Second Quarter 2018
SLM CORPORATION
INVESTOR PRESENTATION
Exhibit 99.1
2
Forward-Looking Statements and Disclaimer
Cautionary Note Regarding Forward-Looking Statements
The following information is current as of April 23, 2018 (unless otherwise noted) and should be read in connection with the press release of SLM Corporation (the
“Company”) announcing its financial results for the quarter ended March 31, 2018, the Form 10-Q for the quarter ended March 31, 2018 (filed with the Securities and
Exchange Commission (“SEC”) on April 23, 2018) and subsequent reports filed with the SEC.
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 statements about the Company’s beliefs, opinions or expectations and statements that assume or are dependent upon future
events, are forward-looking statements. Forward-looking statements are subject to risks, uncertainties, assumptions and other factors that may cause actual results to be
materially different from those reflected in such forward-looking statements. These factors include, among others, the risks and uncertainties set forth in Item 1A. “Risk
Factors” and elsewhere in the Company’s Annual Report on Form 10-K for the year ended Dec. 31, 2017 (filed with the SEC on Feb. 23, 2018) and subsequent filings
with the SEC; increases in financing costs; limits on liquidity; increases in costs associated with compliance with laws and regulations; failure to comply with consumer
protection, banking and other laws; changes in accounting standards and the impact of related changes in significant accounting estimates; any adverse outcomes in any
significant litigation to which the Company or any subsidiary is a party; credit risk associated with the Company’s (or any subsidiary's) exposure to third parties, including
counterparties to the Company’s (or any subsidiary's) derivative transactions; and changes in the terms of education loans and the educational credit marketplace
(including changes resulting from new laws and the implementation of existing laws). The Company could also be affected by, among other things: changes in its funding
costs and availability; reductions to its credit ratings; cyber security incidents and cyber attacks and other; failures or breaches of its operating systems or infrastructure,
including those of third-party vendors; damage to its reputation; risks associated with restructuring initiatives, including failures to successfully implement cost-cutting
programs and the adverse effects of such initiatives on the Company’s business; changes in the demand for educational financing or in financing preferences of lenders,
educational institutions, students and their families; changes in law and regulations with respect to the student lending business and financial institutions generally;
changes in banking rules and regulations, including increased capital requirements; increased competition from banks and other consumer lenders; the creditworthiness
of customers; changes in the general interest rate environment, including the rate relationships among relevant money-market instruments and those of earning assets
versus funding arrangements; rates of prepayments on the loans made by the Company and its subsidiaries; changes in general economic conditions and the
Company’s ability to successfully effectuate any acquisitions; and other strategic initiatives. The preparation of the Company’s consolidated financial statements also
requires management to make certain estimates and assumptions, including estimates and assumptions about future events. These estimates or assumptions may
prove to be incorrect. All forward-looking statements contained in this Presentation are qualified by these cautionary statements and are made only as of the date of this
Presentation. The Company does not undertake any obligation to update or revise these forward-looking statements to conform such statements to actual results or
changes in its expectations.
The Company reports financial results on a GAAP basis and also provides certain non-GAAP “Core Earnings” performance measures. The difference between the
Company’s “Core Earnings” and GAAP results for the periods presented were the unrealized, mark-to-market gains/losses on derivative contracts (excluding current
period accruals on the derivative instruments), net of tax. These are recognized in GAAP, but not in “Core Earnings” results. The Company provides “Core Earnings”
measures because this is what management uses when making management decisions regarding the Company’s performance and the allocation of corporate
resources. The Company’s “Core Earnings” are not defined terms within GAAP and may not be comparable to similarly titled measures reported by other companies.
For additional information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – GAAP Consolidated Earnings Summary-
’Core Earnings’” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 and Quarterly Report on Form 10-Q for the quarter ended March
31, 2018. For a complete reconciliation between GAAP net income and “Core Earnings’’, see the “ ‘Core Earnings’ to GAAP Reconciliation” table in the April 23, 2018
Earnings Press Release.
3
Sallie Mae Brand • #1 saving, planning and paying for
education company with 40 years of
leadership in the education lending
market
• Top ranked brand: 6 out of 10
consumers of education finance
recognize the Sallie Mae brand
• Industry leading market share in
private education lending: 55% market
share(1)
• Over 2,400 actively managed
university relationships across the U.S.
• Complementary consumer product
offerings
• Over one million long-term engaged
customers across the Sallie Mae
brands
(1) Source: MeasureOne CBA Report as of December 2017
4
Sallie Mae Overview
(1) The difference between “Core Earnings” and GAAP net income is driven by mark-to-market unrealized gains and losses on derivative contracts (excluding current period accruals on the derivative instruments), net of
tax, which are recognized in GAAP, but not in “Core Earnings” results. See page 29 for a reconciliation of GAAP and “Core Earnings” .
(2) Derivative Accounting: “Core Earnings” exclude periodic unrealized gains and losses caused by the mark-to-market valuations on derivatives that do not qualify for hedge accounting treatment under GAAP, as well as
the periodic unrealized gains and losses that are a result of ineffectiveness recognized related to effective hedges under GAAP (but include current period accruals on the derivative instruments), net of tax. Under GAAP,
for our derivatives held to maturity, the cumulative net unrealized gain or loss over the life of the contract will equal $0.
(3) Represents the higher credit score of the cosigner or the borrower.
Sallie Mae Key Statistics for Q1 2018
− $0.27 Core Earnings diluted earnings per common share 1,2
− Portfolio of $18.6 billion of high quality Private Education Loans
− 89% of Private Education Loans disbursed in Q1 2018 are cosigned
− Average Q1 2018 Private Education Loan originations FICO of 746 3
− 79% of Private Education Loans outstanding have origination FICO ≥ 700 3
− $1.4 billion in cash
− Net interest income= $333 million
− Net interest margin = 6.17%
− Private Education Loan yield = 8.84%
A diversified approach to funding which includes:
− $16.5 billion in deposits
−$8.6 billion in brokered deposits
−$7.9 billion in retail and other deposits
− $750 million multi-year asset-backed commercial paper funding facility
− $670 million of term funding raised in ABS market in Q1 2018
5
($B as of 3/31/18)
Assets 23.4 -
FFELP Loans 0.9 -
Private Loans 18.6 -
Personal Loans 0.7 -
Deposits 16.5 -
Common Equity 2.2 -
Private Education Loan -
Originator and Servicer
Deposits -
Upromise Rewards -
Credit Card -
- National sales and
marketing
- Largest salesforce in
the industry
- Specialized underwriting
capability
- Capital markets expertise
Sallie Mae Summary
- Leading private education
loan franchise
- Conservative credit and
funding
- Expanding consumer
finance product suite Strategic
Overview
Key
Businesses
Balance
Sheet
Competitive
Advantage
6
Favorable Student Loan Market Trends
Academic Year Enrollment at Four-Year Degree Granting Institutions(1) Annual Cost of Education(2)
Estimated Total Cost of Education – 2016 / 2017 AY(3) Cost of College (Based on a Four-Year Term)(4)
(billions) (thousands)
(1) Source: U.S. Department of Education, National Center for Education Statistics, Projections of Education Statistics to 2024 (NCES, September 2016), Enrollment in Postsecondary Institutions
(2) Source: Trends in College Pricing,© 2017 The College Board, www.collegeboard.org. Note: Academic years, average published tuition, fees, room and board charges at four-year institutions; enrollment-weighted
(3) Source: Total post-secondary education spend is estimated by Sallie Mae determining the full-time equivalents for both graduates and undergraduates and multiplying by the estimated total per person cost of attendance
for each school type. In doing so, we utilize information from the US Department of Education, National Center for Education Statistics, Projections of Education Statistics to 2024 (NCES, September 2016), The Integrated
Postsecondary Education Data System (IPEDS), College Board -Trends in Student Aid 2017, © 2017 The College Board, www.collegeboard.org, College Board -Trends in Student Pricing 2017, © 2017 The College Board,
www.collegeboard.org, National Student Clearinghouse - Term Enrollment Estimates and Company Analysis. Other sources for these data points also exist publicly and may vary from our computed estimates. NCES, IPEDS,
and College Board restate their data annually, which may cause previously reported results to vary. We have also restated figures in our Company Analysis to standardize all costs of attendance to dollars not adjusted for inflation.
This has a minimal impact on historically-stated numbers.
(4) Source: Trends in College Pricing,© 2017 The College Board, www.collegeboard.org, U.S. Department of Education 2017
AY 07/08 AY 17/18
(Millions) (Thousands)
7
Relationship Between Higher Education,
Income and Employment(1)
Unemployment
Average weekly income
Higher Education Value Proposition
Key Statistics
• The unemployment rate for individuals age 25 and older with four-year college degrees was 2.4%, compared to 4.9%
for high school graduates(1)
• 60% of students graduated with student loans in AY 2015-2016(3)
• Of the 60% of bachelor’s degree recipients who graduated with student loans, the average debt amount is $28,400 (3)
(1) Source: U.S. Bureau of Labor Statistics- “More education: Lower unemployment, higher earnings” as of March 2018
(2) Source: PEW Research Center- The Rising Cost of Not Going to College-February 2014
(3) Source: Trends in Student Aid,© 2017 The College Board, www.collegeboard.org, U.S. Department of Education 2017
Incremental Earnings From a College Degree Have Increased
For Generations(2)
8
Product Features
• Offers three repayment options while in school, which include Interest Only, $25
Fixed Payment and Deferred Repayment
• Variable and Fixed Interest Rate Options
• All loans are certified by the school’s financial aid office to ensure all proceeds are
for educational expenses
Distribution Channels
• Nationally recognized brand
• Largest national sales force in industry actively manages over 2,400 college
relationships
• Represented on vast majority of college directed preferred lender lists
• Significant marketing experience to prospective customers through paid search,
affiliates, display, direct mail and email
• Leverage low cost customer channels to contribute to significant serialization in
following years
• Marketing and distribution through partnerships with banks, credit unions,
resellers and membership organizations
Smart Option Overview
9
Analytical Approach to Credit
Borrower/Cosigner
Initial Screen
• $1,000 minimum loan
• Minimum FICO of 640
• No existing SLM 30+ day past dues
• No student loans 90+ day past dues
• No recent bankruptcy
• 2+ trades for cosigners and 4+ trades for
non-cosigner
• Asset expertise and rigorous
underwriting driven by large
volume of historical data
• ~1.3mm annual applications
• ~40% approval rate
Custom Scorecard
• Multi-scenario approach that predicts
percentage of borrowers likely to reach
90+ days past due
• Built in coordination with Experian
Decision Analytics
• Applies 15 – 18 application and credit
bureau attributes
Manual Review
• ~8% of applications
• Pass risk scores, but require further
review due to credit concerns
− Thorough review of bankruptcies,
collection accounts, etc.
− Higher levels of existing student
debt
− High credit utilization
10
$4,076
$4,330
$4,666
$4,819
$1,972
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
$5,000
2014 2015 2016 2017 2018
D
is
b
u
rs
e
m
e
n
ts
(
$
M
M
)
Private Education Loan Disbursements
3%
6%
4%
8%
$5,000
7%$1,847
High Quality Private Education Loan Growth
As of 3/31/18
(1) Represents the higher credit score of the cosigner or the borrower.
Disbursement Statistics ($) 2014 2015 2016 2017 Q1 2018
% Cosigned 90% 90% 89% 88% 89%
% In School Payment 57% 56% 55% 54% 54%
Average FICO at Approval1 748 749 748 747 746
11
High Quality Private Education Portfolio
As of 3/31/18
12
Stable deposit base with no branch overhead
— Diversified mix of retail and other core savings,
MMDA and CDs
— Brokered deposits used as alternative funding source
Term funding / securitizations will augment deposit
funding for future growth
— Experienced capital markets team
— Capacity to securitize $2 – $3billion of private
education loans
Multi-year revolving conduit facility
— Provides seasonal loan funding and backup liquidity
— Multi-year $750 million conduit provided by
consortium of banks
Substantial liquidity portfolio
— 15% of total retail deposit balances held as excess
liquidity
Funding Targets
— 20% of total funding in secured debt combined with
the remaining 80% having an approximately equal
distribution of retail and brokered deposits
Conservative Funding Approach
As of 3/31/18
Secured Debt
19%
Brokered
Variable
32%
Brokered
Fixed
10%
Retail
(H.S.A. & Ed. 529)
17%
Retail
(MMDA & CD)
22%
Retail deposits 39%
Brokered deposits 42%
Secured debt 19%
13
Smart Option Delinquency and Default Performance
(As a % of Loans in P&I Repayment)(1),(2),(3)
31-60 Day Delinquency
91+ Day Delinquency
61-90 Day Delinquency
Annualized Gross Default Rate
As of 3/31/18
(1) For important information regarding historical performance data, see pages 27 and 28.
(2) ‘Loans in P&I Repayment’ include only those loans for which scheduled principal and interest payments were due at the end of the applicable monthly reporting period.
(3) Delinquency and Default rates are calculated as a percentage of loans in principal and interest (P&I) repayment.
14
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
0 1 2 3 4 5 6 7 8
Cu
m
ul
at
iv
e
D
ef
au
lt
s
as
a
%
o
f
D
is
bu
rs
ed
P
ri
nc
ip
al
E
nt
er
in
g
P
&
I
R
ep
ay
m
en
t
Years Since First P&I Repayment Period
2010 2011 2012 2013 2014 2015 2016 2017
Cumulative Defaults by P&I Repayment Vintage(1),(2),(3)
Smart Option Cumulative Gross Defaults by P&I Repayment Vintage and Years Since First P&I Repayment Period
As of 3/31/18
(1) For important information regarding historical performance data and an explanation of the data and calculations underlying this chart, see pages 27-29.
(2) For 2010-2014 P&I repayment vintages only- Data for Legacy SLM, Navient and Sallie Mae Bank serviced portfolios combined. Certain data used in the charts above was provided by Navient under a data sharing agreement.
Sallie Mae Bank has not independently verified, and is not able to verify, the accuracy or completeness of the data provided under the agreement.
(3) For 2015- 2017 P&I repayment vintages only- Data for Sallie Mae Bank serviced loans only – All loans covered are serviced by Sallie Mae Bank, regardless of whether the loans were originated by Sallie Mae Bank when it was
part of legacy SLM, or by Sallie Mae Bank post Spin-Off, and regardless of whether the loans are held by an ABS trust.
Note: Legacy SLM and Navient portfolio serviced pursuant to a 212 day charge-off policy. Sallie Mae Bank portfolio serviced pursuant to a 120 day charge-off policy. Historical trends may not be indicative of future performance.
4.7%
4.0%
2.1%
5.3%
4.8%
6.4%
7.0%
0.3%
15
Financial Review
As of 3/31/18
(in millions) Q1 2018 Q1 2017 Variance
PSL 18,853$ 15,702$ 3,151$
PSL Reserve (252) (185) (67)
FFELP 910 992 (82)
FFELP Reserve (1) (2) 1
PLOAN / Other 678 57 621
PLOAN / Other Reserve (19) - (19)
Total Loans 20,169 16,563 3,606
Cash 1,436 1,078 358
Other Assets 1,802 1,596 206
Total Assets 23,406 19,237 4,169
Brokered Deposits 8,626 6,667 1,959
Retail and Other Deposits 7,938 6,721 1,217
Other Liabilities 4,233 3,412 821
Equity 2,610 2,435 175
Total Liabilities & Equity 23,406$ 19,237$ 4,169$
PSL Reserve % of Balance (Gross) 1.34% 1.18% 0.16 %
Interest Income 437$ 329$ 108$
Interest Expense (105) (61) (44)
Net Interest Income before Provision 333 268 65
Provision (54) (25) (29)
NII After Provision 279 243 36
Other Income - - -
Gain(Loss) on Hedging Activities, net 14 6 8
Total Non-Interest Expenses (125) (103) (22)
GAAP Pre-Tax Income 167$ 146$ 21$
Core Earnings Pre-Tax Income 163$ 151$ 12$
GAAP Net Income 126$ 95$ 31$
Core Earnings Adjustments (3)$ 3$ (6)$
Core Earnings 123$ 98$ 25$
Preferred Dividends (3)$ (6)$ 3$
GAAP Earnings Attributable to Common Stock 123$ 89$ 34$
Core Earnings Attributable to Common Stock 120$ 93$ 27$
Return on Assets (Core) 2.2% 2.1% 0.1%
Return on Common Equity (Core) 22.7% 20.7% 2.0%
Total Risk Based Capital Ratio (Bank Only) 13.0% 13.3% (0.3%)
CSEs 439 439 -
Core EPS 0.27 $0.21 $0.06
B
al
an
ce
S
he
et
In
co
m
e
S
ta
te
m
en
t
16
Enhance Franchise and Diversify Revenue
Goal:
• Develop relevant and innovative Consumer
Lending products to deepen customer
engagement, attract new-to-firm customers
and diversify revenue at attractive returns on
equity.
Our Strengths:
• Access to high quality customer base as they
begin to consume financial services.
• Positive relationships with parents, their key
financial advisor.
• Product innovation will be tailored to meet
needs of the college graduate.
• Underwriting, marketing and servicing teams
have vast prior experience with new products
from Citi, JPM, BAC & DFS.
21%
30%
42%
54%
64%
73%
79%
83%
87%
91%
93% 95%
1% 2%
5%
8%
11%
15%
18%
22%
25%
27%
29% 30%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
18 19 20 21 22 23 24 25 26 27 28 29
%
of
B
or
ro
we
rs
Age of Borrowers
Distribution of Sallie Mae Borrowers by Product and Age
% with a Credit Card
% with a Personal Loan
Personal Loan:
• Built platform in 2017. Began test marketing in 2018.
• This product appeals to millennials as card alternative and is a traditional debt consolidation product.
Credit Card:
• Launch a SLM credit card targeted to the young adult segment in early 2019.
• Leverage a partner to provide an end-to-end solution to reduce execution risk and allow for faster speed to
market.
• Partner will be chosen, product design finalized and team assembled in 2018.
17
• Market share leader in private student loan industry
• High quality assets and conservatively funded balance sheet
• Predictable balance sheet growth
• Strong capital position and funding capabilities
• A financial services company with high growth trajectory and excellent return on equity
Sallie Mae Bank
18
ABS Supplement
19
Sallie Mae’s Smart Option Loan Product Overview
• The Smart Option loan product was introduced by
Sallie Mae in 2009
• The Smart Option loan program consists of:
– Smart Option Interest Only loans - require full
interest payments during in-school, grace, and
deferment periods
– Smart Option Fixed Pay loans - require $25 fixed
payments during in-school, grace, and deferment
periods
– Smart Option Deferred loans – do not require
payments during in-school and grace periods
• Variable rate loans indexed to LIBOR, or fixed rate
• Smart Option payment option may not be changed
after selected at origination
• Underwritten using proprietary credit score model
• Marketed primarily through the school channel and
also directly to consumers, with all loans certified by
and disbursed directly to schools
Smart Option Loan Program
Origination Channel School
Typical Borrower Student
Typical Co-signer Parent
Typical Loan
$10,000 avg orig bal, 5 to 15 yr term,
in-school payments of interest only, $25 fixed or fully
deferred
Origination Period March 2009 to present
Certification and Disbursement School certified and school disbursed
Borrower Underwriting FICO, custom credit score model, and judgmental underwriting
Borrowing Limits Up to the full cost of education, less grants and federal loans
Historical Risk-Based Pricing L + 2% to L + 14%
Dischargeable in Bankruptcy No (1)
Additional Characteristics
• Made to students and parents primarily through
college financial aid offices to fund 2-year, 4-year and
graduate school college tuition, room and board
• Also available on a limited basis to students and
parents to fund non-degree granting secondary
education, including community college, part time,
technical and trade school programs
• Both Title IV and non-Title IV schools
(1) Private education loans are typically non-dischargeable in bankruptcy, unless a borrower can prove
that repayment of the loan would impose an "undue hardship“.
20
(1) Smart Option loans considered in ‘P&I Repayment’ only if borrowers are subject to full principal and interest payments on the loan.
(2) Represents the higher credit score of the cosigner or the borrower.
Note: Pool characteristics as of the Statistical Cutoff Date for the respective transaction
Sallie Mae Bank ABS Summary
21
Sallie Mae Bank ABS Structures
(1) Overcollateralization for Class A & B bonds
(2) Estimated based on a variety of assumptions concerning loan repayment behavior. Actual prepayment rate may vary significantly from estimates.
SMB 2018-A SMB 2017-B
Size $670.0MM $676.0MM
Pricing Date March 14, 2018 October 31, 2017
Collateral
Smart Option
Private Education Loans
Smart Option
Private Education Loans
Servicer Sallie Mae Bank Sallie Mae Bank
Overcollateralization (1) 11% 11%
Pricing Prepayment Speed (2) 8% 8%
Tranche Structure at Issuance
WA Borrower Interest Rate 9.29% 8.94%
WA FICO at Origination 747 747
% Loans with Cosigner 92% 92%
Variable Rate Loans 75% 80%
Class
Amt
($mm) Mdy's WAL Pricing
A-1 226.00 Aaa 1.00 1mL +27
A-2A 268.00 Aaa 5.15 IntS +75
A-2B 132.00 Aaa 5.15 1mL +75
B 50.00 Aa2 9.28 IntS +130
Class
Amt
($mm) Mdy's WAL Pricing
A-1 256.00 Aaa 1.26 1mL +35
A-2A 244.00 Aaa 5.93 IntS +75
A-2B 120.00 Aaa 5.93 1mL +80
B 50.00 Aa2 9.79 IntS +115
22
Sallie Mae Bank Servicing Policies
Policy Pre-Spin, Legacy SLM Serviced Post-Spin, Sallie Mae Bank Serviced
Delinquencies All loans serviced by an affiliate of legacy SLM; loan
owned by Sallie Mae Bank sold to legacy SLM after
becoming 90+ days past due.
Sallie Mae Bank collects delinquent loans thru charge-off, placing
emphasis on returning loans to current status during early
delinquency.
Charge-offs Loans serviced by legacy SLM charge off at 212+
days past due.
Loans serviced by Sallie Mae Bank charge off at 120+ days past
due.
Recoveries Post-charge off collections managed by legacy SLM;
recoveries realized over 10+ years.
Charged-off loans either collected internally or sold to third
parties. Recoveries recognized immediately if charged-off loans
sold to third parties.
Forbearance Granted for 3 mo. intervals with a 12 month
maximum, with fee.
Granted for 3 mo. intervals with a 12 month maximum, no fee.
Sallie Mae Bank Forbearance Policy -
• First choice is always to collect a payment from the borrower or co-signer
• If payment is not possible, forbearance temporarily provides borrowers limited time to improve their ability to repay
during temporary economic hardship
• The vast majority of loans do not use forbearance; those that do, remain in forbearance for less than 12 months
23
Sallie Mae Bank Collections
Each customer is approached individually, and the account manager is educated and empowered to identify optimal resolution
• Co-borrowers are contacted and collected with similar efforts as the primary borrower
Sallie Mae Bank employs a front-loaded, stage based collections approach:
• Early Stage Loan Collections (1 – 29 days delinquent as of the first of the month)
– Calling activity begins as early as 1 cycle day behind (5 days past their due date in most instances)
– Dialer based calling and automated messaging are leveraged for early delinquency
– E-mail and letter campaigns complement calling efforts
• Mid-Stage Loan Collections (30 – 59 days delinquent as of the first of the month)
– Continue early stage activities
– Account is assigned to a collector’s queue based on the delinquency and the type of loan. Collection campaign includes
telephone attempts and manual skip tracing
• Late Stage Loan Collections (60+ days delinquent as of the first of the month)
– Continue both early and mid-stage activities
– Tenured route management collectors and customized letter campaigns
Cash collection is the primary focus, but a variety of tools are also available to collectors to aid in resolving delinquency:
– Auto pay – Monthly payment made automatically, prior delinquency cleared with forbearance
– Three Pay – After three scheduled monthly payments are made, prior delinquency cleared with forbearance
– Rate Reduction – Reduce rate for monthly payment relief, enrolled after three qualifying payments
– Rate Reduction with Term Extension – Reduced rate and extended term
– Additional programs are available when all other methods are not adequate
Bankruptcy Collections Policy – Collection activity stops if both parties on the loan file bankruptcy (borrower and cosigner) or on a non-
cosigned loan; otherwise, collections can continue on the non-filing party
24
Sallie Mae Bank Smart Option Private Education Loans
FFELP vs. Sallie Mae Bank Smart Option Private Education Loan Comparison
FFELP Stafford Loans Sallie Mae Bank Smart OptionPrivate Education Loans(1)
Borrower Student Student or Parent
Co-signer None Typically a parent
Lender Eligible banks and private lenders under FFELP Banks and other private sector lenders
Guarantee
97-100% of principal and interest by the U.S. Department
of Education Not guaranteed by the U.S. Government or any other entity
Interest Subsidy/Special Allowance
Payments
Paid by the U.S. Department of Education Not Applicable
Underwriting
Borrower must have no outstanding student loan defaults
or bankruptcy
Consumer credit underwriting, with minimum FICO, custom
credit score model, and judgmental underwriting
Pricing
Fixed or floating rate depending on origination year and
loan program
Risk-based pricing, with a variable rate indexed to LIBOR
or a fixed rate for life
Maximum Amount per Year
$5,500-$7,500 for dependent student, based on year in
school
Up to the full cost of education, less grants and federal
loans
Repayment Term 10 years, with repayment deferred until after graduation
5 to 15 years, may pay interest or a $25 fixed payment
while in school, or may be deferred until after graduation or
other separation
Collections Based on prescribed U.S. Dept of Education regulations
Consumer loan collections activities typical for unsecured
consumer credit
Deferment
Permitted for a variety of reasons, including economic
hardship
Granted to students who return to school, or are involved in
active military service
Forbearance
Permitted for a variety of reasons, including economic
hardship
Typically granted for economic hardship, up to a maximum
of 12 months
Dischargeable in Bankruptcy No No (1)
(1) Private education loans are typically non-dischargeable in bankruptcy, unless a borrower can prove that repayment of the loan imposes an "undue hardship“.
