What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2021-02-25 compared with 2020-02-28 · 1265 added, 728 removed, 1747 unchanged (53% of the section changed)

13 unchanged sentences

Changes in Internal Control over Financial Reporting

During the fourth quarter of 2019, we implemented new credit loss models in advance of the adoption of FASB’s ASU No.

2016-13, “Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments,” as amended by ASU No.

2019-04, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,” which became effective for us on January 1, 2020.

Changes were made to relevant business processes and the related control activities, including information systems, in order to monitor and maintain appropriate controls over financial reporting.

See Part II, Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates — Recently Issued but Not Yet Adopted Accounting Pronouncements” for additional details regarding our adoption of this new standard.

There have been no other changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Other Information

31 unchanged sentences

4.2 First Supplemental Indenture dated as of April 5, 2017 between SLM Corporation and Deutsche Bank National Trust Company, as Trustee (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed on April 5, 2017).

Description of SLM Corporation’s Common Stock .

Description of SLM Corporation’s Floating-Rate Non-Cumulative Preferred Stock, Series B .

4.3 Second Supplemental Indenture dated as of October 29, 2020 between SLM Corporation and Deutsche Bank National Trust Company, as Trustee (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed on October 29, 2020).

4.4 Form of Senior Note due 2025 (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K filed on October 29, 2020).

4.5 Description of SLM Corporation’s Common Stock (incorporated by reference to Exhibit 4.3 to the Company’s Annual Report on Form 10-K filed on February 28, 2020).

4.6 Description of SLM Corporation’s Floating-Rate Non-Cumulative Preferred Stock, Series B (incorporated by reference to Exhibit 4.4 to the Company’s Annual Report on Form 10-K filed on February 28, 2020).

10.1† Form of SLM Corporation Omnibus Incentive Plan, Bonus Restricted Stock Unit Term Sheet (one-year restriction), 2014 Management Incentive Plan Award (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on April 22, 2015).

55 unchanged sentences

10.49† Sallie Mae 401(k) Savings Plan (Effective as of April 30, 2014) (incorporated by reference to Exhibit 10.44 to the Company’s Annual Report on Form 10-K filed on February 26, 2015).

Restatement of the Sallie Mae 401(k) Savings Plan (Effective as of January 1, 2018).

Amendment to Sallie Mae 401(k) Savings Plan (Effective as of January 1, 2019).

10.50† Restatement of the Sallie Mae 401(k) Savings Plan (Effective as of January 1, 2018) (incorporated by reference to Exhibit 10.50 of the Company’s Annual Report on Form 10-K filed on February 28, 2020).

10.51† Amendment to Sallie Mae 401(k) Savings Plan (Effective as of January 1, 2019) (incorporated by reference to Exhibit 10.51 of the Company’s Annual Report on Form 10-K filed on February 28, 2020).

10.52† Amendment to Sallie Mae 401(k) Savings Plan (Effective as of March 5, 2019) (incorporated by reference to Exhibit 10.4 of the Company’s Quarterly Report on Form 10-Q filed on April 17, 2019).

15 unchanged sentences

10.67† Form of SLM Corporation 2012 Omnibus Incentive Plan, Independent Director Restricted Stock Agreement - 2019 (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on July 24, 2019).

10.68† Form of SLM Corporation 2012 Omnibus Incentive Plan, 2020 Restricted Stock Unit Term Sheet (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on April 22, 2020).

10.69† Form of SLM Corporation 2012 Omnibus Incentive Plan, 2020 Performance Stock Unit Term Sheet (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q filed on April 22, 2020).

10.70† Offer Letter between Jonathan W.

Witter and the Company dated March 4, 2020 (incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q filed on April 22, 2020).

10.71 Fixed Dollar Uncollared ASR Master Confirmation and Form of Supplement (incorporated by reference to Exhibit 10.4 of the Company’s Quarterly Report on Form 10-Q filed on April 22, 2020).

10.72† Form of SLM Corporation 2012 Omnibus Incentive Plan, Independent Director Restricted Stock Agreement – 2020 (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on July 22, 2020).

10.73† Separation Agreement between Raymond J.

Quinlan and the Company effective April 19, 2020 (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q filed on July 22, 2020).

10.74† Jonathan W.

Witter Sign-On Equity Grant - 2020 Restricted Stock Unit Term Sheet (incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q filed on July 22, 2020).

10.75† Offer Letter between Donna F.

Vieira and the Company dated September 18, 2018 (incorporated by reference to Exhibit 10.4 of the Company’s Quarterly Report on Form 10-Q filed on July 22, 2020).

10.76† Separation Agreement between Paul Thome and the Company effective August 10, 2020 (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on October 21, 2020).

21.1* List of Subsidiaries.

6 unchanged sentences

Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

XBRL Taxonomy Extension Schema Document.

XBRL Taxonomy Extension Calculation Linkbase Document.

XBRL Taxonomy Extension Definition Linkbase Document.

XBRL Taxonomy Extension Label Linkbase Document.

XBRL Taxonomy Extension Presentation Linkbase Document.

101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH XBRL Taxonomy Extension Schema Document.

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB XBRL Taxonomy Extension Label Linkbase Document.

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.

104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

4 unchanged sentences

SLM CORPORATION

/ S / RAYMOND J.

Executive Chairman and Chief Executive Officer

/ S / JONATHAN W.

Chief Executive Officer and Director

Pursuant to the requirement of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

/S/ RAYMOND J.

Executive Chairman and Chief Executive Officer

(Principal Executive Officer)

February 28, 2020

/S/ JONATHAN W.

Witter Chief Executive Officer and Director

(Principal Executive Officer) February 25, 2021

/S/ STEVEN J.

Executive Vice President and Chief Financial Officer

McGarry Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

1 unchanged sentence

/S/ JONATHAN R.

Senior Vice President and Controller

Boyles Senior Vice President and Controller

(Principal Accounting Officer)

February 25, 2021

February 28, 2020

/S/ MARY CARTER WARREN FRANKE

Mary Carter Warren Franke

February 28, 2020

Mary Carter Warren Franke Chair of the Board of Directors February 25, 2021

Child Director February 25, 2021

Goode Director February 25, 2021

/S/ MARIANNE M.

February 28, 2020

Keler Director February 25, 2021

Lavelle Director February 25, 2021

/S/ JIM MATHESON

February 28, 2020

Jim Matheson Director February 25, 2021

Puleo Director February 25, 2021

/S/ VIVIAN C.

February 28, 2020

Schneck-Last Director February 25, 2021

/S/ WILLIAM N.

February 28, 2020

Shiebler Director February 25, 2021

/S/ ROBERT S.

February 28, 2020

Strong Director February 25, 2021

/S/ KIRSTEN O.

February 28, 2020

Wolberg Director February 25, 2021

CONSOLIDATED FINANCIAL STATEMENTS

11 unchanged sentences

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of SLM Corporation and subsidiaries (the Company) as of December 31, 2019 and 2018, the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the years in the three‑year period ended December 31, 2019, and the related notes (collectively, the consolidated financial statements).

We have audited the accompanying consolidated balance sheets of SLM Corporation and subsidiaries

(the Company) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2020 and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2020, in conformity with U.S.

1 unchanged sentence

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 25, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for the recognition and measurement of credit losses as of January 1, 2020 due to the adoption of ASC Topic 326, Financial Instruments – Credit Losses .

Basis for Opinion

9 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Assessment of the allowance for loan losses related to private education loans

As discussed in Notes 2 and 6 to the consolidated financial statements, the Company’s allowance for loan losses related to private education loans (ALL) was $374.3 million of a total allowance for loan losses of $441.9 million as of December 31, 2019.

The Company estimated the ALL using a methodology for the non-Troubled Debt Restructuring (TDR) portfolio that projects expected defaults by using the likelihood a loan receivable may progress through delinquency stages and ultimately charge off over the loss emergence period.

Once a charge-off forecast is estimated, a recovery assumption is included which estimates what the Company expects to receive from defaulted loan sales as well as historical borrower payment behavior.

The resulting net charge-off forecast is further adjusted for certain qualitative factors.

For loans identified as a TDR, the Company estimated an allowance through an impairment calculation based on the difference between the loan’s basis and the present value of expected future cash flows, discounted at the loan’s original effective interest rate.

We identified the assessment of the ALL as a critical audit matter because it involved significant measurement uncertainty requiring complex auditor judgment, and knowledge and experience in the industry.

In addition, auditor judgment was required to evaluate the sufficiency of audit evidence obtained.

The assessment of the ALL encompassed the evaluation of the methodology, including the methodologies used to estimate (1) the non-TDR portfolio’s projected expected defaults, recovery rate assumption, loss emergence period, and period of historical loan performance data used (historical observation period), (2) the TDR portfolio’s life-of-loan default assumption and recovery rate assumption, and (3) the qualitative factors.

The primary procedures we performed to address the critical audit matter included the following.

We tested certain internal controls over the Company’s ALL process, including controls related to the (1) development of the ALL methodology, (2) determination of the key factors and assumptions used to estimate the net charge-off forecast and TDR impairment, (3) development of the qualitative factors, (4) calculation of the ALL estimate, and (5) analysis of the ALL results, trends, and ratios.

We evaluated the Company’s process to develop the ALL estimate by testing certain sources of data, factors, and assumptions that the Company used, and considered the relevance and reliability of such data, factors, and assumptions.

In addition, we involved credit risk professionals with specialized industry knowledge and experience who assisted in:

evaluating the Company’s ALL methodology for compliance with U.S.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Assessment of the Allowance for Credit Losses related to Private Education Loans Evaluated on a Collective Basis

As discussed in Note 2 to the consolidated financial statements, the Company adopted ASU No.

2016-13, Financial instruments – Credit Losses (ASC Topic 326), as of January 1, 2020.

The total allowance for credit losses as of January 1, 2020 was $1,585.0 million, a portion of which related to the Company’s allowance for credit losses on private education loans evaluated on a collective basis (the January 1, 2020 ACL).

As discussed in Notes 2 and 7 to the consolidated financial statements, the Company’s total allowance for credit losses as of December 31, 2020 was $1,361.7 million, of which $1,251.6 million related to the Company’s allowance for credit losses on private education loans evaluated on a collective basis (the December 31, 2020 ACL).

For all loans carried at amortized cost, upon loan origination, the Company is required to measure the allowance for credit losses based on the estimate of all current expected credit losses over the remaining contractual term of the loans.

In determining the lifetime expected credit losses on the private education loan portfolio, the Company uses a discounted cash flow model.

This method requires the Company to project future principal and interest cash flows on the loans in this portfolio.

The Company estimated the future expected cash flows following a vintage-based model that considers life of loan loss expectations, prepayments (both voluntary and involuntary), defaults, recoveries, and any other adjustments deemed necessary, to determine the adequacy of the allowance for credit losses.

In determining the loss rates used for the vintage-based approach, the Company starts with historical loss rates, stratifies the loans within each vintage, and then adjusts the loss rates based upon exogenous factors over a reasonable and supportable forecast period.

At the end of the reasonable and supportable forecast period, the forecast is immediately reverted to historical averages.

The cash flows are then discounted at the loan’s effective interest rate to calculate the present value of those cash flows.

In estimating current expected credit losses, the Company uses a combination of expected economic scenarios, which are weighted based upon the current economic conditions and the Company’s view of the risks of alternate outcomes.

In addition to this modeling approach, the Company also takes certain qualitative factors, including but not limited to, changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off and recovery practices not already included in the analysis, and the effect of other external factors such as legal and regulatory requirements on the level of estimated current expected credit losses into consideration when calculating the January 1, 2020 ACL and December 31, 2020 ACL.

We identified the assessment of the January 1, 2020 ACL and December 31, 2020 ACL as a critical audit matter.

A high degree of audit effort, including specialized skills and knowledge, and subjective and complex auditor judgment was involved in the assessment of the ACL due to significant measurement uncertainty.

Specifically, the assessment of the ACL methodology encompassed the evaluation of the development and mathematical accuracy of the discounted cash flow model and the model’s key factors and assumptions, including (1) the economic scenarios, (2) probabilities assigned to each economic scenario weighting (3) the reasonable and supportable forecast periods, (4) the immediate reversion assumption after the reasonable and supportable forecast period, (5) prepayment rates, and (6) the qualitative factors.

The assessment also included an evaluation of the conceptual soundness and performance of the discounted cash flow model.

In addition, auditor judgement was required to evaluate the sufficiency of audit evidence obtained.

The following are the primary procedures we performed to address the critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s measurement of the ACL estimates, including controls over the:

• development of the ACL methodology

• development of the discounted cash flow model

• performance monitoring of the discounted cash flow for the December 31, 2020 ACL

• determination and measurement of the significant assumptions used in the model

• development of the qualitative factors

• calculation of the ACL estimate

• analysis of the ACL results, trends, and ratios.

We evaluated the Company’s process to develop the ACL estimates by testing certain sources of data, factors, and assumptions that the Company used, and considered the relevance and reliability of such data, factors, and assumptions.

In addition, we involved credit risk professionals with specialized skills and knowledge, who assisted in:

• evaluating the Company’s ACL methodology for compliance with U.S.

generally accepted accounting principles

testing the historical observation period used in the methodologies to evaluate the length of the period,

evaluating the methodology used to develop the resulting qualitative factors and the effect of those factors on the ALL compared with the relevant credit risk factors and consistency with credit trends,

evaluating the methodology used to develop the loss emergence periods, and

• evaluating judgments made by the Company relative to the development and performance testing of the discounted cash flow model by comparing them to the relevant Company-specific metrics and trends

• assessing the conceptual soundness and performance testing of the discounted cash flow model by inspecting the model documentation to determine whether the model is suitable for its intended use

• evaluating the methodology used to develop the economic scenarios and underlying assumptions by comparing it to the Company’s business environment and relevant industry practices

• assessing the economic scenarios through comparison to publicly available forecasts and the probabilities assigned to each weighting.

• testing the reasonable and supportable forecast periods to evaluate the length of each period by comparing to specific portfolio risk characteristics and trends

• evaluating the methodology used to develop the qualitative factors and the effect of those factors on the ACL compared with relevant credit risk factors and consistency with credit trends and identified limitations of the underlying quantitative discounted cash flow model

• testing the mathematical accuracy of certain computations of the estimate.

We evaluated the collective results of the procedures performed to assess the sufficiency of the audit evidence obtained related to the Company’s ALL.

Assessment of the disclosure of the expected transition effect from the adoption of ASC Topic 326 related to the allowance for credit losses

As discussed in Note 2 to the consolidated financial statements, the Company disclosed the expected transition effect of the adoption of ASU No.

2016-13, Financial Instruments - Credit Losses (ASC Topic 326), as amended by ASU No.

2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments (commonly known as CECL).

ASC Topic 326 will be adopted by the Company on January 1, 2020 using the modified retrospective method.

ASC Topic 326 eliminates the current accounting guidance for the recognition of credit impairment.

For all loans carried at amortized cost, upon origination, an estimate of all current expected credit losses over the remaining expected life will be used to measure the allowance for credit losses.

The Company’s estimate of current expected credit losses will be determined using a discounted cash flow approach.

Qualitative adjustments are incorporated as necessary to address any limitations in the model.

Upon adoption, the Company expects the allowance for loan losses will increase $1.1 billion over the amount recorded as of December 31, 2019.

We identified the assessment of the disclosure of the Company’s expected transition effect to the allowance for loan losses from the adoption of ASC Topic 326 (the CECL transition effect disclosure) as a critical audit matter.

A high level of audit effort, including knowledge and experience in the industry, and subjective and complex auditor judgment was involved in the evaluation of the CECL transition effect disclosure.

Specifically, the assessment included an evaluation of the development and mathematical accuracy of the discounted cash flow model and the model’s key factors and assumptions, including:

(1) forecasted economic conditions (2) the immediate reversion assumption after the reasonable and supportable forecast period, and (3) prepayment rates.

The assessment also included an evaluation of qualitative adjustments.

In addition, auditor judgment was required to evaluate the sufficiency of the audit evidence obtained related to the completeness and accuracy of the disclosure.

The primary procedures we performed to address this critical audit matter included the following.

We tested certain internal controls over the Company’s CECL transition effect disclosure process, including controls related to the (1) development of the CECL methodology, (2) model development and validation, (3) determination of key factors and assumptions, and (4) model execution.

We assessed the Company’s key factors and assumptions regarding the expected effect of the adoption of ASC Topic 326 by testing certain sources of data, factors, and assumptions that the Company used, and considered their relevance and reliability.

In addition, we involved credit risk professionals with specialized industry knowledge and experience who assisted in:

evaluating the Company’s measurement methodology for compliance with U.S.

generally accepted accounting principles,

evaluating the judgments made by the Company relative to the model development and validation, and the key factors and assumptions used by the Company, and

testing the design and configuration of the models used in determining the CECL transition effect disclosure.

We also evaluated the collective results of the procedures performed to assess the sufficiency of the audit evidence obtained related to the CECL transition effect disclosure.

We also assessed the sufficiency of the audit evidence obtained related to the January 1, 2020 ACL and December 31, 2020 ACL by evaluating the cumulative results of the audit procedures and potential bias in the accounting estimates.

We have served as the Company’s auditor since 2013.

7 unchanged sentences

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2019 and 2018, the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2019, and the related notes (collectively, the consolidated financial statements), and our report dated February 28, 2020 expressed an unqualified opinion on those consolidated financial statements.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board

(United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes

(collectively, the consolidated financial statements), and our report dated February 25, 2021 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

11 unchanged sentences

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of

unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

6 unchanged sentences

Cash and cash equivalents $ 4,455,292 $ 5,563,877

Trading investments at fair value (cost of $ 12,551 )

Available-for-sale investments at fair value (cost of $ 1,986,957 and $ 485,756 , respectively)

1,996,634 487,669

Other investments 80,794 84,420

1 unchanged sentence

Loans held for investment (net of allowance for losses of $ 1,361,723 and $ 441,912 , respectively)

19,183,143 24,667,792

Loans held for sale 2,885,640 —

Restricted cash 154,417 156,883

4 unchanged sentences

Tax indemnification receivable 18,492 27,558

Other assets 19,533 29,398

Total assets $ 30,770,423 $ 32,686,479

Deposits $ 22,666,039 $ 24,283,983

Short-term borrowings — 289,230

Long-term borrowings 5,189,217 4,354,037

Income taxes payable, net

Upromise member accounts — 192,662

4 unchanged sentences

2.5 million and 4 million shares issued, respectively, at stated value of $ 100 per share

251,070 400,000

Common stock, par value $ 0.20 per share, 1.125 billion shares authorized:

456.7 million and 453.6 million shares issued, respectively

91,346 90,720

Additional paid-in capital 1,331,247 1,307,630

Accumulated other comprehensive income (loss) (net of tax expense (benefit) of ($3,995) and $3,436, respectively)

Accumulated other comprehensive loss (net of tax benefit of $( 10,908 ) and $( 3,995 ), respectively)

( 34,200 ) ( 12,367 )

Retained earnings 1,722,365 1,850,512

2 unchanged sentences

81.4 million and 32.5 million shares, respectively

( 798,993 ) ( 324,659 )

Total equity 2,562,835 3,311,836

Total liabilities and equity $ 30,770,423 $ 32,686,479

4 unchanged sentences

Years Ended December 31,

2020 2019 2018

Interest income:

Loans $ 1,989,004 $ 2,249,169 $ 1,894,687

Investments 11,743 7,607 6,162

Cash and cash equivalents 20,913 74,256 34,503

1 unchanged sentence

Interest expense:

Deposits 393,194 547,746 389,349

Interest expense on short-term borrowings 14,459 6,193 5,833

14 unchanged sentences

Other operating expenses 233,635 263,172 271,844

Total operating expenses 538,088 574,253 556,976

Restructuring expenses 26,215 — —

Total non-interest expenses 564,303 574,253 556,976

1 unchanged sentence

Income tax expense 273,316 165,464 71,853

Net income 880,690 578,276 487,476

Preferred stock dividends 9,734 16,837 15,640

10 unchanged sentences

Years Ended December 31,

2020 2019 2018

Net income $ 880,690 $ 578,276 $ 487,476

Other comprehensive income (loss):

10 unchanged sentences

Common Stock Shares

Preferred Stock Shares

Preferred Stock

Additional Paid-In Capital

Preferred Stock Shares Issued Treasury Outstanding Preferred Stock Common Stock Additional Paid-In Capital Accumulated

Comprehensive

Income (Loss)

Retained Earnings

Treasury Stock

Total SLM Corporation Equity

Income Retained Earnings Treasury Stock Total SLM Corporation Equity

Balance at December 31, 2017 4,000,000 443,463,587 ( 11,087,337 ) 432,376,250 $ 400,000 $ 88,693 $ 1,222,277 $ 2,748 $ 868,182 $ ( 107,644 ) $ 2,474,256

Net income — — — — — — — — 487,476 — 487,476

Other comprehensive income, net of tax — — — — — — — 7,013 — — 7,013

Total comprehensive income — — — — — — — — — — 494,489

Cumulative effect of the new stock compensation standard

Reclassification resulting from the adoption of ASU No.

2018-02 — — — — — — — 592 ( 592 ) — —

Reclassification resulting from the adoption of ASU No.

2017-12 — — — — — — — 270 591 — 861

Cash dividends:

Preferred Stock, series A ($1.74 per share)

Preferred Stock, series B ($ 3.91 per share)

Redemption of Series A Preferred Stock

Dividend equivalent units related to employee stock-based compensation plans

— — — — — — — — ( 15,640 ) — ( 15,640 )

Issuance of common shares — 6,392,634 6,392,634 — 1,279 20,834 — — — 22,113

7 unchanged sentences

Common Stock Shares

Preferred Stock Shares

Preferred Stock

Additional Paid-In Capital

Preferred Stock Shares Issued Treasury Outstanding Preferred Stock Common Stock Additional Paid-In Capital Accumulated

Comprehensive

Retained Earnings

Treasury Stock

Total SLM Corporation Equity

Income Retained Earnings Treasury Stock Total Equity

Balance at December 31, 2018 4,000,000 449,856,221 ( 14,174,733 ) 435,681,488 $ 400,000 $ 89,972 $ 1,274,635 $ 10,623 $ 1,340,017 $ ( 142,591 ) $ 2,972,656

Other comprehensive income, net of tax

Net income — — — — — — — — 578,276 — 578,276

Other comprehensive loss, net of tax — — — — — — — ( 22,990 ) — — ( 22,990 )

Total comprehensive income — — — — — — — — — — 555,286

Reclassification resulting from the adoption of ASU No.

Cash dividends:

Common Stock ($ 0.12 per share)

— — — — — — — — ( 51,114 ) — ( 51,114 )

Preferred Stock, series B ($ 4.21 per share)

— — — — — — — — ( 16,837 ) — ( 16,837 )

Dividend equivalent units related to employee stock-based compensation plans — — — — — — 5 — ( 5 ) — —

Issuance of common shares — 3,743,705 3,743,705 — 748 2,627 — — — 3,375

Stock-based compensation expense — — — — — — 30,363 — 175 — 30,538

Common stock repurchased — — ( 16,962,199 ) ( 16,962,199 ) — — — — — ( 167,201 ) ( 167,201 )

Shares repurchased related to employee stock-based compensation plans — — ( 1,369,630 ) ( 1,369,630 ) — — — — — ( 14,867 ) ( 14,867 )

5 unchanged sentences

Common Stock Shares

Preferred Stock Shares

Preferred Stock

Additional Paid-In Capital

Preferred Stock Shares Issued Treasury Outstanding Preferred Stock Common Stock Additional Paid-In Capital Accumulated

Comprehensive

Retained Earnings

Treasury Stock

Total SLM Corporation Equity

Loss Retained Earnings Treasury Stock Total Equity

Balance at December 31, 2019 4,000,000 453,599,926 ( 32,506,562 ) 421,093,364 $ 400,000 $ 90,720 $ 1,307,630 $ ( 12,367 ) $ 1,850,512 $ ( 324,659 ) $ 3,311,836

Cumulative adjustment for the adoption of ASU No.

2016-13 (CECL) — — — — — — — — ( 952,639 ) — ( 952,639 )

Balance at January 1, 2020 4,000,000 453,599,926 ( 32,506,562 ) 421,093,364 400,000 90,720 1,307,630 ( 12,367 ) 897,873 ( 324,659 ) 2,359,197

Net income — — — — — — — — 880,690 — 880,690

Other comprehensive loss, net of tax — — — — — — — ( 21,833 ) — — ( 21,833 )

Total comprehensive income — — — — — — — — — — 858,857

Cash dividends:

Cash dividends declared:

Common Stock ($ 0.12 per share)

— — — — — — — — ( 46,351 ) — ( 46,351 )

Preferred Stock, series B ($ 2.56 per share)

— — — — — — — — ( 9,734 ) — ( 9,734 )

Repurchase of Preferred Stock, series B ( 1,489,304 ) — — — ( 148,930 ) — 80,875 — — — ( 68,055 )

Dividend equivalent units related to employee stock-based compensation plans — — — — — — 271 — ( 281 ) — ( 10 )

9 unchanged sentences

Years Ended December 31,

2020 2019 2018

Operating activities

Net income $ 880,690 $ 578,276 $ 487,476

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

Provisions for credit losses 93,133 354,249 244,864

Deferred tax benefit

Deferred tax provision (benefit) 72,776 ( 9,714 ) ( 63,301 )

Amortization of brokered deposit placement fee 19,401 17,788 13,055

8 unchanged sentences

Losses on sales of securities, net — — 1,549

Gain on sale of Upromise subsidiary, net ( 11,331 ) — —

Other adjustments to net income, net 8,810 3,724 7,446

2 unchanged sentences

Increase in non-marketable securities ( 839 ) ( 10,700 ) ( 5,000 )

(Increase) decrease in other interest-earning assets

Decrease (increase) in other interest-earning assets 9,690 ( 25,407 ) ( 5,571 )

Decrease in tax indemnification receivable — — 35,989

1 unchanged sentence

Decrease in income tax payable, net ( 45,611 ) ( 30,191 ) ( 79,693 )

Increase in accrued interest payable

(Decrease) increase in accrued interest payable ( 14,602 ) 13,817 25,979

Decrease in Upromise member accounts due to sale ( 193,840 ) — —

Increase in other liabilities 80,785 5,386 15,204

8 unchanged sentences

Proceeds from sales and maturities of available-for-sale securities 654,515 50,915 77,897

Total net cash used in investing activities

Proceeds for sale of Upromise subsidiary, net 16,922 — —

Total net cash provided by (used in) investing activities 947,330 ( 2,306,714 ) ( 3,254,863 )

Financing activities

Brokered deposit placement fee ( 4,810 ) ( 27,978 ) ( 25,785 )

Net increase in certificates of deposit

Net (decrease) increase in certificates of deposit ( 2,428,094 ) 4,349,741 2,525,040

Net increase in other deposits 704,382 923,793 918,420

Issuance costs for collateralized borrowings ( 1,402 ) — —

Borrowings collateralized by loans in securitization trusts - issued 1,338,641 1,105,594 1,891,027

5 unchanged sentences

Unsecured debt issued 495,000 — —

Redemption of Series A Preferred Stock

Common stock dividends paid

Preferred stock dividends paid ( 9,734 ) ( 16,837 ) ( 15,640 )

Repurchase of Series B Preferred Stock ( 68,055 ) — —

Common stock dividends paid ( 46,351 ) ( 51,114 ) —

Common stock repurchased ( 558,167 ) ( 167,201 ) —

Net cash provided by financing activities

Net increase (decrease) in cash, cash equivalents and restricted cash

Net cash (used in) provided by financing activities ( 1,875,712 ) 5,361,220 4,403,324

Net (decrease) increase in cash, cash equivalents and restricted cash ( 1,111,051 ) 3,038,865 1,045,720

Cash, cash equivalents and restricted cash at beginning of year 5,720,760 2,681,895 1,636,175

1 unchanged sentence

Cash disbursements made for:

Interest $ 517,444 $ 666,018 $ 472,459

Income taxes paid $ 248,122 $ 201,792 $ 228,074

11 unchanged sentences

While the Sallie Mae name has existed for more than 40 years, the company that operates as Sallie Mae today, SLM Corporation, was formed in late 2013 and includes its wholly-owned subsidiary, Sallie Mae Bank, an industrial bank established in 2005 (the “Bank”).

On April 30, 2014, we legally separated (the “Spin-Off”) from another public company that is now named Navient Corporation (“Navient”),which is in the education loan management, servicing, and asset recovery business.

We are a consumer banking business and did not retain any assets or liabilities generated prior to the Spin-Off other than those explicitly retained by us.

8 unchanged sentences

The Bank is regulated by the Utah Department of Financial Institutions (the “UDFI”), the Federal Deposit Insurance Corporation (the “FDIC”) and the Consumer Financial Protection Bureau (the “CFPB”).

We also operate Upromise, Inc.

(“Upromise”), a save-for-college rewards program helping Americans save for higher education.

SLM CORPORATION

6 unchanged sentences

Actual results could differ from those estimates.

Key accounting policies that include significant judgments and estimates include the valuation of allowance for loan losses and derivative accounting.

Key accounting policies that include significant judgments and estimates include the valuation of allowance for credit losses and derivative accounting.

Consolidation

6 unchanged sentences

Fees associated with investing cash and cash equivalents are amortized into interest income using the effective interest rate method.

Trading Investments

In March 2020, we sold approximately $ 1.7 billion of Private Education Loans through securitization transactions where we were required to retain a 5 percent vertical risk retention interest (i.e., 5 percent of each class issued in the securitizations).

We classified those vertical risk retention interests related to the transactions as available-for-sale investments, except for the interest in the residual classes, which we classified as trading investments recorded at fair value with changes recorded through earnings.

Available-for-Sale Investments

Investments consisted of mortgage-backed securities, Utah Housing Corporation bonds and U.S.

government-sponsored enterprises securities.

government-sponsored enterprises and Treasury securities.

We record our investment purchases and sales on a trade date basis.

3 unchanged sentences

Management reviews all investments at least quarterly to determine whether any impairment is other-than-temporary.

Impairment is evaluated by considering several factors, including the length of time and extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability to retain the investment to allow for an anticipated recovery in fair value.

If, based on the analysis, it is determined that the impairment is other-than-temporary, the investment is written down to fair value and a loss is recognized through earnings.

Other Investments

We hold investments in non-marketable securities and account for these investments at cost, less impairment, plus or minus observable price changes of identical or similar securities of the same issuer.

SLM CORPORATION

2 unchanged sentences

Significant Accounting Policies (Continued)

allow for an anticipated recovery in fair value.

If, based on the analysis, it is determined that the impairment is other-than-temporary, the investment is written down to fair value and a loss is recognized through earnings.

Other Investments

We also invest in affordable housing projects that qualify for the low income housing tax credit (“LIHTC”), which is designed to promote private development of low income housing.

1 unchanged sentence

Loans Held for Investment

Loans, consisting of Private Education Loans, FFELP Loans, unsecured personal loans used for non-educational purposes by borrowers (“Personal Loans”), and our suite of credit cards (“Credit Cards”) that we have the ability and intent to hold for the foreseeable future, are classified as held for investment, and are carried at amortized cost.

Amortized cost includes the unamortized premiums, discounts, and capitalized origination costs and fees, all of which are amortized to interest income as discussed under “Loan Interest Income.” Loans which are held for investment are reported net of an allowance for loan losses.

Loans, consisting of Private Education Loans, FFELP Loans, and our suite of credit cards (“Credit Cards”) that we have the ability and intent to hold for the foreseeable future, are classified as held for investment, and are carried at amortized cost.

Loans Held for Sale

Any loans we have not classified as held for investment are classified as held-for-sale and are carried at the lower of cost or fair value.

Loans are classified as held-for-sale when we have the intent and ability to sell such loans.

Loans which are held-for-sale do not have the associated premium, discount, and capitalized origination costs and fees amortized into interest income.

When a decision has been made to sell loans not previously classified as held for sale, such loans are transferred into the held-for-sale classification and carried at the lower of amortized cost basis (which excludes any allowance for credit losses) or fair value.

At the time of the transfer to the held-for-sale classification, any amount by which the amortized cost basis exceeds fair value is accounted for as a valuation allowance.

In addition, once a loan is classified as held-for-sale, we reverse any allowance for loan loss applicable to these loans.

As market conditions permit, we may sell or securitize loans as a source of financing for other loans.

Due to varying structuring terms, certain transactions may qualify for sale treatment while others do not qualify for sale treatment and are recorded as financings.

All of our education loans are initially categorized as held for investment.

It is only when we have selected the loans to sell or securitize and the transaction qualifies as a sale that we transfer the loans into the held-for-sale classification and carry them at the lower of cost or fair value.

If we anticipate recognizing a gain related to the impending securitization or sale, then the fair value of the loans is higher than their respective cost basis and no valuation allowance is recorded.

Restricted Cash

2 unchanged sentences

Amounts on deposit in these accounts are primarily the result of timing differences between when principal and interest is collected on the trust assets and when principal and interest is paid on trust liabilities.

Allowance for Loan Losses

We maintain an allowance for loan losses at an amount sufficient to absorb probable losses incurred in our portfolios, as well as regarding future loan commitments, at the reporting date based on a projection of estimated probable credit losses incurred in the portfolio.

We consider a loan to be impaired when, based on current information, a loss has been incurred and it is probable that we will not receive all contractual amounts due.

When making our assessment as to whether a loan is impaired, we also take into account more than insignificant delays in payment.

We generally evaluate impaired loans on an aggregate basis by grouping similar loans.

We analyze our portfolios to determine the effects that the various stages of delinquency and forbearance have on borrower default behavior and ultimate charge off.

We estimate the allowance for loan losses for our loan portfolios using a roll rate analysis of delinquent and current accounts.

A “roll rate analysis” is a technique used to estimate the likelihood that a loan receivable may progress through the various delinquency stages and ultimately charge off.

We also take into account the current and future economic environment and certain other qualitative factors when calculating the allowance for loan losses.

The evaluation of the allowance for loan losses is inherently subjective, as it requires material estimates that may be susceptible to significant changes.

Our default estimates are based on a loss emergence period of one year for Private Education Loans, Personal Loans and Credit Cards and two years for FFELP Loans.

A loss emergence period represents the expected period between the first occurrence of an event likely to cause a loss on a loan and the date the loan is expected to be charged off, taking into consideration account management practices that affect the timing of a loss, such as the usage of forbearance.

The loss emergence period underlying the allowance for loan losses is subject to a number of assumptions.

If actual future performance in delinquency, charge-offs and recoveries is significantly different than estimated, or account management assumptions or practices were to change, this could materially affect the estimate of the allowance for loan losses, the timing of when losses are recognized, and the related provision for credit losses on our consolidated statements of income.

We utilize various models to determine an appropriate allowance for loan losses.

Changes to model inputs are made as deemed necessary.

These models are reviewed and validated periodically.

Below we describe in further detail our policies and procedures for the allowance for loan losses as they relate to our Private Education Loan, Personal Loan, FFELP Loan portfolios and Credit Cards.

SLM CORPORATION

2 unchanged sentences

Significant Accounting Policies (Continued)

Allowance for Private Education Loan Losses

In determining the allowance for loan losses on our Private Education Loans that are not troubled debt restructurings (“TDRs”), we estimate the principal amount of loans that will default over the next year ( one year being the expected period between a loss trigger event and default) using a roll rate model and how much we expect to recover over the same one -year period related to the defaulted amount.

The expected defaults less our expected recoveries adjusted for any qualitative factors (discussed below) equal the allowance related to this portfolio.

Our historical experience indicates that, on average, the time between the date that a customer experiences a default causing event (i.e., the loss trigger event) and the date that we charge off the unrecoverable portion of that loan is one year.

In estimating both the non-TDR and TDR allowance amounts, we start with historical experience of customer delinquency and default behavior.

We make judgments about which historical period to start with and then make further judgments about whether that historical experience is representative of future expectations and whether additional adjustments may be needed to those historical default rates.

We also take certain other qualitative factors into consideration when calculating the allowance for loan losses.

These qualitative factors include, but are not limited to, changes in the economic environment, changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off and recovery practices not already included in the analysis, and the effect of other external factors, such as legal and regulatory requirements, on the level of estimated credit losses.

Certain Private Education Loans do not require borrowers to begin repayment until at least six months after they have graduated or otherwise left school.

Consequently, the loss estimates for these loans is generally low while the borrower is in school.

At December 31, 2019 and 2018 , 25 percent and 26 percent , respectively, of the principal balance in the Private Education Loan portfolio was related to borrowers who are in an in-school (fully deferred), grace, or deferment status and not required to make payments.

As this population of borrowers leaves school, they will be required to begin payments on their loans, and the allowance for losses may change accordingly.

Similar to the rules governing FFELP payment requirements, our collection policies allow for periods of nonpayment for borrowers requesting additional payment grace periods upon leaving school or experiencing temporary difficulty meeting payment obligations.

This is referred to as forbearance status and is considered separately in the allowance for loan losses.

The loss emergence period is in alignment with the typical collection cycle and takes into account these periods of nonpayment.

As part of concluding on the adequacy of the allowance for loan losses, we review key allowance and loan metrics.

The most relevant of these metrics considered are the allowance coverage of net charge-offs ratio;

the allowance as a percentage of ending total loans and of ending loans in repayment;

and delinquency and forbearance percentages.

We consider a loan to be delinquent 31 days after the last payment was contractually due.

We use a model to estimate the amount of uncollectible accrued interest on Private Education Loans and reserve for that amount against current period interest income.

Our non-TDR allowance for loan losses is estimated using an analysis of delinquent and current accounts.

Our roll rate model is used to estimate the likelihood that a loan receivable may progress through the various delinquency stages and ultimately charge off.

Once a charge-off forecast is estimated, a recovery assumption is layered on top.

Allowance for Credit Losses 2020

We maintain an allowance for credit losses for the lifetime expected credit losses on loans in our portfolios, as well as for future loan commitments, at the reporting date.

In determining the lifetime expected credit losses on our Private Education Loan portfolio loan segments, we use a discounted cash flow model.

This method requires us to project future principal and interest cash flows on our loans in those portfolios.

To estimate the future expected cash flows, we use a vintage-based model that considers life of loan loss expectations, prepayments (both voluntary and involuntary), defaults, recoveries, and any other adjustments deemed necessary, to determine the adequacy of the allowance at each balance sheet date.

These cash flows are discounted at the loan’s effective interest rate to calculate the present value of those cash flows.

Management adjusts the effective interest rate used to discount expected cash flows to incorporate expected prepayments.

The difference between the present value of those cash flows and the amortized cost basis of the underlying loans is the allowance for credit losses.

Entities that measure credit losses based on the present value of expected future cash flows are permitted to report the entire change in present value as credit loss expense, but may alternatively report the change in present value due to the passage of time as interest income.

We have elected to report the entire change in present value as credit loss expense.

In determining the loss rates used for the vintage-based approach, we start with our historical loss rates, stratify the loans within each vintage, and then adjust the loss rates based upon economic factors forecasted over a reasonable and supportable forecast period.

The reasonable and supportable forecast period is meant to represent the period in which we believe we can estimate the impact of forecasted economic factors in our expected losses.

At the end of the reasonable and supportable forecast period, we immediately revert our forecast of expected losses to our historical averages.

We use a two-year reasonable and supportable forecast period, although this period is subject to change as our view evolves on our ability to reasonably forecast economic conditions to estimate future losses.

In estimating our current expected credit losses, we use a combination of expected economic scenarios coupled with our historical experience to derive a base case adjusted for any qualitative factors (as described below).

We also develop an adverse and favorable economic scenario.

At each reporting date, we determine the appropriate weighting of these alternate scenarios based upon the current economic conditions and our view of the risks of alternate outcomes.

This weighting of expectations is used in calculating our current expected credit losses recorded each period.

In estimating recoveries, we use both estimates of what we would receive from the sale of defaulted loans as well as historical borrower payment behavior to estimate the timing and amount of future recoveries on charged-off loans.

The roll rate analysis model is based upon actual experience using the 120 day charge-off default aversion strategies.

Once the quantitative calculation is performed, we review the adequacy of the allowance for loan losses and determine if qualitative adjustments need to be considered.

We use historical experience and economic forecasts to estimate future prepayment speeds.

As with our loss forecasts, at the end of the two-year reasonable and supportable forecast for prepayments, we immediately revert to our historical long-term prepayment rates.

In addition to the above modeling approach, we also take certain other qualitative factors into consideration when calculating the allowance for credit losses.

These qualitative factors include, but are not limited to, changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off and recovery practices not already included in the analysis, and the effect of other external factors such as legal and regulatory requirements on the level of estimated current expected credit losses.

The evaluation of the allowance for credit losses is inherently subjective, as it requires material estimates that may be susceptible to significant changes.

If actual future performance in delinquency, charge-offs, and recoveries is significantly different than estimated, or management assumptions or practices were to change, this could materially affect the estimate of the allowance for credit losses, the timing of when losses are recognized, and the related provision for credit losses on our consolidated statements of income.

SLM CORPORATION

2 unchanged sentences

Significant Accounting Policies (Continued)

We collect on defaulted loans through a mix of in-house, third-party collectors and sales to third-parties.

When calculating our allowance for credit losses and liability for unfunded commitments, we incorporate several inputs that are subject to change period to period.

These include, but are not limited to, CECL model inputs and any overlays deemed necessary by management.

The most impactful CECL model inputs include:

• Economic forecasts;

• Weighting of economic forecasts;

• Prepayment speeds;

• New loan volume, including commitments made but not yet disbursed;

• Loan sales.

Management overlays can encompass a broad array of factors not captured by model inputs, such as changes in servicing policies.

Below we describe in further detail our policies and procedures for the allowance for credit losses as they relate to our Private Education Loan, Credit Card, and FFELP Loan portfolios.

During the third quarter of 2020, we sold our entire Personal Loan portfolio.

Allowance for Private Education Loan Losses

In addition to the key assumptions/estimates described above, some estimates are unique to our Private Education Loan portfolio.

Estimates are made on our Private Education Loans regarding when each borrower will separate from school.

The cash flow timing of when a borrower will begin making full principal and interest payments is dependent upon when the student either graduates or leaves school.

These dates can change based upon many factors.

We receive information regarding projected graduation dates from a third-party clearinghouse.

The separation from school date will be updated quarterly based on updated information received from the clearinghouse.

Additionally, when we have a contractual obligation to fund a loan or a portion of a loan at a later date, we make an estimate regarding the percentage of this obligation that will be funded.

This estimate is based on historical experience.

For unfunded commitments, we recognize the related life of loan allowance as a liability.

Once the loan is funded, that liability transfers to the allowance for Private Education Loan losses.

Key Credit Quality Indicators - Private Education Loans

We determine the collectability of our Private Education Loan portfolio by evaluating certain risk characteristics.

We consider credit score at original approval and periodically refreshed/updated credit scores through the loan’s term, existence of a cosigner, loan status, and loan seasoning as the key credit quality indicators because they have the most significant effect on the determination of the adequacy of our allowance for credit losses.

Credit scores are an indicator of the creditworthiness of borrowers and the higher the credit scores the more likely it is the borrowers will be able to make all of their contractual payments.

Loan status affects the credit risk because a past due loan is more likely to result in a credit loss than a current loan.

Additionally, loans in the deferred payment status have different credit risk profiles compared with those in current pay status.

Loan seasoning affects credit risk because a loan with a history of making payments generally has a lower incidence of default than a loan with a history of making infrequent or no payments.

The existence of a cosigner lowers the likelihood of default as well.

We monitor and update these credit quality indicators in the analysis of the adequacy of our allowance for credit losses on a quarterly basis.

We collect on defaulted loans through a mix of in-house collectors, third-party collectors and sales to third-parties.

For December 31, 2020 and 2019, we used both an estimate of recovery rates from in-house collections as well as expectations of future sales of defaulted loans to estimate the timing and amount of future recoveries on charged-off loans.

In connection with the Spin-Off, we retained the right to require Navient to purchase certain delinquent loans (at fair value) when the borrower has a lending relationship with both us and Navient (“Split Loans”).

In the second quarter of 2018, we sold our remaining $ 43 million portfolio of Split Loans (both current and non-current loans) to Navient and recognized a net gain of $ 2 million .

Allowance for Personal Loans

We maintain an allowance for Personal Loan losses at an amount sufficient to absorb losses estimated and viewed at the reporting date as probable credit losses to be incurred in the portfolio.

In determining the allowance for loan losses on our Personal Loan portfolio that are not TDRs, we estimate the principal amount of the loans that will default over the next twelve months (twelve months being the expected period between a loss trigger event and default) and how much we expect to recover over the same twelve-month period related to the defaulted amounts.

The expected defaults less our expected recoveries adjusted for any qualitative factors equal the allowance related to this portfolio.

At December 31, 2019 and 2018, there were no Personal Loans classified as TDRs.

Troubled Debt Restructurings

Separately, for our TDR portfolio, we estimate an allowance amount sufficient to cover life-of-loan expected losses through an impairment calculation based on the difference between the loan’s basis and the present value of expected future cash flows (which would include life-of-loan default and recovery assumptions) discounted at the loan’s original effective interest rate.

Our TDR portfolio is comprised mostly of loans with interest rate reductions and loans with forbearance usage greater than three months during a 24-month period, as further described below.

We modify the terms of loans for certain borrowers when we believe such modifications may increase the ability and willingness of a borrower to make payments and thus increase the ultimate overall amount collected on the loan.

These modifications generally take the form of a forbearance, a temporary interest rate reduction or an extended repayment plan.

Private Education Loans generally do not require borrowers to begin principal and interest repayment until at least six months after the borrowers have graduated or otherwise separated from school.

Consequently, the loss estimates for these loans are generally low while the borrower is in school and then increase upon the end of the grace period after separation from

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

Significant Accounting Policies (Continued)

At December 31, 2020 and 2019, 24 percent and 25 percent, respectively, of the principal balance of the Private Education Loan portfolio was related to borrowers who are in an in-school (fully deferred), grace, or other deferment status and not required to make payments.

Our collection policies for Private Education Loans allow for periods of nonpayment for certain borrowers requesting an extended grace period upon leaving school or experiencing temporary difficulty meeting payment obligations.

This is referred to as forbearance and is considered in estimating the allowance for credit losses.

As part of concluding on the adequacy of the allowance for credit losses for Private Education Loans, we review key allowance and loan metrics.

The most relevant of these metrics considered are the allowance as a percentage of ending total loans, delinquency percentages, and forbearance percentages.

We consider a Private Education Loan to be delinquent if the borrower has not made a required payment prior to the 31st day after such payment was contractually due.

Troubled Debt Restructurings (“TDRs”)

In estimating the expected defaults for our Private Education Loans that are considered TDRs, we follow the same discounted cash flow process described above but use the historical loss rates related to past TDR loans.

The appropriate gross loss rates are determined for each individual loan by evaluating loan maturity, risk characteristics, and macroeconomic conditions.

The allowance for our TDR portfolio is included in our overall allowance for Private Education Loans.

Our TDR portfolio is comprised mostly of loans with interest rate reductions and loans with forbearance usage greater than three months, as further described below.

We adjust the terms of loans for certain borrowers when we believe such changes will help our customers manage their student loan obligations, achieve better student outcomes, and increase the collectability of the loans.

These changes generally take the form of a temporary forbearance of payments, a temporary interest rate reduction, a temporary interest rate reduction with a permanent extension of the loan term, and/or a short-term extended repayment alternative.

When we give a borrower facing financial difficulty an interest rate reduction, we temporarily reduce the rate (currently to 4.0 percent) for a two-year period and, in the vast majority of cases, permanently extend the final maturity of the loan.

The combination of these two loan term changes helps reduce the monthly payment due from the borrower and increases the likelihood the borrower will remain current during the interest rate modification period as well as when the loan returns to its original contractual interest rate.

Until the fourth quarter of 2017, we generally considered a loan that was in full principal and interest repayment status which had received more than three months of forbearance in a 24 -month period to be a TDR;

however, during the first nine months after a loan had entered full principal and interest repayment status, we did not count up to the first six months of forbearance received during that period against the three-month policy limit.

We now classify a loan as a TDR due to forbearance using a two-step process.

We classify a loan as a TDR due to forbearance using a two-step process.

The first step is to identify a loan that was in full principal and interest repayment status and received more than three months of forbearance in a 24 -month period;

3 unchanged sentences

Loans that have met the criteria in the first test and have a FICO score under the threshold (based on the most recent quarterly FICO score refresh) will be classified as TDRs.

A loan also becomes a TDR when it is modified to reduce the interest rate on the loan (regardless of when such modification occurs and/or whether such interest rate reduction is temporary).

Once a loan qualifies for TDR status, it remains a TDR for allowance purposes for the remainder of its life.

About half our loans that are considered TDRs involve a temporary forbearance of payments and do not change the contractual interest rate of the loan.

As of December 31, 2020 and 2019, approximately 47 percent and 50 percent, respectively, of TDRs were classified as such due to their forbearance status.

For additional information, see Note 7, “Allowance for Credit Losses.”

During the first quarter of 2020, the pandemic caused by coronavirus 2019 or COVID-19 (“COVID-19”) began to spread worldwide and has caused significant disruptions to the U.S.

and world economies.

SLM CORPORATION

2 unchanged sentences

Significant Accounting Policies (Continued)

A loan also becomes a TDR when it is modified to reduce the interest rate on the loan (regardless of when such modification occurs and/or whether such interest rate reduction is temporary).

Once a loan qualifies for TDR status, it remains a TDR for allowance purposes for the remainder of its life.

As of December 31, 2019 and 2018 , approximately 50 percent and 57 percent, respectively, of TDRs were classified as such due to their forbearance status.

Key Credit Quality Indicators

We determine the collectability of our Private Education Loan portfolio by evaluating certain risk characteristics.

We consider credit scores at original approval and periodically refreshed/updated credit scores through the loan’s term, existence of a cosigner, loan status and loan seasoning as the key credit quality indicators because they have the most significant effect on the determination of the adequacy of our allowance for loan losses.

Credit scores are an indicator of the creditworthiness of borrowers and the higher the credit scores the more likely it is the borrowers will be able to make all of their contractual payments.

Loan status affects the credit risk because a past due loan is more likely to result in a credit loss than a current loan.

Additionally, loans in the deferred payment status have different credit risk profiles compared with those in current pay status.

Loan seasoning affects credit risk because a loan with a history of making payments generally has a lower incidence of default than a loan with a history of making infrequent or no payments.

The existence of a cosigner lowers the likelihood of default as well.

We monitor and update these credit quality indicators in the analysis of the adequacy of our allowance for loan losses on a quarterly basis.

For Personal Loans, we consider FICO scores at original approval, seasoning and loan status to be our key credit quality indicators for the same reasons discussed above.

For Credit Cards, we consider FICO scores at original approval to be our key credit quality indicator.

On March 27, 2020, then President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which, among other things, allows us to (i) elect to suspend the requirements under GAAP for loan modifications related to COVID-19 that would otherwise be categorized as TDRs, and (ii) suspend any determination of a loan modified as a result of the effects of COVID-19 as being a TDR, including impairment for accounting purposes.

Furthermore, on December 27, 2020, the Consolidated Appropriations Act, 2021 (the “CAA”) was signed into law.

The CAA provides for additional COVID-19 focused relief and extends certain provisions of the CARES Act.

We have elected to suspend TDR accounting for both forbearance and interest rate modifications of loans that occur as a result of COVID-19 for the applicable period of the CARES Act and CAA relief.

The relief from TDR guidance applies to modifications of loans that were not more than 30 days past due as of December 31, 2019, and that occur during the period beginning on March 1, 2020, and ending on the earlier of (i) sixty days after the date on which the national emergency related to the COVID-19 outbreak is terminated, or (ii) January 1, 2022.

We are continuing to apply TDR accounting to those loans that were more than 30 days past due as of December 31, 2019 and were subsequently modified.

Off-Balance Sheet Exposure for Contractual Loan Commitments

When we approve a Private Education Loan at the beginning of an academic year, that approval may cover the borrowing for the entire academic year.

As such, we do not always disburse the full amount of the loan at the time of such approval, but instead have a commitment to fund a portion of the loan at a later date (usually the start of the second semester or subsequent trimesters).

We estimate expected credit losses over the contractual period in which we are exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by us.

The discounted cash flow approach described above includes expected future contractual disbursements.

The portion of the allowance for credit losses related to future disbursements is shown as a liability on the face of the balance sheet, and related provision for credit losses is reflected on the income statement.

Uncollectible Interest

The majority of the total accrued interest receivable on our Private Education Loan portfolio represents accrued interest on deferred loans where no payments are due while the borrower is in school and on fixed-pay loans where the borrower makes a $25 monthly payment that is smaller than the interest accrued on the loan in that month.

The accrued interest on these loans will be capitalized and increase the unpaid principal balance of the loans when the borrower exits the grace period after separation from school.

The discounted cash flow approach described above considers both the collectability of principal as well as this portion of accrued interest that is expected to capitalize to the balance of the loan.

Therefore, the allowance for this portion of accrued interest balance is included in our allowance for credit losses.

The discounted cash flow approach does not consider interest accrued on loans that are in a full principal and interest repayment status or in interest-only repayment status.

We separately capture the amount of expected uncollectible interest associated with these loans using historical experience to estimate the uncollectible interest for the next four months at each period-end date.

This amount is recorded as a reduction of interest income.

Accrued interest receivable is separately disclosed on the face of the balance sheet.

Allowance for Credit Card Loans

We use the gross loss approach when estimating the allowance for credit losses for our Credit Card portfolio.

Because our Credit Card portfolio is new and we do not have historical loss experience, we use estimated loss rates reported by other financial institutions to estimate our allowance for credit losses for Credit Cards, net of expected recoveries.

In addition, we use a model that utilizes purchased credit card information with risk characteristics similar to those of our own portfolio as a challenger model.

We then consider any qualitative factors that may change our future expectations of losses.

As all of our Credit Card loans are unconditionally cancelable by us, the issuer, we do not record any estimate of credit losses for unused portions of our Credit Card commitments.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

Significant Accounting Policies (Continued)

Allowance for FFELP Loan Losses

1 unchanged sentence

These insurance obligations are supported by contractual rights against the United States.

For loans disbursed on or after July 1, 2006, we receive 97 percent reimbursement on all qualifying default claims.

For loans disbursed on or after July 1, 2006, we receive 97 percent reimbursement on all qualifying claims.

For loans disbursed after October 1, 1993, and before July 1, 2006, we receive 98 percent reimbursement on all qualifying claims.

For loans disbursed prior to October 1, 1993, we receive 100 percent reimbursement.

