Sallie Mae Reports First-Quarter 2013 Financial Results

  Sallie Mae Reports First-Quarter 2013 Financial Results

                 Loan Originations Up, Delinquency Rates Down

       FFELP Sales, Share Repurchases Contribute to Earnings Per Share

                       Common Stock Dividends Increase

Business Wire

NEWARK, Del. -- April 17, 2013

Sallie Mae (NASDAQ: SLM), formally SLM Corporation, today released
first-quarter 2013 financial results that include increased year-over-year
private education loan originations and decreased delinquency rates. Also
during the quarter, the company realized gains from its first sale of a
residual interest in a federal loan securitization trust, increased its
quarterly common stock dividend and continued common share repurchases.

"Our recent results are good and about as expected with no surprises," said
Albert L. Lord, vice chairman and CEO. "I am optimistic about our prospective
credit costs, though we will watch the next several months with some caution.
While the economy and employment levels are still uncertain, capital markets
liquidity has improved and enabled some important balance sheet structuring in
the quarter. We will remain active market participants."

For the first-quarter 2013, GAAP net income was $346 million ($0.74 diluted
earnings per share), compared with $112million ($0.21diluted earnings per
share) for the year-ago quarter.

Core earnings for the quarter were $283 million ($0.61 diluted earnings per
share), compared with $284 million ($0.55 diluted earnings per share) for the
year-ago quarter.

The first-quarter 2013 core diluted earnings per share increase includes a $55
million gain from the sale of the residual interest in a FFELP loan
securitization trust, a $12 million decline in the provision for loan losses
and a decline in the number of common shares outstanding which more than
offset lower net interest income before provision for loan losses of $57
million and lower debt repurchase gains of $8million. The company will
continue to service the student loans in the trust that was sold.

Sallie Mae provides core basis earnings because management makes its financial
decisions on such measures. The changes in GAAP net income are driven by the
same core earnings items discussed above as well as changes in mark-to-market
unrealized gains and losses on derivative contracts and amortization and
impairment of goodwill and intangible assets that are recognized in GAAP, but
not in core earnings results. First-quarter 2013 GAAP results included a $110
million gain from derivative accounting treatment that is excluded from core
earnings results. In the year-ago period, these amounts were losses of $264
million.

Consumer Lending

In the consumer lending segment, Sallie Mae originates, finances and services
private education loans.

Quarterly core earnings were $88 million compared with core earnings of $84
million in the year-ago quarter.

First-quarter 2013 private education loan portfolio results vs. first-quarter
2012 included:

  *Loan originations of $1.4 billion, up 22 percent.
  *Delinquencies of 90 days or more of 3.9 percent of loans in repayment,
    down from 4.4 percent.
  *Loans in forbearance of 3.4 percent of loans in repayment and forbearance,
    down from 4.3 percent.
  *Annualized charge-off rate of 3.0 percent of average loans in repayment
    for both the current and year-ago quarters.
  *Provision for private education loan losses of $225 million, down from
    $235 million.
  *Core net interest margin, before loan loss provision, of 4.15 percent,
    down from 4.26 percent.
  *The portfolio balance, net of loan loss allowance, totaled $37 billion, a
    $733 million increase over the year-ago quarter.

Business Services

Sallie Mae’s business services segment includes fees from servicing,
collections and college savings businesses.

Business services core earnings were $124 million in first-quarter 2013,
compared with $137 million in the year-ago quarter. The decrease is primarily
due to the lower balance of FFELP loans serviced by Sallie Mae.

Federally Guaranteed Student Loans (FFELP)

This segment represents earnings from Sallie Mae’s amortizing portfolio of
FFELP loans.

Core earnings for the segment were $104 million in first-quarter 2013,
compared with the year-ago quarter’s $80million. The increase was the result
of a $55 million gain from the sale of the residual interest in a FFELP loan
securitization trust, which more than offset the decline in net interest
income from the amortizing FFELP portfolio.

At March31, 2013, the company held $119billion of FFELP loans compared with
$136 billion at March31, 2012.

Operating Expenses

First-quarter 2013 operating expenses were $270 million compared with $262
million in the year-ago quarter. Excluding the result of a non-recurring $8
million pension termination gain in first-quarter 2012, operating expenses
were unchanged.

Funding and Liquidity

During first-quarter 2013, the company issued $1.2 billion in FFELP
asset-backed securities (ABS), $1.4 billion in private education loan ABS and
$1.5 billion of unsecured bonds.

Total debt repurchases were $927 million in first-quarter 2013 compared with
$204 million in first-quarter 2012.

Sallie Mae continues to issue FFELP ABS primarily as a means to finance the
redemption of FFELP loans financed in the U.S. Department of Education’s
conduit program.The company still expects to redeem all of these loans prior
to the conduit program’s Jan. 19, 2014, maturity date.

Shareholder Distributions

In first-quarter 2013, Sallie Mae paid a common stock dividend of $0.15 per
share, up from $0.125 per share in the prior quarter.

For the first-quarter 2013, Sallie Mae repurchased 10million shares of common
stock for $199million. The shares were repurchased under the company’s
February 2013 share repurchase program that authorizes up to $400 million of
share repurchases.

Guidance

The company expects 2013 results to be as follows:

  *Full-year 2013 private education loan originations of at least $4 billion.
  *Fully diluted 2013 core earnings per share of $2.49 inclusive of the
    contributions from the two FFELP loan securitization trust residual sales
    that have occurred in 2013.

                                     ***

Sallie Mae reports financial results on a GAAP basis and also provides certain
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 and the goodwill and
acquired intangible asset amortization and impairment. These items 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. In addition, the company’s equity investors, credit rating agencies
and debt capital providers use these core earnings measures to monitor the
company’s business performance. See “Core Earnings — Definition and
Limitations” for a further discussion and a complete reconciliation between
GAAP net income and core earnings. Given the significant variability of
valuations of derivative instruments on expected GAAP net income, the company
does not provide a GAAP equivalent for its core earnings per share guidance.

Definitions for capitalized terms in this document can be found in the
company’s Annual Report on Form 10-K for the year ended Dec. 31, 2012 (filed
with the SEC on Feb. 26, 2013). Certain reclassifications have been made to
the balances as of and for the three months ended March31, 2012, to be
consistent with classifications adopted for 2013, and had no effect on net
income, total assets or total liabilities.

                                     ***

The company will host an earnings conference call tomorrow, April 18, at 8
a.m. EDT. 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 in the call should dial 877-356-5689
(USA and Canada) or dial 706-679-0623 (international) and use access code
23719299 starting at 7:45 a.m. EDT. A live audio webcast of the conference
call may be accessed at www.SallieMae.com/investors. A replay of the
conference call via the company’s website will be available approximately two
hours after the call’s conclusion. A telephone replay may be accessed
approximately two hours after the call’s conclusion through May 2, by dialing
855-859-2056 (USA and Canada) or 404-537-3406 (international) with access code
23719299.

