Program

 

1.1

 

1.8

 

0.8

 

0.2

 

Convertible Debentures

 

2.0

 

0.0

 

0.0

 

0.0

 

 

 

 

 

 

 

 

 

 

 

Total Corporate Debt Issuance

 

$

14.5

 

$

14.8

 

$

10.3

 

$

1.7

 

 


(1)   Excludes structured and retail note issuance. Also excludes average outstandings under SLM’s commercial paper program, representing $331 million for the quarter ended March 31, 2006 and $345 million for the full year 2005.

 

(2)   US$ equivalents.

 

46



Representative SLM Corporate Benchmark Debt Issues

 

Representative US$ & EUR Benchmark Corporate Debt Issues

 

Issue

 

Issue
Date

 

Issue Size

 

Rating

 

Coupon

 

Maturity

 

 

 

 

 

(mil)

 

 

 

 

 

 

 

USD -

 

 

 

 

 

 

 

 

 

 

 

SLM Corp

 

Feb '03

 

$

800

 

A2/A/A+

 

3.625

%

Mar '08

 

SLM Corp

 

Nov '03

 

$

1,000

 

A2/A/A+

 

4.000

%

Jan '09

 

SLM Corp

 

Jul '05

 

$

2,000

 

A2/A/A+

 

L+14

 

Jul '09

 

SLM Corp

 

Jul '05

 

$

1,250

 

A2/A/A+

 

4.500

%

Jul '10

 

SLM Corp

 

Mar '06

 

$

1,000

 

A2/A/A+

 

L+20

 

Mar '11

 

SLM Corp

 

Apr '06

 

$

750

 

A2/A/A+

 

5.450

%

Apr '11

 

SLM Corp

 

Apr '04

 

$

1,000

 

A2/A/A+

 

5.375

%

May '14

 

SLM Corp

 

Jul '03

 

$

750

 

A2/A/A+

 

5.625

%

Aug '33

 

Euros -

 

 

 

 

 

 

 

 

 

 

 

SLM Corp

 

Jul '03

 

500

 

A2/A/A+

 

3.250

%

Jul '08

 

SLM Corp

 

Jun '05

 

300

 

A2/A/A+

 

L+15

 

Jun '09

 

SLM Corp

 

Apr '04

 

750

 

A2/A/A+

 

L+35

 

Apr '11

 

SLM Corp

 

Sep '05

 

750

 

A2/A/A+

 

3.125

%

Sep '12

 

SLM Corp

 

Mar '04

 

1,250

 

A2/A/A+

 

4.750

%

Mar '14

 

 

47



Consistent Credit Spread Performance

 

      SLM trades at spreads comparable to those of the leading ‘Aa’ U.S. banks

 

SLM Corp 10 Year Bond Spreads vs.
Leading ‘Aa’ Banks and Finance Companies

 

[CHART]

 

Source: Various dealers. As of April 17, 2006. SLM Corp 10 yr spread for 4/02 thru 8/02 estimated based on 5 yr issue spreads. Initial SLM 10 yr benchmark issued 8/02. ‘Aa’ bank index includes Citigroup, Wells Fargo, Bank of America, Wachovia and JPMorganChase. Non-bank index includes American Express, CIT, Capital One, Household Finance prior to its acquisition by HSBC in 2003 and MBNA prior to its acquisition by Bank of America in 2005.

 

48



SLM Corporation ABS Program

 

49



SLM ABS Issuance Volume

 

SLM ABS Term Issuance Volume ($ billions) (1) 

 

 

 

2003

 

2004

 

2005

 

YTD 1Q
2006

 

Non-Consolidation FFELP ABS

 

$

5.8

 

$

10.1

 

$

6.6

 

$

5.1

 

Consolidation FFELP ABS

 

21.0

 

17.4

 

17.1

 

3.1

 

Private Credit ABS

 

3.8

 

2.8

 

3.4

 

2.2

(2)

 

 

 

 

 

 

 

 

 

 

Total ABS Issuance

 

$

30.6

 

$

30.3

 

$

27.0

 

$

10.4

 

 


(1)   Excludes outstandings under SLM’s asset-backed commercial paper program.

 

(2)   SLM Private Credit Trust 2006-A priced March 31, 2006. Closed April 6, 2006, subsequent to quarter end.

 

50



SLM Asset-Backed Securities Structures

 

      Recent SLM new issue ABS Structures –

 

 

 

Non-Consolidation FFELP

 

Consolidation FFELP

 

Private Education Loans

 

 

 

 

 

 

 

Issue

 

$2.6B SLM Trust 2006-3

 

$2.6B SLM Trust 2006-4

 

$2.2B SLM Trust 2006-A

 

 

 

 

 

 

 

Pricing Date

 

March 2, 2006

 

April 12, 2006

 

March 31, 2006

 

 

 

 

 

 

 

Collateral

 

US Govt. Guaranteed FFELP Stafford and Plus Loans

 

US Govt. Guaranteed FFELP Consolidation Loans

 

Non-Guaranteed Private Education Loans

 

 

 

 

 

 

 

Initial Pricing CPR(1)

 

12%

 

CLR Ramp (0%-8% over 10 yrs)

 

4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Moody’s

 

Amt

 

AL(1)

 

Pricing

 

Moody’s

 

Amt

 

AL(1)

 

Pricing

 

Moody’s

 

Amt

 

AL(1)

 

Pricing

Tranching

 

A-1

 

Aaa

 

$

687

 

1.0

 

L -2

 

A-1

 

Aaa

 

$

120

 

1.0

 

L -3

 

A-1

 

Aaa

 

$

434

 

3.0

 

L+2

 

 

A-2

 

Aaa

 

$

825

 

3.0

 

L+0

 

A-2

 

Aaa

 

$

470

 

3.0

 

L+0

 

A-2

 

Aaa

 

$

207

 

5.0

 

L+8

 

 

A-3

 

Aaa

 

$

335

 

5.0

 

L+4

 

A-3

 

Aaa

 

$

150

 

5.0

 

L+4

 

A-3

 

Aaa

 

$

355

 

7.0

 

L+14

 

 

A-4

 

Aaa

 

$

483

 

7.0

 

L+8

 

A-4

 

Aaa

 

$

392

 

7.1

 

L+8

 

A-4

 

Aaa

 

$

373

 

9.9

 

L+19

 

 

A-5

 

Aaa

 

$

162

 

8.4

 

L+10

 

A-5

 

Aaa

 

$

327

 

9.4

 

L+10

 

A-5

 

Aaa

 

$

700

 

14.2

 

L+29

 

 

B

 

Aa1

 

$

77

 

8.4

 

L+20

 

A-6

 

Aaa

 

873

 

15.0

 

E+15

 

B

 

Aa1

 

$

73

 

11.0

 

L+30

 

 

 

 

 

 

 

 

 

 

 

 

B

 

Aa1

 

$

78

 

12.2

 

L+20

 

C

 

A3

 

$

101

 

9.9

 

L+50

 


(1) Estimated based on a variety of assumptions concerning loan repayment behavior, as more fully described in the related prospectus, which may be obtained at http://www2.salliemae.com/investors/debtasset/slmsltrusts/ . Actual average life may vary significantly from estimates.

 

51



2005 ABS Issuer Rankings

 

2005 US$ ABS Issuance by Issuer (1)

 

(in equivalent US$ billions)

 

 

 

 

 

MARKET

 

RANK

 

ISSUER

 

PROCEEDS

 

SHARE(2)

 

1

 

Sallie Mae

 

$

27.0

 

6.1

%

2

 

Ford Motor

 

$

16.7

 

3.7

%

3

 

JP Morgan Chase

 

$

16.5

 

3.7

%

4

 

Capital One

 

$

14.6

 

3.3

%

5

 

Citigroup

 

$

13.8

 

3.1

%

6

 

MBNA

 

$

10.0

 

2.2

%

7

 

General Motors

 

$

10.0

 

2.2

%

8

 

Honda Motors

 

$

7.7

 

1.7

%

9

 

Morgan Stanley

 

$

7.1

 

1.6

%

10

 

GE

 

$

7.1

 

1.6

%

 

 

 

 

 

 

 

 

 

 

Total

 

$

445.4

 

100.0

%

 

2005 Public/144A Student Loan ABS
Issuance by Issuer

 

(in equivalent US$ billions)

 

 

 

 

 

 

 

MARKET

 

RANK

 

ISSUER

 

PROCEEDS

 

SHARE

 

1

 

Sallie Mae

 

$

27.0

 

42.2

%

2

 

Nelnet, Inc.