Because we bear a maximum of three percent loss exposure due to this federal guarantee, our allowance for credit losses for FFELP Loans and related periodic provision expense are relatively small.

We use the gross loss approach when estimating the allowance for credit losses for the unguaranteed portion of our FFELP Loans.

We maintain an allowance for credit losses for our FFELP Loans at a level sufficient to cover lifetime expected credit losses.

The allowance for FFELP Loan losses uses historical experience of customer default behavior.

We apply the default rate projections, net of applicable risk sharing, to our FFELP Loans for the current period to perform our quantitative calculation.

Once the quantitative calculation is performed, we review the adequacy of the allowance for credit losses and determine if qualitative adjustments need to be considered.

Allowance for Credit Losses 2019

Prior to January 1, 2020, we maintained an allowance for credit losses at an amount sufficient to absorb probable losses incurred in our portfolios, as well as regarding future loan commitments, at the reporting date based on a projection of estimated probable credit losses incurred in the portfolio.

We considered a loan to be impaired when, based on current information, a loss had been incurred and it was probable that we would not receive all contractual amounts due.

When making our assessment as to whether a loan was impaired, we also took into account more than insignificant delays in payment.

We generally evaluated impaired loans on an aggregate basis by grouping similar loans.

We analyzed our portfolios to determine the effects that the various stages of delinquency and forbearance had on borrower default behavior and ultimate charge off.

We estimated the allowance for credit losses for our loan portfolios using a roll rate analysis of delinquent and current accounts.

A “roll rate analysis” is a technique used to estimate the likelihood that a loan receivable may progress through the various delinquency stages and ultimately charge off.

We also took into account the current and future economic environment and certain other qualitative factors when calculating the allowance for credit losses.

The evaluation of the allowance for credit losses is inherently subjective, as it required material estimates that may be susceptible to significant changes.

Our default estimates were based on a loss emergence period of one year for Private Education Loans, Personal Loans and Credit Cards and two years for FFELP Loans.

The loss emergence period underlying the allowance for credit losses was subject to a number of assumptions.

If actual future performance in delinquency, charge-offs and recoveries was significantly different than estimated, or account management assumptions or practices were to change, this could materially affect the estimate of the allowance for credit losses, the timing of when losses were recognized, and the related provision for credit losses on our consolidated statements of income.

We utilized various models to determine an appropriate allowance for credit losses.

Changes to model inputs were made as deemed necessary.

The models were reviewed and validated periodically.

Below we describe in further detail our policies and procedures for the allowance for credit losses in 2019 as they relate to our Private Education Loan, Personal Loan, FFELP Loan portfolios and Credit Cards.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

Significant Accounting Policies (Continued)

Allowance for Private Education Loan Losses 2019

Prior to January 1, 2020, in determining the allowance for credit losses on our Private Education Loans that are not TDRs, we estimated the principal amount of loans that would default over the next year (one year being the expected period between a loss trigger event and default) using a roll rate model and how much we expected to recover over the same one-year period related to the defaulted amount.

The expected defaults less our expected recoveries adjusted for any qualitative factors (discussed below) equaled the allowance related to this portfolio.

In estimating both the non-TDR and TDR allowance amounts, we started with historical experience of customer delinquency and default behavior.

We made judgments about which historical period to start with and then made further judgments about whether that historical experience was representative of future expectations and whether additional adjustments may be needed to those historical default rates.

We also took certain other qualitative factors into consideration when calculating the allowance for credit losses.

These qualitative factors include, but were not limited to, changes in the economic environment, changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off and recovery practices not already included in the analysis, and the effect of other external factors, such as legal and regulatory requirements, on the level of estimated credit losses.

Certain Private Education Loans do not require borrowers to begin repayment until at least six months after they have graduated or otherwise left school.

Consequently, the loss estimates for these loans was generally low while the borrower is in school.

At December 31, 2019, 25 percent of the principal balance in the Private Education Loan portfolio was related to borrowers who were in an in-school (fully deferred), grace, or deferment status and not required to make payments.

As this population of borrowers leaves school, they will be required to begin payments on their loans, and the allowance for losses could change accordingly.

This is referred to as forbearance status and was considered separately in the allowance for credit losses.

The loss emergence period was in alignment with the typical collection cycle and took into account these periods of nonpayment.

As part of concluding on the adequacy of the allowance for credit losses, we reviewed key allowance and loan metrics.

The most relevant of these metrics considered are the allowance coverage of net charge-offs ratio;

the allowance as a percentage of ending total loans and of ending loans in repayment;

and delinquency and forbearance percentages.

We consider a loan to be delinquent if the borrower has not made a required payment prior to the 31st day after such payment was contractually due.

We used a model to estimate the amount of uncollectible accrued interest on Private Education Loans and reserved for that amount against current period interest income.

Our non-TDR allowance for credit losses was estimated using an analysis of delinquent and current accounts.

Our roll rate model was used to estimate the likelihood that a loan receivable may progress through the various delinquency stages and ultimately charge off.

Once a charge-off forecast was estimated, a recovery assumption was layered on top.

In estimating recoveries, we used both estimates of what we would receive from the sale of defaulted loans as well as historical borrower payment behavior to estimate the timing and amount of future recoveries on charged-off loans.

The roll rate analysis model was based upon actual experience using the 120 day charge-off default aversion strategies.

Once the quantitative calculation was performed, we reviewed the adequacy of the allowance for credit losses and determined if qualitative adjustments needed to be considered.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

Significant Accounting Policies (Continued)

Allowance for Personal Loans 2019

Prior to January 1, 2020, we maintained an allowance for Personal Loan losses at an amount sufficient to absorb losses estimated and viewed at the reporting date as probable credit losses to be incurred in the portfolio.

In determining the allowance for credit losses on our Personal Loan portfolio that were not TDRs, we estimated the principal amount of the loans that would default over the next twelve months (twelve months being the expected period between a loss trigger event and default) and how much we expected to recover over the same twelve-month period related to the defaulted amounts.

The expected defaults less our expected recoveries adjusted for any qualitative factors equaled the allowance related to this portfolio.

At December 31, 2019, there were no Personal Loans classified as TDRs.

Troubled Debt Restructurings 2019

Separately, for our TDR portfolio, we estimated an allowance amount sufficient to cover life-of-loan expected losses through an impairment calculation based on the difference between the loan’s basis and the present value of expected future cash flows (which would include life-of-loan default and recovery assumptions) discounted at the loan’s original effective interest rate.

Our TDR portfolio is comprised mostly of loans with interest rate reductions and loans with forbearance usage greater than three months during a 24-month period, as further described above.

Allowance for FFELP Loan Losses 2019

FFELP Loans are insured as to their principal and accrued interest in the event of default subject to a risk-sharing level based on the date of loan disbursement.

These insurance obligations are supported by contractual rights against the United States.

For loans disbursed on or after July 1, 2006, we receive 97 percent reimbursement on all qualifying claims.

For loans disbursed after October 1, 1993, and before July 1, 2006, we receive 98 percent reimbursement.

For loans disbursed prior to October 1, 1993, we receive 100 percent reimbursement.

The allowance for FFELP Loan losses uses historical experience of customer default behavior and a two -year loss emergence period to estimate the credit losses incurred in the loan portfolio at the reporting date.

We apply the default rate projections, net of applicable risk sharing, to each category for the current period to perform our quantitative calculation.

Once the quantitative calculation is performed, we review the adequacy of the allowance for loan losses and determine if qualitative adjustments need to be considered.

The 2019 allowance for FFELP Loan losses used historical experience of customer default behavior and a two-year loss emergence period to estimate the credit losses incurred in the loan portfolio at the reporting date.

We applied the default rate projections, net of applicable risk sharing, to each category for the relevant period to perform our quantitative calculation.

Once the quantitative calculation was performed, we reviewed the adequacy of the allowance for credit losses and determined if qualitative adjustments needed to be considered.

Allowance for Credit Cards 2019

The allowance for Credit Card losses is management’s estimate of credit losses inherent in the Credit Card portfolio at the balance sheet date.

The allowance for Credit Card losses uses historical loss rates for accounts with similar characteristics (based on industry data) as a reasonable basis to estimate future losses.

The 2019 allowance for Credit Card losses was management’s estimate of credit losses inherent in the Credit Card portfolio at the relevant balance sheet date.

The allowance for Credit Card losses used historical loss rates for accounts with similar characteristics (based on industry data) as a reasonable basis to estimate future losses.

At December 31, 2019, there were no Credit Cards classified as TDRs.

4 unchanged sentences

For retail MMDA and HYS accounts, the depositor may be required to give written notice of any intended withdrawal not less than seven days before the withdrawal is made.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

Significant Accounting Policies (Continued)

The Bank also includes brokered CDs in its funding base.

2 unchanged sentences

These omnibus accounts may be structured with or without fixed maturities, and may have fixed or variable interest rates.

Upromise Member Accounts

Upromise member accounts represent amounts owed to Upromise rewards members for rebates they have earned from qualifying purchases from Upromise’s participating merchants.

These amounts are held in trust for the benefit of the members until distributed in accordance with the Upromise member’s request and/or the terms of the Upromise service agreement.

Upromise, which acts as the trustee for the trust, has deposited a majority of the cash with the Bank pursuant to a money market deposit account agreement between the Bank and Upromise as trustee of the trust.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

Significant Accounting Policies (Continued)

Fair Value Measurement

23 unchanged sentences

However, significant judgment is required by us in developing the inputs.

Loan Interest Income

For all loans, including impaired loans, classified as held for investment, we recognize interest income as earned, adjusted for the amortization of deferred direct origination and acquisition costs.

Deferred fees or costs are required to be recognized as yield adjustments over the life of the related loans and are recognized by the interest method.

The objective of the interest method is to arrive at periodic interest income (including recognition of fees and costs) at a constant effective yield on the net investment in the receivable (i.e., the principal amount of the receivable adjusted by unamortized fees or costs, purchase premium or discount, and any hedging activity—these unamortized costs will collectively be referred to as “basis adjustments”).

The difference between the periodic interest income so determined and the interest income determined by applying the stated interest rate to the outstanding principal amount of the receivable is the amount of periodic amortization of deferred direct origination and acquisition costs.

For the amortization of the basis adjustments, we determine the constant effective yield necessary to apply the interest method based upon the contractual terms of the loan contract, with no consideration given to expected prepayments.

SLM CORPORATION

2 unchanged sentences

Significant Accounting Policies (Continued)

Loan Interest Income

For all loans, including impaired loans, classified as held for investment, we recognize interest income as earned, adjusted for the amortization of deferred direct origination and acquisition costs.

This adjustment is recognized based upon the expected yield of the loan over its life after giving effect to prepayments and extensions.

We consider our constant prepayment rate (“CPR”) estimates a significant accounting assumption used to measure the expected prepayment activity in our education loan portfolio.

The estimates are based on a number of factors such as historical prepayment rates for loans with similar loan characteristics, assumptions about portfolio composition and loan terms, and the prepayment curve’s tendency to follow a ramp pattern (i.e., the prepayment rate typically increases during the in-school and early repayment periods, then stabilizes).

The CPR measures the expected prepayment activity over the life of the loan and is applied as a flat-rate input assumption when used in forecasting.

Additionally, interest earned on education loans reflects potential non-payment adjustments in accordance with our uncollectible interest recognition policy as discussed further in “Allowance for Loan Losses” of this Note 2.

Because of this, we do not place loans in nonaccrual status prior to charge-off.

We do not amortize any adjustments to the basis of education loans when they are classified as held-for-sale.

Our CPR estimates include the effect of voluntary prepayments and consolidation (if the loans are consolidated to third parties), both of which shorten the lives of loans.

CPR estimates also consider the utilization of deferment, forbearance, and extended repayment plans, which lengthen the lives of loans.

We regularly evaluate the assumptions used to estimate the CPRs.

In instances where there are changes to the assumptions, amortization of deferred direct origination and acquisition costs is adjusted on a cumulative basis to reflect the change since the origination or purchase of the loan.

For the year ended December 31, 2019 , our CPR for Private Education Loans was 6.92 percent , compared with a CPR of 6.83 percent for the year ended December 31, 2018.

For fixed-rate loans, when a prepayment occurs the unamortized balance of the basis adjustments is adjusted so that future amortization (based upon the contractual terms of the loan) will result in a constant effective yield equal to the original effective interest rate.

Prepayments do not result in a change in the effective interest rate of the loan.

We determine the contractual payments on a pool basis;

as such, when a prepayment occurs, future contractual payments will be determined assuming the pool will make smaller payments through the original term of the contract.

The adjustment to the unamortized basis adjustment balance is recorded in interest income.

For variable-rate loans, the effective interest rate at the time of origination is the loan’s effective interest rate assuming all future contractual payments.

The effective interest rate remains the same for that loan until the loan rate changes.

If there is no prepayment and no change in the stated interest rate, the periodic amortization of the basis adjustments is equal to the difference between the effective interest rate multiplied by the book basis and the contractual interest due.

We determine the contractual payments on a pool basis;

as such, when a prepayment occurs, future contractual payments will be determined assuming the pool will make smaller payments through the original term of the contract.

The adjustment to the unamortized basis adjustment balance is recorded in interest income.

When the interest rate on a variable-rate loan changes, the effective interest rate is recalculated using the same methodology described in the previous paragraph;

however, the future contractual payments are changed to reflect the new interest rate.

There is no forecasting of future expected changes in interest rates.

The accounting basis used to determine the effective interest rate of the cash flows is equal to the balances of the unpaid principal balance and unamortized basis adjustments at the time of the rate change.

We also pay to the U.S.

2 unchanged sentences

We do not amortize any adjustments to the basis of loans when they are classified as held-for-sale.

We recognize certain fee income (primarily late fees) on education loans when earned according to the contractual provisions of the promissory notes, as well as our expectation of collectability.

With the adoption of CECL on January 1, 2020, we continue to analyze the collectability of accrued interest associated with loans not currently in full principal and interest repayment status or interest-only repayment status as discussed above;

however, we have changed the recognition of the allowance for this portion of uncollectible interest (amounts to be capitalized after separation from school and the expiration of the grace period) to the provisions for credit losses from our historical practice of recording it as a reduction of interest income, as well as classifying this allowance as part of our allowance for credit losses as opposed to our historical practice of recording it as a reduction of accrued interest income receivable.

The allowance for the portion of uncollectible interest on loans making full interest payments will continue to be recorded as a reduction of interest income.

We recognize certain fee income (primarily late fees) on all loans when earned according to the contractual provisions of the promissory notes, as well as our expectation of collectability.

Fee income is recorded when earned in “other non-interest income” in the accompanying consolidated statements of income.

18 unchanged sentences

These loans were initially recorded as held for investment and were transferred to held-for-sale immediately prior to sale or securitization.

In the second quarter of 2018, we sold our remaining $ 43 million portfolio of Split Loans (both current and non-current loans) to Navient and recognized a net gain of $ 2 million .

In the first quarter of 2020, we recognized a $ 239 million gain from the sale of approximately $ 3.1 billion of our Private Education Loans, including $ 2.9 billion of principal, $ 199 million in capitalized interest, and $ 12 million in accrued interest, to unaffiliated third parties.

In the second quarter of 2018, we sold our remaining $ 43 million portfolio of Split Loans (as hereinafter defined) (both current and non-current loans) to Navient and recognized a net gain of $ 2 million.

See Note 17, “Arrangements with Navient Corporation,” for further discussion regarding loan purchase agreements.

We did not sell loans in 2019 and 2017, other than Split Loans.

Our Upromise subsidiary has a number of programs that encourage consumers to save for the cost of college education.

We have established a consumer savings network, which is designed to promote college savings by consumers who are members of this program by encouraging them to purchase goods and services from the merchants that participate in the program.

Participating merchants generally pay Upromise fees based on member purchase volume, either online or in stores, depending on the contractual arrangement with the merchant.

We recognize revenue as marketing and administrative services are rendered, based upon contractually determined rates and member purchase volumes.

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No.

2014-09, “Revenue from Contracts with Customers (Topic 606).” The guidance in this ASU supersedes existing revenue recognition requirements in Topic 605, Revenue Recognition, including an assortment of transaction-specific and industry-specific rules.

We adopted the new revenue recognition model on January 1, 2018.

This ASU establishes a principles-based model under which revenue from a contract is allocated to the distinct performance obligations within the contract and recognized in income as each performance obligation is satisfied.

ASU Topic 606 does not apply to rights or obligations associated with financial instruments (for example, interest income from loans or investments, or interest expense on debt), and therefore our net interest income should not be affected.

Certain of our fee income related to our Upromise rewards business is within the scope of these rules.

Management has concluded that timing and measurement of fee income related to our Upromise rewards business has remained substantially unchanged under the new standard.

This conclusion covers the vast majority of our revenue that is within the scope of the standard.

The adoption of this standard did not materially affect our consolidated financial statements in 2018.

In March 2016, the FASB issued ASU No.

2016-08, “Revenue from Contracts with Customers (Topic 606):

Principal versus Agent Considerations (Reporting Revenue Gross versus Net).” The guidance in this ASU provides clarification on the principal versus agent concept in relation to revenue recognition guidance issued as part of ASU No.

2014-09, “Revenue from Contracts with Customers (Topic 606).” Topic 606 requires a company to determine whether it is a principal or an agent in a transaction in which another party is involved in providing goods or services to a customer by evaluating the nature of its promise to the customer.

2016-08 provides clarification for identifying the good, service or right being transferred in a revenue transaction and identifies the principal as the party that controls the good, service or right prior to its transfer to the customer.

The ASU provides further clarity on how to evaluate control in this context.

We adopted the standard on January 1, 2018.

The adoption did not result in different conclusions regarding our revenue arrangements that involve a principal-agent relationship.

Also included in other income are late fees on both Private Education Loans and FFELP Loans, which we recognize when the cash has been received, fees related to our credit card affinity program, income for servicing private student loans for third-parties and changes to our tax indemnification receivable from Navient.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

Significant Accounting Policies (Continued)

We did not sell loans in 2019.

Our Upromise subsidiary had a number of programs that encouraged consumers to save for the cost of college education.

We had established a consumer savings network, which was designed to promote college savings by consumers who were members of this program by encouraging them to purchase goods and services from the merchants that participate in the program.

Participating merchants generally paid Upromise fees based on member purchase volume, either online or in stores, depending on the contractual arrangement with the merchant.

We recognized revenue as marketing and administrative services are rendered, based upon contractually determined rates and member purchase volumes.

On May 31, 2020, we sold our Upromise subsidiary to a third party, resulting in the loss of revenue from that business for the second half of 2020.

Also included in other income are late fees on both Private Education Loans and FFELP Loans, which we recognize when the cash has been received, fees related to our Credit Card program, income for servicing private student loans for third-parties and changes to our tax indemnification receivable from Navient.

Securitization Accounting

13 unchanged sentences

• The servicing of the student loan assets within the securitization trusts, on both a pre- and post-default basis;

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

Significant Accounting Policies (Continued)

• Our acting as administrator for the securitization transactions we sponsored;

6 unchanged sentences

Generally, the only recourse the securitization trusts have to us is in the event we breach a seller representation or warranty or our duties as master servicer and servicer, in which event we are obligated to repurchase the related loans from the trust.

From time to time, we also engage in certain transactions that are not consolidated on our balance sheet due to the transaction having met the criterion for sales treatment.

In these transactions, we remove loans from our consolidated balance sheet and recognize any assets retained and liabilities assumed at fair value, and record a gain or loss on the transferred loans.

Our continuing involvement in these securitization transactions mainly consists of acting as the primary servicer and holding certain retained interests.

We provide additional information regarding these types of activities in, Note 11, “Borrowings — Unconsolidated VIEs.”

Derivative Accounting

4 unchanged sentences

All variation margin payments on derivatives cleared through the CME and LCH are accounted for as legal settlement.

As of December 31, 2019 , $ 9.4 billion notional of our derivative contracts were cleared on the CME and $ 0.5 billion were cleared on

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

Significant Accounting Policies (Continued)

As of December 31, 2020, $ 8.2 billion notional of our derivative contracts were cleared on the CME and $ 0.4 billion were cleared on the LCH.

The derivative contracts cleared through the CME and LCH represent 95.3 percent and 4.7 percent, respectively, of our total notional derivative contracts of $ 8.6 billion at December 31, 2020.

1 unchanged sentence

The amount of variation margin included as settlement as of December 31, 2020 was $( 179 ) million and $ 19 million for the CME and LCH, respectively.

Changes in fair value for derivatives not designated as hedging instruments will be presented as realized gains (losses).

Changes in fair value for derivatives not designated as hedging instruments are presented as realized gains (losses).

We determine the fair value for our derivative contracts primarily using pricing models that consider current market conditions and the contractual terms of the derivative contracts.

3 unchanged sentences

Our derivative instruments are classified and accounted for by us as fair value hedges, cash flow hedges, and trading hedges.

On July 1, 2018, we adopted the FASB’s ASU No.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

Significant Accounting Policies (Continued)

On July 1, 2018, we adopted the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Update (“ASU”) No.

2017-12, “Derivatives and Hedging:

1 unchanged sentence

In accordance with the standard, certain provisions were required to be applied on a modified retrospective basis, which requires a cumulative effect adjustment to accumulated other comprehensive income with a corresponding adjustment to retained earnings as of the beginning of the fiscal year of adoption, or January 1, 2018 in our case.

As a result of the cumulative effect of applying the new hedging standard to our fair value hedges on July 1, 2018, we recorded a $ 2 million basis increase to our hedged deposit balances with a corresponding increase to retained earnings of approximately $ 0.8 million , net of taxes and a $ 3 million loss to “gains (losses) on derivatives and hedging activities, net” in our consolidated statements of income to adjust the life-to-date ineffectiveness.

To reflect the adoption of the new hedging standard on our cash flow hedging relationships at July 1, 2018, we recorded a $ 0.2 million , net of taxes decrease to retained earnings and a corresponding $ 0.3 million increase to accumulated other comprehensive income.

As a result of the cumulative effect of applying the hedging standard to our fair value hedges on July 1, 2018, we recorded a $ 2 million basis increase to our hedged deposit balances with a corresponding increase to retained earnings of approximately $ 0.8 million, net of taxes and a $ 3 million loss to “gains (losses) on derivatives and hedging activities, net” in our consolidated statements of income to adjust the life-to-date ineffectiveness.

To reflect the adoption of the hedging standard on our cash flow hedging relationships at July 1, 2018, we recorded a $ 0.2 million, net of taxes decrease to retained earnings and a corresponding $ 0.3 million increase to accumulated other comprehensive income.

Each derivative is designated to a specific (or pool of) liability(ies) on the consolidated balance sheets, and is designated as either a “fair value” hedge or a “cash flow” hedge.

6 unchanged sentences

If it is also determined the hedge will not be effective in the future, we discontinue the hedge accounting prospectively and begin amortization of any basis adjustments that exist related to the hedged item.

On March 12, 2020, FASB issued Accounting Standards Update ASU No.

2020-04, “Reference Rate Reform (“Topic 848”):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” On January 7, 2021, the FASB issued Accounting Standards Update ASU No.

2021-01, “Reference Rate Reform (“Topic 848”):

Scope” that clarified the scope of Topic 848.

Topic 848 contains temporary optional expedients and exceptions for applying GAAP to contract modifications, hedging relationships, and other transactions affected by reference rate reform.

Our derivative portfolio is made up of interest rate swaps that are centrally cleared through either the CME or the LCH.

On October 16, 2020, both the CME and the LCH changed the price alignment interest and discount rate applied when valuing these transactions to the Secured Overnight Financing rate (“SOFR”).

The ISDA 2020 IBOR Fallbacks Protocol (the “ISDA Fallback Protocol”) was made available for adherence on October 23, 2020, with an effective date of January 25, 2021.

Once adhered to by both counterparties in a bilateral relationship and the effective date is reached, the ISDA Fallback Protocol represents a change to the contractual terms of derivatives governed by each respective ISDA agreement between the Company and a derivative counterparty.

We have elected the option provided in Topic 848 to not reassess previous accounting determinations as well as the option to not dedesignate a hedging relationship due to a current or future change in a critical or contractual term related to reference rate reform, including changes in the discount rate.

As our liabilities may begin to use alternatives to LIBOR before LIBOR is no longer published, for cash flow hedges of forecasted LIBOR based payments, we have elected the expedient offered in Topic 848 to disregard the potential change in the designated hedged interest rate risk that may occur because of reference rate reform when we assesses whether the hedged forecasted transactions are probable, in accordance with the requirements of “Derivatives and Hedging” Topic 815.

We have also elected the expedient provided by Topic 848 to assume the reference rate will not be replaced for the remainder of the hedging relationship when assessing hedge effectiveness.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

Significant Accounting Policies (Continued)

Topic 848 allows for different elections to be made at different points in time.

We intend to reassess our elections of optional expedients and exceptions included within Topic 848 when changes or additions are necessary.

Stock-Based Compensation

3 unchanged sentences

We record all excess tax benefits/deficiencies related to the settlement of employee stock-based compensation to the income tax expense line item on our consolidated statements of income.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

Significant Accounting Policies (Continued)

In March 2016, the FASB issued ASU No.

2016-09, “Compensation - Stock Compensation (Topic 718):

Improvements to Employee Share-Based Payment Accounting,” which amended the stock compensation guidance.

The amendments simplified the accounting for the taxes related to stock-based compensation, including adjustments to how excess tax benefits and a company’s payments for tax withholdings should be classified.

The standard became effective for fiscal periods beginning after December 15, 2016, with early adoption permitted.

We adopted this standard effective January 1, 2017 and recorded an $ 8.5 million benefit in income tax expense in 2017 because of this standard.

We previously recorded the excess tax benefits/deficiencies to the additional paid-in capital line item on our consolidated balance sheets.

Under the guidance, we also elected the option to no longer apply a forfeiture rate to our stock-based compensation expense, but to record forfeitures when they occur, and, as a result, under a modified retrospective basis we recorded a cumulative effect of the new stock compensation standard in total equity of $ 0.2 million , net of tax, in the first quarter of 2017.

Restructuring Activities

During the third quarter of 2020, we initiated a restructuring program to reduce costs and improve operating efficiencies by better aligning our organizational structure with our new corporate strategic imperatives.

In conjunction with these restructuring plans, involuntary benefit arrangements, and certain other costs that are incremental and incurred as a direct result of our restructuring plans, are classified as restructuring expenses in the accompanying consolidated statements of income.

Restructuring expenses of $ 26 million were recorded in the year ended December 31, 2020.

Of that total, $ 20 million related to severance benefits and $ 6 million related to other related costs, primarily legal and consulting fees.

There were no restructuring expenses recorded in the years ended December 31, 2019 and 2018.

We sponsor employee severance plans that provide severance benefits in the event of termination of our full-time employees and part-time employees who work at least 24 hours per week.

The severance plans establish specified benefits based on base salary, job level immediately preceding termination, and years of service upon termination of employment due to involuntary termination or a job abolishment, as defined in the severance plans.

The benefits payable under the severance plans relate to past service.

Accordingly, we recognize severance costs to be paid pursuant to the severance plans when payment of such benefits is probable and reasonably estimable.

Such benefits, including severance pay calculated based on the severance plan, medical and dental benefits, outplacement services and continuation pay, have been incurred during the year ended December 31, 2020, as a direct result of our restructuring initiative.

Accordingly, such costs are classified as restructuring expenses in the accompanying consolidated statements of income.

We finalized this restructuring plan and while we expect to record additional restructuring expenses in the first quarter of 2021, we expect those amounts to be immaterial.

The majority of these restructuring expenses incurred through December 31, 2020 and expected to be incurred in future periods are severance costs related to the elimination of approximately 165 positions, or approximately 9 percent of the workforce that existed as of December 31, 2019.

We account for income taxes under the asset and liability approach, which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and tax basis of our assets and liabilities.

To the extent tax laws change, deferred tax assets and liabilities are adjusted in the period that the tax change is enacted.

On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), which lowered federal corporate income tax rates from 35 percent to 21 percent, beginning January 1, 2018.

Because the Tax Act was enacted during the fourth-quarter 2017, we were required to reflect the application of the lower tax rate in future years to our deferred assets, liabilities and indemnification receivables.

We recognized additional discrete tax expense of $ 15 million for the year ended December 31, 2017, primarily due to the remeasurement of our deferred tax assets and liabilities following the enactment of the Tax Act.

At December 31, 2019, our accounting for the Tax Act is complete under the SEC’s Staff Accounting Bulletin No.

In February 2018, the FASB issued ASU No.

2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the tax law and tax rate changes under the Tax Act.

Under the Tax Act, deferred taxes were adjusted to reflect the reduction of the historical corporate income tax rate to the newly enacted corporate income tax rate, which left the tax effects on items within accumulated other comprehensive income stranded at an inappropriate tax rate.

This guidance was effective for fiscal years beginning after December 15, 2018, and for interim periods within those fiscal years, with early adoption permitted.

We adopted this standard effective January 1, 2018 and recorded a $ 0.6 million reclass from accumulated other comprehensive income to retained earnings in the first quarter of 2018.

“Income tax expense (benefit)” includes (i) deferred tax expense (benefit), which represents the net change in the deferred tax asset or liability balance during the year when applicable, and (ii) current tax expense (benefit), which represents the amount of tax currently payable to or receivable from a tax authority plus amounts accrued for unrecognized tax benefits.

3 unchanged sentences

We recognize interest and penalties related to unrecognized tax benefits in income tax expense (benefit).

In connection with the Spin-Off, we recorded a liability related to uncertain tax positions of $ 27 million for which we are indemnified by Navient.

If there is an adjustment to the indemnified uncertain tax liability, an offsetting adjustment to the indemnification receivable will be recorded as pre-tax adjustment to other income in the income statement.

SLM CORPORATION

2 unchanged sentences

Significant Accounting Policies (Continued)

As of the date of the Spin-Off on April 30, 2014, we recorded a liability of $ 310 million ($ 283 million related to deferred taxes and $ 27 million related to uncertain tax positions) and an indemnification receivable of $ 291 million ($ 310 million less the $ 19 million discount).

In connection with the Spin-Off, we recorded a liability related to uncertain tax positions of $ 27 million for which we are indemnified by Navient.

As of the date of the Spin-Off on April 30, 2014, we recorded liabilities related to deferred taxes and uncertain tax positions and an indemnification receivable of $ 291 million.

As of December 31, 2020, with respect to those amounts recorded at the Spin-Off, the remaining liability balance is $ 7 million (related to uncertain tax positions) and the remaining indemnification receivable balance is $ 7 million (related to uncertain tax positions).

Reclassifications

Certain reclassifications have been made to the balances as of and for the years ended December 31, 2018 and 2017, to be consistent with classifications adopted for 2019 , which had no effect on net income, total assets or total liabilities.

Recently Issued and Adopted Accounting Pronouncements

2016-02, “Leases”

In February 2016, the FASB issued ASU No.

2016-02, “Leases,” a comprehensive new lease standard which superseded previous lease guidance.

The standard requires a lessee to recognize in its balance sheet assets and liabilities related to long-term leases that were classified as operating leases under previous guidance.

An asset will be recognized related to the right to use the underlying asset and a liability will be recognized related to the obligation to make lease payments over the term of the lease.

The standard also requires expanded disclosures surrounding leases.

The standard is effective for fiscal periods beginning after December 15, 2018, and requires modified retrospective adoption, with early adoption permitted.

We adopted this guidance on January 1, 2019.

In doing so, we identified and evaluated the related lease contracts and revised our controls and processes to address the lease standard.

The adoption of this guidance resulted in the recognition of less than $ 34 million of right of use asset and lease liability, which did not have a material impact on our consolidated financial statements.

Recently Issued but Not Yet Adopted Accounting Pronouncements

2016-13, “Financial Instruments-Credit Losses (Topic 326):

2 unchanged sentences

2016-13, “Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments,” as amended by ASU No.

2019-04, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,” which will become effective for us on January 1, 2020 (“CECL”).

This ASU eliminates the current accounting guidance for the recognition of credit impairment.

Under the new guidance, for all loans carried at amortized cost, upon loan origination we will be required to measure our allowance for credit losses based on our estimate of all current expected credit losses over the remaining contractual term of the assets.

Measurement of Credit Losses on Financial Instruments,” which became effective for us on January 1, 2020 (“CECL”).

This ASU eliminated the previous accounting guidance for the recognition of credit impairment.

Under the new guidance, for all loans carried at amortized cost, upon loan origination we are required to measure our allowance for credit losses based on our estimate of all current expected credit losses over the remaining contractual term of the assets.

Updates to that estimate each period will be recorded through provision expense.

The estimate of credit losses must be based on historical experience, current conditions, and reasonable and supportable forecasts.

The estimate of loan losses must be based on historical experience, current conditions, and reasonable and supportable forecasts.

The ASU does not mandate the use of any specific method for estimating credit loss, permitting companies to use judgment in selecting the approach that is most appropriate in their circumstances.

Upon adoption, a cumulative effect adjustment to retained earnings will be recorded as of the beginning of the first reporting period in which the guidance is effective in an amount necessary to adjust the allowance for credit losses to equal the current estimate of expected losses on financial assets held at that date.

We have evaluated the standard and completed our implementation efforts.

We have identified the loss forecasting approach and have built the loss models for our Private Education Loans, Personal Loans acquired from third-parties and those originated organically, and for prepayments.

For our Private Education Loan and Personal Loan portfolios, we will be using the discounted cash flow approach to calculate our current expected credit losses.

We will estimate the CECL allowance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.

We have determined that, for modeling current expected credit losses, we can reasonably estimate expected losses that incorporate the current and forecasted economic conditions over a two-year period, after which the model will immediately revert to our long-term historic loss rates.

During the third and fourth quarters of 2019, we performed monthly

In addition, Topic 326 made changes to the accounting for available-for-sale debt securities.

One such change is to require an assessment of unrealized losses on available-for-sale debt securities that we have the ability and intent to hold for a period of time sufficient to recover the amortized cost of the security, for the purpose of determining credit impairment.

If any credit impairment exists, an allowance for losses must be established for the amount of the unrealized loss that is determined to be credit-related.

Adoption of the standard had a material impact on how we record and report our financial condition and results of operations, and on regulatory capital.

The following table illustrates the impact of the cumulative effect adjustment made upon adoption of CECL on January 1, 2020:

SLM CORPORATION

2 unchanged sentences

Significant Accounting Policies (Continued)

dry runs of our CECL solution to test the end-to-end implementation of the new solution.

The loss and other models that will be used in our CECL solution have been validated and approved to be used for the adoption of CECL.

In the fourth quarter of 2019, we finalized and implemented the required governance and internal controls, completed our loss models for both Personal Loans we originated and Credit Card receivables, and completed the testing and validation for all the models to be used to implement CECL.

On January 1, 2020, we adopted CECL using the modified retrospective method and it will have a material impact on how we record and report our financial condition and results of operations and on regulatory capital.

Our first quarter 2020 financial results will reflect a transition adjustment that we estimate will increase the allowance for loan losses by approximately $ 1.1 billion , increase the liability representing our off-balance sheet exposure for unfunded commitments by approximately $ 115 million and increase our deferred tax asset by approximately $ 300 million , resulting in a cumulative effect adjustment that reduces retained earnings by approximately $ 950 million .

January 1, 2020

As reported under CECL Pre-CECL Adoption Impact of CECL Adoption

Allowance for credit losses:

Private Education Loans $ 1,435,130 $ 374,300 $ 1,060,830

FFELP Loans 4,485 1,633 2,852

Personal Loans 145,060 65,877 79,183

Credit Cards 290 102 188

Total $ 1,584,965 $ 441,912 $ 1,143,053

Deferred tax asset $ 415,540 $ 109,369 $ 306,171

Allowance for credit losses:

Off-balance sheet exposures $ 118,239 $ 2,481 $ 115,758

Retained Earnings $ 897,873 $ 1,850,512 $ ( 952,639 )

This transition adjustment is inclusive of qualitative adjustments incorporated into our CECL allowance as necessary, to address any limitations in the models used.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

On August 26, 2020, the federal banking agencies published a final rule that provides those banking organizations that adopt CECL during the 2020 calendar year with the option to delay for two years, and then phase in over the following three years, the effects on regulatory capital of CECL relative to the incurred loss methodology.

We have elected to use this option.

Under this final rule, because we have elected to use the deferral option, the regulatory capital impact of our transition adjustments recorded on January 1, 2020 from the adoption of CECL will be deferred for two years.

In addition, from January 1, 2020 through the end of the two-year deferral period, 25 percent of the ongoing impact of CECL on our allowance for credit losses, retained earnings, and average total consolidated assets, each as reported for regulatory capital purposes, will be added to the deferred transition amounts (“adjusted transition amounts”) and deferred for the two -year period.

At the conclusion of the two -year period (i.e., beginning January 1, 2022), the adjusted transition amounts will be phased in for regulatory capital purposes at a rate of 25 percent per year, with the phased-in amounts included in regulatory capital at the beginning of each year.

For additional information, see Note 18, “Regulatory Capital.”

Cash and Cash Equivalents

3 unchanged sentences

The FRB Term Deposit Facility program is used to facilitate the conduct of monetary policy by providing a tool that may be used to manage the aggregate quantity of reserve balances held by depository institutions.

Under this program, the FRB accepts deposits for a stated maturity at a rate of interest determined via auction.

Under this program, the FRB

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

Cash and Cash Equivalents (Continued)

accepts deposits for a stated maturity at a rate of interest determined via auction.

The funds are removed from the accounts of participating institutions for the life of the term deposit.

We participated in these auctions in 2019 and 2018 , resulting in interest income of $ 0.3 million and $ 0.2 million, respectively.

We did not participate in these auctions in 2020, resulting in no interest reported.

Participation in 2019 resulted in interest income of $ 0.3 million.

As of December 31, 2020 and 2019, no funds were on deposit with the FRB under this program.

Trading Investments

At December 31, 2020, we had $ 17 million classified as trading investments.

Available-for-Sale Investments

The amortized cost and fair value of securities available for sale are as follows:

December 31, 2020

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Estimated Fair Value

Amortized Cost Allowance for credit losses (1)

Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value

Available for sale:

1 unchanged sentence

Utah Housing Corporation bonds 12,357 — 210 — 12,567

government-sponsored enterprises

government-sponsored enterprises and Treasuries 1,596,890 — 3,395 — 1,600,285

Other securities 68,797 — 462 ( 351 ) 68,908

Total $ 1,986,957 $ — $ 10,162 $ ( 485 ) $ 1,996,634

December 31, 2019

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Estimated Fair Value

Amortized Cost Allowance for credit losses (1)

Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value

Available for sale:

1 unchanged sentence

Utah Housing Corporation bonds 19,474 — 145 ( 83 ) 19,536

government-sponsored enterprises 250,394 — 635 ( 21 ) 251,008

Total $ 485,756 $ — $ 2,675 $ ( 762 ) $ 487,669

(1) Represents the amount of impairment that has resulted from credit-related factors, and that was recognized in the consolidated balance sheets (as a credit loss expense on available-for-sale securities).

The amount excludes unrealized losses related to non-credit factors.

SLM CORPORATION

3 unchanged sentences

The following table summarizes the amount of gross unrealized losses for our available-for-sale securities and the estimated fair value for securities having gross unrealized loss positions, categorized by length of time the securities have been in an unrealized loss position:

Less than 12 months

12 months or more

Gross Unrealized Losses

Estimated Fair Value

Gross Unrealized Losses

Estimated Fair Value

Gross Unrealized Losses

Estimated Fair Value

Less than 12 months 12 months or more Total

Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Estimated Fair Value

As of December 31, 2020:

1 unchanged sentence

Utah Housing Corporation bonds — — — — — —

government-sponsored enterprises

government-sponsored enterprises and Treasuries — — — — — —

Other securities ( 351 ) 30,441 — — ( 351 ) 30,441

Total $ ( 485 ) $ 76,452 $ — $ — $ ( 485 ) $ 76,452

As of December 31, 2019:

1 unchanged sentence

Utah Housing Corporation bonds — — ( 83 ) 11,097 ( 83 ) 11,097

government-sponsored enterprises ( 21 ) 14,977 — — ( 21 ) 14,977

Total $ ( 239 ) $ 40,601 $ ( 523 ) $ 53,545 $ ( 762 ) $ 94,146

For available-for-sale debt securities in an unrealized loss position, we first assess whether we intend to sell, or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis.

If either of these criteria is met, the security’s amortized cost basis is written down to fair value through income.

For securities in an unrealized loss position that do not meet these criteria, we evaluate whether the decline in fair value has resulted from credit loss or other factors.

In making this assessment, we consider the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, adverse conditions specifically related to the security, as well as any guarantees (e.g., guarantees by the U.S.

Government) that may be applicable to the security.

If this assessment indicates a credit loss exists, the credit-related portion of the loss is recorded as an allowance for losses on the security.

Our investment portfolio is comprised primarily of mortgage-backed securities issued by Ginnie Mae, Fannie Mae and Freddie Mac, with amortized costs of $ 32 million, $ 80 million, and $ 197 million, respectively, at December 31, 2020.

1 unchanged sentence

In the second quarter of 2018, we elected to sell nine securities totaling $ 41 million to better align the portfolio with the Community Reinvestment Act requirements, and we recognized a $ 2 million loss upon the sale of those securities.

As of December 31, 2019 , 33 of the 107 separate mortgage-backed securities in our investment portfolio had unrealized losses, and 18 of the 33 securities in a net loss position were issued under Ginnie Mae programs that carry a full faith and credit guarantee from the U.S.

As of December 31, 2020, six of the separate mortgage-backed securities in our investment portfolio had unrealized losses.

Approximately 32 percent of our mortgage-backed securities were issued under Ginnie Mae programs that carry a full faith and credit guarantee from the U.S.

The remaining securities in a net loss position carry a principal and interest guarantee by Fannie Mae or Freddie Mac, respectively.

2 unchanged sentences

The remainder carried a principal and interest guarantee by Fannie Mae or Freddie Mac, respectively.

We also invest in Utah Housing Corporation bonds for the purpose of complying with the Community Reinvestment Act.

These bonds are Aa3 rated by Moody’s Investors Service.

The amortized cost of the investment on the consolidated balance sheet at December 31, 2019 and December 31, 2018 was $ 19 million and $ 22 million, respectively.

We have the intent and ability to hold these bonds for a period of time sufficient for the market price to recover to at least the adjusted amortized cost of the security.

Beginning in the second quarter of 2019, we began investing in U.S.

government-sponsored enterprise securities issued by the Federal Home Loan Bank (“FHLB”), Freddie Mac and the Federal Farm Credit Bank (“FFCB”).

These bonds are rated AA+ by Moody’s Investors Services.

As of December 31, 2019, 1 of the 14 securities had unrealized losses.

SLM CORPORATION

2 unchanged sentences

Investments (Continued)

We invest in Utah Housing Corporation bonds for the purpose of complying with the Community Reinvestment Act.

These bonds are Aa3 rated by Moody’s Investors Service.

The amortized cost of the investment on the consolidated balance sheet at December 31, 2020 and December 31, 2019 was $ 12 million and $ 19 million, respectively.

We invest in U.S.

Treasuries and U.S.

government-sponsored enterprise securities issued by the Federal Home Loan Bank, Freddie Mac and the Federal Farm Credit Bank.

As of December 31, 2020, none of the 30 securities had unrealized losses and as of December 31, 2019, 1 of the 14 securities had unrealized losses.

We have the intent and ability to hold each of these bonds for a period of time sufficient for the market price to recover to at least the adjusted amortized cost of the security.

These bonds are rated Aaa by Standard and Poor’s or AA+ by Moody’s Investors Service.

Based on this qualitative analysis, we have determined that no credit impairment exists.

In March 2020, we sold approximately $ 1.7 billion of Private Education Loans through a securitization transaction where we were required to retain a 5 percent vertical risk retention interest.

We classify the non-residual vertical retention interests as available-for-sale investments.

As of December 31, 2020, eight out of 10 of these investments had unrealized losses.

We have the intent and ability to hold each of these bonds for a period of time sufficient for the market price to recover to at least the adjusted amortized cost of the security.

We expect to receive all contractual cash flows related to these investments and do not consider a credit impairment to exist.

As of December 31, 2020, the amortized cost and fair value of securities, by contractual maturities, are summarized below.

Contractual maturities versus actual maturities may differ due to the effect of prepayments.

Year of Maturity

Amortized Cost

Estimated Fair Value

The mortgage-backed securities have been pledged to the FRB as collateral against any advances and accrued interest under the Primary Credit lending program sponsored by the FRB.

Year of Maturity Amortized Cost Estimated Fair Value

2021 $ 454,193 $ 455,185

2022 978,017 979,802

2023 164,680 165,299

2039 2,032 2,249

2042 4,767 4,769

2043 8,745 9,153

2044 11,586 12,139

2045 9,739 10,133

2046 15,292 15,748

2047 25,056 25,574

2048 6,466 6,743

2049 44,711 46,681

2050 192,706 194,056

2054 68,797 68,908

Total $ 1,986,957 $ 1,996,634

Some of the mortgage-backed securities and a portion of the government securities have been pledged to the FRB as collateral against any advances and accrued interest under the Primary Credit lending program sponsored by the FRB.

We had $ 815 million and $ 252 million par value of securities pledged to this borrowing facility at December 31, 2020 and 2019, respectively, as discussed further in Note 11, “Borrowings.”

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

Investments (Continued)

Other Investments

3 unchanged sentences

We used the valuation associated with the more recent securities investment to adjust the valuation of our previous investments and, as a result, recorded a gain of $ 8 million on our earlier equity securities investments.

This gain was recorded in “other income” in the consolidated statements of income.

As of December 31, 2019 and December 31, 2018, our total investment in the securities of this issuer was $ 26 million and $ 8 million , respectively.

This gain was recorded in “other income” in the consolidated statements of income in 2019.

At both December 31, 2020 and December 31, 2019, our total investment in the securities of this issuer was $ 26 million.

Low Income Housing Tax Credit Investments

2 unchanged sentences

The amount of amortization of such investments reported in income tax expense was $ 5 million, $ 4 million and $ 4 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Total carrying value of the LIHTC investments

Total carrying value of the LIHTC investments was $ 54 million at December 31, 2020 and $ 58 million at December 31, 2019.

We are periodically required to provide additional financial support during the investment period.

Our liability for these unfunded commitments was $ 19 million at December 31, 2020 and $ 29 million at December 31, 2019.

SLM CORPORATION

1 unchanged sentence

(Dollars in thousands, unless otherwise noted)

Investments (Continued)

was $ 58 million at December 31, 2019 and $ 48 million at December 31, 2018.

We are periodically required to provide additional financial support during the investment period.

Our liability for these unfunded commitments was $ 29 million at December 31, 2019 and $ 37 million at December 31, 2018.

Loans Held for Investment

Loans Held for Investment consist of Private Education Loans, FFELP Loans, Personal Loans and Credit Cards.

Loans held for investment consist of Private Education Loans, FFELP Loans and Credit Cards.

We use “Personal Loans” to mean those unsecured loans to individuals that may be used for non-educational purposes.

We sold our entire Personal Loan portfolio in the third quarter of 2020.

Our Private Education Loans are made largely to bridge the gap between the cost of higher education and the amount funded through financial aid, government loans, and customers’ resources.

1 unchanged sentence

We manage this risk through risk-performance underwriting strategies and qualified cosigners.

Private Education Loans may be fixed-rate or may carry a variable interest rate indexed to LIBOR, the London interbank offered rate.

Private Education Loans may be fixed-rate or may carry a variable interest rate indexed to LIBOR, the London interbank offered rate, or another index in the future.

As of December 31, 2020 and 2019, 55 percent and 58 percent, respectively, of our Private Education Loans were indexed to LIBOR.

We provide incentives for customers to include a cosigner on the loan, and the vast majority of loans in our portfolio are cosigned.

We provide incentives for customers to include a cosigner on the loan, and the vast majority of Private Education Loans in our portfolio are cosigned.

We also encourage customers to make payments while in school.

7 unchanged sentences

For loans disbursed prior to October 1, 1993, we receive 100 percent reimbursement on all qualifying claims.

In 2016, we began to acquire Personal Loans from a marketplace lender, but discontinued those purchases in July 2018.

In 2018, we began to originate and service Personal Loans.

However, in the fourth quarter of 2019, we elected to discontinue new originations as part of our 2020 planning process.

In the second quarter of 2019, we launched our suite of cash-back Credit Cards with unique bonus rewards designed to help cardholders develop financially responsible habits.

There were VIEs created in the execution of certain of these loan sales;

however, based on our consolidation analysis, we are not the primary beneficiary of these VIEs.

These transactions qualified for sale treatment and removed the balance of the loans from our balance sheet on the respective settlement dates.

We remained the servicer of these loans pursuant to applicable servicing agreements executed in connection with the sales.

In the third quarter of 2020, we sold our entire Personal Loan portfolio, including $ 697 million of principal and $ 7 million in accrued interest, which resulted in a $ 43 million reduction to our provision for credit losses.

SLM CORPORATION

4 unchanged sentences

Private Education Loans:

Fixed-rate $ 8,950,216 $ 9,830,301

Variable-rate 10,779,121 13,359,290

1 unchanged sentence

Deferred origination costs and unamortized premium/ (discount) 63,475 81,224

Allowance for loan losses

Allowance for credit losses ( 1,355,844 ) ( 374,300 )

Total Private Education Loans, net 18,436,968 22,896,515

FFELP Loans 737,593 783,306

Deferred origination costs and unamortized premium/ (discount) 1,993 2,143

Allowance for loan losses

Allowance for credit losses ( 4,378 ) ( 1,633 )

Total FFELP Loans, net 735,208 783,816

1 unchanged sentence

Deferred origination costs and unamortized premium/ (discount) — 513

Allowance for loan losses

Allowance for credit losses — ( 65,877 )

Total Personal Loans, net — 983,643

1 unchanged sentence

Deferred origination costs and unamortized premium/ (discount) 230 36

Allowance for loan losses

Allowance for credit losses ( 1,501 ) ( 102 )

Total Credit Cards, net 10,967 3,818

1 unchanged sentence

The estimated weighted average life of education loans in our portfolio was approximately 5.4 years at both December 31, 2020 and 2019, respectively.

The average balance and the respective weighted average interest rates of loans in our portfolio are summarized as follows:

SLM CORPORATION

2 unchanged sentences

Loans Held for Investment (Continued)

The average balance and the respective weighted average interest rates of loans in our portfolio are summarized as follows:

Years Ended December 31,

Average Balance

Weighted Average Interest Rate

Average Balance

Weighted Average Interest Rate

Average Balance

Weighted Average Interest Rate

2020 2019 2018

Average Balance Weighted Average Interest Rate Average Balance Weighted Average Interest Rate Average Balance Weighted Average Interest Rate

Private Education Loans $ 22,426,216 8.42 % $ 22,225,473 9.32 % $ 19,282,500 9.10 %

FFELP Loans 757,953 3.76 814,198 4.79 888,301 4.57

Personal Loans 582,552 12.43 1,141,503 12.09 900,152 11.08

7 unchanged sentences

Forbearance does not grant any reduction in the total principal or interest repayment obligation.

While a loan is in forbearance status, interest continues to accrue and is capitalized to principal when the loan re-enters repayment status.

While a loan is in forbearance status, interest continues to accrue and is capitalized to principal when the loan re-enters repayment status (except as described below in the case of disaster forbearance).

We grant forbearance through our servicing centers to borrowers who are current in their payments and through our collections centers to certain borrowers who are delinquent.

Our forbearance policies and practices vary depending upon whether a borrower is current or delinquent at the time forbearance is requested, generally with stricter payment requirements for delinquent borrowers.

We view the population of borrowers that use forbearance positively because the borrowers are either proactively reaching out to the Company to obtain assistance in managing their obligations or are working with our collections center to bring their loans current.

Forbearance may be granted through our servicing centers to customers who are exiting their grace period, which generally is the six-month period after the borrower separates from school and during which the borrower is not required to make full principal and interest payments, and to other customers who are current in their payments, to provide temporary payment relief.

We view the population of borrowers that use forbearance positively because the borrowers are either proactively reaching out to us to obtain assistance in managing their obligations or are working with our collections center to bring their loans current.

Forbearance may be granted through our servicing centers to customers who are exiting their grace period, and to other customers who are current in their payments, to provide temporary payment relief.

In these circumstances, a customer’s loan is placed into a forbearance status in limited monthly increments and is reflected in the forbearance status at month-end during this time.

3 unchanged sentences

If specific payment requirements are met, the forbearance can cure the delinquency and the customer is returned to a current repayment status.

Forbearance as a collection tool is used most effectively when applying historical experience and our judgment to a customer’s unique situation.

We leverage updated customer information and other decision support tools to best determine who will be granted forbearance based on our expectations as to a customer’s ability and willingness to repay their obligation.

This strategy is aimed at assisting customers while mitigating the risks of delinquency and default as well as

Forbearance as a collection tool is used most effectively when applying historical experience and our

SLM CORPORATION

2 unchanged sentences

Loans Held for Investment (Continued)

encouraging resolution of delinquent loans.

judgment to a customer’s unique situation.

This strategy is aimed at assisting customers while mitigating the risks of delinquency and default as well as encouraging resolution of delinquent loans.

In all instances, we require one or more payments before granting forbearance to delinquent borrowers.

The COVID-19 pandemic is having far reaching, negative impacts on individuals, businesses, and, consequently, the overall economy.

Specifically, COVID-19 has materially disrupted business operations throughout the country, resulting in significantly higher levels of unemployment or underemployment.

As a result, we expect many of our individual customers will experience financial hardship, making it difficult, if not impossible, to meet their payment obligations to us without temporary assistance.

We are monitoring key metrics as early warning indicators of financial hardship, including changes in weekly unemployment claims, enrollment in auto-debit payments, requests for new forbearances, enrollment in hardship payment plans, and early delinquency metrics.

As a result of the negative impact on employment from COVID-19, our customers are experiencing higher levels of financial hardship, which led initially to higher levels of forbearance.

We expect such higher levels of financial hardship to lead to higher levels of delinquencies and defaults in the future, as borrowers who had received disaster forbearance from us re-enter repayment status.

We expect that, left unabated, this deterioration in forbearance, delinquency, and default rates will persist until such time as the economy and employment return to relatively normal levels.

For some students, going back to school in the fall was not an option because of the pandemic, or for other reasons.

Therefore, some students are taking a “gap year” before returning to school.

In 2020, for those students that had unexpectedly separated from school, we provided an extension of time through fall 2021 to re-enroll, before beginning their grace period that occurs prior to entering full principal and interest repayment status.