25
Appendix
26
“Core Earnings” to GAAP Reconciliation
(1) Derivative Accounting: “Core Earnings” exclude periodic unrealized gains and losses caused by the mark-to-market valuations on derivatives that do not qualify for hedge accounting treatment under GAAP, as well as the
periodic unrealized gains and losses that are a result of ineffectiveness recognized related to effective hedges under GAAP (but include current period accruals on the derivative instruments), net of tax. Under GAAP, for our
derivatives held to maturity, the cumulative net unrealized gain or loss over the life of the contract will equal $0.
(2) “Core Earnings” tax rate is based on the effective tax rate at the Bank where the derivative instruments are held.
Mar. 31, Dec. 31, Mar. 31,
2018 2017 2017
(Dollars in thousands, except per share amounts)
“Core Earnings” adjustments to GAAP:
GAAP net income……….….…….........………………… 126,254$ 47,003$ 94,943$
Preferred stock dividends ………....….........…………… 3,397 3,137 5,575
GAAP net income attributable to SLM Corporation common
stock………...……...……...….…..…………. 122,857$ 43,866$ 89,368$
Adjustments:
Net impact of derivative accounting(1) …………….…. (3,782) 706 5,458
Net tax effect(2) …….…...……………………..………. (919) 270 2,084
Total “Core Earnings” adjustments to GAAP ……… (2,863) 436 3,374
"Core Earnings" attributable to SLM Corporation common
stock……...…......…..…..…...………. 119,994$ 44,302$ 92,742$
GAAP diluted earnings per common share …………. 0.28$ 0.10$ 0.20$
Derivative adjustments, net of tax ….....……………… (0.01) - 0.01
“Core Earnings” diluted earnings per common share ….. 0.27$ 0.10$ 0.21$
Quarters Ended
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Important Information Regarding Historical Loan Performance Data
On April 30, 2014 (the “Spin-Off Date”), the former SLM Corporation legally separated (the “Spin-Off”) into two distinct publicly-traded entities: an education loan management, servicing and asset recovery business called Navient
Corporation (“Navient”), and a consumer banking business called SLM Corporation. SLM Corporation’s primary operating subsidiary is Sallie Mae Bank. We sometimes refer to SLM Corporation, together with its subsidiaries and its
affiliates, during the period prior to the Spin-Off as “legacy SLM.”
In connection with the Spin-Off, all private education loans owned by legacy SLM, other than those owned by its Sallie Mae Bank subsidiary as of the date of the Spin-Off, and all private education loan asset-backed securities (“ABS”)
trusts previously sponsored and administered by legacy SLM were transferred to Navient. As of the Spin-Off Date, Navient and its sponsored ABS trusts owned $30.8 billion of legacy SLM’s private education loan portfolio originated both
prior to and since 2009. As of the Spin-Off Date, Sallie Mae Bank owned $7.2 billion of private education loans, the vast majority of which were unencumbered Smart Option Student Loans originated since 2009.
Legacy SLM’s Private Education Loan and ABS Programs Prior to the Spin-Off
In 1989, legacy SLM began making private education loans to graduate students. In 1996, legacy SLM expanded its private education loan offerings to undergraduate students. Between 2002 and 2007, legacy SLM issued $18.6 billion of
private education loan-backed ABS in 12 separate transactions.
In 2008, in response to the financial downturn, legacy SLM revised its private education loan underwriting criteria, tightened its forbearance and collections policies, ended direct-to-consumer disbursements, and ceased lending to
students attending certain for-profit schools. Legacy SLM issued no private education loan ABS in 2008.
In 2009, legacy SLM introduced its Smart Option Student Loan product and began underwriting private education loans with a proprietary custom credit score. The custom credit score included income-based factors, which led to a
significant increase in the percentage of loans requiring a co-signer, typically a parent. The initial loans originated under the Smart Option Student Loan program (the “Interest Only SOSLs”) were variable rate loans and required interest
payments by borrowers while in school, which reduced the amounts payable over the loans’ lives and helped establish repayment habits among borrowers. In 2010, legacy SLM introduced a second option for its Smart Option Student
Loan customers, which required a $25 fixed monthly payment while borrowers were in school (the “Fixed Pay SOSLs”). In 2011, legacy SLM introduced another option for its Smart Option Student Loan customers, which allowed
borrowers to defer interest and principal payments until after a student graduates or separates from school (the “Deferred SOSLs”). In 2012, legacy SLM introduced a fixed rate loan option for its Interest Only, Fixed Pay and Deferred
SOSLs. Borrowers must select which of these options they prefer at the time of loan origination and are not permitted to change those options once selected.
In 2011, legacy SLM included private education loans originated under the Smart Option Student Loan program in its ABS pools for the first time. Between 2011 and 2014, the mix of Smart Option Student Loans included in legacy SLM’s
private education loan ABS steadily increased as a percentage of the collateral pools, from 10% initially to 64% in later transactions.
Sallie Mae Bank’s Private Education Loan and ABS Programs Post-Spin-Off
Originations. Following the Spin-Off, Sallie Mae Bank continued to originate loans under the Smart Option Student Loan program. As of December 31, 2017, it owned $17.4 billion of private education loans (gross), the vast majority of
which were Smart Option Student Loans originated since 2009, and over 90% of which were originated between 2013 and 2017. Navient ceased originating private education loans following the Spin-Off.
Servicing. Immediately prior to the Spin-Off, Sallie Mae Bank assumed responsibility for collections of delinquent loans on the vast majority of its Smart Option Student Loan portfolio. Following the Spin-Off Date, Navient continued to
service all private education loans owned by the two companies on its servicing platform until October 2014, when servicing for the vast majority of Sallie Mae Bank’s private education loan portfolio was transitioned to Sallie Mae Bank.