Presentation slides for the conference call, as well as additional information
about the company’s loan portfolios, operating segments, and other details,
may be accessed at www.SallieMae.com/investors under the webcasts tab.

This press release contains “forward-looking statements” and information based
on management’s current expectations as of the date of this release.
Statements that are not historical facts, including statements about the
company’s beliefs 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 Item1A “Risk Factors” and elsewhere in the
company’s Annual Report on Form 10-K for the year ended Dec. 31, 2012;
increases in financing costs; limits on liquidity; increases in costs
associated with compliance with laws and regulations; 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 is a party; credit risk associated with the company’s exposure to
third parties, including counterparties to the company’s derivative
transactions; and changes in the terms of student 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 or the credit ratings of the United States of America; failures
of its operating systems or infrastructure, including those of third-party
vendors; damage to its reputation; failures to successfully implement
cost-cutting and restructuring initiatives and adverse effects of such
initiatives on its 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; increased competition
from banks and other consumer lenders; the creditworthiness of its customers;
changes in the general interest rate environment, including the rate
relationships among relevant money-market instruments and those of its earning
assets vs. its funding arrangements; changes in general economic conditions;
and changes in the demand for debt management services. 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 release are qualified by these
cautionary statements and are made only as of the date of this release. 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 its expectations.

                                     ***

Sallie Mae(NASDAQ: SLM) is the nation’s No.1 financial services company
specializing in education. Celebrating 40 years of making a difference, Sallie
Mae continues to turn education dreams into reality for American families,
today serving 25million customers. With products and services that include
529 college savings plans, Upromise rewards, scholarship search and planning
tools, education loans, insurance, and online banking, Sallie Mae offers
solutions that help families save, plan, and pay for college. Sallie Mae also
provides financial services to hundreds of college campuses as well as to
federal and state governments. Learn more at SallieMae.com. Commonly known as
Sallie Mae, SLM Corporation and its subsidiaries are not sponsored by or
agencies of the United States of America.

                                                               
Selected Financial Information and Ratios
(Unaudited)
                                                                   
                                     Quarters Ended
                                      March 31,     December 31,   March 31,
(In millions, except per share         2013         2012        2012    
data)
                                                                   
GAAP Basis
Net income attributable to SLM        $ 346         $  348         $ 112
Corporation
Diluted earnings per common share     $ .74         $  .74         $ .21
attributable to SLM Corporation
Weighted average shares used to         458            463           510
compute diluted earnings per share
Return on assets                        .82     %      .79     %     .24     %
                                                                   
“Core Earnings” Basis^(1)
“Core Earnings” attributable to SLM   $ 283         $  257         $ 284
Corporation
“Core Earnings” diluted earnings
per common share attributable to      $ .61         $  .55         $ .55
SLM Corporation
Weighted average shares used to         458            463           510
compute diluted earnings per share
“Core Earnings” return on assets        .67     %      .58     %     .62     %
                                                                   
Other Operating Statistics
Ending FFELP Loans, net               $ 119,195     $  125,612     $ 135,934
Ending Private Education Loans, net    37,465       36,934      36,732  
                                                                   
Ending total student loans, net       $ 156,660    $  162,546    $ 172,666 
                                                                   
Average student loans                 $ 160,261     $  164,800     $ 174,942

     
       “Core Earnings” are non-GAAP financial measures and do not represent a
^(1)   comprehensive basis of accounting. For a greater explanation of “Core
       Earnings,” see the section titled “‘Core Earnings’ — Definition and
       Limitations” and subsequent sections.
       

Results of Operations

We present the results of operations below on a consolidated basis in
accordance with GAAP. The presentation of our results on a segment basis is
not in accordance with GAAP. We have four business segments: Consumer Lending,
Business Services, FFELP Loans and Other. Since these segments operate in
distinct business environments and we manage and evaluate the financial
performance of these segments using non-GAAP financial measures, these
segments are presented on a “Core Earnings” basis (see “‘Core Earnings’ —
Definition and Limitations”).

                                                                     
GAAP Statements of Income (Unaudited)
                                                                          
                                                     March 31, 2013 vs.   March 31, 2013 vs.
                                                     December 31, 2012    March 31, 2012
                                                     Increase             Increase
                Quarters Ended                      (Decrease)           (Decrease)
                 March 31,   December   March 31,                                
                             31,
(In millions,
except per        2013      2012      2012      $       %          $       %
share data)
Interest
income:
FFELP Loans      $ 735       $ 792       $ 842       $ (57  )   (7   )%   $ (107 )   (13  )%
Private
Education          623         625         625         (2   )   —           (2   )   —
Loans
Other loans        3           4           5           (1   )   (25  )      (2   )   (40  )
Cash and          5         5         5         —       —         —       —    
investments
                                                                                     
Total interest     1,366       1,426       1,477       (60  )   (4   )      (111 )   (8   )
income
Total interest    571       594       666       (23  )   (4   )     (95  )   (14  )
expense
                                                                                     
Net interest       795         832         811         (37  )   (4   )      (16  )   (2   )
income
Less:
provisions for    241       314       253       (73  )   (23  )     (12  )   (5   )
loan losses
                                                                                     
Net interest
income after       554         518         558         36       7           (4   )   (1   )
provisions for
loan losses
Other income
(loss):
Losses on
derivative and
hedging            (31   )     (28   )     (372  )     (3   )   11          341      (92  )
activities,
net
Servicing          96          92          97          4        4           (1   )   (1   )
revenue
Contingency        99          95          90          4        4           9        10
revenue
Gains on debt      23          43          37          (20  )   (47  )      (14  )   (38  )
repurchases
Other income      90        52        40        38      73        50      125  
                                                                                     
Total other        277         254         (108  )     23       9           385      356
income (loss)
Expenses:
Operating          270         252         262         18       7           8        3
expenses
Goodwill and
acquired
intangible
assets             4           14          5           (10  )   (71  )      (1   )   (20  )
impairment and
amortization
expense
Restructuring     —         2         5         (2   )   (100 )     (5   )   (100 )
expenses
                                                                                     
Total expenses    274       268       272       6       2         2       1    
Income before
income tax         557         504         178         53       11          379      213
expense
Income tax        211       156       67        55      35        144     215  
expense
                                                                                     
Net income         346         348         111         (2   )   (1   )      235      212
Less: net loss
attributable
to                —         —         (1    )    —       —         1       (100 )
noncontrolling
interest
                                                                                     
Net income
attributable       346         348         112         (2   )   (1   )      234      209
to SLM
Corporation
Preferred
stock             5         5         5         —       —         —       —    
dividends
                                                                                     
Net income
attributable
to SLM           $ 341      $ 343      $ 107      $ (2   )   (1   )%   $ 234     219  %
Corporation
common stock
                                                                                     
Basic earnings
per common
share            $ .76      $ .75      $ .21      $ .01     1    %    $ .55     262  %
attributable
to SLM
Corporation
                                                                                     
                                                                                     
Diluted
earnings per
common share     $ .74      $ .74      $ .21      $ —       —    %    $ .53     252  %
attributable
to SLM
Corporation
                                                                                     
Dividends per
common share
attributable     $ .15      $ .125     $ .125     $ .025    20   %    $ .025    20   %
to SLM
Corporation

                                                               
GAAP Balance Sheet (Unaudited)
                                                                   
                                      March 31,     December 31,   March 31,
(In millions, except share and per     2013         2012        2012    
share data)
                                                                   
Assets
FFELP Loans (net of allowance for
losses of $147; $159 and $180,        $ 119,195     $  125,612     $ 135,934
respectively)
Private Education Loans (net of
allowance for losses of $2,170;         37,465         36,934        36,732
$2,171 and $2,190, respectively)
Cash and investments                    4,691          4,982         4,042
Restricted cash and investments         4,828          5,011         5,884
Goodwill and acquired intangible        444            448           471
assets, net
Other assets                           7,463        8,273       8,629   
                                                                   
Total assets                          $ 174,086    $  181,260    $ 191,692 
                                                                   
                                                                   
Liabilities
Short-term borrowings                 $ 17,254      $  19,856      $ 27,123
Long-term borrowings                    147,887        152,401       155,588
Other liabilities                      3,791        3,937       3,936   
                                                                   
Total liabilities                      168,932      176,194     186,647 
                                                                   
                                                                   
Commitments and contingencies
                                                                   
Equity
Preferred stock, par value $0.20
per share, 20 million shares
authorized:
Series A: 3.3 million; 3.3 million
and 3.3 million shares,                 165            165           165
respectively, issued at stated
value of $50 per share
Series B: 4 million; 4 million and
4 million shares, respectively,         400            400           400
issued at stated value of $100 per
share
Common stock, par value $0.20 per
share, 1.125 billion shares
authorized: 540 million; 536            108            107           106
million and 532 million shares,
respectively, issued
Additional paid-in capital              4,291          4,237         4,182
Accumulated other comprehensive         (4      )      (6      )     (9      )
loss, net of tax benefit
Retained earnings                      1,723        1,451       814     
                                                                   
Total SLM Corporation stockholders’     6,683          6,354         5,658
equity before treasury stock
Less: Common stock held in
treasury: 95 million; 83 million       (1,535  )     (1,294  )    (620    )
and 39 million shares, respectively
                                                                   
Total SLM Corporation stockholders’     5,148          5,060         5,038
equity
Noncontrolling interest                6            6           7       
                                                                   
Total equity                           5,154        5,066       5,045   
                                                                   
Total liabilities and equity          $ 174,086    $  181,260    $ 191,692 
                                                                             

Consolidated Earnings Summary—GAAP basis

Three Months Ended March31, 2013 Compared with Three Months Ended March31,
2012

For the three months ended March31, 2013, net income was $346 million, or
$0.74 diluted earnings per common share, compared with net income of $112
million, or $0.21 diluted earnings per common share, for the three months
ended March31, 2012. The increase in net income was primarily due to a $341
million decrease in net losses on derivative and hedging activities, a
$50million increase in other income and a $12 million decrease in provisions
for loan losses, which were partially offset by a $16 million decrease in net
interest income and a $14 million decrease in gains on debt repurchases.

The primary contributors to each of the identified drivers of changes in net
income for the current quarter compared with the year-ago quarter are as
follows:

  *Net interest income declined by $16 million primarily due to a $15.3
    billion decline in average FFELP Loans outstanding. The decline in average
    FFELP Loans outstanding was driven by normal loan amortization as well as
    $5.2 billion of loans that were consolidated by the U. S. Department of
    Education (“ED”) in 2012 under their Special Direct Consolidation Loan
    Initiative (“SDCL”).
  *Provisions for loan losses declined $12 million compared with the year-ago
    quarter primarily as a result of the overall improvement in Private
    Education Loans’ credit quality and delinquency trends as well as expected
    decreases in future charge-offs.
  *Other income increased by $50 million primarily as a result of a $55
    million gain on the sale of the Residual Interest in a FFELP Loan
    securitization trust. See “FFELP Loans Segment” for further discussion.
  *Gains (losses) on derivative and hedging activities resulted in a net loss
    of $31 million in the current quarter compared with a net loss of $372
    million in the year-ago quarter. The primary factors affecting the change
    were interest rate and foreign currency fluctuations, which primarily
    affected the valuations of our Floor Income Contracts, basis swaps and
    foreign currency hedges during each period. Valuations of derivative
    instruments vary based upon many factors including changes in interest
    rates, credit risk, foreign currency fluctuations and other market
    factors. As a result, net gains and losses on derivative and hedging
    activities may continue to vary significantly in future periods.
  *Gains on debt repurchases decreased $14 million. Debt repurchase activity
    will fluctuate based on market fundamentals and our liability management
    strategy.
  *First-quarter 2013 operating expenses were $270 million compared with $262
    million in the year-ago quarter. Excluding the result of a non-recurring
    $8 million pension termination gain in first-quarter 2012, operating
    expenses were unchanged.

In addition, we repurchased 10million shares of our common stock during the
first-quarter 2013 as part of a common share repurchase program. Primarily as
a result of ongoing common share repurchases, our average outstanding diluted
shares decreased by 52 million shares from the year-ago quarter.

“Core Earnings”—Definition and Limitations

We prepare financial statements in accordance with GAAP. However, we also
evaluate our business segments on a basis that differs from GAAP. We refer to
this different basis of presentation as “Core Earnings.” We provide this “Core
Earnings” basis of presentation on a consolidated basis for each business
segment because this is what we review internally when making management
decisions regarding our performance and how we allocate resources. We also
refer to this information in our presentations with credit rating agencies,
lenders and investors. Because our “Core Earnings” basis of presentation
corresponds to our segment financial presentations, we are required by GAAP to
provide “Core Earnings” disclosure in the notes to our consolidated financial
statements for our business segments.

