Sallie Mae Investor Presentation Chock Full of Industry and Company Data

Glancing through Sallie Mae's 83-page investor presentation filed with the SEC on Friday.  Here were some interesting insights/data (with page numbers):

• Total outstanding federal student loan market of $636 billion with $487 billion controlled by FFELP lenders (77% of total) as of 9/30/2009 (slide #13)
  
  • Sallie Mae is top holder of federal student loans with $154 billion or 37% of total FFELP volume.

• Highlighted three aspects of business model going forward (slide #14)
  • FFELP loan portfolio, guarantor collections and servicing
    • "Generating substantial income and cash flow"
  • Private education loan originations and servicing
  • Sallie Mae servicing - identified industry consolidation as opportunity

• While federal student loans have grown at compounded annual rate of 12% from 2002-2008, President's 2011 budget projects a 6% growth rate going forward which seems quite conservative (slide #15).

• While overall unemployment near 10%, college graduates experiencing rates about 50% lower, or around 5.0% (slide #16).

• Provided reasons why SLM's private student loan volume has decreased 50% + over last few quarters:  "tighter underwriting criteria, an increase in federal student loan limits, an overall increase in the use of federal student loans as well as an increase in federal student grants (slide #22)"
  • 1Q 2010:  Average FICO score of 740 with cosigner rate of 85%
  • SLA estimates $20 billion increase in federal student loans for 2009-10 and $10 billion for Pell Grants

• Cost of attendance gap has grown for both public and private schools in the last decade:
  • Private school gap has grown from $93,800 to $111,500 in real terms
  • Public school gap has grown from $24,600 to $29,800 in real terms

• Average loan size has declined 20-30% in 1Q 2010 compared to 2008 (slide #28) and over 21% of loans in 1Q 2010 from proprietary schools down from 29.1% in 2008.

• Private education loan chargeoffs in 2009 of 6.0% exceeded loan spread of 4.5%.  1Q 2010 chargeoffs just slightly higher than loan spread of 4.5%.

• Chargeoffs still coming disproportionately from the non-traditional portfolio:  11% of portfolio generated 40% of chargeoffs in 1Q 2010 (slide #35)

• Chargeoff rates with/without a cosigner in Q1 2010 (slide #36):
  • Traditional portfolio:  2.0% vs. 5.0%
  • Non-traditional:  10.6% vs. 17.9%

• Highlighted the locations for their servicing business (#43):
  • Fishers and Muncie, Indiana
  • Wilkes-Barre, Pennsylvania
  • Newark, Delaware

• Provide chart with recent ABS transactions showing how funding costs have declined for both FFELP and private credit (slide #46)

• Information on bank deposits held at Sallie Mae Bank (source of funding for private student loans) shows importance of brokered deposits (88% of deposits) and worrisome 10% decline in deposits since June of 2009 (slide #57).  

• Slides #69 and #70 show default emergence based on time in repayment and number of payments
  • 55% of defaults occur within first 24 payments
  • 55% of defaults occur within first five years of repayment

• Highlighted activities to improve private credit loan collections: