At this time I would like to welcome everyone to the SLM Corporation First Quarter 2008 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Mr. Steve McGarry, Senior Vice President of Investor Relations.

Good morning everybody, thank you for joining us this morning. With me on the call today are Al Lord our CEO and Jack Remondi our Chief Financial Officer. Before we get started and I turn the call over to Al let me read the forward looking statement. Please note that during the conference call we may discuss predictions and expectations and may make other forward looking statements. Actual results in the future may differ from those discussed here, perhaps materially based on a variety of factors. Listeners should refer to the discussion of those factors on the company’s Form 10-K and other filings with the SEC. During the course of this conference call we will refer to non-GAAP measures that we call our core earnings presentation. The description of core earnings, a full reconciliation of the core earnings presentation to GAAP measures and our GAAP results can be found in our first quarter 2008 supplemental earnings disclosure accompanying the earnings press release which we posted under the Investors page at our website www.SallieMae.com. Thank you. Now I’ll turn the call over to Al.

Good morning. The last two earnings announcements that we’ve done, we’ve actually done in person, standing in front of you back in October and January. That was because there was a great deal of news to relate at the time and frankly there’s a great deal of news to relate to you today. The first piece I will mention is that today we are not reducing our 2008 earnings forecast. We continue to target $1.70 to $1.80 a share of core earnings. In January we announced to you that we would make some changes on our Board and our Management. As you are probably aware by now the Board changes have added some financial, legal and capital markets expertise. In 2008 we’ve added Frank Puleo, Mike Martin, Howard Newman, you met Tony Terracciano in January but he’s also obviously new to the Board in 2008. We intend to add one more Board member later this year. The Board will have turned over roughly one third including a new Board Chairman. On the executive floor I am increasingly pleased with the team that is serving the Board and you, as shareholders. It’s a very different team than we had a year ago. We’ve recently added Jack Hewes to be our Chief Credit Officer, Jack is a very highly experienced guy. We are pushing very aggressively to build both the breadth and the depth of our private credit team. About the quarter, when we last met we were talking about a vastly changed due to loan landscape because the capital markets it has changed even a great deal more since January. You guys have seen our quarterly earnings. I understand some analysts might even be pleasantly surprised at our $0.48 run rate quarter. I am not particularly pleased with the $0.48. I’m…

Good morning everyone. I’m going to take the next few moments to review our operating results for the quarter about the core cash and GAAP basis. In addition, I will review the performance of our private credit portfolio, changes to our loan origination plans, our funding requirements and our cost reductions. Finally, I’ll provide an update on our outlook for the balance of the year. As we began 2008 we spoke of significant challenges. Most of these such as dealing with our non-traditional private credit portfolio were within our control and have been addressed. Once significant challenge not only remains but is now worse, access to reasonably priced funding. This issue is significantly compounded by the steady exit or reduced commitments of other FFELP lenders. Our outlook in loan origination activities are very much dependent upon how this major issue evolves during the next week or so. Although we are waiting a potential resolution to this issue from Washington I want to be perfectly clear we will not do business that jeopardizes the company’s liquidity position or franchise value. For the quarter our core cash earnings including non-recurring items were $188 million or $0.34 per share compared to $251 million or $0.57 per share. These results include non-recurring charges of $82 million from the accelerated loan premium amortization resulting from our decision to stop making consolidation loans and of $21 million restructuring expense. Excluding these charges earnings were $254 million or $0.48 per share. Our net interest income including the $82 million non-recurring charge was $567 million in the quarter versus $644 million in the prior year. The net interest margin declined to 1.24% from 1.64% in the year ago quarter. The decrease is the result of several factors including the non-recurring premium amortization charge which totaled 19 basis points…

[Operator Instructions] Your first question will be from Matt Snowling from FBR Capital Markets. Matt Snowling – FBR Capital Markets: You have in your supplement you have about $19 billion of unencumbered FFELP assets as part of your liquidity sources. Is that even a viable option given where the ABS market is today?

Certainly it’s a viable option in terms of providing liquidity. Obviously the cost of the securitization activity is higher than we would like to experience. In terms of actually providing cash to meet obligations we do believe it’s a viable source. Matt Snowling – FBR Capital Markets: In terms of funding new loans you wouldn’t necessarily want to go out and lock a higher spread I guess is what I was getting at.

It depends on the usage. An example would be if you were to securitize these loans at libor plus 140 and used the proceeds to buy back debt that yielding libor plus 500 that would be an excellent use. Obviously it would not be a good use in terms of raising money at those levels to buy new loans at a loss and that’s principally what we are working with Washington on at this point to make them realize, which they do, that lenders can’t lend at these kinds of spreads and expect to meet the rise in demand that we are seeing from students for this upcoming academic season. Matt Snowling – FBR Capital Markets: Clarifying your guidance, the $1.70 to $1.80 range is that based off the $0.34 or $0.48 number?

$0.48

Your next question will be from the line of Brad Ball of Citi. Brad Ball – Citi: I wonder if you could give us a sense for your view of the core cash student loan spread over the next couple of quarters to get to your $1.70 to $1.80 guidance and then I have another follow up after that.

The number is going to be in the mid to high 150’s for the balance of the year. Most of that, as I mentioned in my comments, because of the high percentage of the portfolio that’s funded to term or funded with four year average life liabilities that spread is pretty solid. What changes of course will depend on how much funding we do or how many loans we originate during the balance of this year and what those funding sources are. At this stage in the game, when we look at the demand that’s coming through the door its pretty clear, as I said in my testimony to the Senate the other day earlier this week the pace of which applications are coming in is not a pace that we can fund. The access to liquidity is just not there and of course the cost is just too high to continue those kinds of activities. It’s early in the process, its only April and April is still a relatively light month in terms of applications but it is something that we are monitoring each and every day and keeping people in Washington informed as to what is happening here. Brad Ball – Citi: The second disbursements that seem to have a lifting impact on your first quarter spread does that go away entirely or does it diminish as the year progresses?

Second disbursements are pretty much done at this stage in the game. We still have commitments to buy old loans, pre-10/1 loans from our third party lender clients. We will be bringing in some volume that is subject to these older terms. That runs off pretty quickly during the course of this year with a small balance trailing into 2009 as well. Going forward what’s coming through the door is going to be principally post-10/1 loans. Brad Ball – Citi: With respect to your obligation or your commitments to extending FFELP loans even during these trying times how willing are you to continue making loans that are unprofitable with the uncertainty that’s facing us in Washington?

I think at this stage in the game, when asked to grade the seriousness of the issue on Monday I said it was between 9 and 10. Given the announcements of some lenders this week its certainly moving to the high end of that range. It’s a limited timeframe.

If we didn’t convey the urgency of the issue and we haven’t been particularly successful to date. Jack and I and our executive management team and the Board are very engaged in working this through. As I said, we feel a special obligation to make sure that this program operates without a serious hiccup. We think it’s important for the confidence of students and schools that there not be a dry period here for the students. We are literally in daily deliberations about how much further we can go. What I would ask you and other shareholders and questioners is to give us a little breathing space in the coming days to try to sort this through both with our various constituencies of schools, students, shareholders and the Federal Government. Brad Ball – Citi: One last question you proposed to the Senate Banking Committee that the Federal Financing Banks step up and provide funding for the guarantee portion of FFELP loans. Is there any limitation on their capacity to do that at the FFB or is the FFB’s balance sheet big enough to absorb all of the FFELP loans you envision needing support?

That’s a good question because I think there was some confusion on this topic at the hearing. The FFB has unlimited ability to borrow from the US Treasury Department. There are no limits as to what they can do. The $15 billion number referenced in that Committee hearing was a limit as to the amount of debt the FFB can issue directly to investors. It does not limit what they can acquire in terms of loans or participation as was proposed. That doesn’t mean that they come up with a solution that is unlimited in size its just there are no limits that we are aware of as to what they can fund.

Your next question will be from the line of Moshe Orenbuch of Credit Suisse. Moshe Orenbuch – Credit Suisse: Assuming that next week the Administration does come with some kind of plan that allow the Federal Financing Bank to support the securitization market, obviously the rise in spreads is a combination of general market stuff and the combination of reduced excess spread and higher credit somewhat higher credit risk in your FFELP assets do you have a point of view as to how much of that 140 basis points might be able to be recovered if they were to do that? The converse being how much would be structurally higher because of the new FFELP profitability?

Obviously between the 140 basis point cost to funds, 130 basis points higher than where it was last summer plus the 70 basis point reduction in yields have us absorbing a 200 basis point reduction in spread. That is a problem and it’s coming from both sides. As to how much of that 10 basis points the 140 is credit we actually think very very little. The issues here, we don’t hear any kind of feedback from investors of concerns about credit. As I mentioned 100% of the loans can default in the AAA holders get paid in full. It’s, in our view more a lack of willingness of investors to buy asset backed securities at this stage in the game. We do believe that the Federal Financing Bank option does provide some relief here. It’s obviously very difficult to quantify that but it does take the supply issue of what has potentially coming into the market in terms of new asset backed securities down and gives, I think investors confidence that the Federal Government is supporting this program. Those two factors ideally will help to reduce spreads but it’s hard to say by how much. Moshe Orenbuch – Credit Suisse: Will that have an impact on the private side or is that going to be a separate issue?

It’s hard to figure that out but I think the one thing where it helps us meet our demand we will see from investors for private credit loans. It frees up potentially what we are funding on balance sheet on the FFELP side of the equation, you can use those dollars for private credit funding instead.

[Operator Instructions] Your next question will be from the line of [Renee Toct of Carrin]. [Renee Toct – Carrin]: In the report released by Moody’s for April of this year Moody’s flagged that you are facing certain collateral posting agreements under you ISDA contracts as the result of your downgrades. Could you give us any visibility on current aggregate collateral posting obligations and the status of further demands for collateral percentage of ISDA agreements?

All of our derivative counter parties’ regardless of our corporate rating require collateral posting when positions move in favor for or against. Right now our collateral positions are net positive to us and so our counter parties are posting collateral to Sallie Mae. The issue there was more the use of that collateral and under certain downgrade levels that collateral would have had to have been restricted in use. All of our counter parties have waived those provisions for the DDD minus rating and we have full use of that collateral posting today. It’s more of a use of collateral versus the amount of collateral that needed to be posted. [Renee Toct – Carrin]: Can you share with us the aggregate amount of such collateral with which the waive related to. How much hypothetically can the banks decide not to continue with the waiver status? Would they potentially require you to keep on balance sheet?

Those waivers were permanent and so some other event would have to occur for that to change. The amount of collateral that we are currently the net beneficiary of is about $2 billion. As I said, all that would have changed here. The standard process in ISDA agreements between counter parties is to postpone collateral back and forth regardless of rating. Its really just who has use of that collateral. The $2 billion is now cash on our balance sheet, although we certainly view that as restricted and not available for immediate liquidity needs.

Your next question will be from the line of Cyril Battini of Credit Suisse Cyril Battini – Credit Suisse: I’d like to touch upon your debt and liquidity. Your short term borrowing went up by $2 billion, is that from the bank lines?

That was under our asset backed commercial paper program where those borrowings took place, $34 billion in total facility 364 day maturity non-recourse to the company. Cyril Battini – Credit Suisse: Looking at your liquidity profile your total sources of primary and standby liquidity of $37.5 billion is just under total managed borrowings can you talk about the mitigating factor to meet those maturing liabilities?

On balance sheet there are different types of liabilities. There are non-recourse liabilities which is the $34 billion credit facility that I mentioned of which there is approximately $26 billion outstanding. Then there are unsecured debt obligations which are corporate bonds that have been issued in prior periods. When we look at what we have in terms of maturity there is approximately $7 billion of unsecured corporate debt that is maturing in the balance of 2008 and an additional $8 billion in 2009. When I mentioned our sources of liquidity in my prepared remarks we look at that, we look at all of the debt maturity, interest payments and other cash going out the door including commitments to buy loans that we have with existing lenders or to fund second disbursements in our existing sources of liquidity meet all of those obligations through 2012.

Your next question will be from the line of Bruce Harting with Lehman Brothers. Bruce Harting – Lehman Brothers: It seems like we’ve got a case of huge unintended consequence from the legislation to reduce spread which was meant to make lending better for the borrow but its having the exact opposite effect exacerbated by the credit crisis resulting in what could be catastrophic for the student in this school year. Is that a safe way of looking at this right now? Not covering a lot of components of the lending business the Federal Direct and some of the other non-public companies just looking at market share just seems like with so many companies pulling out of the consolidation loan business and the FFELP business can you help size the best case versus a worse case 2008 scenario depending on whether we do get as you say a system wide liquidity solution or we don’t get that. Best case, worse case from not only your share outlook but what it will look like for the students if there’s not a fix here.

Let me try to take the first part first. I think you were talking about unintended consequences. At this juncture it’s a little difficult to parse basis points. Unfortunately there are so many basis points that have entered the fray. At this point our borrowing costs are up about 130 basis points against our best term financing but I think they are up 125 probably 115 against what we would have expected to fund in the term ABS markets. The legislation cost 70 basis points more so we are looking at 175 to 200 basis point decline in the margin of the student loan that does not have anywhere near 200 basis points to play with. Whether it was legislation or the term ABS markets is very difficult to pinpoint. At this point it’s almost irrelevant because the fact is that the economics just aren’t working and we need to make a structural change. You asked for best and worse case for 2008, I think you were talking about our operating results. I think our numbers, best case they don’t change very much from what we’ve put forward. We would not be expecting much if any margin in a solution from the Government. We very much would expect to get paid for originating and servicing assets which is basically what we do and do well. I would say, with respect to the numbers that we’ve put on the table for this year, as Jack said, the low end of the $1.70 to $1.80 range. The differences wouldn’t really be very much worth getting into it at this point. I think you did touch on the most important issue and that is kids getting loans without some major operational or financing snafu and as I said in my prepared remarks I’m very heartened by the recognition, the powers that be and the people that are most important to a solution here get it. Obviously Government has a variety of heads but I’ve been very very pleased with the way that not only the various parts of Government but the two parties that work together on this. I really do believe that they understand that there’s an issue. As I said, we have only begun, literally in the last two weeks our volume flow has exploded and we’ve tried to convey that these issues have moved very much forward. It may well be just because banks have backed out and we are aware of quite a number of banks that are not playing, that you haven’t read about. The other issue is that students reading the newspaper about credit availability are moving up their application flow. I think there are unintended consequences from the legislation but its not clear to me that the crisis would have been maybe less intense and maybe a little bit later had the legislation not passed. It’s at least a two part problem.

Your next question will be from the line of Sameer Gokhale of KBW. Sameer Gokhale – KBW: I was wondering if you could share your thoughts on the issue of using the Federal Finance Bank again as a source of liquidity in the market. It certainly seems like that would be the quickest most efficient solution but in your discussions with people on the Hill is it your sense that there is significant resistance to this idea or is it just that it seems like the legislators and other folks on the Hill are trying to work through a variety of different solutions to try to get at the most optimal solution. If you could comment on that, that would be great.

As you heard from the Senate hearing earlier this week on Tuesday, Senator Dodd, Chair of that Committee came out at the beginning and supported the Federal Financing Bank option and by the end of that hearing he had bipartisan support for that. I think people are gravitating towards that solution because it is the most viable lowest cost and fastest solution available to policy makers right now. Anything else requires a fair amount of contractual negotiations and/or legislation and that just slows everything down. If more time were available perhaps these solutions might be better. We are at the cust of peak lending and we don’t have weeks or months to resolve this solution. They need a solution today. Options like lender of last resort that require renegotiation and setting up an infrastructure to originate and process loans are just very very time consuming to put into place. Similarly other options that might be available from the Department of Education require legislation to pass and as Senator Dodd said at his hearings he sees that as being a very very difficult thing to do in the timeframe that’s available. Sameer Gokhale – KBW: On a different topic, I don’t know if you addressed this when I was trying to get back on the call but in terms of capital levels can you talk about whether you will be seeking to additional growth capital at some point in time and if so when, how are you thinking about your capital adequacy at this point?

The approach that we use for what our capital levels should be is very much driven by our asset allocation mix. We fully understand that our private credit loans require more capital than our Federal student loans. We allocate capital according to that and have consistently done that for a number of years with rating agencies. We do not get a lot of push back from the rating agencies on those levels. Federal student loans because of that explicit government guarantee and the historically low levels of losses that we incur on that portfolio require very little capital. That is consistently applied even today in the asset backed securities market. There have been very little changes to that at the rating agency level and perhaps more importantly at the investor level. We are not seeing higher subordination requirements in our Federal student loan asset backs because of any credit concerns there. It’s also important to note that the level may look low relative to other financial institutions but other financial institutions don’t have a mix of assets where 82% of their portfolio carried that explicit Government guarantee. When you look at that and you look at the fact that, also I think another important differential between ourselves and other financial institutions is the significant portion of our portfolio is match funded to the duration of the asset. It creates no liquidity, normally you’d say there is little credit risk but you need liquidity capital. If 65% of your loans are funded for the life of the loan you don’t need to maintain lots of liquidity capital against that asset. We think when you take all of these factors together that our capital level is adequate; the rating agencies in their write ups even through the downgrade process have reaffirmed that. Their issues are the same ones that we fully acknowledge, that it’s more about funding and liquidity today than it is about asset quality or capital. The short answer after my long one is that we think our capital is adequate at the moment and don’t see any need to raise additional capital at this stage in the game. Sameer Gokhale – KBW: My last question was related to the impairment charges in the asset performance group. Were those impairment charges all because you expect to collect less on those portfolios than you paid for them or are they because of the accounting rules requiring you to record an impairment charges when you expect to collect less than you originally estimated even though it may still be more than your originally paid for those portfolios?

It’s the accounting rules that are driving this. It is two things. It’s both collecting less and the collection periods are extending in that process and when you extend that term you have to take an impairment charge as well.

There are no further questions at this time. Are there any closing remarks?

No, that pretty much wraps it up. Thank you everybody for joining us this morning on the call.

This concludes today’s conference call. Thank you for your participation you may now disconnect.