“Core Earnings” are not a substitute for reported results under GAAP. We use
“Core Earnings” to manage each business segment because “Core Earnings”
reflect adjustments to GAAP financial results for two items, discussed below,
that create significant volatility mostly due to timing factors generally
beyond the control of management. Accordingly, we believe that “Core Earnings”
provide management with a useful basis from which to better evaluate results
from ongoing operations against the business plan or against results from
prior periods. Consequently, we disclose this information as we believe it
provides investors with additional information regarding the operational and
performance indicators that are most closely assessed by management. The two
items for which we adjust our “Core Earnings” presentations are (1)our use of
derivative instruments to hedge our economic risks that do not qualify for
hedge accounting treatment or do qualify for hedge accounting treatment but
result in ineffectiveness and (2)the accounting for goodwill and acquired
intangible assets.

While GAAP provides a uniform, comprehensive basis of accounting, for the
reasons described above, our “Core Earnings” basis of presentation does not.
“Core Earnings” are subject to certain general and specific limitations that
investors should carefully consider. For example, 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. Accordingly, our “Core Earnings”
presentation does not represent a comprehensive basis of accounting.
Investors, therefore, may not be able to compare our 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, our board of directors, rating agencies, lenders
and investors to assess performance.

Specific adjustments that management makes to GAAP results to derive our “Core
Earnings” basis of presentation are described in detail in the section titled
“‘Core Earnings’—Definition and Limitations — Differences between ‘Core
Earnings’ and GAAP” below.

              
                Quarter Ended March 31, 2013
(Dollars in     Consumer  Business  FFELP           Elimina-   Total      Adjustments                                   Total
millions)       Lending    Services   Loans   Other     tions^(1)   “Core       Reclassi-  Additions/      Total             GAAP
                                                                    Earnings”   fications   (Subtractions)   Adjustments^(2)
Interest
income:
Student loans   $   623    $   —      $ 599   $ —       $  —        $  1,222    $  212      $  (76  )        $    136          $ 1,358
Other loans         —          —        —       3          —           3           —           —                  —              3
Cash and           1         2       2      2        (2   )     5          —         —                —            5
investments
                                                                                                                               
Total
interest            624        2        601     5          (2   )      1,230       212         (76  )             136            1,366
income
Total
interest           204       —       340    13       (2   )     555        18        (2   )^(4)        16           571
expense
                                                                                                                               
Net interest        420        2        261     (8  )      —           675         194         (74  )             120            795
income (loss)
Less:
provisions         225       —       16     —        —         241        —         —                —            241
for loan
losses
                                                                                                                               
Net interest
income (loss)
after               195        2        245     (8  )      —           434         194         (74  )             120            554
provisions
for loan
losses
Servicing           10         212      23      —          (149 )      96          —           —                  —              96
revenue
Contingency         —          99       —       —          —           99          —           —                  —              99
revenue
Gains on debt       —          —        —       29         —           29          (6   )      —                  (6     )       23
repurchases
Other income       —         8       55     —        —         63         (188 )     184  ^(5)         (4     )      59
                                                                                                                               
Total other         10         319      78      29         (149 )      287         (194 )      184                (10    )       277
income (loss)
Expenses:
Direct
operating           66         122      157     —          (149 )      196         —           —                  —              196
expenses
Overhead           —         —       —      74       —         74         —         —                —            74
expenses
                                                                                                                               
Operating           66         122      157     74         (149 )      270         —           —                  —              270
expenses
Goodwill and
acquired
intangible
assets             —         —       —      —        —         —          —         4                4            4
impairment
and
amortization
                                                                                                                               
Total              66        122     157    74       (149 )     270        —         4                4            274
expenses
                                                                                                                               
Income (loss)
before income       139        199      166     (53 )      —           451         —           106                106            557
tax expense
(benefit)
Income tax
expense            51        75      62     (20 )     —         168        —         43               43           211
(benefit)^(3)
                                                                                                                               
Net income      $   88     $   124    $ 104   $ (33 )   $  —       $  283      $  —       $  63           $    63          $ 346
(loss)

     
       The eliminations in servicing revenue and direct operating expense
^(1)   represent the elimination of intercompany servicing revenue where the
       Business Services segment performs the loan servicing function for the
       FFELP Loans segment.
       
^(2)   “Core Earnings” adjustments to GAAP:

                                                                   
                                Quarter Ended March 31, 2013
                                Net Impact of   Net Impact of
                                Derivative      Goodwill and
(Dollars in millions)           Accounting      Acquired Intangibles   Total
Net interest income after       $   120         $       —              $ 120
provisions for loan losses
Total other loss                    (10   )             —                (10 )
Goodwill and acquired
intangible assets impairment       —                 4              4   
and amortization
                                                                       
Total “Core Earnings”           $   110        $       (4     )         106
adjustments to GAAP
                                                                       
Income tax expense                                                      43  
                                                                       
Net income                                                             $ 63  

     
^(3)   Income taxes are based on a percentage of net income before tax for the
       individual reportable segment.
       
^(4)   Represents a portion of the $29 million of “other derivative accounting
       adjustments.”
       
       Represents the $157 million of “unrealized gains on derivative and
^(5)   hedging activities, net” as well as the remaining portion of the $29
       million of “other derivative accounting adjustments.”

                                                                                                                    
                Quarter Ended December 31, 2012
(Dollars in     Consumer   Business   FFELP             Elimina-    Total       Adjustments                                    Total
millions)       Lending    Services   Loans   Other     tions^(1)   “Core       Reclassi-   Additions/       Total             GAAP
                                                                    Earnings”   fications   (Subtractions)   Adjustments^(2)
Interest
income:
Student loans   $   625    $   —      $ 654   $ —       $  —        $  1,279    $  215      $    (77  )      $      138        $ 1,417
Other loans         —          —        —       4          —           4           —             —                  —            4
Cash and           1         3       3      —        (2   )     5          —           —                —           5
investments
                                                                                                                               
Total
interest            626        3        657     4          (2   )      1,288       215           (77  )             138          1,426
income
Total
interest           207       —       360    9        (2   )     574        20          —                20          594
expense
                                                                                                                               
Net interest        419        3        297     (5  )      —           714         195           (77  )             118          832
income (loss)
Less:
provisions         296       —       18     —        —         314        —           —                —           314
for loan
losses
                                                                                                                               
Net interest
income (loss)
after               123        3        279     (5  )      —           400         195           (77  )             118          518
provisions
for loan
losses
Servicing           11         218      21      —          (158 )      92          —             —                  —            92
revenue
Contingency         —          95       —       —          —           95          —             —                  —            95
revenue
Gains on debt       —          —        —       43         —           43          —             —                  —            43
repurchases
Other income       —         10      —      4        —         14         (195 )       205  ^(4)        10          24
(loss)
                                                                                                                               
Total other         11         323      21      47         (158 )      244         (195 )        205                10           254
income (loss)
Expenses:
Direct
operating           65         121      165     1          (158 )      194         —             —                  —            194
expenses
Overhead           —         —       —      58       —         58         —           —                —           58
expenses
                                                                                                                               
Operating           65         121      165     59         (158 )      252         —             —                  —            252
expenses
Goodwill and
acquired
intangible
assets              —          —        —       —          —           —           —             14                 14           14
impairment
and
amortization
Restructuring      —         2       —      —        —         2          —           —                —           2
expenses
                                                                                                                               
Total              65        123     165    59       (158 )     254        —           14               14          268
expenses
                                                                                                                               
Income (loss)
before income       69         203      135     (17 )      —           390         —             114                114          504
tax expense
(benefit)
Income tax
expense            23        69      46     (5  )     —         133        —           23               23          156
(benefit)^(3)
                                                                                                                               
Net income      $   46     $   134    $ 89    $ (12 )   $  —       $  257      $  —       $    91         $      91         $ 348
(loss)

     
       The eliminations in servicing revenue and direct operating expense
^(1)   represent the elimination of intercompany servicing revenue where the
       Business Services segment performs the loan servicing function for the
       FFELP Loans segment.
       
^(2)   “Core Earnings” adjustments to GAAP:

                                                                     
                                  Quarter Ended December 31, 2012
                                  Net Impact of   Net Impact of
                                  Derivative      Goodwill and
(Dollars in millions)             Accounting      Acquired Intangibles   Total
Net interest income after         $     118       $      —               $ 118
provisions for loan losses
Total other income                      10               —                 10
Goodwill and acquired
intangible assets impairment           —               14              14
and amortization
                                                                         
Total “Core Earnings”             $     128       $      (14     )         114
adjustments to GAAP
                                                                         
Income tax expense                                                        23
                                                                         
Net income                                                               $ 91

     
^(3)   Income taxes are based on a percentage of net income before tax for the
       individual reportable segment.
       
       Represents the $167 million of “unrealized gains on derivative and
^(4)   hedging activities, net” as well as the $38 million of “other
       derivative accounting adjustments.”

                                                                                                                     
                 Quarter Ended March 31, 2012
(Dollars in      Consumer   Business   FFELP             Elimina-    Total       Adjustments                                    Total
millions)        Lending    Services   Loans   Other     tions^(1)   “Core       Reclassi-   Additions/       Total             GAAP
                                                                     Earnings”   fications   (Subtractions)   Adjustments^(2)
Interest
income:
Student loans    $   625    $  —       $ 725   $ —       $  —        $ 1,350     $  215      $  (98   )       $    117          $ 1,467
Other loans          —         —         —       5          —          5            —           —                  —              5
Cash and            2        3       3      —        (3   )    5          —         —                —            5     
investments
                                                                                                                                
Total interest       627       3         728     5          (3   )     1,360        215         (98   )            117            1,477
income
Total interest      202      —       424    5        (3   )    628        36        2     ^(4)        38           666   
expense
                                                                                                                                
Net interest         425       3         304     —          —          732          179         (100  )            79             811
income (loss)
Less:
provisions for      235      —       18     —        —        253        —         —                —            253   
loan losses
                                                                                                                                
Net interest
income (loss)
after                190       3         286     —          —          479          179         (100  )            79             558
provisions for
loan losses
Servicing            12        236       25      —          (176 )     97           —           —                  —              97
revenue
Contingency          —         90        —       —          —          90           —           —                  —              90
revenue
Gains on debt        —         —         —       37         —          37           —           —                  —              37
repurchases
Other income        —        8       —      3        —        11         (179 )     (164  )^(5)       (343   )      (332  )
(loss)
                                                                                                                                
Total other          12        334       25      40         (176 )     235          (179 )      (164  )            (343   )       (108  )
income (loss)
Expenses:
Direct
operating            69        120       185     —          (176 )     198          —           —                  —              198
expenses
Overhead            —        —       —      64       —        64         —         —                —            64    
expenses
                                                                                                                                
Operating            69        120       185     64         (176 )     262          —           —                  —              262
expenses
Goodwill and
acquired
intangible           —         —         —       —          —          —            —           5                  5              5
assets
impairment and
amortization
Restructuring       1        1       —      3        —        5          —         —                —            5     
expenses
                                                                                                                                
Total expenses      70       121     185    67       (176 )    267        —         5                5            272   
                                                                                                                                
Income (loss)
before income        132       216       126     (27 )      —          447          —           (269  )            (269   )       178
tax expense
(benefit)
Income tax
expense             48       80      46     (10 )     —        164        —         (97   )           (97    )      67    
(benefit)^(3)
                                                                                                                                
Net income           84        136       80      (17 )      —          283          —           (172  )            (172   )       111
(loss)
Less: net loss
attributable
to                  —        (1  )    —      —        —        (1    )     —         —                —            (1    )
noncontrolling
interest
                                                                                                                                
Net income
(loss)
attributable     $   84     $  137    $ 80    $ (17 )   $  —       $ 284      $  —       $  (172  )       $    (172   )     $ 112   
to SLM
Corporation

     
       The eliminations in servicing revenue and direct operating expense
^(1)   represent the elimination of intercompany servicing revenue where the
       Business Services segment performs the loan servicing function for the
       FFELP Loans segment.
       
^(2)   “Core Earnings” adjustments to GAAP:

                                                                  
                               Quarter Ended March 31, 2012
                               Net Impact of   Net Impact of
                               Derivative      Goodwill and
(Dollars in millions)          Accounting      Acquired Intangibles   Total
Net interest income after      $   79          $       —              $ 79
provisions for loan losses
Total other loss                   (343   )            —                (343 )
Goodwill and acquired
intangible assets impairment      —                 5              5    
and amortization
                                                                      
Total “Core Earnings”          $   (264   )    $       (5     )         (269 )
adjustments to GAAP
                                                                      
Income tax benefit                                                     (97  )
                                                                      
Net loss                                                              $ (172 )

           
^(3)               Income taxes are based on a percentage of net income before
                   tax for the individual reportable segment.

^(4)               Represents a portion of the $27 million of “other
                   derivative accounting adjustments.”

                   Represents the $193 million of “unrealized losses on
^(5)               derivative and hedging activities, net” as well as the
                   remaining portion of the $27 million of “other derivative
                   accounting adjustments.”

Differences between “Core Earnings” and GAAP

The following discussion summarizes the differences between “Core Earnings”
and GAAP net income (loss) and details each specific adjustment required to
reconcile our “Core Earnings” segment presentation to our GAAP earnings.

                                                                 
                                          Quarters Ended
                                          March 31,   December 31,   March 31,
(Dollars in millions)                       2013       2012        2012 
“Core Earnings” adjustments to GAAP:
Net impact of derivative accounting       $  110      $   128        $  (264 )
Net impact of goodwill and acquired          (4   )       (14   )       (5   )
intangible assets
Net income tax effect                       (43  )      (23   )      97   
                                                                     
Total “Core Earnings” adjustments to      $  63      $   91        $  (172 )
GAAP

   
     Derivative Accounting: “Core Earnings” exclude periodic unrealized gains
     and losses that are 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. These
     unrealized gains and losses occur in our Consumer Lending, FFELP Loans
1)   and Other business segments. Under GAAP, for our derivatives that are
     held to maturity, the cumulative net unrealized gain or loss over the
     life of the contract will equal $0 except for Floor Income Contracts
     where the cumulative unrealized gain will equal the amount for which we
     sold the contract. In our “Core Earnings” presentation, we recognize the
     economic effect of these hedges, which generally results in any net
     settlement cash paid or received being recognized ratably as an interest
     expense or revenue over the hedged item’s life.
     
     The table below quantifies the adjustments for derivative accounting
     between GAAP and “Core Earnings” net income.

                                                                 
                                          Quarters Ended
                                          March 31,   December 31,   March 31,
(Dollars in millions)                       2013       2012        2012 
“Core Earnings” derivative adjustments:
Losses on derivative and hedging
activities, net, included in other        $  (31  )   $   (28   )    $  (372 )
income^(1)
Plus: Realized losses on derivative and     188        195         179  
hedging activities, net^(1)
                                                                     
Unrealized gains (losses) on derivative      157          167           (193 )
and hedging activities, net^(2)
Amortization of net premiums on Floor
Income Contracts in net interest income      (76  )       (77   )       (98  )
for “Core Earnings”
Other derivative accounting                 29         38          27   
adjustments^(3)
                                                                     
Total net impact of derivative            $  110     $   128       $  (264 )
accounting^(4)

     
       See “Reclassification of Realized Gains (Losses) on Derivative and
^(1)   Hedging Activities” below for a detailed breakdown of the components of
       realized losses on derivative and hedging activities.
       
^(2)   Unrealized gains (losses) on derivative and hedging activities, net”
       comprises the following unrealized mark-to-market gains (losses):

                                                                 
                                          Quarters Ended
                                          March 31,   December 31,   March 31,
(Dollars in millions)                       2013       2012        2012 
Floor Income Contracts                    $  189      $   237        $  136
Basis swaps                                  (4   )       (10   )       (22  )
Foreign currency hedges                      (32  )       (55   )       (294 )
Other                                       4          (5    )      (13  )
                                                                     
Total unrealized gains (losses) on        $  157     $   167       $  (193 )
derivative and hedging activities, net

               
                           Other derivative accounting adjustments consist of
                           adjustments related to: (1) foreign currency
                           denominated debt that is adjusted to spot foreign
                           exchange rates for GAAP where such adjustments are
^(3)                       reversed for “Core Earnings” and (2) certain
                           terminated derivatives that did not receive hedge
                           accounting treatment under GAAP but were economic
                           hedges under “Core Earnings” and, as a result, such
                           gains or losses are amortized into “Core Earnings”
                           over the life of the hedged item.

                           Negative amounts are subtracted from “Core
^(4)                       Earnings” net income to arrive at GAAP net income
                           and positive amounts are added to “Core Earnings”
                           net income to arrive at GAAP net income.

Reclassification of Realized Gains (Losses) on Derivative and Hedging
Activities

Derivative accounting requires net settlement income/expense on derivatives
and realized gains/losses related to derivative dispositions (collectively
referred to as “realized gains (losses) on derivative and hedging activities”)
that do not qualify as hedges to be recorded in a separate income statement
line item below net interest income. Under our “Core Earnings” presentation,
these gains and losses are reclassified to the income statement line item of
the economically hedged item. For our “Core Earnings” net interest margin,
this would primarily include: (a) reclassifying the net settlement amounts
related to our Floor Income Contracts to student loan interest income and (b)
reclassifying the net settlement amounts related to certain of our basis swaps
to debt interest expense. The table below summarizes the realized losses on
derivative and hedging activities and the associated reclassification on a
“Core Earnings” basis.

                                                                 
                                          Quarters Ended
                                          March 31,   December 31,   March 31,
(Dollars in millions)                     2013        2012           2012
Reclassification of realized gains
(losses) on derivative and hedging
activities:
Net settlement expense on Floor Income
Contracts reclassified to net interest    $  (212 )   $   (215  )    $  (215 )
income
Net settlement income on interest rate
swaps reclassified to net interest           18           20            36
income
Net realized gains on terminated
derivative contracts reclassified to        6          —           —    
other income
                                                                     
Total reclassifications of realized
losses on derivative and hedging          $  (188 )   $   (195  )    $  (179 )
activities


Cumulative Impact of Derivative Accounting under GAAP compared to “Core
Earnings”

As of March 31, 2013, derivative accounting has reduced GAAP equity by
approximately $1.0 billion as a result of cumulative net unrealized losses
(after tax) recognized under GAAP, but not in “Core Earnings.” The following
table rolls forward the cumulative impact to GAAP equity due to these
unrealized after tax net losses related to derivative accounting.

                                                                
                                        Quarters Ended
                                        March 31,    December 31,   March 31,
(Dollars in millions)                   2013         2012           2012
Beginning impact of derivative          $ (1,080 )   $  (1,183  )   $ (977   )
accounting on GAAP equity
Net impact of net unrealized gains
(losses) under derivative                53          103         (172   )
accounting^(1)
                                                                    
Ending impact of derivative             $ (1,027 )   $  (1,080  )   $ (1,149 )
accounting on GAAP equity

     
^(1)   Net impact of net unrealized gains (losses) under derivative accounting
       is composed of the following:

                                                                 
                                          Quarters Ended
                                          March 31,   December 31,   March 31,
(Dollars in millions)                       2013       2012        2012 
Total pre-tax net impact of derivative    $  110      $   128        $  (264 )
accounting recognized in net income^(a)
Tax impact of derivative accounting          (60  )       (28   )       87
adjustments recognized in net income
Change in unrealized gain on
derivatives, net of tax recognized in       3          3           5    
other comprehensive income
                                                                     
Net impact of net unrealized gains        $  53      $   103       $  (172 )
(losses) under derivative accounting

     
^(a)   See “‘Core Earnings’ derivative adjustments” table above.


Net Floor premiums received on Floor Income Contracts that have not been
amortized into “Core Earnings” as of the respective year-ends are presented in
the table below. These net premiums will be recognized in “Core Earnings” in
future periods and are presented net of tax. As of March 31, 2013, the
remaining amortization term of the net floor premiums was approximately 3.25
years for existing contracts. Historically, we have sold Floor Income
Contracts on a periodic basis and depending upon market conditions and
pricing, we may enter into additional Floor Income Contracts in the future.
The balance of unamortized Floor Income Contracts will increase as we sell new
contracts and decline due to the amortization of existing contracts.

                                                                 
                                          March 31,   December 31,   March 31,
(Dollars in millions)                       2013       2012        2012 
Unamortized net Floor premiums (net of    $  (498 )   $   (551  )    $  (711 )
tax)

   
     Goodwill and Acquired Intangible Assets: Our “Core Earnings” exclude
2)   goodwill and intangible asset impairment and the amortization of acquired
     intangible assets. The following table summarizes the goodwill and
     acquired intangible asset adjustments.

                                                                 
                                          Quarters Ended
                                          March 31,   December 31,   March 31,
(Dollars in millions)                       2013       2012        2012 
“Core Earnings” goodwill and acquired     $  (4   )   $   (14   )    $  (5   )
intangible asset adjustments^(1)

     
^(1)   Negative amounts are subtracted from “Core Earnings” net income to
       arrive at GAAP net income.


Business Segment Earnings Summary — “Core Earnings” Basis
Consumer Lending Segment

The following table includes “Core Earnings” results for our Consumer Lending
segment.

                                                                
                         Quarters Ended                   % Increase
                                                          (Decrease)
                                                          Mar. 31,    Mar. 31,
                                                          2013 vs.    2013 vs.
                         Mar. 31,   Dec. 31,   Mar. 31,   Dec. 31,    Mar. 31,
(Dollars in millions)    2013       2012       2012       2012        2012
“Core Earnings”
interest income:
Private Education        $   623    $   625    $   625    —     %     —     %
Loans
Cash and investments        1         1         2      —          (50   )
                                                                      
Total “Core Earnings”        624        626        627    —           —
interest income
Total “Core Earnings”       204       207       202    (1    )     1     
interest expense
                                                                      
Net “Core Earnings”          420        419        425    —           (1    )
interest income
Less: provision for         225       296       235    (24   )     (4    )
loan losses
                                                                      
Net “Core Earnings”
interest income after        195        123        190    59          3
provision for loan
losses
                                                                      
Servicing revenue           10        11        12     (9    )     (17   )
                                                                      
Total other income           10         11         12     (9    )     (17   )
                                                                      
Direct operating             66         65         69     2           (4    )
expenses
Restructuring expenses      —         —         1      —          (100  )
                                                                      
Total expenses              66        65        70     2          (6    )
                                                                      
Income before income         139        69         132    101         5
tax expense
Income tax expense          51        23        48     122        6     
                                                                      
“Core Earnings”          $   88     $   46     $   84     91    %     5     %


Consumer Lending Net Interest Margin

The following table shows the Consumer Lending “Core Earnings” net interest
margin along with reconciliation to the GAAP basis Consumer Lending net
interest margin before provision for loan losses.

                                                                 
                                          Quarters Ended
                                          March 31,   December 31,   March 31,
                                          2013        2012           2012
“Core Earnings” basis Private Education   6.35   %    6.34     %     6.42   %
Loan yield
Discount amortization                     .23        .22           .24    
                                                                     
“Core Earnings” basis Private Education   6.58        6.56           6.66
Loan net yield
“Core Earnings” basis Private Education   (2.02  )    (2.02    )     (2.01  )
Loan cost of funds
                                                                     
“Core Earnings” basis Private Education   4.56        4.54           4.65
Loan spread
“Core Earnings” basis other               (.41   )    (.47     )     (.39   )
interest-earning asset spread impact
                                                                     
“Core Earnings” basis Consumer Lending    4.15   %    4.07     %     4.26   %
net interest margin^(1)
                                                               
                                                                     
“Core Earnings” basis Consumer Lending    4.15   %    4.07     %     4.26   %
net interest margin^(1)
Adjustment for GAAP accounting            (.03   )    (.05     )     (.13   )
treatment^(2)
                                                                     
GAAP basis Consumer Lending net           4.12   %    4.02     %     4.13   %
interest margin^(1)

     
^(1)   The average balances of our Consumer Lending “Core Earnings” basis
       interest-earning assets for the respective periods are:

                                                                 
                                          Quarters Ended
                                          March 31,   December 31,   March 31,
                                          2013        2012           2012
(Dollars in millions)
Private Education Loans                   $  38,406   $   37,926     $  37,749
Other interest-earning assets               2,662       2,977        2,327
                                                                     
Total Consumer Lending “Core Earnings”    $  41,068   $   40,903     $  40,076
basis interest-earning assets

     
       Represents the reclassification of periodic interest accruals on
       derivative contracts from net interest income to other income and other
^(2)   derivative accounting adjustments. For further discussion of these
       adjustments, see section titled “‘Core Earnings’ — Definition and
       Limitations — Difference between ‘Core Earnings’ and GAAP” above.


Private Education Loan Provision for Loan Losses and Charge-Offs
       
The following table summarizes the total Private Education Loan provision for
loan losses and charge-offs.

                                                                 
                                          Quarters Ended
                                          March 31,   December 31,   March 31,
(Dollars in millions)                     2013        2012           2012
Private Education Loan provision for      $   225     $     296      $   235
loan losses
Private Education Loan charge-offs        $   232     $     329      $   224


In establishing the allowance for Private Education Loan losses as of March
31, 2013, we considered several factors with respect to our Private Education
Loan portfolio. In particular, as compared with the year-ago period, we
continue to see improving credit quality and continuing positive delinquency,
forbearance and charge-off trends in connection with this portfolio. Improving
credit quality is seen in higher FICO scores and cosigner rates as well as a
more seasoned portfolio. Total loans delinquent (as a percentage of loans in
repayment) has decreased to 7.8 percent from 9.1 percent in the year-ago
quarter. Loans greater than 90 days delinquent (as a percentage of loans in
repayment) has decreased to 3.9 percent from 4.4 percent in the year-ago
quarter. Loans in forbearance (as a percentage of loans in repayment and
forbearance) has decreased to 3.4 percent from 4.3 percent in the year-ago
quarter. The charge-off rate remained unchanged at 3.0 percent in both
quarters.

The decline in charge-offs in first-quarter 2013 from fourth-quarter 2012 was
primarily a result of a change in our policy for granting forbearance. During
the second quarter of 2012, we increased our focus on encouraging customers to
enter into repayment plans in lieu of using forbearance to better help our
customers manage their overall payment obligations. As we expected, this
change resulted in higher late-stage delinquencies in the third quarter of
2012 and higher charge-offs during the last six months of 2012. We believe
most of this increase in charge-offs in the last six months of 2012 was an
acceleration of charge-offs that would have occurred in future periods.

Additionally, Private Education Loans that have defaulted between 2008 and
2011 for which we have previously charged off estimated losses have, to
varying degrees, not met our post-default recovery expectations to date and
may continue not to do so. Our allowance for loan losses takes into account
these potential recovery uncertainties.

The Private Education Loan provision for loan losses was $225 million in the
first quarter of 2013, down $10 million from the first quarter of 2012, as a
result of the overall improvement in credit quality and delinquency trends as
well as expected decreases in future charge-offs. The $71 million decrease in
provision from the fourth quarter of 2012 was primarily the result of the
decrease in charge-offs as discussed above.

For a more detailed discussion of our policy for determining the
collectability of Private Education Loans and maintaining our allowance for
Private Education Loan losses, see Item 7 “Management’s Discussion and
Analysis of Financial Condition and Results of Operations — Critical
Accounting Policies and Estimates — Allowance for Loan Losses” in our Annual
Report on Form 10-K for the year ended December 31, 2012.

Operating Expenses — Consumer Lending Segment

Operating expenses for our Consumer Lending segment include costs incurred to
originate Private Education Loans and to service and collect on our Private
Education Loan portfolio. The decrease in operating expenses in the quarter
ended March 31, 2013 compared with the year-ago quarter was primarily the
result of continued management focus on expense control and operating
efficiencies. Operating expenses were 70 basis points and 77 basis points of
average Private Education Loans in the quarters ended March 31, 2013 and 2012,
respectively.

Business Services Segment

The following table includes “Core Earnings” results for our Business Services
segment.

                                                               
                       Quarters Ended                   % Increase (Decrease)
                       Mar. 31,   Dec. 31,   Mar. 31,   Mar. 31,     Mar. 31,
                                                        2013 vs.     2013 vs.
(Dollars in            2013       2012       2012       Dec. 31,     Mar. 31,
millions)                                               2012         2012
Net interest income    $   2      $   3      $  3       (33   ) %    (33   ) %
Servicing revenue:
Intercompany loan          149        158       176     (6    )      (15   )
servicing
Third-party loan           27         24        22      13           23
servicing
Guarantor servicing        10         10        11      —            (9    )
Other servicing           26        26       27     —           (4    )
                                                                     
Total servicing            212        218       236     (3    )      (10   )
revenue
Contingency revenue        99         95        90      4            10
Other Business            8         10       8      (20   )      —     
Services revenue
                                                                     
Total other income         319        323       334     (1    )      (4    )
                                                                     
Direct operating           122        121       120     1            2
expenses
Restructuring             —         2        1      (100  )      (100  )
expenses
                                                                     
Total expenses            122       123      121    (1    )      1     
                                                                     
Income before income       199        203       216     (2    )      (8    )
tax expense
Income tax expense        75        69       80     9           (6    )
                                                                     
“Core Earnings”            124        134       136     (7    )      (9    )
Less: net loss
attributable to           —         —        (1  )   —           (100  )
noncontrolling
interest
                                                                     
“Core Earnings”
attributable to SLM    $   124    $   134    $  137    (7    )%     (9    )%
Corporation


Our Business Services segment includes intercompany loan servicing fees from
servicing the FFELP Loans in our FFELP Loans segment. The average balance of
this portfolio was $121 billion and $135 billion for the quarters ended March
31, 2013 and 2012, respectively. The decline in intercompany loan servicing
revenue from the year-ago period is primarily the result of a lower
outstanding principal balance in the underlying portfolio.

We are servicing approximately 4.8 million accounts under the ED Servicing
Contract as of March 31, 2013, compared with 4.3 million and 3.7 million
accounts serviced at December 31, 2012 and March 31, 2012, respectively.
Third-party loan servicing fees in the quarters ended March 31, 2013 and 2012
included $23 million and $17 million, respectively, of servicing revenue
related to the ED Servicing Contract. This increase in ED loan servicing fees
was driven by the increase in the number of accounts serviced as well as an
increase in ancillary servicing fees earned.

Third-party loan servicing income increased $5 million from the year-ago
quarter primarily due to the increase in ED servicing revenue (discussed
above) as well as a result of the sale of a Residual Interest in a FFELP Loan
securitization trust in the first quarter of 2013. (See “FFELP Loans Segment”
for further discussion.) When we sold this Residual Interest, we retained the
right to service the trust. As such, servicing income that had previously been
recorded as intercompany loan servicing will now be recognized as third-party
loan servicing income.

Other servicing revenue includes account asset servicing revenue and Campus
Solutions revenue. Account asset servicing revenue represents fees earned on
program management, transfer and servicing agent services and administration
services for our various 529 college-savings plans. Assets under
administration of 529 college savings plans totaled $47.9 billion as of March
31, 2013, a 16 percent increase from the year-ago quarter. Campus Solutions
revenue is earned from our Campus Solutions business whose services include
comprehensive financing and transaction processing solutions that we provide
to college financial aid offices and students to streamline the financial aid
process.

Our contingency revenue consists of fees we receive for collections of
delinquent debt on behalf of third-party clients performed on a contingent
basis. Contingency revenue increased $9 million in the current quarter
compared with the year-ago quarter as a result of the higher volume of
collections.


The following table presents the outstanding inventory of contingent
collections receivables that our Business Services segment will collect on
behalf of others. We expect the inventory of contingent collections
receivables to decline over time as a result of the elimination of FFELP.

                                               
                        March 31,   December 31,   March 31,
(Dollars in millions)   2013        2012           2012
Contingency:
Student loans           $  13,549   $   13,189     $  11,004
Other                     2,239       2,139        1,752
                                                   
Total                   $  15,788   $   15,328     $  12,756
                                                      

Other Business Services revenue is primarily transaction fees that are earned
in conjunction with our rewards program from participating companies based on
member purchase activity, either online or in stores, depending on the
contractual arrangement with the participating company.

Revenues related to services performed on FFELP Loans accounted for 74 percent
and 76 percent, respectively, of total segment revenues for the quarters ended
March 31, 2013 and 2012.

FFELP Loans Segment

The following table includes “Core Earnings” results for our FFELP Loans
segment.

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                       Quarters Ended                   % Increase (Decrease)
                                                        Mar. 31,      Mar. 31,
                                                        2013          2013
                       Mar. 31,   Dec. 31,   Mar. 31,   vs.           vs.
(Dollars in            2013       2012       2012       Dec. 31,      Mar. 31,
millions)                                               2012          2012
“Core Earnings”
interest income:
FFELP Loans            $   599    $   654    $   725    (8     )%     (17  )%
Cash and investments      2         3         3      (33    )      (33  )
                                                                      
Total “Core
Earnings” interest         601        657        728    (9     )      (17  )
income
Total “Core
Earnings” interest        340       360       424    (6     )      (20  )
expense

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