At December 31, 2020, $ 1.0 billion of Private Education Loans were granted this extended period of time.

See Note 7, “Allowance for Credit Losses — Delinquencies — Private Education Loans Held for Investment” for an additional breakout of these loans.

We assist customers with an array of payment programs during periods of financial hardship as standard operating convention, including:

forbearance, which defers payments during a short-term hardship;

our Graduated Repayment Plan (“GRP”), which is an interest-only payment for 12 months;

or a loan modification that, in the event of long-term hardship, reduces the interest rate on a loan to 4 percent for 24 months and/or permanently extends the maturity date of the loan.

Historically, we have utilized disaster forbearance for material events, including hurricanes, wildfires, and floods.

Disaster forbearance defers payments for as much as 90 days upon enrollment.

We have invoked this same disaster forbearance program to assist our customers through COVID-19 and offer this program across our operations, including through mobile app and self-service channels such as chat and interactive voice response (“IVR”).

Customers who receive a disaster forbearance will not progress in delinquency and will not be assessed late fees or other fees.

During a disaster forbearance, a customer’s credit file will continue to reflect the status of the loan as it was immediately prior to granting the disaster forbearance.

During the period of the disaster forbearance, interest will continue to accrue, but is not capitalized to the loan balance after the loan returns to repayment status.

The first wave of disaster forbearance was granted primarily in 90-day increments.

As these forbearances ended, we reduced the disaster forbearance to one-month increments and implemented additional discussions between our servicing agents and borrowers to encourage borrowers/cosigners to enter repayment.

If the financial hardship extends beyond 90 days, additional assistance will be available for eligible customers.

For example, for borrowers exiting disaster forbearance and not eligible for GRP, we may allow them to make interest only payments for 12 months before reverting to full principal and interest payments.

Management continually monitors our credit administration practices and may periodically modify these practices based upon performance, industry conventions, and/or regulatory feedback.

In light of these considerations, we plan to implement certain changes to our credit administration practices.

Specifically, we plan to revise our credit administration practices limiting the number of forbearance months granted consecutively and the number of times certain extended or reduced repayment alternatives may be granted.

In light of these considerations, we previously announced that we plan to implement certain changes to our credit administration practices in the future.

As discussed below, however, we postponed until the fourth quarter of 2020 the implementation of the announced credit administration practices changes due to the COVID-19 pandemic.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

Loans Held for Investment (Continued)

Specifically, we previously announced that we plan to revise our credit administration practices limiting the number of forbearance months granted consecutively and the number of times certain extended or reduced repayment alternatives may be granted.

For example, we currently grant forbearance to borrowers without requiring any period of prior principal and interest payments, meaning that, if a borrower satisfies all eligibility requirements, forbearance increments may be granted consecutively.

Beginning in the second quarter of 2020, we plan to phase in a required six-month period between successive grants of forbearance and between forbearance grants and certain other repayment alternatives.

This required period will not apply, however, to forbearances granted during the first six months following a borrower’s grace period and will not be required for a borrower to receive a contractual interest rate reduction.

In addition, we plan to limit the participation of delinquent borrowers in certain short-term extended or interest-only repayment alternatives to once in 12 months and twice in five years.

We previously announced that, beginning in the second quarter of 2020, we would phase in a required six-month period between successive grants of forbearance and between forbearance grants and certain other repayment alternatives.

We announced this required period will not apply, however, to forbearances granted during the first six months following a borrower’s grace period and will not be required for a borrower to receive a contractual interest rate reduction.

In addition, we announced we would limit the participation of delinquent borrowers in certain short-term extended or interest-only repayment alternatives to once in 12 months and twice in five years.

As previously announced, prior to full implementation of the credit administration practices changes described above, management will conduct a controlled testing program on randomly selected borrowers to measure the impact of the changes on our customers, our credit operations, and key credit metrics.

The testing commenced in October 2019 for some of the planned changes on a very small percentage of our total portfolio and we originally expected to expand the number of borrowers in repayment who would be subject to the new credit administration practices.

However, due to the COVID-19 pandemic, we postponed our efforts so that we can be more flexible in dealing with our customers’ financial hardship.

In October 2020, we began to roll out in a methodical approach the implementation of the credit administration practices changes and related testing.

Management now expects to have completed implementation of the planned credit administration practices changes by year-end 2022.

However, we may modify or delay the contemplated practice changes, the proposed timeline, or the method of implementation as we learn more about the impacts of the program on our customers.

We also offer rate and term modifications to customers experiencing more severe hardship.

Currently, we temporarily reduce the contractual interest rate on a loan to 4.0 percent (previously, to 2.0 percent ) for a two-year period and, in the vast majority of cases, permanently extend the final maturity date of the loan.

Currently, we temporarily reduce the contractual interest rate on a loan to 4.0 percent for a two -year period and, in the vast majority of cases, permanently extend the final maturity date of the loan.

As part of demonstrating the ability and willingness to pay, the customer must make three consecutive monthly payments at the reduced payment to qualify for the program.

The combination of the rate reduction and maturity extension helps reduce the monthly payment due from the borrower and increases the likelihood the borrower will remain current during the interest rate modification period as well as when the loan returns to its original contractual interest rate.

At December 31, 2019 and December 31, 2018, 7.2 percent and 6.4 percent , respectively, of our loans then currently in full principal and interest repayment status were subject to interest rate reductions made under our rate modification program.

At December 31, 2020 and December 31, 2019, 7.8 percent and 7.2 percent, respectively, of our Private Education Loans held for investment then currently in full principal and interest repayment status were subject to interest rate reductions made under our rate modification program.

We currently have no plans to change the basic elements of the rate and term modifications we offer to our customers experiencing more severe hardship.

Prior to full implementation of the credit administration practice changes described above, management will conduct a controlled testing program on randomly selected borrowers to measure the impact of the changes on our customers, our credit operations, and key credit metrics.

The testing commenced in October 2019 for some of the planned changes on a very small percentage of our total portfolio and will expand over subsequent quarters as the impacts are better understood.

Management expects to have completed implementation of the new policies and practices by year-end 2020.

However, we may modify or delay the contemplated practice changes, the proposed timeline, or the method of implementation as we learn more about the impacts during the progression of the testing program.

While there are limitations to our estimate of the future impact of the credit administration practice changes described above, absent the effect of any mitigating measures, and based on an analysis of borrower behavior under our current credit administration practices, which may not be indicative of how borrowers will behave under revised credit administration practices, we expect that the credit administration practice changes described above will accelerate defaults and could increase life of loan defaults in our Private Education Loan portfolio by approximately 4 percent to 14 percent .

Among the measures that we are planning to implement and expect may partly offset or moderate any acceleration of or increase in defaults will be greater focus on the risk assessment process to ensure borrowers are mapped to the appropriate program, better utilization of existing programs (e.g., Graduated Repayment Program and rate modifications), and the introduction of a new program offering short-term payment reductions (permitting interest-only payments for up to six months) for certain early stage delinquencies.

As a result of the changes described above, we recorded a minimal increase in our current allowance for loan losses at December 31, 2019, as a result of higher expected losses on our TDR loans where we maintain a life of loan allowance.

The full impact of these revisions may only be realized over the longer term, however.

In particular, when calculated under CECL, which became effective on January 1, 2020, our loan loss reserves are expected to increase materially because we expect the

While there are limitations to our estimate of the future impact of the credit administration practices changes described above, absent the effect of any mitigating measures, and based on an analysis of borrower behavior under our current credit administration practices, which may not be indicative of how borrowers will behave under revised credit administration practices, we expect that the credit administration practices changes described above will accelerate defaults and could increase life of loan defaults in our Private Education Loan held for investment portfolio by approximately 4 percent to 14 percent.

Among the measures that we are planning to implement and expect may partly offset or moderate any acceleration of or increase in defaults will be greater focus on the risk assessment process to ensure borrowers are mapped to the appropriate program, better utilization of existing programs (e.g., GRP and rate modifications), and the introduction of a new program offering short-term payment reductions (permitting interest-only payments for up to six months) for certain early stage delinquencies.

The full impact of these changes to our collections practices described above may only be realized over the longer term, however.

In particular, when we calculate the allowance for credit losses under CECL, which became effective on January 1, 2020, our loan loss reserves increased materially because we expect the life of loan defaults on our overall Private Education Loan portfolio to increase, in part as a result of the planned changes to our credit administration practices.

As we progress with the controlled testing program of the planned changes to our credit administration practices, we expect to learn more about how

SLM CORPORATION

2 unchanged sentences

Loans Held for Investment (Continued)

life of loan defaults on our overall Private Education Loan portfolio to increase as a result of the planned changes to our credit administrative practices.

As we progress with the controlled testing program of the planned changes to our credit administration practices, we expect to learn more about how our borrowers are reacting to these changes and, as we analyze such reactions, will continue to refine our estimates of the impact of those changes on our allowance for loan losses.

our borrowers are reacting to these changes and, as we analyze such reactions, we will continue to refine our estimates of the impact of those changes on our allowance for credit losses.

The period of delinquency for loans is based on the number of days scheduled payments are contractually past due.

As of December 31, 2019 and 2018 , we had $ 48 million and $ 43 million, respectively, of FFELP Loans and $ 63 million and $ 51 million, respectively, of Private Education Loans held for investment which were more than 90 days delinquent that continue to accrue interest.

As of December 31, 2020 and 2019, we had $ 81 million and $ 63 million, respectively, of Private Education Loans held for investment and $ 36 million and $ 48 million, respectively, of FFELP Loans held for investment which were more than 90 days delinquent that continue to accrue interest.

At December 31, 2020 and 2019, we had no loans in nonaccrual status.

5 unchanged sentences

At December 31, 2020, 38.8 percent of total education loans were concentrated in the following states:

New York 9.7 %

California 9.6

Pennsylvania 8.0

New Jersey 6.2

At December 31, 2019, 39.4 percent of total education loans were concentrated in the following states:

New York 10.1 %

California 9.4

Pennsylvania 8.4

New Jersey 6.6

No other state had a concentration of total education loans in excess of 5 percent of the aggregate outstanding education loans held for investment.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, unless otherwise noted)

Loans Held for Sale

We had $ 2.9 billion in loans held for sale at December 31, 2020 and no loans held for sale at December 31, 2019.

At December 31, 2020, we reversed $ 206 million through the provisions for credit losses for the allowance related to these loans, when the loans were transferred from held for investment to held-for-sale.

On January 8, 2021, we sold $ 3 billion of our Private Education Loans, including $ 2.8 billion of principal, $ 185 million in capitalized interest and $ 15 million in accrued interest to an unaffiliated third party.

Allowance for Credit Losses

Our provision for credit losses represents the periodic expense of maintaining an allowance sufficient to absorb lifetime expected credit losses in the held for investment loan portfolios.

The evaluation of the allowance for credit losses is inherently subjective, as it requires material estimates that may be susceptible to significant changes.

We believe the allowance for credit losses is appropriate to cover lifetime expected losses incurred in the loan portfolios.

See Note 2, “Significant Accounting Policies — Allowance for Credit Losses 2020 — Allowance for Private Education Loan Losses, — Allowance for FFELP Loan Losses, and — Allowance for Credit Cards” for a more detailed discussion.

Allowance for Credit Losses Metrics

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

Allowance for Loan Losses

Our provision for credit losses represents the periodic expense of maintaining an allowance sufficient to absorb incurred probable losses in the held-for-investment loan portfolios.

The evaluation of the allowance for loan losses is inherently subjective, as it requires material estimates that may be susceptible to significant changes.

We believe the allowance for loan losses is appropriate to cover probable losses incurred in the loan portfolios.

See Note 2, “Significant Accounting Policies — Allowance for Loan Losses — Allowance for Private Education Loan Losses, — Allowance for Personal Loans, — Allowance for FFELP Loan Losses, and — Allowance for Credit Cards” for a more detailed discussion.

Allowance for Loan Losses Metrics

Allowance for Loan Losses

Allowance for Credit Losses (Continued)

Allowance for Credit Losses

Year Ended December 31, 2020

Private Education

Allowance for Loan Losses

Loans Private Education

Loans Personal

Loans Credit Cards Total

Allowance for Credit Losses

Beginning balance $ 1,633 $ 374,300 $ 65,877 $ 102 $ 441,912

Total provision

Day 1 adjustment for the adoption of CECL 2,852 1,060,830 79,183 188 1,143,053

Balance at January 1, 2020 4,485 1,435,130 145,060 290 1,584,965

Transfer from unfunded commitment liability (1)

— 320,808 — — 320,808

Provision for current period 412 148,673 40,485 1,328 190,898

Loan sale reduction to provision — ( 161,793 ) ( 42,916 ) — ( 204,709 )

Loan transfer to held-for-sale — ( 205,669 ) — — ( 205,669 )

Total provisions (2)

412 ( 218,789 ) ( 2,431 ) 1,328 ( 219,480 )

Net charge-offs:

Charge-offs ( 519 ) ( 205,326 ) ( 39,079 ) ( 119 ) ( 245,043 )

Recoveries — 24,021 4,984 2 29,007

Net charge-offs ( 519 ) ( 181,305 ) ( 34,095 ) ( 117 ) ( 216,036 )

Loan sales — — ( 108,534 ) — ( 108,534 )

Ending Balance $ 4,378 $ 1,355,844 $ — $ 1,501 $ 1,361,723

8 unchanged sentences

Net charge-offs as a percentage of average loans in repayment (3)

0.09 % 1.17 % — % 1.26 %

Allowance as a percentage of the ending total loan balance 0.59 % 6.87 % — % 12.27 %

Allowance as a percentage of the ending loans in repayment (3)

0.76 % 9.48 % — % 12.27 %

Allowance coverage of net charge-offs 8.44 7.48 — 12.83

1 unchanged sentence

Average loans in repayment (3)

$ 549,584 $ 15,518,851 $ — $ 9,286

Ending loans in repayment (3)

$ 573,361 $ 14,304,821 $ — $ 12,238

(1) See Note 8, “Unfunded Loan Commitments,” for a summary of the activity in the allowance for and balance of unfunded loan commitments, respectively.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

Allowance for Credit Losses (Continued)

(2) Below is a reconciliation of the provisions for credit losses reported in the consolidated statements of income.

When a new loan commitment is made, we record the CECL allowance as a liability for unfunded loan commitments by recording a provision for credit losses.

When the loan is funded, we transfer that liability to the allowance for credit losses.

Consolidated Statements of Income

Provisions for Credit Losses Reconciliation

December 31, 2020

Private Education Loan provisions for credit losses:

Provisions for loan losses $ ( 218,789 )

Provisions for unfunded loan commitments 312,613

Total Private Education Loan provisions for credit losses 93,824

Other impacts to the provisions for credit losses:

Personal Loans ( 2,431 )

FFELP Loans 412

Credit Cards 1,328

Total ( 691 )

Provisions for credit losses reported in consolidated statements of income $ 93,133

2 unchanged sentences

(Dollars in thousands, unless otherwise noted)

Allowance for Loan Losses (Continued)

Allowance for Loan Losses

Allowance for Credit Losses (Continued)

Allowance for Credit Losses

Year Ended December 31, 2019

Private Education

Allowance for Loan Losses

Loans Private Education

Loans Personal

Loans Credit Cards Total

Allowance for Credit Losses

Beginning balance $ 977 $ 277,943 $ 62,201 $ — $ 341,121

1 unchanged sentence

Net charge-offs:

Charge-offs ( 822 ) ( 208,978 ) ( 74,313 ) ( 1 ) ( 284,114 )

Recoveries — 25,765 5,206 — 30,971

Net charge-offs ( 822 ) ( 183,213 ) ( 69,107 ) ( 1 ) ( 253,143 )

Loan sales (1)

Ending Balance $ 1,633 $ 374,300 $ 65,877 $ 102 $ 441,912

8 unchanged sentences

Net charge-offs as a percentage of average loans in repayment (1)

0.13 % 1.17 % 6.07 % 0.13 %

Allowance as a percentage of the ending total loan balance 0.21 % 1.61 % 6.28 % 2.63 %

Allowance as a percentage of the ending loans in repayment (1)

0.26 % 2.23 % 6.28 % 2.63 %

Allowance coverage of net charge-offs 1.99 2.04 0.95 102.00

1 unchanged sentence

Average loans in repayment (1)

$ 631,029 $ 15,605,927 $ 1,138,887 $ 786

Ending loans in repayment (1)

Represents fair value adjustments on loans sold.

$ 617,646 $ 16,787,670 $ 1,049,007 $ 3,884

(1) Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period.

2 unchanged sentences

(Dollars in thousands, unless otherwise noted)

Allowance for Loan Losses (Continued)

Allowance for Loan Losses

Allowance for Credit Losses (Continued)

Allowance for Credit Losses

Year Ended December 31, 2018

Private Education

Allowance for Loan Losses

Loans Private Education

Loans Personal

Allowance for Credit Losses

Beginning balance $ 1,132 $ 243,715 $ 6,628 $ 251,475

1 unchanged sentence

Net charge-offs:

Charge-offs ( 1,135 ) ( 154,701 ) ( 19,690 ) ( 175,526 )

Recoveries — 20,858 946 21,804

Net charge-offs ( 1,135 ) ( 133,843 ) ( 18,744 ) ( 153,722 )

Loan sales (1)

— ( 1,216 ) — ( 1,216 )

Ending Balance $ 977 $ 277,943 $ 62,201 $ 341,121

8 unchanged sentences

Net charge-offs as a percentage of average loans in repayment (2)

0.16 % 1.01 % 2.11 %

Allowance as a percentage of the ending total loan balance 0.12 % 1.36 % 5.23 %

Allowance as a percentage of the ending loans in repayment (2)

0.15 % 1.90 % 5.23 %

Allowance coverage of net charge-offs 0.86 2.08 3.32

1 unchanged sentence

Average loans in repayment (2)

$ 691,406 $ 13,303,801 $ 889,348

Ending loans in repayment (2)

$ 665,807 $ 14,666,856 $ 1,190,091

(1) Represents fair value adjustments on loans sold.

3 unchanged sentences

(Dollars in thousands, unless otherwise noted)

Allowance for Loan Losses (Continued)

Allowance for Credit Losses (Continued)

Allowance for Credit Losses - Forecast Assumptions

In determining the adequacy of the allowance for credit losses, we include forecasts of college graduate unemployment and the Consumer Price Index in our loss forecasting models.

We obtain forecasts for these two inputs from Moody’s Analytics.

Moody’s Analytics provides a range of forecasts for each of these inputs with various likelihoods of occurring.

We determine which forecasts we will include in our estimation of allowance for credit losses and the associated weightings for each of these inputs.

At both January 1, 2020 (the initial adoption date of CECL), and December 31, 2020, we used the Base (50th percentile likelihood of occurring)/S1 (stronger near-term growth scenario with 10 percent likelihood of occurring)/S3 (downside scenario with 10 percent likelihood of occurring) scenarios and weighted them 40 percent, 30 percent and 30 percent, respectively.

Management reviews both the scenarios and their respective weightings each quarter in determining the allowance for credit losses.

For the year ended December 31, 2020, we had total provisions for credit losses of $ 93 million.

The provisions for credit losses for 2020 were affected primarily by $ 290 million in additional provisions for credit losses related to new commitments made in 2020, an additional $ 129 million due to deteriorating economic conditions during the year as a result of the COVID-19 pandemic, and $ 99 million caused by lower recovery rates and various overlays and other adjustments applied during the year.

Offsetting these was a $ 206 million reduction in the provisions for credit losses as a result of $ 2.9 billion of loans transferred to held-for-sale from held for investment in the fourth quarter of 2020, the sale of $ 3.1 billion of Private Education Loans in the first quarter of 2020, which resulted in a reduction to our provision for credit losses of $ 162 million, a benefit of $ 121 million from faster prepayment speeds, and the sale of our entire Personal Loan portfolio, which resulted in a reduction to our provision for credit losses of $ 43 million.

The benefit from faster prepayment speeds reflected actual loan prepayment speeds being higher than what our models were predicting due to the significant amount of COVID-19 related government stimulus.

As COVID-19 continues to impact the economy, we could continue to experience significant changes in our allowance for credit losses in 2021.

See Note 5, “Loans Held for Investment - Certain Collection Tools - Private Education Loans,” for additional information.

Troubled Debt Restructurings

2 unchanged sentences

When we give a borrower facing financial difficulty an interest rate reduction, we temporarily reduce the contractual interest rate on a loan to 4.0 percent (previously, to 2.0 percent ) for a two-year period and, in the vast majority of cases, permanently extend the final maturity date of the loan.

When we give a borrower facing financial difficulty an interest rate reduction, we temporarily reduce the contractual interest rate on a loan to 4.0 percent for a two-year period and, in the vast majority of cases, permanently extend the final maturity date of the loan.

At December 31, 2019 and 2018, 7.2 percent and 6.4 percent , respectively, of our loans then currently in full principal and interest repayment status were subject to interest rate reductions made under our rate modification program.

At December 31, 2020 and 2019, 7.8 percent and 7.2 percent, respectively, of our Private Education Loans held for investment then currently in full principal and interest repayment status were subject to interest rate reductions made under our rate modification program.

Once a loan qualifies for TDR status, it remains a TDR for allowance purposes for the remainder of its life.

As of December 31, 2020 and 2019, approximately 47 percent and 50 percent, respectively, of TDRs were classified as such due to their forbearance status.

See Note 2, “Significant Accounting Policies — Allowance for Loan Losses” for a more detailed discussion.

See Note 2, “Significant Accounting Policies — Allowance for Credit Losses 2020” for a more detailed discussion.

Within the Private Education Loan portfolio, loans greater than 90 days past due are nonperforming.

FFELP Loans are at least 97 percent guaranteed as to their principal and accrued interest by the federal government in the event of default and, therefore, we do not deem FFELP Loans as nonperforming from a credit risk standpoint at any point in their life cycle prior to claim payment and continue to accrue interest on those loans through the date of claim.

FFELP Loans are at least 97 percent guaranteed as to their principal and accrued interest by the federal government in the event of default and, therefore, we do not deem FFELP Loans as nonperforming from a credit risk perspective at any point in their life cycle prior to claim payment and continue to accrue interest on those loans through the date of claim.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

Allowance for Credit Losses (Continued)

At December 31, 2020 and 2019, all of our TDR loans had a related allowance recorded.

The following table provides the recorded investment, unpaid principal balance and related allowance for our TDR loans.

Recorded Investment

Unpaid Principal Balance

Recorded Investment Unpaid Principal Balance Allowance

December 31, 2020

TDR Loans $ 1,312,805 $ 1,274,590 $ 104,265

December 31, 2019

TDR Loans $ 1,612,896 $ 1,581,966 $ 186,697

The following table provides the average recorded investment and interest income recognized for our TDR loans.

Years Ended December 31,

2020 2019 2018

Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized

TDR Loans $ 1,546,908 $ 100,125 $ 1,434,137 $ 95,507 $ 1,141,993 $ 77,670

SLM CORPORATION

1 unchanged sentence

(Dollars in thousands, unless otherwise noted)

Allowance for Loan Losses (Continued)

The following table provides the average recorded investment and interest income recognized for our TDR loans.

Years Ended December 31,

Average Recorded Investment

Interest Income Recognized

Average Recorded Investment

Interest Income Recognized

Average Recorded Investment

Interest Income Recognized

Allowance for Credit Losses (Continued)

The following table provides information regarding the loan status and aging of TDR loans.

December 31, December 31,

Balance % Balance %

TDR loans in in-school/grace/deferment (1)

$ 88,750 $ 87,749

TDR loans in forbearance (2)

76,704 99,054

TDR loans in repayment (3) and percentage of each status:

1 unchanged sentence

Loans delinquent 31-60 days (4)

59,249 5.3 85,555 6.1

Loans delinquent 61-90 days (4)

43,576 3.9 49,626 3.6

Loans delinquent greater than 90 days (4)

34,431 3.1 29,028 2.1

Total TDR loans in repayment (3)

1,109,136 100.0 % 1,395,163 100.0 %

Total TDR loans, gross $ 1,274,590 $ 1,581,966

1 unchanged sentence

(2) Loans for customers who have requested extension of grace period generally during employment transition or who have temporarily ceased making full payments due to hardship or other factors, consistent with established loan program servicing policies and procedures.

(3) Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period, (but, for purposes of the table, do not include those loans while they are in forbearance).

(4) The period of delinquency is based on the number of days scheduled payments are contractually past due.

2 unchanged sentences

(Dollars in thousands, unless otherwise noted)

Allowance for Loan Losses (Continued)

The following table provides the amount of modified loans (which includes forbearance and reductions in interest rates) that became TDRs in the periods presented.

Allowance for Credit Losses (Continued)

The following table provides the amount of modified loans (which include forbearance and reductions in interest rates) that became TDRs in the periods presented.

Additionally, for the periods presented, the table summarizes charge-offs occurring in the TDR portfolio, as well as TDRs for which a payment default occurred in the relevant period presented and within 12 months of the loan first being designated as a TDR.

1 unchanged sentence

Years Ended December 31,

Modified Loans (1)

Payment-Default

Modified Loans (1)

Payment-Default

2020 2019 2018

Modified Loans (1)

Payment-Default

Charge-offs Payment-Default Modified Loans (1)

Charge-offs Payment-Default

TDR Loans $ 207,001 $ 71,267 $ 75,153 $ 515,398 $ 74,137 $ 111,810 $ 394,639 $ 52,823 $ 90,231

(1) Represents the principal balance of loans that have been modified during the period and resulted in a TDR.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

Allowance for Loan Losses (Continued)

Private Education Loan Key Credit Quality Indicators

FFELP Loans are at least 97 percent insured and guaranteed as to their principal and accrued interest in the event of default;

Private Education Loans Held for Investment - Key Credit Quality Indicators

FFELP Loans are at least 97 percent guaranteed as to their principal and accrued interest in the event of default;

therefore, there are no key credit quality indicators associated with FFELP Loans.

1 unchanged sentence

The FICO scores are assessed at original approval and periodically refreshed/updated through the loan’s term.

The following table highlights the gross principal balance of our Private Education Loan portfolio stratified by key credit quality indicators.

December 31, 2019

The following tables highlight the gross principal balance of our Private Education Loan portfolio (held for investment), by year of origination, stratified by key credit quality indicators.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

Allowance for Credit Losses (Continued)

Private Education Loans Held for Investment - Credit Quality Indicators

December 31, 2020

Credit Quality Indicators:

Year of Origination 2020 (1)

2015 and Prior (1)

With cosigner $ 2,915,328 $ 3,467,219 $ 2,556,400 $ 2,262,635 $ 1,977,952 $ 4,198,748 $ 17,378,282 88 %

Without cosigner 527,437 559,629 384,111 277,159 211,270 391,449 2,351,055 12

FICO at Original Approval (2) :

Total $ 3,442,765 $ 4,026,848 $ 2,940,511 $ 2,539,794 $ 2,189,222 $ 4,590,197 $ 19,729,337 100 %

FICO at Origination (2) :

Less than 670 $ 195,214 $ 290,711 $ 225,276 $ 197,948 $ 162,413 $ 369,609 $ 1,441,171 7 %

670-699 464,785 594,950 441,357 407,394 351,303 771,477 3,031,266 16

700-749 1,111,373 1,310,390 967,802 846,983 740,028 1,533,517 6,510,093 33

Greater than or equal to 750 1,671,393 1,830,797 1,306,076 1,087,469 935,478 1,915,594 8,746,807 44

Total $ 3,442,765 $ 4,026,848 $ 2,940,511 $ 2,539,794 $ 2,189,222 $ 4,590,197 $ 19,729,337 100 %

FICO Refreshed (2)(3) :

Less than 670 $ 240,154 $ 331,229 $ 301,784 $ 298,195 $ 293,077 $ 734,599 $ 2,199,038 11 %

670-699 438,665 493,135 336,966 283,906 231,759 504,779 2,289,210 12

700-749 1,102,666 1,248,806 871,677 734,222 603,160 1,220,468 5,780,999 29

Greater than or equal to 750 1,661,280 1,953,678 1,430,084 1,223,471 1,061,226 2,130,351 9,460,090 48

Total $ 3,442,765 $ 4,026,848 $ 2,940,511 $ 2,539,794 $ 2,189,222 $ 4,590,197 $ 19,729,337 100 %

Seasoning (4) :

5 unchanged sentences

Not yet in repayment 1,374,085 1,330,175 733,824 508,478 327,763 504,715 4,779,040 24

Balance represents gross Private Education Loans.