Sallie Mae Bank now services and is responsible for collecting the vast majority of the Smart Option Student Loans it owns.
Securitization and Sales. In August 2014, Sallie Mae Bank sponsored its first private education loan ABS, SMB Private Education Loan Trust 2014-A (the “SMB 2014-A transaction”). Because this transaction occurred prior to the transfer
of loan servicing from Navient to Sallie Mae Bank, Sallie Mae Bank acted as master servicer for the transaction and Navient as subservicer, and the loan pool is serviced pursuant to Navient servicing policies. In April 2015 and October
2015, Sallie Mae Bank sponsored securitizations and residual sales, SMB Private Education Loan Trust 2015-A and SMB Private Education Loan Trust 2015-C, respectively. Sallie Mae Bank also sponsored on-balance sheet term
securitizations as follows:
Sallie Mae Bank services the loans in all of the securitizations it has sponsored following the SMB 2014-A transaction.
Additional Information. Prior to the Spin-Off, all Smart Option Student Loans were originated and initially held by Sallie Mae Bank, as a subsidiary of legacy SLM. Sallie Mae Bank typically then sold certain of the performing Smart Option
Student Loans to an affiliate of legacy SLM for securitization. Additionally, on a monthly basis Sallie Mae Bank sold all loans that were over 90 days past due, in forbearance, restructured or involved in a bankruptcy to an affiliate of legacy
SLM. As a result of this second practice, prior to the occurrence of the Spin-Off, historical performance data for Sallie Mae Bank’s Smart Option Student Loan portfolio reflected minimal later stage delinquencies, forbearance or charge-offs.
Legacy SLM collected Smart Option Student Loans pursuant to policies that required loans be charged off after 212 days of delinquency. In April 2014, Sallie Mae Bank began collecting the vast majority of its Smart Option Student Loans
pursuant to policies that required loans be charged off after 120 days of delinquency, in accordance with bank regulatory guidance. As a result of the various policies described above, it was not until recently that (a) a meaningful amount
of Smart Option Student Loan charge-offs occurred in Sallie Mae Bank’s portfolio, and (b) performance data on Sallie Mae Bank’s owned Smart Option Student Loan portfolio became useful as a basis for evaluating historical trends for
Smart Option Student Loans. For the reasons described above, much of Sallie Mae Bank’s historical performance data does not reflect current collections and charge off practices and may not be indicative of the future performance of the
Bank’s Smart Option Student Loans.
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Important Information Regarding Historical Loan Performance Data (cont.)
Types of Smart Option Loan Portfolio Data
The portfolio data we used in this report comes from three separate sources of information:
(1) Combined Smart Option Student Loan Portfolio Data for Legacy SLM, Navient and Sallie Mae Bank. Information in this category is presented on a combined basis for loans originated under the Smart Option Student Loan program,
whether originated by Sallie Mae Bank when it was part of legacy SLM or by Sallie Mae Bank post Spin-Off, and regardless of whether the loan is currently held by an ABS trust, or held or serviced by Navient or Sallie Mae Bank. Data in
this category is used in the tables under the following headings:
• “Cumulative Defaults by P&I Repayment Vintage and Years Since First P&I Repayment Period” – Only for 2010-2014 P&I Repayment Vintages
This combined Smart Option Student Loan portfolio data provides insight into gross defaults of the covered vintages of Smart Option Student Loans since 2010, regardless of ownership or servicing standard. Data available for earlier
periods includes a limited number of Smart Option Student Loan product types.
Loans contained in the combined Smart Option Student Loan portfolio category were serviced by legacy SLM prior to the Spin-Off, and by either Navient or Sallie Mae Bank after the Spin-Off. As noted above, loans serviced by legacy
SLM and Navient were serviced pursuant to different policies than those loans serviced by Sallie Mae Bank after the Spin-Off. Specifically, legacy SLM charged off loans after 212 days of delinquency, and Navient has continued this
policy. Sallie Mae Bank currently charges off loans after 120 days of delinquency. All loans included in the combined Smart Option Student Loan portfolio that were serviced by legacy SLM prior to the Spin-Off were serviced pursuant to a
212-day charge off policy. Following the Spin-Off, a portion of the loans included in the combined Smart Option Student Loan portfolio data have been serviced by Navient pursuant to a 212-day charge off policy, and a portion have been
serviced by Sallie Mae Bank pursuant to a 120-day charge off policy. As a result, future performance of loans serviced by Sallie Mae Bank may differ from the historical performance of loans reflected in this combined Smart Option
Student Loan portfolio data.
(2) Smart Option Student Loan Portfolio Data for Sallie Mae Bank Serviced Loans. Information in this category is presented for loans originated under the Smart Option Student Loan program, whether originated by Sallie Mae Bank when
it was part of legacy SLM or by Sallie Mae Bank post Spin-Off, and regardless of whether the loan is currently held by an ABS trust. All loans in this category are serviced by Sallie Mae Bank. Data in this category is used in the tables
under the following headings:
• “Cumulative Defaults by P&I Repayment Vintage and Years Since First P&I Repayment Period” – Only for 2015 and 2016 P&I Repayment Vintages
The Sallie Mae Bank Serviced portfolio data provides insight into gross defaults of the Smart Option Student Loans covered and serviced by Sallie Mae Bank since 2015, regardless of ownership. We believe historical loan performance
data since 2015 is more representative of the expected performance of Smart Option Student Loans to be included in new Sallie Mae Bank trusts than data available for earlier periods.
Loans contained in the Smart Option Student Loan Portfolio Data for Sallie Mae Bank Serviced Loans category were serviced by legacy SLM prior to the Spin-Off, and by Sallie Mae Bank after the Spin-Off. Sallie Mae Bank currently
charges off loans after 120 days of delinquency.
(3) Sallie Mae Bank-Only Smart Option Student Loan Data from and after the Spin-Off Date. Information in this category is presented from and after the Spin-Off Date for Smart Option Student Loans serviced by Sallie Mae Bank from and
after the Spin-Off. Data in this category is used in the tables under the following headings:
This Smart Option Student Loan portfolio data provides insight into historical delinquencies and defaults specifically of the Smart Option Student Loans covered, regardless of the loans’ ownership at the time, or whether the loans serve
as collateral for an ABS trust. We believe this data is currently the most relevant data available for assessing historical Smart Option Student Loan performance.
Loans serviced by Sallie Mae Bank and contained in this Smart Option Student Loan portfolio were serviced pursuant to Sallie Mae Bank servicing policies since the Spin-Off. Sallie Mae Bank charges off loans after 120 days of
delinquency in accordance with bank regulatory guidance. Future performance of loans serviced by Sallie Mae Bank may differ from the historical performance of loans reflected in this Smart Option Student Loan portfolio data.
Any data or other information presented in the charts is for comparative purposes only, and is not to be deemed a part of any offering of securities.
A significant portion of the Smart Option Student Loan performance data described above is provided to Sallie Mae Bank by Navient under a data sharing agreement executed in connection with the Spin-Off. This data
sharing agreement expires in 2019. Under the data sharing agreement, Navient makes no representations or warranties to Sallie Mae Bank concerning the accuracy and completeness of information that it provided. Sallie
Mae Bank has not independently verified, and is not able to verify, the accuracy or completeness of the data provided under the agreement.
̶ “31-60 Day Delinquencies (as a Percentage of Loans in P&I Repayment);”
̶ “61-90 Day Delinquencies (as a Percentage of Loans in P&I Repayment);”
̶ “91-plus Day Delinquencies (as a Percentage of Loans in P&I Repayment);” and
̶ “Annualized Gross Defaults (as a Percentage of Loans in P&I Repayment)”
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Terms and calculations used in the cohort default curves are defined below:
First P&I Repayment Period – The month during which a borrower is first required to make a full principal and interest payment on a loan.
P&I Repayment Vintage – The calendar year of a loan’s First P&I Repayment Period.
Disbursed Principal Entering P&I Repayment – The total amount of disbursed loan principal in a P&I Repayment Vintage, excluding any interest
capitalization.
Reported Default Data -
o For loans that default prior to their First P&I Repayment Period: Loans defaulting prior to their First P&I Repayment Period are included in the P&I
Repayment Vintage corresponding to the calendar year in which the default occurs, and are aggregated and reported in Year 0 of that P&I Repayment
Vintage in the relevant charts and tables. For example: (a) if a loan’s First P&I Repayment Period was scheduled for 2015, but the loan defaulted in
2014, the default amount is reflected in Year 0 of the 2014 P&I Repayment Vintage; and (b) if a loan’s First P&I Repayment Period occurred in 2015, but
the loan defaulted in 2015 before that First P&I Repayment Period, the default amount is reflected in Year 0 of the 2015 P&I Repayment Vintage.
o For loans that default after their First P&I Repayment Period: Loans enter a particular annual P&I Repayment Vintage at different times during the
P&I Repayment Vintage year. Default data is not reported for loans in a particular annual P&I Repayment Vintage until the First P&I Repayment Period
has occurred for all loans in that annual P&I Repayment Vintage. Once reporting starts, data reflects defaults that occurred in a particular period through
the number of months since December 31 of that annual P&I Repayment Vintage year. For example, in the relevant charts and tables included in this
presentation as of March 31, 2018: (i) default data reported for loans in the 2017 P&I Repayment Vintage represents defaults occurring during the first 3
months after a loan’s First P&I Repayment Period regardless of the month in 2017 during which the first full principal and interest payment for that loan
became due; and (ii) default data for loans in the 2016 P&I Repayment Vintage represents defaults occurring during the first 15 months after a loan’s
First P&I Repayment Period regardless of the month in 2016 during which the first full principal and interest payment for that loan became due.
Periodic Defaults – For any loan in a particular P&I Repayment Vintage, the defaulted principal and interest is reflected in the year corresponding to the
number of years since the First P&I Repayment Period for that loan.
Cumulative Defaults – At any time for a particular P&I Repayment Vintage, the cumulative sum of Periodic Defaults for that vintage.
o Defaulted principal includes any interest capitalization that occurred prior to default
o Defaulted principal is not reduced by any amounts recovered after the loan defaulted
o Because the numerator includes capitalized interest while the denominator (i.e., Disbursed Principal Entering P&I Repayment) does not, default rates
are higher than they would be if the numerator and denominator both included capitalized interest
Note: Historical trends suggested by the cohort default triangles may not be indicative of future performance. Legacy SLM and Navient serviced loans were serviced pursuant to a 212 day charge-off policy. Sallie
Mae Bank serviced loans were serviced pursuant to a 120 day charge-off policy.
Smart Option Loan Program Cohort Default Curves