 

$

6.5

 

10.2

%

3

 

Student Loan Corp

 

$

4.3

 

6.8

%

4

 

Brazos Group

 

$

3.7

 

5.8

%

5

 

First Marblehead

 

$

3.2

 

5.1

%

6

 

College Loan Corp

 

$

2.7

 

4.2

%

7

 

Collegiate Funding

 

$

2.7

 

4.2

%

8

 

Access Group, Inc.

 

$

2.1

 

3.2

%

9

 

Goal Financial

 

$

2.0

 

3.1

%

10

 

Wachovia

 

$

1.8

 

2.8

%

 

 

 

 

 

 

 

 

 

 

Total

 

$

64.0

 

100.0

%

 


(1)   Rankings exclude home equity ABS issuance.

 

(2)   Market share as a % of total ABS, excluding home equity ABS.

 

52



SLM U.S. Government Guaranteed

Student Loan ABS

 

53



SLM FFELP ABS Issue Characteristics

 

Typical SLM FFELP ABS Transaction Features –

 

      U.S. Government guaranteed collateral

 

      Issue size $1.5B to $3.0(+)B

 

      Tranches denominated in US$ or Euros

 

      ‘Aaa/AAA/AAA’ rated senior tranches make up 97% of issue structure

 

      20% risk based capital weighting, in most countries

 

      Floating rate tied to 3 mo. LIBOR, with occasional fixed rate issuance

 

      Amortizing tranches, with 1 to 15(+) year average lives

 

      Reset Rate Notes offer ‘soft bullet’ maturities for selected issues

 

      Serviced by SLM Corporation’s subsidiary Sallie Mae, Inc., which is designated an “Exceptional Performer” by the U.S. Department of Education

 

54



SLM FFELP ABS Reset Rate Notes

 

SLM FFELP ABS ‘Soft Bullet’ Fixed Rate, Euro and Sterling Structures -

 

      Shorter term “soft bullet” US$ fixed rate, Euro and Sterling tranches, backed by long-dated collateral

 

      Remarketed at a date certain prior to the expected maturity date, typically 3, 5, 7 or 10 years from issuance

 

      Successful remarketing or call provides for full repayment of outstanding reset rate notes on remarketing date

 

      $13.9 billion of reset rate notes issued to date

 

55



SLM Trust 2004-10 Reset Rate Note Structure

 

      Class A Notes pay sequentially

 

      A-4, A-5, A-6 and A-7 Reset Rate Note remarketing dates occur well in advance of expected amortization of underlying collateral

 

Amortization Illustration

 

[CHART]

 

56



SLM FFELP ABS Relative Value

 

      SLM FFELP ‘AAA’ ABS spreads track ‘AAA’ prime credit card ABS, yet SLM FFELP ABS collateral is backed by an explicit U.S. government guarantee

 

Historical 3 Year Triple-A Rated ABS
Secondary Spreads

 

Historical 7 Year Triple-A Rated ABS
Secondary Spreads

 

 

 

[CHART]

 

[CHART]

 

Source:   Merrill Lynch Research. As of April 10, 2006.

 

57



SLM ‘AAA’ FFELP vs. US Agencies

 

      Sallie Mae ‘AAA’ FFELP ABS offers wider new issue spreads than U.S. agency debentures across all maturities

 

[CHART]

 


(1)   Spreads as of April 17, 2006. US Agency spreads average of Fannie Mae and Freddie Mac LIBOR equivalent spreads. Source: Various dealers.

 

58



SLM ‘AAA’ FFELP ABS Spread Performance vs. U.S. Agencies

 

Historical Spread to LIBOR on SLM ‘AAA’ FFELP ABS
vs. U.S. Agencies

 

 

 

SLM

 

FNMA

 

Current

 

5

 

-13

 

Max

 

12

 

6

 

Min

 

3

 

-20

 

Mean

 

8

 

-9

 

Std Dev

 

3

 

4

 

 

[CHART]

 


(1)   5-year unsecured Fannie Mae, rolling weekly average LIBOR equivalent pricing. Source: Various dealers.

 

59



SLM Private Credit Student
Loan ABS Program

 

60



SLM Private Credit ABS Issue Characteristics

 

Typical SLM Private Credit ABS Transaction Features –

 

      Issue size $1.0B to $2.0B

 

      US$ denominated

 

      Student loan collateral not guaranteed by the U.S. Government

 

      ‘Aaa/AAA/AAA’ rated class A senior tranches, ‘Aa3/A/AA’ rated Class B and ‘A3/BBB/A’ rated class C subordinate tranches

 

      Floating rate tied to 3 mo. LIBOR, with occasional fixed rate issuance

 

      Typically amortizing tranches, with 1 to 15 year average lives

 

      Serviced by SLM Corporation’s subsidiary Sallie Mae, Inc.

 

61



SLM Private Credit Loan Programs

 

SLM Private Credit Loan Program Characteristics –

 

Loan Program

 

Description

 

Current Minimum
FICO Score(1)

 

Underwriting
Standards

 

 

 

 

 

 

 

Signature Student Loans®

 

Undergraduate students

 

640

 

 

 

 

 

 

 

 

 

Signature Student Loans®

 

Graduate students

 

640

 

 

 

 

 

 

 

 

FICO Basis

LAWLOANS®

 

Law school and graduates studying for the bar

 

640

 

(May 1998 –

 

 

 

 

 

 

Present)

MBA Loans®

 

Graduate business school

 

640

 

 

 

 

 

 

 

 

 

MEDLOANS®

 

Medical students and graduates in residency

 

N/A

 

Judgmental

 


(1)   Minimum FICO score for standard programs. Prior to July 1, 2001 the minimum FICO score was 630. Minimum FICO score subject to exceptions, representing a limited percentage of the portfolio. Custom loan origination programs have been negotiated with certain schools where the FICO cut-off may be lower. In certain cases, Sallie Mae has recourse to the school for these custom program loans.

 

62



SLM Private Credit ABS Issuance

 

      Prior to its most recent $2.2 billion private credit ABS issue in March 2006, SLM had issued $10.6 billion of private credit ABS

 

SLM Managed Private Credit
Loans Outstanding
(1)

 

SLM Private Credit
Cumulative ABS Issuance
(1)

 

 

 

[CHART]

 

[CHART]

 


(1)   Gross outstandings for total managed portfolio, before deducting loan loss allowance and unamortized discount.

 

63



SLM Private Credit ABS Relative Value

 

      Spreads on SLM Private Credit ABS tightened over the past two years, until widening recently relative to credit card ABS

 

Historical 3 Year Triple-A Rated ABS
Secondary Spreads

 

Historical 7 Year Triple-A Rated ABS
Secondary Spreads

 

 

 

[CHART]

 

[CHART]

 

Source:   Merrill Lynch Research. As of April 10, 2006.

 

64



SLM 2006-A Private Credit
Student Loan ABS

 

65



SLM 2006-A Transaction Structure

 

Class

 

Principal
Balance ($)

 

Principal
Balance (%)

 

Ratings (M/S/F)

 

Index

 

WA Life
to Call
(4%CPR)(1)

 

Expected Principal
Window

 

Maturity

 

A-1

 

$

434,000,000

 

19.3

%

Aaa/AAA/AAA

 

3ml

 

3.0

 

06/06-09/10

 

03/16/2020

 

A-2

 

$

207,000,000

 

9.2

%

Aaa/AAA/AAA

 

3ml

 

5.0

 

09/10-12/11

 

12/15/2020

 

A-3

 

$

355,000,000

 

15.8

%

Aaa/AAA/AAA

 

3ml

 

7.0

 

12/11-09/14

 

06/15/2022

 

A-4

 

$

373,267,000

 

16.6

%

Aaa/AAA/AAA

 

3ml

 

9.9

 

09/14-09/17

 

12/15/2023

 

A-5

 

$

700,000,000

 

31.2

%

Aaa/AAA/AAA

 

3ml

 

14.2

 

09/17-03/22

 

06/15/2039

 

B

 

$

73,297,000

 

3.3

%

Aa3/AA-/AA

 

3ml

 

11.7

 

03/13-06/21

 

06/15/2039

 

C

 

$

101,488,000

 

4.5

%

A3/A/A

 

3ml

 

10.6

 

06/13-06/20

 

06/15/2039

 

Total

 

$

2,244,052,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subordination

 

Initial(2)

 

Target(3)

 

Components

Class A

 

8.50

%

15.00

%

Class B, Class C, O/C

Class B

 

5.25

%

10.125

%

Class C, O/C

Class C

 

0.75

%

3.00

%

O/C

 

 

 

 

 

 

 

Overcollateralization (O/C)

 

Builds from 0.50% to 2.00% of Initial Asset Balance

Reserve Account

 

0.25% of Initial Pool Balance (non-declining)

Excess Spread

 

3.74% per annum (4)

Other Enhancement

 

Two 15-year Prime/LIBOR Swaps

 

 

11.31% Cash Capitalization Account for liquidity (steps down over time)(3)

 


(1)   Estimated based on a variety of assumptions concerning loan repayment behavior, as more fully described in the prospectus, which may be obtained at http://www2.salliemae.com/investors/debtasset/slmsltrusts/. Actual average life and repayment characteristics may vary significantly from estimates.

 

(2)   Percent of Initial Asset Balance.

 

(3)   Percent of Current Asset Balance.

 

(4)   Based on a variety of assumptions. Assumes all loans in repayment status.

 

66



SLM 2006-A Pool Characteristics

 

Loan Program

 

% Co-Borrower as Obligor

 

Borrower Payment Status

 

 

 

 

 

[CHART]

 

[CHART]

 

[CHART]

 

 

Pool Weighted Original Average FICO Score

 

719

 

 

 

 

 

 

 

 

Pool Weighted Current Average FICO Score

 

707

 

 

 

 

 

 

 

 

Average Borrower Indebtedness

 

$

12,121

 

 

 

 

 

 

 

 

Weighted Average Remaining Term

 

203

 months

 

67



SLM 2006-A Collateral Pool FICO Distribution at Origination(1)

 

SLM 2006-A FICO Distribution at Origination (1)

 

[CHART]

 


(1)   If there is a co-borrower, the co-borrower’s FICO is used. Exludes loans underwritten without relying upon FICO scores or where no FICO scores are available, which represented 1.8% of the pool.

 

68



SLM Private Credit ABS Prepayment Analysis

 

Historical SLM Private Credit ABS CPRs

 

[CHART]

 

69



Additional Information

 

70



Additional Information Available at www.salliemae.com

 

[GRAPHIC]

 

71



SLM “Core Earnings” Revenue Mix

 

2005 “Core Earnings” Revenue Mix -

 

      Net interest income from student loans made up 70% of net revenue in 2005

 

      The remaining 30% of net revenue was derived primarily from fee generating businesses

 

      Debt Management & Collections Operations, primarily related to student loans

 

      Guarantor Servicing for student loans

 

      Other sources, including late fees on student loans

 

[CHART]

 

Note: Figures as of year end December 31, 2005, before provisions for losses. Adjusted for items separately disclosed in the Company’s quarterly earnings releases.

 

72



SLM Summary Financial Performance

 

Managed Student Loans Outstanding

 

“Core Earnings” Net Income

 

 

 

[CHART]

 

[CHART]

 


(1)   2004 “core earnings” net income adjusted for costs associated with the wind-down of the GSE and other items disclosed separately in the Company’s quarterly earnings releases.

 

73



Sallie Mae Offices

 

10,600 employees located across the United States*

 

[GRAPHIC]

 


* As of December 31, 2005. Does not include all locations or employees.

 

74



Debt Investor Relations Contact Information

 

Guido van der Ven

Vice President, Corporate Finance

Sallie Mae, Inc.

36 Leitch Avenue

Skaneateles, NY 13152

315-685-9825

guido.e.vanderven@slma.com

 

Leo Subler

Managing Director, Corporate Finance

Sallie Mae, Inc.

12061 Bluemont Way

Reston, VA 20190

703-984-5564

leo.subler@slma.com

 

75