RESTON, Va., July 21, 2009—SLM Corporation (NYSE: SLM), commonly known as Sallie Mae, reported net income on a core earnings basis of $170 million, or $.31 per diluted share, for the second quarter ended June 30, 2009, vs. net income of $156 million, or $.27 per diluted share, in the year-ago quarter.

Second-Quarter Highlights

This quarter’s results included $325 million ($.44 per diluted share) of gains on debt repurchases, a $362 million provision for private credit losses, and a $105 million ($.13 per diluted share) reduction of net interest income caused by commercial paper market dislocation. Excluded from core earnings is $141 million ($.17 per diluted share) of floor income.

In the quarter, the company added significantly to its liquidity by:

• Extending its asset-backed commercial paper facility to April 23, 2010 and reducing outstandings from $21.8 billion to $12.5 billion;
• Completing $5.1 billion in federal student loan and $2.6 billion in private education loan securitizations;
• Repurchasing $1.1 billion in unsecured debt maturing between 2009 and 2014; and
• Funding $11 billion through the Straight A conduit program sponsored by the Department of Education (ED).

Also during the second quarter, the company was awarded a contract with ED for loan servicing.

Loan Volume

With the conclusion of the 2008-2009 academic lending season, the company originated nearly $20 billion in federal student loans, an increase over the 2007-2008 academic year’s $18 billion.

“We met our 2008 commitment to make every federal student loan to every student at every school last academic year,” said Albert L. Lord, vice chairman & CEO. “We were prepared for a significant increase in federal loan applications, and our loan origination team delivered outstanding service. We again expect to handle a sizeable increase this year and look forward to providing the first-rate loan origination service our students and schools rely on.”

During the quarter, the company originated $3.7 billion in federal student loans, compared to $2.4 billion in the year-ago quarter, a 53-percent increase. The company implemented its new private education loan product, the SMART Option Student Loan, raised credit quality standards and originated $387 million in private education loans in the quarter.

Asset Quality

The company charged off $355 million of managed private education loans in the quarter, an increase from $202 million in this year’s first quarter. Approximately half of the charged-off loans were non-traditional private education loans, a market segment that the company discontinued 18 months ago. The related loan loss provision was $362 million, compared to $297 million in the prior quarter.

While 90-day plus delinquencies rose during the quarter, early stage delinquencies declined. The loan loss allowance totaled nearly $2 billion at the end of the second-quarter 2009 and covers expected charge-offs for the next two years.

Other Income and Operating Expenses

Core earnings fee income, which consists primarily of fees earned from guarantor servicing and collection activity, was $201 million in the second quarter, compared to $221 million in the year-ago quarter.

Operating expenses were $305 million for the quarter, a decrease from $339 million in the year-ago quarter.

GAAP

Sallie Mae reports financial results on a GAAP basis and also presents certain core earnings performance measures. The company's management, equity investors, credit rating agencies and debt capital providers use these 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 Second Quarter 2009 Supplemental Earnings Disclosure.

Sallie Mae reported a second-quarter 2009 GAAP net loss of $123 million, or $.32 diluted loss per share, compared to net income of $266 million, or $.50 diluted earnings per share, in the 2008 second quarter. This loss was primarily driven by a $484 million unrealized, mark-to-market loss on derivative and hedging activities. Such mark-to-market gains and losses are volatile, temporary and will generally reverse so that there is no cumulative, unrealized gain or loss at the respective maturity dates of the derivatives.

The GAAP provision for loan losses was $278 million, compared to the year-ago quarter’s $143 million. Under GAAP accounting, the provision for loan losses is based only on on-balance sheet loans, while the comparable core earnings figure is based on total managed loans.

Here are the presentation slides for the conference call discussed below.

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The company will host an earnings conference call tomorrow, July 22 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 should call the following number tomorrow, July 22, 2009, starting at 7:45 a.m. EDT: (877) 356-5689 (USA and Canada) or (706) 679-0623 (International) and use access code 15501913. The conference call will be replayed continuously beginning at 11 a.m. EDT on July 22, 2009, and concluding at midnight on Aug. 5, 2009. To access the replay, please dial (800) 642-1687 (USA and Canada) or dial (706) 645-9291 (International) and use access code 15501913. 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, 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, changes in liquidity, financing costs and 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 Second Quarter 2009. All information in this release is as of July 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.