Total $ 3,442,765 $ 4,026,848 $ 2,940,511 $ 2,539,794 $ 2,189,222 $ 4,590,197 $ 19,729,337 100 %

2020 Current period (5) gross charge-offs

$ ( 1,087 ) $ ( 10,940 ) $ ( 27,000 ) $ ( 35,851 ) $ ( 36,416 ) $ ( 94,032 ) $ ( 205,326 )

2020 Current period (5) recoveries

42 636 2,274 3,585 4,284 13,200 24,021

2020 Current period (5) net charge-offs

$ ( 1,045 ) $ ( 10,304 ) $ ( 24,726 ) $ ( 32,266 ) $ ( 32,132 ) $ ( 80,832 ) $ ( 181,305 )

Total accrued interest by origination vintage $ 90,438 $ 265,688 $ 252,251 $ 209,178 $ 141,094 $ 210,247 $ 1,168,896

(1) Balance represents gross Private Education Loans, held for investment.

(2) Represents the higher credit score of the cosigner or the borrower.

(3) Represents the FICO score updated as of the fourth-quarter 2020.

Number of months in active repayment (whether interest-only payment, fixed payment, or full principal and interest repayment status) for which a scheduled payment was due.

(4) Number of months in active repayment (whether interest only payment, fixed payment, or full principal and interest payment status) for which a scheduled payment was due.

(5) Current period refers to period from January 1, 2020 through December 31, 2020.

SLM CORPORATION

1 unchanged sentence

(Dollars in thousands, unless otherwise noted)

Allowance for Loan Losses (Continued)

Personal Loan Key Credit Quality Indicators

For Personal Loans, the key credit quality indicators are FICO scores, loan seasoning, and loan delinquency status.

The FICO scores are assessed at original approval and periodically refreshed/updated through the loan’s term.

The following table highlights the gross principal balance of our Personal Loan portfolio stratified by key credit quality indicators.

Personal Loans

Credit Quality Indicators

December 31, 2019

Allowance for Credit Losses (Continued)

Private Education Loans Held for Investment - Credit Quality Indicators

December 31, 2019

Credit Quality Indicators:

FICO at Original Approval:

Year of Origination 2019 (1)

2014 and Prior (1)

With cosigner $ 3,475,256 $ 4,303,772 $ 3,575,973 $ 3,112,873 $ 2,579,214 $ 3,662,547 $ 20,709,635 89 %

Without cosigner 571,792 584,601 427,512 320,985 241,958 333,108 2,479,956 11

Total $ 4,047,048 $ 4,888,373 $ 4,003,485 $ 3,433,858 $ 2,821,172 $ 3,995,655 $ 23,189,591 100 %

FICO at Origination (2) :

Less than 670 $ 283,040 $ 343,613 $ 285,747 $ 236,457 $ 203,145 $ 313,587 $ 1,665,589 7 %

670-699 592,376 714,779 617,676 529,575 439,050 676,569 3,570,025 16

700-749 1,319,563 1,601,904 1,325,387 1,155,253 944,135 1,324,506 7,670,748 33

Greater than or equal to 750 1,852,069 2,228,077 1,774,675 1,512,573 1,234,842 1,680,993 10,283,229 44

Total $ 4,047,048 $ 4,888,373 $ 4,003,485 $ 3,433,858 $ 2,821,172 $ 3,995,655 $ 23,189,591 100 %

FICO Refreshed (2)(3) :

Less than 670 $ 401,979 $ 515,901 $ 475,007 $ 449,568 $ 419,308 $ 717,674 $ 2,979,437 13 %

670-699 582,256 645,422 497,497 397,889 308,607 451,451 2,883,122 13

700-749 1,284,867 1,506,849 1,199,564 994,309 772,205 1,048,808 6,806,602 29

Greater than or equal to 750 1,777,946 2,220,201 1,831,417 1,592,092 1,321,052 1,777,722 10,520,430 45

Total $ 4,047,048 $ 4,888,373 $ 4,003,485 $ 3,433,858 $ 2,821,172 $ 3,995,655 $ 23,189,591 100 %

Seasoning (4) :

4 unchanged sentences

More than 48 payments — — — — 1,056,229 1,973,795 3,030,024 13

Balance represents gross Personal Loans.

Number of months in active repayment for which a scheduled payment was due.

Not yet in repayment 1,670,644 1,580,513 1,010,764 635,798 375,585 414,101 5,687,405 25

Total $ 4,047,048 $ 4,888,373 $ 4,003,485 $ 3,433,858 $ 2,821,172 $ 3,995,655 $ 23,189,591 100 %

2019 gross charge-offs $ ( 1,697 ) $ ( 14,650 ) $ ( 29,119 ) $ ( 40,576 ) $ ( 41,141 ) $ ( 81,795 ) $ ( 208,978 )

2019 recoveries 69 1,016 2,622 4,431 5,175 12,452 25,765

2019 net charge-offs $ ( 1,628 ) $ ( 13,634 ) $ ( 26,497 ) $ ( 36,145 ) $ ( 35,966 ) $ ( 69,343 ) $ ( 183,213 )

Total accrued interest by origination vintage $ 116,423 $ 321,568 $ 327,002 $ 261,083 $ 165,764 $ 174,318 $ 1,366,158

(1) Balance represents gross Private Education Loans, held for investment.

(2) Represents the higher credit score of the cosigner or the borrower.

(3) Represents the FICO score updated as of the fourth-quarter 2019.

(4) Number of months in active repayment (whether interest only payment, fixed payment, or full principal and interest payment status) for which a scheduled payment was due.

SLM CORPORATION

1 unchanged sentence

(Dollars in thousands, unless otherwise noted)

Allowance for Loan Losses (Continued)

Private Education Loan Delinquencies

The following table provides information regarding the loan status of our Private Education Loans.

Private Education Loans

Allowance for Credit Losses (Continued)

Delinquencies - Private Education Loans Held for Investment

The following tables provide information regarding the loan status of our Private Education Loans, held for investment, by year of origination.

Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period, (but, for purposes of the following tables, do not include those loans while they are in forbearance).

Private Education Loans Held for Investment - Delinquencies by Origination Vintage

December 31, 2020

2020 2019 2018 2017 2016 2015 and Prior Total

Loans in-school/grace/deferment (1)(2)

$ 1,374,085 $ 1,330,175 $ 733,824 $ 508,478 $ 327,763 $ 504,715 $ 4,779,040

Loans in forbearance (1)(3)

Loans in repayment and percentage of each status:

16,159 92,677 110,319 118,946 109,073 198,302 645,476

Loans in repayment (1) :

Loans current 2,043,033 2,573,228 2,045,012 1,850,539 1,685,572 3,701,564 13,898,948

Loans delinquent 31-60 days (4)

6,400 16,983 26,934 30,771 33,040 91,400 205,528

Loans delinquent 61-90 days (4)

2,628 9,143 15,026 18,121 19,064 55,661 119,643

Loans delinquent greater than 90 days (4)

460 4,642 9,396 12,939 14,710 38,555 80,702

Total Private Education Loans in repayment 2,052,521 2,603,996 2,096,368 1,912,370 1,752,386 3,887,180 14,304,821

5 unchanged sentences

Percentage of Private Education Loans in repayment 59.6 % 64.7 % 71.3 % 75.3 % 80.0 % 84.7 % 72.5 %

Delinquencies as a percentage of Private Education Loans in repayment

Loans in forbearance as a percentage of Private Education Loans in repayment and forbearance

Delinquent Private Education Loans in repayment as a percentage of Private Education Loans in repayment 0.5 % 1.2 % 2.4 % 3.2 % 3.8 % 4.8 % 2.8 %

Loans in forbearance as a percentage of loans in repayment and forbearance 0.8 % 3.4 % 5.0 % 5.9 % 5.9 % 4.9 % 4.3 %

(1) For some students, going back to school in the fall was not an option because of the pandemic, or for other reasons.

Therefore, some students are taking a “gap year” before returning to school.

At December 31, 2020, the loans in the “in-school/grace/deferment” category above include $ 401 million of Private Education Loans whose borrowers did not return to school in the fall of 2020 and who received such extension of time from us to re-enroll before beginning their grace period.

At December 31, 2020, the loans in the “in forbearance” category above include $ 30 million of Private Education Loans whose borrowers did not return to school in the fall of 2020 and who received such extension of time from us to re-enroll before beginning their grace period.

At December 31, 2020, the loans in the “in repayment” category above include $ 609 million of Private Education Loans whose borrowers did not return to school in the fall of 2020 and who received such extension of time from us to re-enroll before beginning their grace period.

(2) Deferment includes customers who have returned to school or are engaged in other permitted educational activities and are not yet required to make payments on the loans (e.g., residency periods for medical students or a grace period for bar exam preparation).

4 unchanged sentences

(Dollars in thousands, unless otherwise noted)

Allowance for Loan Losses (Continued)

Personal Loan Delinquencies

The following table provides information regarding the loan status of our Personal Loans.

Personal Loans

Loans in repayment and percentage of each status:

Allowance for Credit Losses (Continued)

Private Education Loans Held for Investment - Delinquencies by Origination Vintage

December 31, 2019

2019 2018 2017 2016 2015 2014 and Prior Total

Loans in-school/grace/deferment (1)

$ 1,670,644 $ 1,580,513 $ 1,010,764 $ 635,798 $ 375,585 $ 414,101 $ 5,687,405

Loans in forbearance (2)

21,009 108,509 142,341 146,114 127,799 168,744 714,516

Loans in repayment:

Loans current 2,340,221 3,159,878 2,781,132 2,566,815 2,225,721 3,241,884 16,315,651

Loans delinquent 31-60 days (3)

11,152 26,096 44,382 51,656 54,559 100,206 288,051

Loans delinquent 61-90 days (3)

3,087 9,527 17,048 21,161 24,562 45,917 121,302

Loans delinquent greater than 90 days (3)

Total Personal Loans in repayment

Total Personal Loans, gross

Personal Loans deferred origination costs and unamortized premium/(discount)

Total Personal Loans

Personal Loans allowance for losses

Personal Loans, net

Delinquencies as a percentage of Personal Loans in repayment

935 3,850 7,818 12,314 12,946 24,803 62,666

Total Private Education Loans in repayment 2,355,395 3,199,351 2,850,380 2,651,946 2,317,788 3,412,810 16,787,670

Total Private Education Loans, gross 4,047,048 4,888,373 4,003,485 3,433,858 2,821,172 3,995,655 23,189,591

Private Education Loans deferred origination costs and unamortized premium/(discount) 23,661 17,699 13,843 12,304 8,564 5,153 81,224

Total Private Education Loans 4,070,709 4,906,072 4,017,328 3,446,162 2,829,736 4,000,808 23,270,815

Private Education Loans allowance for losses ( 3,013 ) ( 19,105 ) ( 44,858 ) ( 71,598 ) ( 80,974 ) ( 154,752 ) ( 374,300 )

Private Education Loans, net $ 4,067,696 $ 4,886,967 $ 3,972,470 $ 3,374,564 $ 2,748,762 $ 3,846,056 $ 22,896,515

Percentage of Private Education Loans in repayment 58.2 % 65.4 % 71.2 % 77.2 % 82.2 % 85.4 % 72.4 %

Delinquent Private Education Loans in repayment as a percentage of Private Education Loans in repayment 0.6 % 1.2 % 2.4 % 3.2 % 4.0 % 5.0 % 2.8 %

Loans in forbearance as a percentage of loans in repayment and forbearance 0.9 % 3.3 % 4.8 % 5.2 % 5.2 % 4.7 % 4.1 %

(1) Deferment includes customers who have returned to school or are engaged in other permitted educational activities and are not yet required to make payments on the loans (e.g., residency periods for medical students or a grace period for bar exam preparation).

(3) The period of delinquency is based on the number of days scheduled payments are contractually past due.

2 unchanged sentences

(Dollars in thousands, unless otherwise noted)

Allowance for Loan Losses (Continued)

Allowance for Credit Losses (Continued)

Private Education Loans Held for Investment - Delinquencies by Origination Vintage

December 31, 2018

2018 2017 2016 2015 2014 2013 and Prior Total

Loans in-school/grace/deferment (1)

$ 1,602,476 $ 1,497,955 $ 975,796 $ 589,558 $ 314,393 $ 280,267 $ 5,260,445

Loans in forbearance (2)

14,543 93,018 127,389 133,023 101,285 107,906 577,164

Loans in repayment:

Loans current 2,233,102 2,800,142 2,769,458 2,533,550 1,865,094 2,088,359 14,289,705

Loans delinquent 31-60 days (3)

10,263 22,219 41,788 49,762 43,291 63,893 231,216

Loans delinquent 61-90 days (3)

3,521 7,227 15,893 19,935 18,561 29,968 95,105

Loans delinquent greater than 90 days (3)

640 3,322 8,042 10,549 10,983 17,294 50,830

Total Private Education Loans in repayment 2,247,526 2,832,910 2,835,181 2,613,796 1,937,929 2,199,514 14,666,856

Total Private Education Loans, gross 3,864,545 4,423,883 3,938,366 3,336,377 2,353,607 2,587,687 20,504,465

Private Education Loans deferred origination costs and unamortized premium/(discount) 20,433 16,362 14,747 10,422 4,992 1,365 68,321

Total Private Education Loans 3,884,978 4,440,245 3,953,113 3,346,799 2,358,599 2,589,052 20,572,786

Private Education Loans allowance for losses ( 2,670 ) ( 15,469 ) ( 43,469 ) ( 63,442 ) ( 62,852 ) ( 90,041 ) ( 277,943 )

Private Education Loans, net $ 3,882,308 $ 4,424,776 $ 3,909,644 $ 3,283,357 $ 2,295,747 $ 2,499,011 $ 20,294,843

Percentage of Private Education Loans in repayment 58.2 % 64.0 % 72.0 % 78.3 % 82.3 % 85.0 % 71.5 %

Delinquent Private Education Loans in repayment as a percentage of Private Education Loans in repayment 0.6 % 1.2 % 2.3 % 3.1 % 3.8 % 5.1 % 2.6 %

Loans in forbearance as a percentage of loans in repayment and forbearance 0.6 % 3.2 % 4.3 % 4.8 % 5.0 % 4.7 % 3.8 %

(3) The period of delinquency is based on the number of days scheduled payments are contractually past due.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

Allowance for Credit Losses (Continued)

Accrued Interest Receivable

The following table provides information regarding accrued interest receivable on our Private Education Loans.

The table also discloses the amount of accrued interest on loans greater than 90 days past due as compared to our allowance for uncollectible interest.

The table also discloses the amount of accrued interest on loans greater than 90 days past due as compared to our allowance for uncollectible interest on loans making full interest payments.

The majority of the total accrued interest receivable represents accrued interest on deferred loans where no payments are due while the borrower is in school and fixed-pay loans where the borrower makes a $ 25 monthly payment that is smaller than the interest accruing on the loan in that month.

The accrued interest on these loans will be capitalized to the balance of the loans when the borrower exits the grace period upon separation from school.

The allowance for uncollectible interest exceeds the amount of accrued interest on our 90 days past due portfolio for all periods presented.

The allowance for this portion of interest is included in our loan loss reserve.

The allowance for uncollectible interest exceeds the amount of accrued interest on our 90 days past due Private Education Loan portfolio for all periods presented.

Private Education Loans

1 unchanged sentence

Total Interest

Allowance for

Receivable Greater Than

Past Due Allowance for

Uncollectible

4 unchanged sentences

(Dollars in thousands, unless otherwise noted)

Unfunded Loan Commitments

When we approve a Private Education Loan at the beginning of an academic year, that approval may cover the borrowing for the entire academic year.

As such, we do not always disburse the full amount of the loan at the time of such approval, but instead have a commitment to fund a portion of the loan at a later date (usually at the start of the second semester or subsequent trimesters).

See Note 2, “Significant Accounting Policies — Allowance for Credit Losses 2020 — Off-Balance Sheet Exposure for Contractual Loan Commitments” for additional information.

At December 31, 2020, we had $ 1.7 billion of outstanding contractual loan commitments that we expect to fund during the remainder of the 2020/2021 academic year.

The tables below summarize the activity in the allowance recorded to cover lifetime expected credit losses on the unfunded commitments, which is recorded in “Other Liabilities” on the consolidated balance sheets, as well as the activity in the unfunded commitments balance.

Years Ended December 31,

2020 2019 2018

Allowance Unfunded Commitments Allowance Unfunded Commitments Allowance Unfunded Commitments

Beginning Balance $ 2,481 $ 1,910,603 $ 2,165 $ 2,010,744 $ 1,885 $ 1,838,840

Day 1 adjustment for the adoption of CECL 115,758 — — — — —

Balance January 1, 2020 118,239 1,910,603 2,165 2,010,744 1,885 1,838,840

Provision/New commitments - net (1)

312,613 5,070,175 6,533 5,513,790 5,611 5,474,284

Transfer - funded loans (2)

( 320,808 ) ( 5,307,760 ) ( 6,217 ) ( 5,613,931 ) ( 5,331 ) ( 5,302,380 )

Ending Balance $ 110,044 $ 1,673,018 $ 2,481 $ 1,910,603 $ 2,165 $ 2,010,744

________________

(1) Net of expirations of commitments unused.

(2) When a loan commitment is funded, its related liability for credit losses (which originally was recorded as a provision for unfunded commitments) is transferred to the allowance for credit losses.

The unfunded commitments disclosed above represent the total amount of outstanding unfunded commitments at each period end.

However, historically not all of these commitments are funded prior to the expiration of the commitments.

We estimate the amount of commitments expected to be funded in calculating the reserve for unfunded commitments.

The amount we expect to fund and use in our calculation of the reserve for unfunded commitments will change period to period based upon the loan characteristics of the underlying commitments.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

Premises and Equipment, net

3 unchanged sentences

Furniture, fixtures and equipment 28,272 25,694

Software 76,500 70,191

Premises and equipment, gross 238,099 214,227

14 unchanged sentences

Fees paid to third-party brokers related to these CDs were $ 5 million, $ 28 million, and $ 26 million during the years ended December 31, 2020, 2019 and 2018, respectively.

Interest bearing deposits at December 31, 2020 and 2019 are summarized as follows:

SLM CORPORATION

2 unchanged sentences

Deposits (Continued)

Interest bearing deposits at December 31, 2019 and 2018 are summarized as follows:

December 31, 2019

December 31, 2018

Year-End Weighted

December 31, 2020 December 31, 2019

Amount Year-End Weighted

Average Stated Rate (1)

Year-End Weighted

Amount Year-End Weighted

Average Stated Rate (1)

Money market $ 10,159,657 0.83 % $ 9,616,547 2.04 %

Savings 907,976 0.55 718,616 1.71

Certificates of deposit 11,597,266 1.34 13,947,743 2.44

8 unchanged sentences

After five years 48,202 92,111

Total $ 11,597,266 $ 13,947,743

As of December 31, 2020 and 2019, there were $ 571 million and $ 963 million, respectively, of deposits exceeding FDIC insurance limits.

6 unchanged sentences

The following table summarizes our secured borrowings at December 31, 2020 and 2019.

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Short-Term Long-Term Total Short-Term Long-Term Total

Unsecured borrowings:

3 unchanged sentences

Private Education Loan term securitizations:

Fixed-rate — 3,261,233 3,261,233 — 2,629,902 2,629,902

Variable-rate — 1,235,105 1,235,105 — 1,525,976 1,525,976

2 unchanged sentences

Total secured borrowings — 4,496,338 4,496,338 289,230 4,155,878 4,445,108

Total $ — $ 5,189,217 $ 5,189,217 $ 289,230 $ 4,354,037 $ 4,643,267

Short-term Borrowings

Secured Borrowing Facility

On February 20, 2019, we amended and extended the maturity of our Secured Borrowing Facility.

On February 19, 2020, we amended our Secured Borrowing Facility to, among other things, increase the amount that can be borrowed under the facility to $ 2 billion (from $ 750 million) and extend the maturity of the facility.

We hold 100 percent of the residual interest in the Secured Borrowing Facility trust.

Under the amended Secured Borrowing Facility, we incur financing costs on unused borrowing capacity and on outstandings.

Under the amended Secured Borrowing Facility, we incur financing costs on unused borrowing capacity and on outstanding advances.

The amended Secured Borrowing Facility extended the revolving period, during which we may borrow, repay and reborrow funds, until February 17, 2021.

The scheduled amortization period, during which amounts outstanding under the Secured Borrowing Facility must be repaid, ends on February 17, 2022 (or earlier, if certain material adverse events occur).

At December 31, 2019 , $ 289 million secured borrowings were outstanding under the Secured Borrowing Facility, and at December 31, 2018, there were no secured borrowings outstanding under the Secured Borrowing Facility.

On February 17, 2021, we further amended and extended the maturity of our Secured Borrowing Facility such that the revolving period now extends until February 16, 2022.

The scheduled amortization period, during which amounts outstanding under the Secured Borrowing Facility must be repaid, now ends on February 16, 2023 (or earlier, if certain material adverse events occur).

At December 31, 2020, there were no secured borrowings outstanding under the Secured Borrowing Facility, and at December 31, 2019, $ 289 million secured borrowings were outstanding under the Secured Borrowing Facility.

For additional information, see Notes to Consolidated Financial Statements, Note 25, “Subsequent Events.”

7 unchanged sentences

Borrowings (Continued)

December 31, 2019

December 31, 2020 Year Ended

December 31, 2020

Ending Balance

Weighted Average

Interest Rate

Average Balance

Weighted Average

Ending Balance Weighted Average

Interest Rate Average Balance Weighted Average

Interest Rate (1)

2 unchanged sentences

Maximum outstanding at any month end $ 289,230

December 31, 2018

December 31, 2019 Year Ended

December 31, 2019

Ending Balance

Weighted Average

Interest Rate

Average Balance

Weighted Average

Ending Balance Weighted Average

Interest Rate Average Balance Weighted Average

Interest Rate

2 unchanged sentences

Maximum outstanding at any month end $ 297,800

(1) The interest for the non-use fees is calculated based on the Secured Borrowing Facility’s maximum borrowing limit, which increased to $ 2 billion in 2020.

Long-term Borrowings

Unsecured Debt

On April 5, 2017, we issued an unsecured debt offering of $ 200 million of 5.125 percent Senior Notes due April 5, 2022 at par.

On April 5, 2017, we issued at par an unsecured debt offering of $ 200 million of 5.125 percent Senior Notes due April 5, 2022.

At December 31, 2020, the outstanding balance was $ 199 million.

On October 29, 2020, we issued at par an unsecured debt offering of $ 500 million of 4.20 percent Senior Notes due October 29, 2025.

At December 31, 2020, the outstanding balance was $ 494 million.

Secured Financings

2020 Transactions

On March 13, 2019, we executed our $ 453 million SMB Private Education Loan Trust 2019-A term ABS transaction, which was accounted for as a secured financing.

On February 12, 2020, we executed our $ 636 million SMB Private Education Loan Trust 2020-A term ABS transaction, which was accounted for as a secured financing.

We sold $ 636 million of notes to third parties and retained a 100 percent interest in the residual certificates issued in the securitization, raising approximately $ 634 million of gross proceeds.

1 unchanged sentence

At December 31, 2020, $ 605 million of our Private Education Loans, including $ 567 million of principal and $ 38 million in capitalized interest, were encumbered because of this transaction.

On June 12, 2019, we executed our $ 657 million SMB Private Education Loan Trust 2019-B term ABS transaction, which was accounted for as a secured financing.

On August 12, 2020, we executed our $ 707 million SMB Private Education Loan Trust 2020-B term ABS transaction, which was accounted for as a secured financing.

We sold $ 707 million of notes to third parties and retained a 100 percent interest in the residual certificates issued in the securitization, raising approximately $ 705 million of gross proceeds.

4 unchanged sentences

We sold $ 453 million of notes to third parties and retained a 100 percent interest in the residual certificates issued in the securitization, raising approximately $ 451 million of gross proceeds.

The Class A and Class B notes had a weighted average life of 4.43 years and priced at a weighted average LIBOR equivalent cost of 1-

SLM CORPORATION

2 unchanged sentences

Borrowings (Continued)

month LIBOR plus 0.78 percent .

A and Class B notes had a weighted average life of 4.26 years and priced at a weighted average LIBOR equivalent cost of 1-month LIBOR plus 0.92 percent.

At December 31, 2020, $ 377 million of our Private Education Loans, including $ 355 million of principal and $ 22 million in capitalized interest, were encumbered because of this transaction.

3 unchanged sentences

At December 31, 2020, $ 578 million of our Private Education Loans, including $ 542 million of principal and $ 36 million in capitalized interest, were encumbered because of this transaction.

On September 19, 2018, we executed our $ 544 million SMB Private Education Loan Trust 2018-C term ABS transaction, which was accounted for as a secured financing.

We sold $ 544 million of notes to third parties and retained a 100 percent interest in the residual certificates issued in the securitization, raising approximately $ 541 million of gross proceeds.

The Class A and Class B notes had a weighted average life of 4.32 years and priced at a weighted average LIBOR equivalent cost of 1-month LIBOR plus 0.77 percent .

At December 31, 2019, $ 502 million of our Private Education Loans, including $ 471 million of principal and $ 31 million in capitalized interest, were encumbered because of this transaction.

Pre-2019 Transactions

4 unchanged sentences

The long-term borrowings amortize over time and mature serially from 2025 to 2053.

December 31, 2019

December 31, 2018

December 31, 2020 Year Ended

December 31, 2020 December 31, 2019 Year Ended

December 31, 2019

Ending Balance

Weighted Average

Interest Rate

Average Balance

Ending Balance

Weighted Average

Interest Rate

Average Balance

Ending Balance Weighted Average

Interest Rate Average Balance Ending Balance Weighted Average

Interest Rate Average Balance

Floating-rate borrowings $ 1,235,105 1.09 % $ 1,432,446 $ 1,525,976 2.61 % $ 1,731,675

9 unchanged sentences

Maturity to Call Date

Brokered Deposits

Unsecured Debt

Secured Borrowings

Brokered Deposits

Unsecured Debt

Secured Borrowings

Brokered Deposits Unsecured Debt Secured Borrowings Total Brokered Deposits Unsecured Debt Secured Borrowings Total

Year of Maturity

2021 $ 3,691,601 $ — $ 612,195 $ 4,303,796 $ 3,691,601 $ — $ 612,195 $ 4,303,796

2022 2,918,823 200,000 567,540 3,686,363 2,918,823 200,000 567,540 3,686,363

2023 1,536,077 — 605,658 2,141,735 1,536,077 — 605,658 2,141,735

2024 499,112 — 596,843 1,095,955 499,112 — 596,843 1,095,955

2025 270,274 500,000 587,801 1,358,075 270,274 500,000 587,801 1,358,075

2026 and after 47,401 — 1,705,576 1,752,977 47,401 — 1,705,576 1,752,977

8,963,288 700,000 4,675,613 14,338,901 8,963,288 700,000 4,675,613 14,338,901

Hedge accounting adjustments 108,913 — — 108,913 108,913 — — 108,913

Total $ 9,072,201 $ 700,000 $ 4,675,613 $ 14,447,814 $ 9,072,201 $ 700,000 $ 4,675,613 $ 14,447,814

(1) We view our securitization trust debt as long-term based on the contractual maturity dates and projected principal paydowns based on our current estimates regarding loan prepayment speeds.

