Sallie Mae Announces Fourth-Quarter and Full-Year 2008 Results

Sallie Mae:

• Student Loan Originations Exceed $24 Billion in 2008
• Federal Student Loan Originations Grow 25 Percent in Quarter
• Private Student Loan Provision Increases

SLM Corporation (NYSE:SLM), commonly known as Sallie Mae, today reported fourth-quarter and full-year 2008 results that reflect significant growth in federal student loan originations and increased provisions for private loan losses.

"In the midst of this historic financial environment for consumers and businesses, the federal government’s liquidity solutions continue to allow us to deliver – at a net savings to taxpayers – access to federal loans for every student who seeks one,” said Albert L. Lord, chief executive officer. "Thanks to timely action by Congress and the Departments of Education and Treasury, we increased our federal student loan originations in 2008 and continued our mission to help students and families pay for college.”

Core earnings net income was $65 million, or $.08 diluted earnings per share, in the 2008 fourth quarter. The company provided $348 million for managed private loan losses in the fourth quarter 2008, reducing the current quarter’s earnings per diluted share $.20 from the prior quarter and bringing the full-year 2008 managed private loan provision to $874 million. Also, the commercial paper/LIBOR spread, which was wider during the quarter than the historical average, reduced earnings per diluted share by $.06 in the 2008 fourth quarter compared to the prior quarter.

For the full-year 2008, core earnings net income was $526 million, or $.89 diluted earnings per share. This includes the after-tax effects of restructuring-related expenses of $57 million ($.12 diluted loss per share), purchased-paper business losses of $199 million ($.43 diluted loss per share), and a reduction of premium expense on student loans as a result of loan prepayment assumption changes of $22 million ($.05 diluted earnings per share).

Excluding restructuring-related expenses, fourth-quarter 2008 core earnings operating expenses were $270 million, a 26-percent decrease from the year-ago period, exceeding the company’s 20 percent cost reduction target. For the full-year 2008, core earnings operating expenses were $1.26 billion.

The company originated $4.8 billion in student loans in the 2008 fourth quarter and $24.2 billion in the full-year 2008. Federal student loan originations were $3.9 billion in the fourth-quarter 2008, a 25-percent increase from the year-ago quarter, and $17.9 billion in the full-year 2008.

Private student loan delinquencies increased during the fourth-quarter 2008, with 2.6 percent of traditional managed private student loans in repayment more than 90-days delinquent at Dec. 31, 2008, compared to 2.3 percent at Sept. 30, 2008.

For 2009, the company will continue to make student loans available. Funding for this lending will come from an unlimited ability to fund federal student loans under various liquidity programs implemented by the federal government and a secure source of funding for private student loans through term bank deposits.

Core earnings net interest income was $553 million in the 2008 fourth quarter. In 2008, core earnings net interest income was $2.4 billion.

Core earnings other income, which consists primarily of fees earned from guarantor servicing and collection activity, was $200 million in the fourth-quarter 2008. In 2008, core earnings other income was $778 million.

In addition to presenting certain core earnings performance measures, Sallie Mae reports financial results on a GAAP basis. The company's management, equity investors, credit rating agencies and debt capital providers use core earnings measures to monitor the company’s business performance. Both a description of the core earnings treatment and a full reconciliation to the GAAP income statement can be found at: http://www.salliemae.com/about/investors/stockholderinfo/earningsinfo/, click on the Fourth Quarter 2008 Supplemental Earnings Disclosure.

Sallie Mae reported a fourth-quarter 2008 GAAP net loss of $216 million, or $.52 diluted loss per share. These fourth-quarter 2008 results include the net impact of a $439 million unrealized, mark-to-market, pre-tax loss on certain derivative contracts that are recognized in GAAP, but not in core earnings, results.

In 2008, GAAP net loss was $213 million, including the net impact of a $552 million unrealized, mark-to-market, pre-tax loss on certain derivative contracts that are recognized in GAAP, but not in core earnings, results.

The company will host an earnings conference call tomorrow, Jan. 22 at 8 a.m. EST. Sallie Mae executives will be on hand to discuss various highlights of the quarter and to answer questions related to the company’s performance. Individuals interested in participating should call the following number tomorrow, Jan. 22, 2009, starting at 7:45 a.m. EST: (877) 356-5689 (USA and Canada) or (706) 679-0623 (International) and use access code 79327982. The conference call will be replayed continuously beginning at 11 a.m. EST on Thursday, Jan. 22, 2009, and concluding at midnight on Feb. 5, 2009. To access the replay, please dial (800) 642-1687 (USA and Canada) or dial (706) 645-9291 (International) and use access code 79327982. In addition, there will be a live audio Web cast of the conference call, which may be accessed at www.salliemae.com. A replay will be available 30 to 45 minutes after the live broadcast.

This press release contains "forward-looking statements” based on management’s current expectations as of the date of this release. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Because such statements inherently involve risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks include, among others, general economic conditions, 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 such laws and regulations, adverse results in legal disputes, changes in the demand for educational financing or in financing preferences of educational institutions, students and their families, limited liquidity, increased financing costs and changes in the general interest rate environment. For more information, see the company's filings with the Securities and Exchange Commission, including the forward-looking statements contained in the company’s Supplemental Financial Information Fourth Quarter 2008. All information in this release is as of January 21, 2009. The Company does not undertake any obligation to update or revise these forward-looking statements to conform the statement to actual results or changes in the Company’s expectations.

SLM Corporation (NYSE:SLM), commonly known as Sallie Mae, is the nation’s leading provider of saving- and paying-for-college programs. The company manages $180 billion in education loans and serves 10 million student and parent customers. Through its Upromise affiliates, the company also manages more than $17.5 billion in 529 college-savings plans, and is a major, private source of college funding contributions in America with 10 million members and more than $450 million in member rewards. Sallie Mae and its subsidiaries offer debt management services as well as business and technical products to a range of business clients, including higher education institutions, student loan guarantors and state and federal agencies. More information is available at www.salliemae.com. SLM Corporation and its subsidiaries are not sponsored by or agencies of the United States of America.

"Core Earnings”

In accordance with the rules and regulations of the Securities and Exchange Commission ("SEC”), we prepare financial statements in accordance with generally accepted accounting principles in the United States of America ("GAAP”). In addition to evaluating the Company’s GAAP-based financial information, management evaluates the Company’s business segments on a basis that, as allowed under the Financial Accounting Standards Board’s Statement of Financial Accounting Standards ("SFAS”) No. 131, "Disclosures about Segments of an Enterprise and Related Information,” differs from GAAP. We refer to management’s basis of evaluating our segment results as "Core Earnings” presentations for each business segment and we refer to this information in our presentations with credit rating agencies and lenders. While "Core Earnings” are not a substitute for reported results under GAAP, we rely on "Core Earnings” to manage each operating segment because we believe these measures provide additional information regarding the operational and performance indicators that are most closely assessed by management.

Our "Core Earnings” are not defined terms within GAAP and may not be comparable to similarly titled measures reported by other companies. "Core Earnings” net income reflects only current period adjustments to GAAP net income as described below. Unlike financial accounting, there is no comprehensive, authoritative guidance for management reporting and as a result, our management reporting is not necessarily comparable with similar information for any other financial institution. Our operating segments are defined by products and services or by types of customers, and reflect the manner in which financial information is currently evaluated by management. Intersegment revenues and expenses are netted within the appropriate financial statement line items consistent with the income statement presentation provided to management. Changes in management structure or allocation methodologies and procedures may result in changes in reported segment financial information.

Limitations of "Core Earnings”

While GAAP provides a uniform, comprehensive basis of accounting, for the reasons described above, management believes that "Core Earnings” are an important additional tool for providing a more complete understanding of the Company’s results of operations. Nevertheless, "Core Earnings” are subject to certain general and specific limitations that investors should carefully consider. For example, as stated above, unlike financial accounting, there is no comprehensive, authoritative guidance for management reporting. Our "Core Earnings” are not defined terms within GAAP and may not be comparable to similarly titled measures reported by other companies. Unlike GAAP, "Core Earnings” reflect only current period adjustments to GAAP. Accordingly, the Company’s "Core Earnings” presentation does not represent a comprehensive basis of accounting. Investors, therefore, may not compare our Company’s performance with that of other financial services companies based upon "Core Earnings.” "Core Earnings” results are only meant to supplement GAAP results by providing additional information regarding the operational and performance indicators that are most closely used by management, the Company’s board of directors, rating agencies and lenders to assess performance.

Other limitations arise from the specific adjustments that management makes to GAAP results to derive "Core Earnings” results. For example, in reversing the unrealized gains and losses that result from SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities,” on derivatives that do not qualify for "hedge treatment,” as well as on derivatives that do qualify but are in part ineffective because they are not perfect hedges, we focus on the long-term economic effectiveness of those instruments relative to the underlying hedged item and isolate the effects of interest rate volatility, changing credit spreads and changes in our stock price on the fair value of such instruments during the period. Under GAAP, the effects of these factors on the fair value of the derivative instruments (but not on the underlying hedged item) tend to show more volatility in the short term. While presentation of our results on a "Core Earnings” basis provides important information regarding the performance of our Managed loan portfolio, a limitation of this presentation is that we present the ongoing spread income on loans that have been sold to a trust we manage. While we believe that our "Core Earnings” presentation presents the economic substance of our Managed loan portfolio, it understates earnings volatility from securitization gains. Our "Core Earnings” results exclude certain Floor Income, which is cash income, from our reported results and therefore may understate earnings in certain periods. Management’s financial planning and valuation of operating results, however, does not take into account Floor Income because of its inherent uncertainty, except when it is economically hedged through Floor Income Contracts.

Pre-Tax Differences between "Core Earnings” and GAAP

Our "Core Earnings” are the primary financial performance measures used by management to evaluate performance and to allocate resources. Accordingly, financial information is reported to management on a "Core Earnings” basis by reportable segment, as these are the measures used regularly by our chief operating decision makers. Our "Core Earnings” are used in developing our financial plans, tracking results, and establishing corporate performance targets. Management believes this information provides additional insight into the financial performance of the Company’s core business activities. "Core Earnings” net income reflects only current period adjustments to GAAP net income, as described in the more detailed discussion of the differences between "Core Earnings” and GAAP that follows, which includes further detail on each specific adjustment required to reconcile our "Core Earnings” segment presentation to our GAAP earnings.