RESTON, Va., Oct. 20, 2009 — SLM Corporation (NYSE: SLM), commonly known as Sallie Mae, reported net income on a core earnings basis of $164 million ($.26 per diluted share) for the third quarter ended Sept. 30, 2009, compared to $170 million ($.31 per diluted share) for the prior quarter, and $117 million ($.19 per diluted share) for the year-ago quarter.

The current quarter’s results included a $74 million gain on debt repurchases, vs. the prior quarter’s $325 million, and a $55 million accounting adjustment to reflect slower loan prepayments, and were reduced by $20 million for the early conversion of a portion of the company’s Series C Preferred Stock into common stock. Floor income, not included in core earnings, totaled $36 million in the quarter.

“The return of the CP-LIBOR relationship to more normal levels helped this quarter’s results; we expect credit quality to improve earnings in subsequent periods,” said Albert L. Lord, vice chairman & CEO. "Obviously we are very engaged with other loan providers and schools to reform student lending. We can achieve all the President’s objectives without transition risk, with first-class origination service and without thousands of private sector job losses.”

Loan Volume

The 2009-2010 academic lending season opened with strong growth in federal student loan originations. The company originated $6.9 billion in federal student loans, an increase of 25 percent from the year-ago quarter. These loans are eligible for the U.S. Department of Education’s (ED) purchase program. The company expects to service these and other accounts under the ED servicing contract.

During the quarter, the company originated $893 million in private education loans, a significant but not unexpected decrease from the year-ago quarter’s $2.1 billion. The decrease is principally due to tightened underwriting standards and reduced demand caused by increased federal student loan limits.

Private Education Loan Portfolio Quality

The third-quarter 2009 private education loan loss provision was $413 million, net charge-offs were $443 million. Management anticipates loan charge-offs to decline from the current quarter but to remain at historically elevated levels. Loans in late-stage delinquency decreased, and loans in forbearance significantly decreased to $1.3 billion from a high of nearly $3.0 billion in early 2008.

Liquidity

In the quarter, the company significantly improved its liquidity by:

• Completing $2.8 billion in private education loan securitizations, which provided life-of-loan funding;
• Funding $3.2 billion in federal student loans through the Straight A conduit program sponsored by ED;
• Reducing “2008 ABCP Facility” outstandings to $9.4 billion from $12.5 billion at the end of the second quarter; and
• Repurchasing $1.4 billion in unsecured debt generating a $74 million gain.

Other Income and Operating Expenses

Core fee income, which included the gain on debt repurchases noted above, was $331 million in the third quarter. Year-ago core fee income was $64 million, which included a $242 million impairment in the company’s purchased-paper line of business.

Operating expenses were $309 million for the quarter, a decrease from $317 million in the year-ago quarter.

GAAP

Sallie Mae officially 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 Third Quarter 2009 Supplemental Earnings Disclosure.

Sallie Mae reported third-quarter 2009 GAAP net income of $159 million, or $.25 diluted earnings per share, compared to net losses of $159 million, or $.40 diluted loss per share, in the 2008 third quarter.

The GAAP provision for loan losses was $321 million, compared to the year-ago quarter’s $187 million. Under GAAP accounting, the provision for loan losses is based solely upon on-balance sheet loans; the comparable “core earnings” figure is based on total managed loans.

Presentation slides for the conference call discussed below may be accessed on www.salliemae.com/about/investors/stockholderinfo/webcast.

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The company will host an earnings conference call tomorrow, Oct. 21 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, Oct. 21, 2009, starting at 7:45 a.m. EDT: (877) 356-5689 (USA and Canada) or (706) 679-0623 (International) and use access code 35188825. The conference call will be replayed continuously beginning at 11 a.m. EDT on Oct. 21, 2009, and concluding at midnight on Nov. 4, 2009 EST. To access the replay, please dial (800) 642-1687 (USA and Canada) or dial (706) 645-9291 (International) and use access code 35188825. 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, 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 Third Quarter 2009. All information in this release is as of Oct. 20, 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.