The projected principal paydowns in year 2021 include $ 612 million related to the securitization trust debt.

(2) The aggregate principal amount of debt that matures in each period is $ 3.2 billion in 2020, $ 4.2 billion in 2021, $ 3.4 billion in 2022, $ 1.8 billion in 2023, $ 1.0 billion in 2024, and $ 1.8 billion in 2025 and after.

SLM CORPORATION

4 unchanged sentences

The following summarizes our secured financings issued in 2019 and 2020:

Weighted Average Cost of Funds (1)

Issue Date Issued Total Issued Weighted Average Cost of Funds (1)

Weighted Average Life

Private Education:

1-month LIBOR plus 0.78%

1-month LIBOR plus 0.76%

September 2018

1-month LIBOR plus 0.77%

Private Education Loans:

2019-A March 2019 $ 453,000 1-month LIBOR plus 0.92 %

2019-B June 2019 657,000 1-month LIBOR plus 1.01 %

Total notes issued in 2019 $ 1,110,000

Total loan and accrued interest amount securitized at inception in 2019 $ 1,208,963

1-month LIBOR plus 0.92%

1-month LIBOR plus 1.01%

2020-A February 2020 $ 636,000 1-month LIBOR plus 0.88 %

2020-B August 2020 707,000 1-month LIBOR plus 1.30 %

Total notes issued in 2020 $ 1,343,000

9 unchanged sentences

December 31, 2020

Debt Outstanding

Carrying Amount of Assets Securing Debt Outstanding

Restricted Cash

Other Assets (1)

Debt Outstanding Carrying Amount of Assets Securing Debt Outstanding

Short-Term Long-Term Total Loans Restricted Cash Other Assets (1)

Secured borrowings:

1 unchanged sentence

Secured Borrowing Facility — — — — — 436 436

Total $ — $ 4,496,338 $ 4,496,338 $ 5,661,123 $ 154,417 $ 357,403 $ 6,172,943

December 31, 2019

Debt Outstanding

Carrying Amount of Assets Securing Debt Outstanding

Restricted Cash

Other Assets (1)

Debt Outstanding Carrying Amount of Assets Securing Debt Outstanding

Short-Term Long-Term Total Loans Restricted Cash Other Assets (1)

Secured borrowings:

1 unchanged sentence

Secured Borrowing Facility 289,230 — 289,230 339,666 8,803 23,832 372,301

Total $ 289,230 $ 4,155,878 $ 4,445,108 $ 5,586,652 $ 154,563 $ 357,005 $ 6,098,220

(1) Other assets primarily represent accrued interest receivable.

Unconsolidated VIEs

Student Loan Securitizations

Our unconsolidated VIEs include variable interests that we hold in certain securitization trusts created by the sale of our Private Education Loans to unaffiliated third parties in the first quarter of 2020.

The Company remained the servicer of these loans pursuant to applicable servicing agreements executed in connection with the sales, and is also the administrator of these trusts.

Additionally, we own 5 percent of the securities issued by the trusts in order to meet risk retention requirements.

We were not required to consolidate these entities because we do not have the power to direct the activities that most significantly impact their economic performance.

Our maximum exposure to these entities is limited to the investment on our consolidated balance sheet of $ 86 million as of December 31, 2020.

Other Borrowing Sources

We maintain discretionary uncommitted Federal Funds lines of credit with various correspondent banks, which totaled $ 125 million at December 31, 2020.

The interest rate we are charged on these lines of credit is priced at Fed Funds plus a spread at the time of borrowing, and is payable daily.

The interest rate we are charged on these lines of credit is priced at Fed Funds plus a

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

Borrowings (Continued)

spread at the time of borrowing, and is payable daily.

We did not utilize these lines of credit in the years ended December 31, 2020 and 2019.

7 unchanged sentences

We did not utilize this facility in the years ended December 31, 2020 and 2019.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

Derivative Financial Instruments

23 unchanged sentences

The amount of variation margin included as settlement as of December 31, 2020 was $( 179 ) million and $ 19 million for the CME and LCH, respectively.

Changes in fair value for derivatives not designated as hedging instruments will be presented as realized gains (losses).

Changes in fair value for derivatives not designated as hedging instruments are presented as realized gains (losses).

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

Derivative Financial Instruments (Continued)

Our exposure is limited to the value of the derivative contracts in a gain position less any collateral held and plus any collateral posted.

4 unchanged sentences

Our derivative instruments are classified and accounted for by us as fair value hedges, cash flow hedges, and trading hedges.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

Derivative Financial Instruments (Continued)

We elected to early adopt ASU No.

6 unchanged sentences

For fair value hedges, we generally consider all components of the derivative’s gain and/or loss when assessing hedge effectiveness and generally hedge changes in fair values due to interest rates.

Under the new standard, for fair value hedges, the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness is recorded in the same line item in the consolidated statements of income that is used to present the earnings effect of the hedged component of the hedged item.

For fair value hedges, the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness is recorded in the same line item in the consolidated statements of income that is used to present the earnings effect of the hedged component of the hedged item.

The timing of recognition of the change in fair value of a hedging instrument included in the assessment of hedge effectiveness is the same as prior to the adoption of ASU No.

4 unchanged sentences

We hedge exposure to changes in cash flows due to changes in interest rates or total changes in cash flow.

Under the new standard, for cash flow hedges, the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness is recorded in other comprehensive income (loss).

For cash flow hedges, the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness is recorded in other comprehensive income (loss).

Those amounts are subsequently reclassified to earnings, in the same line item in the consolidated statements of income as impacted by the hedged item, when the hedged item affects earnings.

12 unchanged sentences

Impact of Derivatives on the Consolidated Balance Sheets

Cash Flow Hedges

Fair Value Hedges

Cash Flow Hedges Fair Value Hedges Trading Total

December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31,

2020 2019 2020 2019 2020 2019 2020 2019

Fair Values (1)

1 unchanged sentence

Derivative Assets:

Interest rate swaps

Interest rate

Interest rate swaps Interest rate $ — $ 715 $ 594 $ — $ 135 $ — $ 729 $ 715

Derivative Liabilities:

Interest rate swaps

Interest rate

Interest rate swaps Interest rate ( 287 ) — — ( 896 ) — ( 268 ) ( 287 ) ( 1,164 )

Total net derivatives $ ( 287 ) $ 715 $ 594 $ ( 896 ) $ 135 $ ( 268 ) $ 442 $ ( 449 )

3 unchanged sentences

(2) The following table reconciles gross positions with the impact of master netting agreements to the balance sheet classification:

Other Liabilities

Other Assets Other Liabilities

December 31, December 31, December 31, December 31,

2020 2019 2020 2019

Gross position (1)

$ 729 $ 715 $ ( 287 ) $ ( 1,164 )

Impact of master netting agreement ( 176 ) ( 519 ) 176 519

1 unchanged sentence

Cash collateral pledged (2)

42,874 52,564 — —

Net position $ 43,427 $ 52,760 $ ( 111 ) $ ( 645 )

(1) Gross position amounts include accrued interest and variation margin as legal settlement of the derivative contract.

4 unchanged sentences

Derivative Financial Instruments (Continued)

Cash Flow Fair Value Trading Total

December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31,

2020 2019 2020 2019 2020 2019 2020 2019

Notional Values

2 unchanged sentences

Line Item in the Balance Sheet in Which the Hedged Item is Included:

Carrying Amount of the Hedged Assets/(Liabilities)

Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities)

Carrying Amount of the Hedged Assets/(Liabilities) Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities)

December 31, December 31, December 31, December 31,

2020 2019 2020 2019

Deposits $ ( 4,992,867 ) $ ( 5,085,426 ) $ ( 154,235 ) $ ( 63,148 )

SLM CORPORATION

4 unchanged sentences

Years Ended December 31,

2020 2019 2018

Fair Value Hedges

3 unchanged sentences

Derivatives recorded in interest expense 91,419 77,177 8,123

Total $ 72,000 $ ( 8,979 ) $ ( 11,485 )

Cash Flow Hedges

1 unchanged sentence

Amount of gain (loss) reclassified from accumulated other comprehensive income into interest expense $ ( 16,000 ) $ 2,299 $ ( 1,455 )

Total $ ( 16,000 ) $ 2,299 $ ( 1,455 )

Interest rate swaps:

Change in fair value of future interest payments recorded in earnings $ 10,164 $ 19,469 $ ( 1,400 )

Total 10,164 19,469 ( 1,400 )

Total $ 66,164 $ 12,789 $ ( 14,340 )

SLM CORPORATION

4 unchanged sentences

Years Ended December 31,

2020 2019 2018

Amount of gain (loss) recognized in other comprehensive income (loss) $ ( 52,511 ) $ ( 36,115 ) $ 10,452

3 unchanged sentences

As of December 31, 2020, cash collateral held and pledged excludes amounts that represent legal settlement of the derivative contracts held with the CME and LCH.

There was no cash collateral held related to derivative exposure between us and our derivatives counterparties at December 31, 2019 and 2018 , respectively.

There was no cash collateral held by us related to derivative exposure between us and our derivatives counterparties at December 31, 2020 and 2019, respectively.

Collateral held is recorded in “Other Liabilities” on the consolidated balance sheets.

6 unchanged sentences

Preferred Stock

On May 5, 2017, we redeemed, with the proceeds from our unsecured debt offering (see Note 9, “Borrowings”), the outstanding 3.3 million shares of our 6.97 percent Cumulative Redeemable Preferred Stock, Series A (the “Series A Preferred Stock”).

The Series A Preferred Stock was redeemed at a price of $ 50 per share, plus accrued and unpaid dividends from May 1, 2017 to, but excluding, the May 5, 2017 redemption date.

At December 31, 2020, we had 2.5 million shares of Floating-Rate Non-Cumulative Preferred Stock, Series B (the “Series B Preferred Stock”) outstanding.

4 unchanged sentences

Holders of Series B Preferred Stock are entitled to receive quarterly dividends based on 3-month LIBOR plus 170 basis points per annum in arrears.

Upon liquidation or dissolution of the Company, holders of the Series B Preferred Stock are entitled to receive $ 100 per share, plus an amount equal to accrued and unpaid dividends for the then current quarterly dividend period, pro rata, and before any distribution of assets are made to holders of our common stock.

In October 2020, we initiated a cash tender offer to purchase up to 2,000,000 shares of our Series B Preferred Stock.

On November 30, 2020, we accepted for purchase 1,489,304 shares of the Series B Preferred Stock at a purchase price of $ 45 per share plus an amount equal to accrued and unpaid dividends, for an aggregate purchase price of approximately $ 68 million.

Our shareholders have authorized the issuance of 1.125 billion shares of common stock (par value of $0 .20 ).

At December 31, 2020, 375 million shares were issued and outstanding and 35 million shares were unissued but encumbered for outstanding stock options, restricted stock, restricted stock units, performance stock units and dividend equivalent units for employee compensation and remaining authority for stock-based compensation plans.

In the year ended December 31, 2019, we paid a total common stock dividend of $ 0.12 per common share.

We did no t pay common stock dividends for the years ended December 31, 2018 and 2017 .

Dividend and Share Repurchases

In both the years ended December 31, 2020 and 2019, we paid a total common stock dividend of $ 0.12 per common share, respectively.

We did no t pay common stock dividends for the year ended December 31, 2018.

Common stock dividend declarations are subject to determination by, and the discretion of, our Board of Directors.

5 unchanged sentences

The FDIC has the authority to prohibit or limit the payment of dividends by the Bank and SLM Corporation.

The January 23, 2019 share repurchase program (the “2019 Share Repurchase Program”), which was effective upon announcement and expires on January 22, 2021, permits us to repurchase from time to time shares of our common stock up to an aggregate repurchase price not to exceed $ 200 million .

Under our 2019 Share Repurchase Program, we repurchased 17 million shares of common stock for $ 167 million in the year ended December 31, 2019.

The January 23, 2019 share repurchase program (the “2019 Share Repurchase Program”), which was effective upon announcement and expired on January 22, 2021, permitted us to repurchase from time to time shares of our common stock up to an aggregate repurchase price not to exceed $ 200 million.

We have utilized all capacity under our 2019 Share Repurchase Program, having repurchased 17 million shares of common stock for $ 167 million in the year ended December 31, 2019 and 3 million shares of common stock for $ 33 million in the year ended December 31, 2020.

On January 22, 2020, we announced a new share repurchase program (the “2020 Share Repurchase Program”), which was effective upon announcement and expires on January 21, 2022, and permits us to repurchase shares of common stock from time to time up to an aggregate repurchase price not to exceed $ 600 million.

Repurchases may occur from time to time and through a variety of methods, including open market repurchases, repurchases effected through Rule 10b5-1 trading plans, negotiated block purchases, accelerated share repurchase programs, tender offers or other similar transactions.

Under the authority of the 2020 Share Repurchase Program, on March 10, 2020, we entered into an accelerated share repurchase agreement (“ASR”) with a third-party financial institution under which we paid $ 525 million for an upfront delivery of our common stock and a forward agreement.

On March 11, 2020, the third-party financial institution delivered to us approximately 44.9 million shares.

The final total actual number of shares of common stock delivered to us pursuant to the forward agreement was based generally upon a discount to the Rule 10b-18 volume-weighted average price at which the shares of our common stock traded during the regular trading sessions on the NASDAQ Global Select Market during the term of the ASR.

The transactions are accounted for as equity transactions and are included in treasury stock when the shares are received,

SLM CORPORATION

2 unchanged sentences

Stockholders’ Equity (Continued)

For the years ended December 31, 2018 and 2017, we only repurchased common stock acquired in connection with taxes withheld resulting from award exercises and vesting under our employee stock-based compensation plans.

at which time there is an immediate reduction in the weighted average common shares calculation for basic and diluted earnings per share.

On January 26, 2021, we completed the ASR and upon final settlement on January 28, 2021, we received an additional 13 million shares.

In total, we repurchased 58 million shares under the ASR at an average price per share of $ 9.01 .

For additional information, see Notes to Consolidated Financial Statements, Note 25, “Subsequent Events.”

On January 27, 2021, we announced a new share repurchase program (the “2021 Share Repurchase Program”), which was effective upon announcement and expires on January 26, 2023, and permits us to repurchase shares of our common stock from time to time up to an aggregate repurchase price not to exceed $ 1.25 billion.

On February 2, 2021, we announced the commencement of a tender offer (the “Tender Offer”) to purchase up to $ 1 billion in aggregate purchase price of our outstanding shares of common stock, par value $ 0.20 per share (the “Securities”) or such lesser aggregate purchase price of Securities as are properly tendered and not properly withdrawn, at a single per-Security price not greater than $ 15.00 nor less than $ 13.10 per share to the seller in cash, less any applicable withholding taxes and without interest.

The Tender Offer may be amended from time to time, and will expire, upon the terms and conditions described in the relevant Tender Offer materials filed with the SEC.

The results of the Tender Offer will be reflected in the Company’s financial results for the first fiscal quarter of 2021.

For additional information, see Notes to Consolidated Financial Statements, Note 25, “Subsequent Events.”

Repurchases under our share repurchase programs may occur from time to time and through a variety of methods, including tender offers, open market repurchases, repurchases effected through Rule 10b5-1 trading plans, negotiated block purchases, accelerated share repurchase programs, or other similar transactions.

The timing and volume of any repurchases under the 2020 Share Repurchase Program and the 2021 Share Repurchase Program will be subject to market conditions, and there can be no guarantee that the Company will repurchase up to the limit of the programs or at all.

For the year ended December 31, 2018, we only repurchased common stock acquired in connection with taxes withheld resulting from award exercises and vesting under our employee stock-based compensation plans.

The following table summarizes our common share repurchases and issuances associated with these programs.

2 unchanged sentences

Common stock repurchased under repurchase program (1)(2)

47,736,847 16,962,199 —

Average purchase price per share (3)

$ 9.66 $ 9.86 $ —

Shares repurchased related to employee stock-based compensation plans (4)

1,197,843 1,369,630 3,087,396

Average purchase price per share $ 10.93 $ 10.85 $ 11.32

Common shares issued (5)

Common shares purchased under our 2019 Share Repurchase Program.

$ 33 million of capacity under the program remained available as of December 31, 2019.

3,129,325 3,743,705 6,392,634

(1) Common shares purchased under our share repurchase programs.

$ 75 million of capacity under the 2020 Share Repurchase Program remained available as of December 31, 2020.

(2) For the year ended December 31, 2020, the amount includes 44.9 million shares related to the initial delivery of shares under our accelerated share repurchase agreement, described above.

(3) Average purchase price per share includes purchase commission costs.

10 unchanged sentences

(In thousands, except per share data) 2020 2019 2018

Net income $ 880,690 $ 578,276 $ 487,476

Preferred stock dividends 9,734 16,837 15,640

3 unchanged sentences

Dilutive effect of stock options, restricted stock, restricted stock units, performance stock units and Employee Stock Purchase Plan (“ESPP”) (1)(2)

3,490 3,382 4,627

Weighted average shares used to compute diluted EPS 387,195 430,674 439,681

2 unchanged sentences

(1) Includes the potential dilutive effect of additional common shares that are issuable upon exercise of outstanding stock options, restricted stock, restricted stock units, performance stock units and the outstanding commitment to issue shares under the ESPP, determined by the treasury stock method.

For the years ended December 31, 2019 , 2018 and 2017 , securities covering no shares, less than 1 million shares and no shares, respectively, were outstanding but not included in the computation of diluted earnings per share because they were anti-dilutive.

(2) For the years ended December 31, 2020, 2019 and 2018, securities covering no shares, no shares and less than one million shares, respectively, were outstanding but not included in the computation of diluted earnings per share because they were anti-dilutive.

SLM CORPORATION

13 unchanged sentences

The total stock-based compensation cost recognized in the consolidated statements of income for the years ended December 31, 2020, 2019 and 2018 was $ 36 million, $ 31 million and $ 32 million, respectively.

As of December 31, 2019 , there was $ 13 million of total unrecognized compensation expense related to unvested stock awards, which is expected to be recognized over a weighted average period of 1.4 years .

As of December 31, 2020, there was $ 17 million of total unrecognized compensation expense related to unvested restricted stock awards, restricted stock units, performance stock units and ESPP awards, which is expected to be recognized over a weighted average period of 1.4 years.

We amortize compensation expense on a straight-line basis over the related vesting periods of each tranche of each award.

Stock Options

Stock options granted prior to 2012 expire 10 years after the grant date, and those granted since 2012 expire in 5 years.

Stock options granted prior to 2012 expire 10 years after the grant date.

The exercise price must be equal to or greater than the market price of our common stock on the grant date.

10 unchanged sentences

The following table summarizes stock option activity for the year ended December 31, 2020.

(Dollars in thousands, except per share data)

(Dollars in thousands, except per share data) Number of

Options Weighted

Share Weighted

Term Aggregate

Outstanding at December 31, 2019 789,846 $ 4.75

Exercised (2)(3)

( 545,971 ) 4.51

Canceled ( 2,200 ) 3.70

Outstanding at December 31, 2020 (4)

Exercisable at December 31, 2019

241,675 $ 5.24 0.1 years $ 1,727

Exercisable at December 31, 2020 241,675 $ 5.24 0.1 years $ 1,727

(1) The aggregate intrinsic value represents the total intrinsic value (the aggregate difference between our closing stock price on December 31, 2020 and the exercise price of in-the-money options) that would have been received by the option holders if all in-the-money options had been exercised on December 31, 2020.

1 unchanged sentence

(3) No cash was received from option exercises for the year ended December 31, 2020.

The actual tax benefit realized for the tax deductions from option exercises totaled $ 1 million for the year ended December 31, 2019.

The actual tax benefit realized for the tax deductions from option exercises totaled less than $ 1 million for the year ended December 31, 2020.

(4) For net-settled options, gross number is reflected.

8 unchanged sentences

The following table summarizes restricted stock activity for the year ended December 31, 2020.

(Shares and per share amounts in actuals)

(Shares and per share amounts in actuals) Number of

Shares Weighted

Average Grant

Non-vested at December 31, 2019 118,789 $ 9.26

Granted 143,033 7.69

( 118,789 ) 9.26

Non-vested at December 31, 2020 (2)

143,033 $ 7.69

(1) The total fair value of shares that vested during the years ended December 31, 2020, 2019 and 2018 was $ 1 million, $ 1 million and $ 1 million, respectively.

6 unchanged sentences

Restricted stock units (“RSUs”) and performance stock units (“PSUs”) are equity awards granted to employees that entitle the holder to shares of our common stock when the award vests.

RSUs may be time-vested over three years or vested at grant but subject to transfer restrictions, while PSUs vest based on corporate performance targets over a three -year period.

RSUs may be time-vested over three years or vested at grant but subject to transfer restrictions, while PSUs vest based on corporate performance targets at the end of a three-year period.

Outstanding RSUs and PSUs are entitled to dividend equivalent units that vest subject to the same vesting requirements or lapse of transfer restrictions, as applicable, as the underlying award.

1 unchanged sentence

The following table summarizes RSU and PSU activity for the year ended December 31, 2020.

(Shares and per share amounts in actuals)

(Shares and per share amounts in actuals) Number of

PSUs Weighted

Average Grant

Outstanding at December 31, 2019 5,179,217 $ 11.28

Granted 4,073,495 9.91

Vested and converted to common stock (1)

( 2,410,931 ) 10.79

Canceled ( 120,276 ) 11.05

Outstanding at December 31, 2020 (2)

6,721,505 $ 10.41

(1) The total fair value of RSUs/PSUs that vested and converted to common stock during the years ended December 31, 2020, 2019 and 2018 was $ 26 million, $ 27 million and $ 25 million, respectively.

9 unchanged sentences

Expected dividend rate 1.76 % 1.34 % — %

Expected life of the option

Expected life of the option 1 year 1 year 1 year

Weighted average fair value of stock purchase rights $ 1.74 $ 1.77 $ 2.32

7 unchanged sentences

rate at the grant date consistent with the expected life.

The dividend yield was zero for the years ended December 31, 2018 and 2017, respectively, as we did not pay dividends on our common stock in 2018 and 2017.

The dividend yield was zero for the year ended December 31, 2018, as we did not pay dividends on our common stock in 2018.

The fair values were amortized to compensation cost on a straight-line basis over a one -year vesting period.

As of December 31, 2020, there was less than $ 1 million of unrecognized compensation cost related to the ESPP, which is expected to be recognized by July 2021.

No shares were purchased for the year ended December 31, 2019, as our stock price on July 31, 2019 was less than the offering price for the ESPP plan.

During the years ended December 31, 2018 and 2017, plan participants purchased 233,232 shares and 283,952 shares, respectively, of our common stock.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

No shares were purchased for the years ended December 31, 2020 and 2019, as our stock price on both July 31, 2020 and 2019 was less than the offering price for the ESPP plan.

During the year ended December 31, 2018, plan participants purchased 233,232 shares of our common stock.

Fair Value Measurements

4 unchanged sentences

Fair Value Measurements on a Recurring Basis

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Trading investments $ — $ — $ 16,923 $ 16,923 $ — $ — $ — $ —

Available-for-sale investments — 1,996,634 — 1,996,634 — 487,669 — 487,669

Derivative instruments — 729 — 729 — 715 — 715

Total $ — $ 1,997,363 $ 16,923 $ 2,014,286 $ — $ 488,384 $ — $ 488,384

Derivative instruments $ — $ ( 287 ) $ — $ ( 287 ) $ — $ ( 1,164 ) $ — $ ( 1,164 )

Total $ — $ ( 287 ) $ — $ ( 287 ) $ — $ ( 1,164 ) $ — $ ( 1,164 )

SLM CORPORATION

3 unchanged sentences

The following table summarizes the fair values of our financial assets and liabilities, including derivative financial instruments.

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Value Carrying

Value Difference Fair

Value Carrying

Value Difference

Earning assets:

1 unchanged sentence

Private Education Loans $ 22,124,171 $ 18,436,968 $ 3,687,203 $ 24,988,941 $ 22,896,515 $ 2,092,426

FFELP Loans 748,657 735,208 13,449 795,055 783,816 11,239

Personal Loans — — — 1,047,119 983,643 63,476

Credit Cards 12,249 10,967 1,282 3,818 3,818 —

Loans held for sale 3,226,029 2,885,640 340,389 — — —

Cash and cash equivalents 4,455,292 4,455,292 — 5,563,877 5,563,877 —

Trading investments 16,923 16,923 — — — —

Available-for-sale investments 1,996,634 1,996,634 — 487,669 487,669 —

17 unchanged sentences

These are level 1 valuations.

Investments are classified as available-for-sale and are carried at fair value in the consolidated financial statements.

Investments in mortgage-backed securities and Utah Housing Corporation bonds are valued using observable market prices of similar assets.

As such, these are level 2 valuations.

SLM CORPORATION

2 unchanged sentences

Fair Value Measurements (Continued)

Investments classified as trading are carried at fair value in the consolidated financial statements.

As such, these are level 3 valuations.

Available-for-Sale

Investments classified as available-for-sale are carried at fair value in the consolidated financial statements.

Investments in mortgage-backed securities, U.S.

government-sponsored enterprises and Treasury securities and Utah Housing Corporation bonds are valued using observable market prices of similar assets.

As such, these are level 2 valuations.

Loans Held For Investment and Accrued Interest Receivable

Private Education Loans

Our Private Education Loans are accounted for at cost or at the lower of cost or market if the loan is held-for-sale.

For Private Education Loans, fair value was determined by using observable quoted prices for similar assets in our most recent market transactions.

4 unchanged sentences

FFELP Loans, Personal Loans, and Credit Cards

Our FFELP Loans, Personal Loans and Credit Cards are accounted for at cost or at the lower of cost or market if the loan is held-for-sale.

For both Personal Loans and FFELP Loans, the fair value was determined by modeling expected loan level cash flows using stated terms of the assets and internally developed assumptions to determine aggregate portfolio yield, net present value and average life.

For FFELP Loans, Personal Loans and Credit Cards, the fair value was determined by modeling expected loan level cash flows using stated terms of the assets and internally developed assumptions to determine aggregate portfolio yield, net present value and average life.

The significant assumptions used to determine fair value are prepayment speeds, default rates, cost of funds and required return on equity.

2 unchanged sentences

As such, these are level 3 valuations.

Loans Held For Sale

Our loans held for sale are accounted for at the lower of cost or market.

The fair value was determined by using observable quoted prices for similar assets in our most recent market transactions.

These are considered level 2 valuations.

Tax Indemnification Receivable

8 unchanged sentences

These are level 1 valuations.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

Fair Value Measurements (Continued)

Certificates of Deposit

10 unchanged sentences

This is a level 2 valuation.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

Fair Value Measurements (Continued)

All derivatives are accounted for at fair value in the consolidated financial statements.

10 unchanged sentences

We also entered into various other ancillary agreements with Navient to effect the Spin-Off and provide a framework for our relationship with Navient thereafter, such as a transition services agreement, a tax sharing agreement, an employee matters agreement, a loan servicing and administration agreement, a joint marketing agreement, a key services agreement, a data sharing agreement and a master sublease agreement.

The majority of these agreements are transitional in nature with most having terms that have expired or will expire within the next one to two years.

The majority of these agreements were transitional in nature with most having terms that have expired or will expire within the next year.

We continue to have exposure to risks related to Navient’s creditworthiness.

1 unchanged sentence

Pursuant to the terms of the Spin-Off and applicable law, Navient is responsible for all liabilities (whether accrued, contingent or otherwise and whether known or unknown) arising out of or resulting from the conduct of pre-Spin-Off SLM and its subsidiaries’ businesses prior to the Spin-Off, other than certain specifically identified liabilities relating to the conduct of our consumer banking business for which the Bank is responsible.

Nonetheless, given the prior usage of the Sallie Mae and SLM names by entities now owned by Navient, we and our subsidiaries may from time to time be improperly named as defendants in legal proceedings where the allegations at issue are the legal responsibility of Navient.

Nonetheless, given the prior usage of the Sallie Mae and SLM names by entities now owned by Navient, we and our subsidiaries may from time to time be improperly named as

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

Arrangements with Navient Corporation (Continued)

defendants in legal proceedings where the allegations at issue are the legal responsibility of Navient.

Most of these legal proceedings involve matters that arose in whole or in part in the ordinary course of business of pre-Spin-Off SLM.

3 unchanged sentences

For additional information regarding the Separation and Distribution Agreement and the other ancillary agreements, see our Current Report on Form 8-K filed on May 2, 2014.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

Arrangements with Navient Corporation (Continued)

Separation and Distribution Agreement

2 unchanged sentences

• the allocation among the parties of rights and obligations under insurance policies;

the creation of a governance structure, including a separation oversight committee of representatives from us and Navient, by which matters related to the separation and other transactions contemplated by the Separation and Distribution Agreement will be monitored and managed.

• the creation of a governance structure by which matters related to the separation and other transactions contemplated by the Separation and Distribution Agreement are to be managed.

The Separation and Distribution Agreement provides specific processes and procedures pursuant to which we may submit claims for indemnification to Navient.

8 unchanged sentences

As of December 31, 2020, the remaining balance of the indemnification receivable related to those uncertain tax positions was $ 7 million.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

Arrangements with Navient Corporation (Continued)

Long-Term Arrangements

3 unchanged sentences

The term of the data sharing agreement expired on April 29, 2019, however.

SLM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, unless otherwise noted)

Arrangements with Navient Corporation (Continued)

The tax sharing agreement governs the respective rights, responsibilities and obligations of us and Navient after the Spin-Off relating to taxes, including with respect to the payment of taxes, the preparation and filing of tax returns and the conduct of tax contests.

1 unchanged sentence

The agreement also addresses the allocation of tax liabilities that are incurred as a result of the Spin-Off and related transactions.

Additionally, the agreement restricts the parties from taking certain actions that could prevent the Spin-Off from qualifying for the anticipated tax treatment.

Amended Loan Participation and Purchase Agreement

Prior to the Spin-Off, the Bank sold substantially all of its Private Education Loans to several former affiliates, now subsidiaries of Navient (collectively, the “Purchasers”), pursuant to this agreement.

This agreement predates the Spin-Off, but was significantly amended and reduced in scope in connection with the Spin-Off.

Post-Spin-Off, the Bank retained only the right to require the Purchasers to purchase Split Loans (at fair value) when the Split Loans either (1) were more than 90 days past due;

The agreement predates the Spin-Off, but was significantly amended and reduced in scope in connection with the Spin-Off.

Post-Spin-Off, the Bank retained only the right to require the Purchasers to purchase loans whose borrowers had a lending relationship with both the Bank and Navient (“Split Loans”) (at fair value) when the Split Loans either (1) were more than 90 days past due;

(2) had been restructured;

2 unchanged sentences

In the second quarter of 2018, we sold our remaining $ 43 million portfolio of Split Loans (both current and non-current loans) to Navient and recognized a net gain of $ 2 million.

During the year ended December 31, 2017, the Bank sold loans to the Purchasers in the amount of $ 12 million in principal and less than $ 1 million in accrued interest income.

There was no gain or loss resulting from loans sold to the Purchasers in the year ended December 31, 2017.

Total write-downs to fair value for loans sold to the Purchasers with a fair value lower than par totaled $ 5 million in the year ended December 31, 2017.

Navient is the servicer for all of these loans.

SLM CORPORATION

2 unchanged sentences

Regulatory Capital

The Bank is subject to various regulatory capital requirements administered by the FDIC and UDFI.

Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material adverse effect on our business, results of operations and financial condition.

The Bank is subject to various regulatory capital requirements administered by the FDIC and the UDFI.

Under the FDIC’s regulations implementing the Basel III capital framework (“U.S.

1 unchanged sentence

The Bank’s capital amounts and its classification under the prompt corrective action framework are also subject to qualitative judgments by the regulators about components of capital, risk weightings, and other factors.

Basel III is aimed at increasing both the quantity and quality of regulatory capital.

Certain aspects of U.S.

Basel III, including new deductions from and adjustments to regulatory capital and a capital conservation buffer, have been phased in over several years.

The Bank is subject to the following minimum capital ratios under U.S.

a Common Equity Tier 1 risk-based capital ratio of 4.5 percent, a Tier 1 risk-based capital ratio of 6.0 percent, a Total risk-based capital ratio of 8.0 percent, and a Tier 1 leverage ratio of 4.0 percent.

In addition, as of January 1, 2019, the Bank is subject to a fully phased-in Common Equity Tier 1 capital conservation buffer of greater than 2.5 percent.

(As of December 31, 2018, the Bank was subject to a Common Equity Tier 1 capital conservation buffer of greater than 1.875 percent.) Failure to maintain the buffer will result in restrictions on the Bank’s ability to make capital distributions, including the payment of dividends, and to pay discretionary bonuses to executive officers.

Including the buffer, as of January 1, 2019, the Bank is required to maintain the following capital ratios under U.S.

In addition, the Bank is subject to a Common Equity Tier 1 capital conservation buffer of greater than 2.5 percent.

Failure to maintain the buffer will result in restrictions on the Bank’s ability to make capital distributions, including the payment of dividends, and to pay discretionary bonuses to executive officers.

Including the buffer, the Bank is required to maintain the following capital ratios under U.S.

Basel III in order to avoid such restrictions:

1 unchanged sentence

To qualify as “well capitalized” under the prompt corrective action framework for insured depository institutions, the Bank must maintain a Common Equity Tier 1 risk-based capital ratio of at least 6.5 percent, a Tier 1 risk-based capital ratio of at least 8.0 percent, a Total risk-based capital ratio of at least 10.0 percent, and a Tier 1 leverage ratio of at least 5.0 percent.

On August 26, 2020, the FDIC and other federal banking agencies published a final rule that provides those banking organizations that adopt CECL during the 2020 calendar year with the option to delay for two years, and then phase in over the following three years, the effects on regulatory capital of CECL relative to the incurred loss methodology.

We have elected to use this option.

The final rule is substantially similar to an interim final rule issued on March 27, 2020.

Our January 1, 2020 CECL transition amounts increased the allowance for credit losses by $ 1.1 billion, increased the liability representing our off-balance sheet exposure for unfunded commitments by $ 116 million, and increased our deferred tax asset by $ 306 million, resulting in a cumulative effect adjustment that reduced retained earnings by $ 953 million.

This transition adjustment was inclusive of qualitative adjustments incorporated into our CECL allowance as necessary, to address any limitations in the models used.

SLM CORPORATION

4 unchanged sentences

Minimum Requirements Plus Buffer (1)(2)

Amount Ratio Amount Ratio

As of December 31, 2020:

16 unchanged sentences

Generally, under Utah’s industrial bank laws and regulations as well as FDIC regulations, the Bank may pay dividends from its net profits without regulatory approval if, following the payment of the dividend, the Bank’s capital and surplus would not be impaired.

The Bank declared $ 254 million in dividends to the Company for the year ended December 31, 2019, with the proceeds primarily used to fund the 2019 Share Repurchase Program and stock dividends.

The Bank paid no dividends on its common stock for the years ended December 31, 2018 and 2017, respectively.

The Bank declared $ 579 million and $ 254 million in dividends to the Company for the years ended December 31, 2020 and 2019, respectively, with the proceeds primarily used to fund the 2020 and 2019 Share Repurchase Programs and stock dividends.

The Bank paid no dividends on its common stock for the year ended December 31, 2018.

In the future, we expect that the Bank will pay dividends to the Company as may be necessary to pay any declared dividends on its Series B Preferred Stock and common stock and to consummate any common share repurchases by the Company under its repurchase programs.

2 unchanged sentences

The Sallie Mae 401(k) Savings Plan covers substantially all employees.

After six months of service, we match 100 percent of the first five percent of contributions for eligible employees.

After six months of service, we match 100 percent of the first 5 percent of contributions for eligible employees.

For the years ended December 31, 2020, 2019 and 2018, we contributed $ 8 million, $ 7 million and $ 5 million, respectively, to this plan.

25 unchanged sentences

The Court took the motion under advisement.

On July 17, 2018, the Mississippi Attorney General filed a lawsuit in Mississippi state court against Navient, Navient Solutions, LLC, and the Bank arising out of the Multi-State Investigation.

The complaint alleges unfair and deceptive trade practices against all three defendants as to private loan origination practices from 2000 to 2009, and against the two Navient defendants as to servicing practices between 2010 and the present.

The complaint further alleges that Navient assumed responsibility for these matters under the Separation and Distribution Agreement for alleged conduct that pre-dated the Spin-Off.

On September 27, 2018, the Mississippi Attorney General filed an amended complaint.

On October 8, 2018, the Bank moved to dismiss the Mississippi Attorney General’s action as to the Bank, arguing, among other things, that the complaint

To date, four other state attorneys general (California, Washington, Pennsylvania, and New Jersey) have filed suits against Navient and one or more of its current subsidiaries related to matters arising from the Multi-State Investigation.

Neither SLM, the Bank, nor any of their current subsidiaries are named in, or otherwise a party to, the California, Washington, Pennsylvania, or New Jersey lawsuits, and no claims are asserted against them.

Each complaint asserts in its own fashion that Navient assumed responsibility under the Separation and Distribution Agreement for the alleged conduct in the complaints prior to the Spin-Off.

On September 24, 2018, the Washington Attorney General served a third-party subpoena on the Bank calling for the production of certain records.

The Bank has responded to the subpoena.

SLM CORPORATION

2 unchanged sentences

Commitments, Contingencies and Guarantees (Continued)

failed to allege with sufficient particularity or specificity how the Bank was responsible for any of the alleged conduct, most of which predated the Bank’s existence.

On November 20, 2018, the Mississippi Attorney General filed an opposition brief and the Bank filed a reply on December 21, 2018.

The court heard oral argument on the Bank’s motion to dismiss on April 11, 2019.

On August 15, 2019, the court entered an order denying the Bank’s motion to dismiss.

On September 5, 2019, the Bank filed with the Supreme Court of Mississippi a petition for interlocutory appeal.

The Mississippi Attorney General filed an opposition to the petition for interlocutory appeal on September 19, 2019.

On October 16, 2019, the Supreme Court of Mississippi granted the Bank’s petition for interlocutory appeal and stayed the trial court proceedings.

To date, three other state attorneys general (California, Washington and Pennsylvania) have filed suits against Navient and one or more of its current subsidiaries related to matters arising from the Multi-State Investigation.

Neither SLM, the Bank, nor any of their current subsidiaries are named in, or otherwise a party to, the California, Washington or Pennsylvania lawsuits, and no claims are asserted against them.

Each complaint asserts in its own fashion that Navient assumed responsibility under the Separation and Distribution Agreement for the alleged conduct in the complaints prior to the Spin-Off.

On September 24, 2018, the Washington Attorney General served a third-party subpoena on the Bank calling for the production of certain records.

The Bank has responded to the subpoena.

Additional lawsuits may arise from the Multi-State Investigation which may or may not name the Company, the Bank or any of their current subsidiaries as parties to these suits.

19 unchanged sentences

Years Ended December 31,

2020 2019 2018

Statutory rate 21.0 % 21.0 % 21.0 %

4 unchanged sentences

federal and state, net of federal benefit 0.7 ( 0.1 ) ( 15.9 )

Excess tax benefits/deficiencies for employee stock-based compensation, federal and state, net of federal benefit

Impact of state rate change on net deferred tax liabilities, net of federal benefit

State, valuation allowance adjustments on net operating losses

Other, net 1.1 0.7 1.0

Effective tax rate 23.7 % 22.3 % 12.9 %

The effective tax rate varies from the statutory U.S.

federal rate of 21 percent primarily due to business tax credits and the impact of state taxes, net of federal benefit, for the year ended December 31, 2019 ;

the reduction in uncertain tax positions related to statute of limitation expirations and the impact of state taxes, net of federal benefit, for the year ended December 31, 2018 ;

and the impact of tax reform and state taxes, net of federal benefit, for the year ended December 31, 2017 .

federal rate of 21 percent primarily due to business tax credits and the impact of state taxes, net of federal benefit, for the year ended December 31, 2020 and 2019, respectively;

and the reduction in uncertain tax positions related to statute of limitation expirations and the impact of state taxes, net of federal benefit, for the year ended December 31, 2018.

Income tax expense consists of:

2020 2019 2018

Current provision:

Federal $ 172,153 $ 150,800 $ 102,516

State 28,387 24,378 32,638

Total current provision 200,540 175,178 135,154

Deferred benefit:

Federal 58,003 ( 8,240 ) ( 57,076 )

State 14,773 ( 1,474 ) ( 6,225 )

Total deferred benefit 72,776 ( 9,714 ) ( 63,301 )

14 unchanged sentences

Market value adjustments on student loans, investments and derivatives — —

Other 1,003 874

Total deferred tax assets 398,920 142,054

Deferred tax liabilities:

Fixed assets 11,098 10,475

Acquired intangible assets 7,767 5,453

3 unchanged sentences

Student loan premiums and discounts, net 11,336 3,398

Other 307 285

Total deferred tax liabilities 43,615 28,154

1 unchanged sentence

Included in operating loss carryovers are state net operating losses of $ 277 million and $ 6 million as of December 31, 2020 and 2019, respectively.

The Company has recorded a full valuation allowance against these net operating losses.

The valuation allowance is primarily attributable to deferred tax assets for state net operating losses that management believes is more likely than not to expire prior to being realized.

The Company has recorded a valuation allowance against these net operating losses of $ 277 million and $ 6 million, respectively.

Also included in operating loss carryovers is a capital loss of $ 16 million and $ 0 as of December 31, 2020 and 2019, respectively.

The Company has recorded a full valuation allowance against this capital loss.

The valuation allowance is primarily attributable to deferred tax assets for state net operating losses and capital losses that management believes is more likely than not to expire prior to being realized.

The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income of the appropriate character (i.e., capital or ordinary) during the period in which the temporary differences become deductible.

Management considers, among other things, the scheduled reversals of deferred tax liabilities and the history of positive taxable income in evaluating the realizability of the deferred tax assets.

Management believes that it is more likely than not that the results of future operations will generate sufficient taxable income to realize our deferred tax assets (other than state net operating loss carryovers as outlined above).

As of December 31, 2019 , the state net operating loss carryforwards will begin to expire in 2029.

SLM CORPORATION

2 unchanged sentences

Income Taxes (Continued)

As of December 31, 2020, the state net operating loss carryforwards will begin to expire in 2029 and the capital loss will expire in 2025.

Accounting for Uncertainty in Income Taxes

The following table summarizes changes in unrecognized tax benefits:

2020 2019 2018

Unrecognized tax benefits at beginning of year $ 53,509 $ 52,159 $ 131,608

16 unchanged sentences

Various combinations of subsidiaries, tax years, and jurisdictions remain open for review, subject to statute of limitations periods (typically 3 to 4 prior years).

The Company’s federal income tax return for the year ended December 31, 2015 is currently under audit by the Internal Revenue Service.

We do not expect the resolution of open audits to have a material impact on our unrecognized tax benefits.

10 unchanged sentences

We provide funding, delivery and servicing support for education loans in the United States through our Private Education Loan program.

Because of this concentration in one industry, we are exposed to credit, legislative, operational, regulatory, and liquidity risks associated with the student loan industry.

Because of this concentration in one industry, we are exposed to credit, legislative/political/reputational, operational, regulatory, liquidity, capital, and interest rate risks associated with the student loan industry.

Concentration Risk in the Revenues Associated with Private Education Loans

18 unchanged sentences

Total investments in subsidiaries (primarily Sallie Mae Bank) 2,689,027 3,326,578

Income taxes receivables, net 1,835 —

Tax indemnification receivable 18,492 27,558

Due from subsidiaries, net 47,357 42,544

Other assets 2,457 2,579

Total assets $ 3,298,242 $ 3,552,767

Liabilities and Equity

6 unchanged sentences

2.5 million and 4 million shares issued, respectively, at stated value of $ 100 per share

251,070 400,000

Common stock, par value $ 0.20 per share, 1.125 billion shares authorized:

456.7 million and 453.6 million shares issued, respectively

91,346 90,720

Additional paid-in capital 1,331,247 1,307,630

Accumulated other comprehensive income (loss) (net of tax expense (benefit) of ($3,995) and $3,436, respectively)

Accumulated other comprehensive loss (net of tax benefit of $( 10,908 ) and $( 3,995 ), respectively)

( 34,200 ) ( 12,367 )

Retained earnings 1,722,365 1,850,512

2 unchanged sentences

81.4 million and 32.5 million shares, respectively

( 798,993 ) ( 324,659 )

Total equity 2,562,835 3,311,836

Total liabilities and equity $ 3,298,242 $ 3,552,767

5 unchanged sentences

Years Ended December 31,

2020 2019 2018

Interest income $ 452 $ 2,663 $ 4,693

1 unchanged sentence

Net interest loss ( 14,444 ) ( 8,397 ) ( 6,366 )

Non-interest loss

Non-interest income (loss) 2,820 ( 10,856 ) ( 93,176 )

Non-interest expenses 57,945 39,423 41,893

2 unchanged sentences

Equity in net income from subsidiaries (primarily Sallie Mae Bank) 939,024 611,692 532,741

Net income 880,690 578,276 487,476

Preferred stock dividends 9,734 16,837 15,640

6 unchanged sentences

Years Ended December 31,

2020 2019 2018

Cash flows from operating activities:

Net income $ 880,690 $ 578,276 $ 487,476

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

3 unchanged sentences

Amortization of unsecured debt upfront fees 1,029 811 809

Gain on sale of Upromise subsidiary, net ( 11,331 ) — —

Decrease in investment in subsidiaries, net 53,698 2,611 9,495

Decrease in tax indemnification receivable — — 35,989

Decrease (increase) in due from subsidiaries, net

(Increase) decrease in due from subsidiaries, net ( 4,813 ) 6,254 ( 11,277 )

Increase in other assets ( 10,504 ) ( 12,999 ) ( 18,040 )

1 unchanged sentence

Decrease in payable due to entity that is a subsidiary of Navient ( 533 ) ( 416 ) ( 1,089 )

(Decrease) increase in other liabilities

Increase (decrease) in other liabilities 12,874 ( 5,796 ) 6,807

Total adjustments ( 323,430 ) ( 381,392 ) ( 540,315 )

Net cash used in operating activities

Net cash provided by (used in) operating activities 557,260 196,884 ( 52,839 )

Cash flows from investing activities:

Proceeds from the sale of Upromise subsidiary, net 16,922 — —

Net cash provided by investing activities 16,922 — —

2 unchanged sentences

Issuance costs for unsecured debt offering ( 1,309 ) — —

Redemption of Series A Preferred Stock

Repurchase of Series B Preferred Stock ( 68,055 ) — —

Common stock dividends paid ( 46,351 ) ( 51,114 ) —

2 unchanged sentences

Net cash used in financing activities ( 188,616 ) ( 235,152 ) ( 15,640 )

Net decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents 385,566 ( 38,268 ) ( 68,479 )

Cash and cash equivalents at beginning of year 153,508 191,776 260,255

4 unchanged sentences

Selected Quarterly Financial Information (unaudited)

(Dollars in thousands, except per share data)

First Second Third Fourth

(Dollars in thousands, except per share data) Quarter Quarter Quarter Quarter

Net interest income $ 400,116 $ 348,775 $ 364,567 $ 366,537

provisions for credit losses 61,258 351,887 ( 3,640 ) ( 316,372 )

Net interest income after provisions for credit losses

Net interest income (loss) after provisions for credit losses 338,858 ( 3,112 ) 368,207 682,909

Gains (losses) on sales of loans, net 238,935 ( 369 ) ( 4 ) ( 247 )

Gains (losses) on derivative and hedging activities, net 45,672 3,751 ( 15 ) 136

Other income (loss)

Total non-interest expenses

Income tax expense

Other income 7,487 25,412 9,646 1,043

Total operating expenses 147,298 141,557 127,490 121,743

Total restructuring expenses — — 24,127 2,088

Income tax expense (benefit) 121,481 ( 30,664 ) 55,189 127,310

Net income (loss) 362,173 ( 85,211 ) 171,028 432,700

Preferred stock dividends 3,464 2,478 2,058 1,734

Net income attributable to SLM Corporation common stock

Basic earnings per common share attributable to SLM Corporation (1)

Diluted earnings per common share attributable to SLM Corporation (1)

Net income (loss) attributable to SLM Corporation common stock $ 358,709 $ ( 87,689 ) $ 168,970 $ 430,966

Basic earnings (loss) per common share attributable to SLM Corporation (1)

$ 0.88 $ ( 0.23 ) $ 0.45 $ 1.15

Diluted earnings (loss) per common share attributable to SLM Corporation (1)

$ 0.87 $ ( 0.23 ) $ 0.45 $ 1.13

Declared dividends per common share attributable to SLM Corporation $ 0.03 $ 0.06 $ — $ 0.03

5 unchanged sentences

Selected Quarterly Financial Information (unaudited) (Continued)

(Dollars in thousands, except per share data)

First Second Third Fourth

(Dollars in thousands, except per share data) Quarter Quarter Quarter Quarter

Net interest income $ 402,281 $ 396,868 $ 405,065 $ 419,101

1 unchanged sentence

Net interest income after provisions for credit losses 338,491 303,493 305,539 321,543

Gains on sales of loans, net

Losses on sales of securities, net

Gains (losses) on derivative and hedging activities, net 2,763 16,736 1,961 ( 3,635 )

1 unchanged sentence

Total non-interest expenses 140,147 138,806 153,621 141,679

Income tax expense (benefit)

Income tax expense 56,296 33,801 40,701 34,666

Net income 158,189 150,277 128,458 141,352

Preferred stock dividends 4,468 4,331 4,153 3,885

1 unchanged sentence

Basic earnings per common share attributable to SLM Corporation (1)

$ 0.35 $ 0.34 $ 0.29 $ 0.33

Diluted earnings per common share attributable to SLM Corporation (1)

$ 0.35 $ 0.34 $ 0.29 $ 0.32

Declared dividends per common share attributable to SLM Corporation $ 0.03 $ 0.06 $ — $ 0.03

(1) Basic and diluted earnings per common share attributable to SLM Corporation are computed independently for each of the quarters presented.

4 unchanged sentences

Subsequent Events

2020-A Securitization

On February 12, 2020, we executed our $ 636 million SMB Private Education Loan Trust 2020-A term ABS transaction, which was accounted for as a secured financing.

We sold $ 636 million of notes to third parties and retained a 100 percent interest in the residual certificates issued in the securitization, raising approximately $ 634 million of gross proceeds.

The Class A and Class B notes had a weighted average life of 4.18 years and priced at a weighted average LIBOR equivalent cost of 1-month LIBOR plus 0.88 percent .

2021 Loan Sales and 2021-A Securitization

On January 8, 2021, we sold $ 3 billion of our Private Education Loans, including $ 2.8 billion in principal, $ 185 million in capitalized interest and $ 15 million in accrued interest to an unaffiliated third party.

The transaction qualified for sale treatment and removed the balance of the loans from our balance sheet on the settlement date.

We will continue to service these loans.

On February 9, 2021, we closed an SMB Private Education Loan Trust 2021-A term ABS transaction (the “2021-A Transaction”), in which the unaffiliated third-party sold to the trust approximately $ 2.5 billion of Private Education Loans that the third-party seller previously purchased from us, as described above.

In the 2021-A Transaction, we were the sponsor, servicer and administrator, and the seller of an additional approximately $ 130 million of Private Education Loans.

The sale of such additional loans qualified for sale treatment and removed these loans from our balance sheet on the settlement date of the 2021-A Transaction.

In connection with the 2021-A Transaction, we retained a 5 percent vertical risk retention interest (i.e., 5 percent of each class issued in the securitization).

We classified those vertical risk retention interests related to the 2021-A Transaction as available-for-sale investments, except for the interest in the residual class, which we classified as a trading investment recorded at fair value with changes recorded through earnings.

Final Settlement of ASR

On January 26, 2021, we completed our ASR with a third-party financial institution and we received an additional 13 million shares.

In total, we repurchased 58 million shares under the ASR at an average price per share of $ 9.01 .

For additional information regarding this ASR, see Notes to Consolidated Financial Statements, Note 13, “Stockholders’ Equity.”

Commencement of Common Stock Cash Tender Offer

The Tender Offer may be amended from time to time, and will expire, upon the terms and conditions described in the relevant Tender Offer materials filed with the SEC.

The results of the Tender Offer will be reflected in the Company’s financial results for the first fiscal quarter of 2021.

Amended and Increased Secured Borrowing Facility

On February 19, 2020, we amended and extended the maturity of the Secured Borrowing Facility, discussed in Note 9, “Borrowings.” The amended Secured Borrowing Facility is a $ 2 billion Secured Borrowing Facility (previously $ 750 million before the amendment), under which the full $ 2 billion is available for us to draw.

Under the amended Secured Borrowing Facility, we incur financing costs on unused borrowing capacity and on outstandings.

On February 17, 2021, we amended and extended the maturity of the Secured Borrowing Facility, discussed in Note 11, “Borrowings.” The amended Secured Borrowing Facility is a $ 2 billion Secured Borrowing Facility, under which the full $ 2 billion is available for us to draw.

Under the amended Secured Borrowing Facility, we incur financing costs on unused borrowing capacity and on outstanding advances.

The amended Secured Borrowing Facility extended the revolving period, during which we may borrow, repay and reborrow funds, until February 16, 2022.

The scheduled amortization period, during which amounts outstanding under the Secured Borrowing Facility must be repaid, ends on February 16, 2023 (or earlier, if certain material adverse events occur).

2020 Loan Sales

On February 20, 2020, we sold $ 954 million in principal and $ 68 million in accrued interest of Private Education Loans to an unaffiliated third party.

The transaction qualified for sale treatment and removed the balance of the loans from our balance sheet on the settlement date.

We will continue to service these loans.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures