Borrowings

6 Months Ended

Jun. 30, 2011


3.	Borrowings

The following table summarizes our borrowings as of June 30, 2011 and December 31, 2010.


	June 30, 2011						December 31, 2010
	Short		Long				Short		Long
(Dollars in millions)	Term		Term		Total		Term		Term		Total

Unsecured borrowings:
Senior unsecured debt	$	2,464	$	16,787	$	19,251	$	4,361	$	15,742	$	20,103
Brokered deposits		1,550		1,654		3,204		1,387		3,160		4,547
Retail and other deposits		1,487		—		1,487		1,370		—		1,370
Other⁽¹⁾		1,004		—		1,004		887		—		887

Total unsecured borrowings		6,505		18,441		24,946		8,005		18,902		26,907

Secured borrowings:
FFELP Loans securitizations		—		109,524		109,524		—		112,425		112,425
Private Education Loans securitizations		—		21,815		21,815		—		21,409		21,409
ED Conduit Program Facility		22,756		—		22,756		24,484		—		24,484
ABCP borrowings		314		5,000		5,314		—		5,853		5,853
Acquisition financing⁽²⁾		—		1,010		1,010		—		1,064		1,064
FHLB-DM Facility		1,000		—		1,000		900		—		900
Indentured trusts		—		1,125		1,125		—		1,246		1,246

Total secured borrowings		24,070		138,474		162,544		25,384		141,997		167,381

Total before hedge accounting adjustments		30,575		156,915		187,490		33,389		160,899		194,288
Hedge accounting adjustments		191		3,850		4,041		227		2,644		2,871

Total	$	30,766	$	160,765	$	191,531	$	33,616	$	163,543	$	197,159


⁽¹⁾		“Other” primarily consists of cash collateral held related to derivative exposures that are recorded as a short-term debt obligation.

⁽²⁾		Relates to the acquisition of $25 billion of student loans at the end of 2010.

Secured Borrowings

We currently consolidate all of our financing entities that are variable interest entities (“VIEs”) of which we are the primary beneficiary. As a result, these financing VIEs are accounted for as secured borrowings. We consolidate the following financing VIEs as of June 30, 2011 and December 31, 2010:


	June 30, 2011
	Debt Outstanding						Carrying Amount of Assets Securing Debt
	Short		Long				Outstanding
(Dollars in millions)	Term		Term		Total		Loans		Cash		Other Assets		Total

Secured Borrowings — VIEs:
ED Conduit Program Facility	$	22,756	$	—	$	22,756	$	22,802	$	647	$	572	$	24,021
ABCP borrowings		314		5,000		5,314		5,661		77		75		5,813
Securitizations — FFELP Loans		—		109,524		109,524		110,434		3,825		575		114,834
Securitizations — Private Education Loans		—		21,815		21,815		25,084		1,171		753		27,008
Indentured trusts		—		1,125		1,125		1,441		126		13		1,580

Total before hedge accounting adjustments		23,070		137,464		160,534		165,422		5,846		1,988		173,256
Hedge accounting adjustments		—		2,414		2,414		—		—		2,135		2,135

Total	$	23,070	$	139,878	$	162,948	$	165,422	$	5,846	$	4,123	$	175,391


	December 31, 2010
	Debt Outstanding						Carrying Amount of Assets Securing Debt
	Short		Long				Outstanding
(Dollars in millions)	Term		Term		Total		Loans		Cash		Other Assets		Total

Secured Borrowings — VIEs:
ED Conduit Program Facility	$	24,484	$	—	$	24,484	$	24,511	$	819	$	634	$	25,964
ABCP borrowings		—		5,853		5,853		6,290		94		53		6,437
Securitizations — FFELP Loans		—		112,425		112,425		113,400		3,728		966		118,094
Securitizations — Private Education Loans		—		21,409		21,409		24,355		1,213		690		26,258
Indentured trusts		—		1,246		1,246		1,549		129		15		1,693

Total before hedge accounting adjustments		24,484		140,933		165,417		170,105		5,983		2,358		178,446
Hedge accounting adjustments		—		1,311		1,311		—		—		1,348		1,348

Total	$	24,484	$	142,244	$	166,728	$	170,105	$	5,983	$	3,706	$	179,794

Transactions During the Six Months Ended June 30, 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.

On March 3, 2011, we issued an $812 million FFELP ABS transaction at an all-in LIBOR equivalent cost of one-month LIBOR plus 1.14 percent. This issue has a weighted average life of 5.8 years and initial over-collateralization of approximately 3 percent.

On January 14, 2011, we issued a $2 billion five-year 6.25 percent fixed rate unsecured bond. The bond was issued to yield 6.50 percent before underwriting fees. The rate on the bond was swapped from a fixed rate to a floating rate equal to an all-in cost of one-month LIBOR plus 4.46 percent. The proceeds of this bond were designated for general corporate purposes.

We also repurchase our outstanding unsecured debt in both open-market repurchases and public tender offers. Repurchasing debt helps us to better manage our short-term and long-term funding needs by utilizing current excess liquidity to reduce future obligations related to our unsecured borrowings at favorable pricing. During the first half of 2011, we repurchased $885 million of debt and realized gains of $38 million for the six months ended June 30, 2011, compared with $2.7 billion and $181 million the six months ended June 30, 2010.

We have $5.2 billion in Private Education Loan securitization bonds outstanding at June 30, 2011, where we have the ability to call the bonds at a discount to par between the fourth quarter of 2011 and 2014. We have concluded that it is probable we will call these bonds at the call date at their respective discount to par. We consider it probable because we believe that these bonds can be refinanced at the call date at or lower than a breakeven cost of funds based on the call discount. As a result, we are accreting this call discount as a reduction to interest expense through the call date. If it becomes less than probable that we will call these bonds at a future date, it will result in our reversing this prior accretion as a cumulative catch-up adjustment. We have accreted approximately $228 million, cumulatively, and $28 million and $56 million in the three and six months ended June 30, 2011 as a reduction of interest expense.

The following table summarizes our securitization activity for the three and six months ended June 30, 2011 and 2010. The securitizations in the periods presented below were accounted for as financings.


	Three Months Ended June 30,								Six Months Ended June 30,
	2011				2010				2011				2010
			Loan				Loan				Loan				Loan
	No. of		Amount		No. of		Amount		No. of		Amount		No. of		Amount
(Dollars in millions)	Transactions		Securitized		Transactions		Securitized		Transactions		Securitized		Transactions		Securitized

Securitizations:
FFELP Stafford/PLUS Loans		—	$	—		1	$	1,211		—	$	—		1	$	1,211
FFELP Consolidation Loans		1		774		—		—		2		1,546		—		—
Private Education Loans		2		1,699		—		—		2		1,699		1		1,929

Total securitizations		3	$	2,473		1	$	1,211		4	$	3,245		2	$	3,140