8-K

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 15, 2004

SLM CORPORATION (Exact name of registrant as specified in its charter)
DELAWARE (State or other jurisdiction of incorporation)	File No. 001-13251 (Commission File Number)	52-2013874 (IRS Employer Identification Number)

11600 Sallie Mae Drive, Reston, Virginia
(Address of principal executive offices)
20193
(zip code)

Registrant's telephone number, including area code: (703) 810-3000

Not Applicable
(Former name or former address, if changed since last report)

Item 12. Results of Operations and Financial Condition

        On July 15, 2004, SLM Corporation issued a press release with respect to its earnings for the fiscal quarter ended June 30, 2004, which is furnished as Exhibit 99.1 to this Current Report on Form 8-K. Additional information for the quarter, which is available on the Registrant's website at www.salliemae/investor/corpreports.html, is furnished as Exhibit 99.2.

SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

SLM CORPORATION
By:	/s/  C.E. ANDREWS
	Name:	C.E. Andrews
	Title:	Executive Vice President, Accounting and Risk Management

Dated: July 15, 2004

SLM CORPORATION

Form 8-K

CURRENT REPORT

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press Release dated July 15, 2004
99.2	Additional Information Available on the Registrant's Website

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Item 12. Results of Operations and Financial Condition

SIGNATURES
EXHIBIT INDEX

EX-99.1

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Exhibit 99.1

	N E W S        R E L E A S E
FOR IMMEDIATE RELEASE	Media Contacts: Tom Joyce 703/810-5610 Martha Holler 703/810-5178	Investor Contacts: Steve McGarry 703/810-7746 Nam Vu 703/810-7723

SLM CORPORATION SECOND QUARTER LOAN ORIGINATIONS UP 24 PERCENT

Fee Income Businesses Grow 21 Percent

RESTON, Va., July 15, 2004—SLM Corporation (NYSE: SLM), commonly known as Sallie Mae, today reported second-quarter 2004 earnings and performance results that include $2.3 billion in preferred channel loan origination activity, a 24-percent increase from the prior year. Also included in the quarterly figures was a 32-percent jump in originations through Sallie Mae's owned brands, and a 21-percent increase in fee income, driven largely by the company's debt management operation.

        Preferred channel loan originations consist of loans created by the company's owned or affiliated brands. These loans are a key measure of Sallie Mae's market share success and, as an indicator of future loan acquisition volume, drive the company's earnings growth. At quarter end, the company's total managed loan portfolio totaled $94.9 billion, a 14-percent increase from the same time last year.

        In addition, the company reported that it is 98 percent complete in the wind down of its government-sponsored enterprise (GSE), with $2.2 billion in student loans remaining in the GSE, as compared to $16 billion at March 31, 2004. The company now expects to complete its full privatization in early 2005.

        "We are pleased to be able to deliver this earnings growth while moving so near to full privatization," said Albert L. Lord, vice chairman and chief executive officer.

        Sallie Mae reports financial results on a GAAP basis and also presents certain non-GAAP or "core cash" performance measures. The company's equity investors, credit rating agencies and debt capital providers request these "core cash" measures to monitor the company's business performance.

        Sallie Mae reported second-quarter 2004 GAAP net income of $615 million, or $1.36 per diluted share, compared to $373 million, or $.80 per diluted share, in the year-ago period. GAAP net income for the first half of 2004 totaled $906 million compared to $789 million in 2003.

        "Core cash" net income for the quarter was $237 million, up from $210 million in the year-ago period. On a diluted share basis, the company increased 18 percent in the quarter to $.52, compared to $.44 per diluted share in the 2003 second quarter. "Core cash" net interest income was $445 million for the quarter and $879 million for the first half of 2004, up from $393 million and $766 million for the same periods last year.

        "Core cash" other income, which consists primarily of fees earned from guarantor servicing and debt management, was $166 million for the 2004 second quarter, down from $174 million for the prior quarter and up 21 percent from the year-ago quarter's $137 million. "Core cash" operating expenses were $199 million, down from $202 million in the prior quarter, and up from $183 million in the year-ago quarter.

        A description of the "core cash" treatment and a full reconciliation to the GAAP income statement can be found at www.salliemae.com.

        Total equity for the company at June 30, 2004, was $2.9 billion, an increase of $554 million from a year ago. Tangible capital stood at 1.93 percent of managed assets, as compared to 1.81 percent as of June 30, 2003.

        The company will host its regular earnings conference call today at noon. Sallie Mae executives will be on hand to discuss various highlights of the quarter and to answer questions related to the company's performance. Individuals interested in participating should call the following number today, July 15, 2004, starting at 11:45 a.m. EDT: (877) 356-5689 (USA and Canada) or (706) 679-0623 (International). The conference call will be replayed continuously beginning Thursday, July 15, at 3:30 p.m. EDT and concluding at 11:59 p.m. EDT on Thursday, July 22. Please dial (800) 642-1687 (USA and Canada) or dial (706) 645-9291 (International) and use access code 7961444. In addition, there will be a live audio Web cast of the conference call, which may be accessed at www.salliemae.com. A replay will be available 30-45 minutes after the live broadcast.

***

Statements in this release referring to expectations as to future market share, the successful consummation of any business acquisitions and other future developments are forward-looking statements, which involve risks, uncertainties and other factors that may cause the actual results to differ materially from such forward-looking statements. Such factors include, among others, changes in the terms of student loans and the educational credit marketplace arising from the implementation of applicable laws and regulations, and from changes in such laws and regulations, changes in the demand for educational financing or in financing preferences of educational institutions, students and their families, and changes in the general interest rate environment. For more information, see the company's filings with the Securities and Exchange Commission.

***

SLM Corporation (NYSE: SLM), commonly known as Sallie Mae, is the nation's leading provider of education funding, managing nearly $95 billion in student loans for more than 7 million borrowers. The company primarily provides federally guaranteed student loans originated under the Federal Family Education Loan Program (FFELP), and offers comprehensive information and resources to guide students, parents and guidance professionals through the financial aid process. Sallie Mae was established in 1973 as a government-sponsored enterprise (GSE) called the Student Loan Marketing Association, and began the privatization process in 1997. Since then, the parent company name has changed, most recently to SLM Corporation. Through its specialized subsidiaries and divisions, Sallie Mae also provides an array of consumer credit loans, including those for lifelong learning and K-12 education, and business and technical products and services for colleges and universities. More information is available at http://www.salliemae.com. SLM Corporation and its subsidiaries, other than the Student Loan Marketing Association, are not sponsored by or agencies of the United States.

SLM CORPORATION
Supplemental Earnings Disclosure
June 30, 2004
(Dollars in millions, except earnings per share)

	Quarters ended									Six months ended
	June 30, 2004			March 31, 2004			June 30, 2003			June 30, 2004			June 30, 2003
	(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)
SELECTED FINANCIAL INFORMATION AND RATIOS — (GAAP Basis)
Net income	$	615		$	291		$	373		$	906		$	789
Diluted earnings per common share	$	1.36		$	.64		$	.80		$	2.00		$	1.68
Return on assets		3.61	%		1.86	%		2.90	%		2.77	%		3.14	%
NON-GAAP INFORMATION (See Explanation Below)
"Core cash" net income	$	237		$	231		$	210		$	468		$	413
"Core cash" diluted earnings per common share	$	.52		$	.51		$	.44		$	1.03		$	.87
"Core cash" return on assets		.87	%		.90	%		.93	%		.89	%		.95	%
OTHER OPERATING STATISTICS
Average on-balance sheet student loans	$	54,799		$	52,892		$	44,173		$	53,846		$	44,166
Average off-balance sheet student loans		39,318			37,786			37,811			38,552			36,527
Average Managed student loans	$	94,117		$	90,678		$	81,984		$	92,398		$	80,693
Ending on-balance sheet student loans, net	$	51,577		$	54,414		$	42,993
Ending off-balance sheet student loans, net		43,324			37,735			40,121
Ending Managed student loans, net	$	94,901		$	92,149		$	83,114
Ending Managed FFELP student loans, net	$	85,015		$	83,013		$	76,093
Ending Managed Private Credit Student Loans, net		9,886			9,136			7,021
Ending Managed student loans, net	$	94,901		$	92,149		$	83,114

Non-GAAP "Core Cash" Earnings

        In accordance with the Rules and Regulations of the SEC, we prepare financial statements in accordance with generally accepted accounting principles ("GAAP"). In addition to evaluating the Company's GAAP-based financial information, management, credit rating agencies, lenders and analysts also evaluate the Company on certain non-GAAP performance measures that we refer to as "core cash" measures. While "core cash" measures are not a substitute for reported results under GAAP, we rely on "core cash" measures in operating our business because we believe they provide additional information regarding the operational and performance indicators that are most closely assessed by management.

        We report pro forma "core cash" measures, which are the financial performance measures used by management not only in developing our financial plans and tracking results, but also in establishing corporate performance targets and determining incentive compensation. Our "core cash" measures are not defined terms within GAAP and may not be comparable to similarly titled measures reported by other companies. "Core cash" measures reflect only current period adjustments to GAAP earnings as described below. Accordingly, the Company's "core cash" measures presentation does not represent another comprehensive basis of accounting. A more detailed discussion of the differences between GAAP and "core cash" measures follows.

1)

Securitization: Under GAAP, certain securitization transactions are accounted for as sales of assets. Under "core cash," we present all securitization transactions as long-term non-recourse financings. The upfront "gains" on sale from securitization as well as ongoing "servicing and securitization revenue" presented in accordance with GAAP are excluded from "core cash" and replaced by the interest income, provision for loan losses, and interest expense as they are earned or incurred on the securitized loans.

2)

Derivative Accounting: "Core cash" measures exclude the periodic unrealized gains and losses primarily caused by the one-sided mark-to-market derivative valuations prescribed by Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," and recognize the economic effect of these hedges, which results in any cash paid or received being recognized ratably as an expense or revenue over the hedged item's life. We also exclude the gain or loss on our equity forward contracts that are required to be accounted for in accordance with SFAS No. 133 as derivatives and are marked to market through earnings.

3)

Floor Income: The timing and amount (if any) of Floor Income earned is uncertain and in excess of expected spreads and, therefore, we exclude such income when it is not economically hedged from "core cash" measures. We employ derivatives, primarily Floor Income Contracts and futures, to economically hedge Floor Income. As discussed in more detail below, these derivatives do not qualify as effective accounting hedges and therefore are marked-to-market through the derivative market value adjustment. For "core cash" measures, we reverse the fair value adjustments on the Floor Income Contracts and futures economically hedging Floor Income and include the amortization of net premiums received (net of Eurodollar futures contracts' realized gains or losses) in income.

4)

Other items: We exclude certain transactions that are not considered part of our core business, including amortization of acquired intangibles, as well as gains and losses on certain sales of securities.

SLM CORPORATION
Consolidated Balance Sheets
(In thousands, except per share amounts)

	June 30, 2004		March 31, 2004		June 30, 2003
	(unaudited)		(unaudited)		(unaudited)
Assets
Federally insured student loans (net of allowance for losses of $8,877; $20,592; and $55,800, respectively)	$	16,729,709	$	26,174,672	$	34,422,041
Federally insured student loans in trust (net of allowance for losses of $33,364; $28,637; and $4,491, respectively)		31,104,748		24,062,169		4,258,526
Private Credit Student Loans (net of allowance for losses of $154,918; $154,222; and $160,350 respectively)		3,742,432		4,176,841		4,312,886
Academic facilities financings and other loans		928,209		1,104,226		1,177,178
Cash and investments		15,242,069		10,294,692		6,788,926
Restricted cash and investments		1,915,538		1,245,828		401,849
Retained Interest in securitized receivables		2,330,360		2,482,242		2,985,777
Goodwill and acquired intangible assets, net		618,930		589,078		583,676
Other assets		3,355,426		3,133,709		3,251,914
Total assets	$	75,967,421	$	73,263,457	$	58,182,773
Liabilities
Short-term borrowings	$	8,063,041	$	16,176,387	$	24,619,758
Borrowings collateralized by loans in trust		31,958,701		24,595,289		4,243,000
Long-term notes		30,078,062		26,710,017		23,806,326
Other liabilities		2,946,951		3,044,113		3,147,517
Total liabilities		73,046,755		70,525,806		55,816,601
Commitments and contingencies*
Stockholders' equity
Preferred stock, par value $.20 per share, 20,000 shares authorized: 3,300; 3,300; and 3,300 shares, respectively, issued at stated value of $50 per share		165,000		165,000		165,000
Common stock, par value $.20 per share, 1,125,000 shares authorized: 478,722; 476,442; and 638,983 shares, respectively, issued		95,745		95,289		127,797
Additional paid-in capital		1,747,284		1,670,640		1,359,082
Accumulated other comprehensive income, net of tax		355,955		534,445		689,220
Retained earnings		1,683,563		1,153,100		3,386,218
Stockholders' equity before treasury stock		4,047,547		3,618,474		5,727,317
Common stock held in treasury at cost: 39,760; 33,533; and 188,491 shares, respectively		1,126,881		880,823		3,361,145
Total stockholders' equity		2,920,666		2,737,651		2,366,172
Total liabilities and stockholders' equity	$	75,967,421	$	73,263,457	$	58,182,773

*

Commitments to purchase loans, lines of credit and letters of credit were $34.6 billion, $1.0 billion and $.3 billion, respectively, at June 30, 2004.

SLM CORPORATION
Consolidated Statements of Income
(In thousands, except per share amounts)

		Quarters ended								Six months ended
		June 30, 2004		March 31, 2004			June 30, 2003			June 30, 2004		June 30, 2003
		(unaudited)		(unaudited)			(unaudited)			(unaudited)		(unaudited)
Interest income:
	Federally insured student loans	$	492,166	$	468,967		$	462,425		$	961,133	$	929,906
	Private Credit Student Loans		76,613		76,589			87,892			153,202		175,464
	Academic facilities financings and other loans		18,126		18,376			19,290			36,502		39,496
	Investments		52,534		43,457			42,034			95,991		70,295
Total interest income			639,439		607,389			611,641			1,246,828		1,215,161
Interest expense			306,832		285,674			257,473			592,506		514,775
Net interest income			332,607		321,715			354,168			654,322		700,386
Less: provision for losses			28,344		39,818			36,449			68,162		78,994
Net interest income after provision for losses			304,263		281,897			317,719			586,160		621,392
Other income:
	Gains on student loan securitizations		197,840		113,954			314,220			311,794		620,023
	Servicing and securitization revenue		124,037		136,658			200,207			260,695		388,819
	Derivative market value adjustment		386,147		(116,743	)		(205,295	)		269,404		(324,358	)
	Guarantor servicing fees		23,249		34,971			25,259			58,220		60,453
	Debt management fees		70,113		79,928			52,684			150,041		111,497
	Other		68,115		58,955			59,083			127,070		108,657
Total other income			869,501		307,723			446,158			1,177,224		965,091
Operating expenses			206,051		208,877			189,867			414,928		369,232
Income before income taxes			967,713		380,743			574,010			1,348,456		1,217,251
Income taxes			352,787		89,278			201,316			442,065		428,008
Net income			614,926		291,465			372,694			906,391		789,243
Preferred stock dividends			2,864		2,886			2,875			5,750		5,750
Net income attributable to common stock		$	612,062	$	288,579		$	369,819		$	900,641	$	783,493
Basic earnings per common share		$	1.39	$	..65			..82		$	2.04	$	1.72
Average common shares outstanding			439,901		442,664			452,174			441,283		454,365
Diluted earnings per common share		$	1.36	$	..64		$	..80		$	2.00	$	1.68
Average common and common equivalent shares outstanding			448,184		451,747			465,132			449,966		467,402
Dividends per common share		$	..19	$	..17		$	..17		$	..36	$	..25

SLM CORPORATION
Pro-Forma "Core Cash"
Consolidated Statements of Income
(In thousands, except per share amounts)

		Quarters ended						Six months ended
		June 30, 2004		March 31, 2004		June 30, 2003		June 30, 2004		June 30, 2003
		(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)
Managed interest income:
	Managed federally insured student loans	$	710,079	$	687,222	$	643,831	$	1,397,301	$	1,287,778
	Managed Private Credit Student Loans		146,835		113,658		110,469		260,493		208,865
	Academic facilities financings and other loans		18,126		18,376		19,290		36,502		39,496
	Investments		56,026		47,936		43,892		103,962		73,135
Total Managed interest income			931,066		867,192		817,482		1,798,258		1,609,274
Managed interest expense			485,784		433,765		424,274		919,549		843,616
Net Managed interest income			445,282		433,427		393,208		878,709		765,658
Less: provision for losses			40,624		44,968		29,150		85,592		60,756
Net Managed interest income after provision for losses			404,658		388,459		364,058		793,117		704,902
Other income:
	Guarantor servicing fees		23,249		34,971		25,259		58,220		60,453
	Debt management fees		70,113		79,928		52,684		150,041		111,497
	Other		72,252		59,336		58,685		131,588		111,890
Total other income			165,614		174,235		136,628		339,849		283,840
Operating expenses			199,314		202,149		183,283		401,463		356,020
Income before income taxes			370,958		360,545		317,403		731,503		632,722
Income taxes			133,851		129,491		107,841		263,342		219,870
"Core cash" net income			237,107		231,054		209,562		468,161		412,852
Preferred stock dividends			2,864		2,886		2,875		5,750		5,750
"Core cash" net income attributable to common stock		$	234,243	$	228,168	$	206,687	$	462,411	$	407,102
"Core cash" basic earnings per common share		$	..53	$	..52	$	..46	$	1.05	$	..90
Average common shares outstanding			439,901		442,664		452,174		441,283		454,365
"Core cash" diluted earnings per common share		$	..52	$	..51	$	..44	$	1.03	$	..87
Average common and common equivalent shares outstanding			448,184		451,747		465,132		449,966		467,402

SLM CORPORATION
Pro-Forma "Core Cash"
Reconciliation of GAAP Net Income to "Core Cash" Net Income
(In thousands)

		Quarters ended									Six months ended
		June 30, 2004			March 31, 2004			June 30, 2003			June 30, 2004			June 30, 2003
		(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)
GAAP net income		$	614,926		$	291,465		$	372,694		$	906,391		$	789,243
"Core cash" adjustments:
	Net impact of securitization accounting		(70,822	)		11,089			(247,986	)		(59,733	)		(513,264	)
	Net impact of derivative accounting		(561,534	)		(99,490	)		29,510			(661,024	)		(85,301	)
	Net impact of Floor Income		24,327			60,780			(44,176	)		85,107			(6,885	)
	Amortization of acquired intangibles and other		11,273			7,423			6,045			18,696			20,921
Total "core cash" adjustments before income taxes			(596,756	)		(20,198	)		(256,607	)		(616,954	)		(584,529	)
Net tax effect (A)			218,937			(40,213	)		93,475			178,724			208,138
Total "core cash" adjustments			(377,819	)		(60,411	)		(163,132	)		(438,230	)		(376,391	)
"Core cash" net income		$	237,107		$	231,054		$	209,562		$	468,161		$	412,852

(A)

Such tax effect is based upon the Company's "core cash" effective tax rate for the year. The net tax effect results primarily from the exclusion of the permanent income tax impact of the equity forward contracts.

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Exhibit 99.1

SLM CORPORATION Supplemental Earnings Disclosure June 30, 2004 (Dollars in millions, except earnings per share)
SLM CORPORATION Consolidated Balance Sheets (In thousands, except per share amounts)
SLM CORPORATION Consolidated Statements of Income (In thousands, except per share amounts)
SLM CORPORATION Pro-Forma "Core Cash" Consolidated Statements of Income (In thousands, except per share amounts)
SLM CORPORATION Pro-Forma "Core Cash" Reconciliation of GAAP Net Income to "Core Cash" Net Income (In thousands)

EX-99.2

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Exhibit 99.2

SLM CORPORATION
SUPPLEMENTAL FINANCIAL INFORMATION
SECOND QUARTER 2004
(Dollars in millions, except per share amounts)

        The following supplemental information should be read in connection with SLM Corporation's (the "Company") press release of second quarter 2004 earnings, dated July 15, 2004.

        Statements in this Supplemental Financial Information release, which refer to expectations as to future developments, are forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. Such forward-looking statements contemplate risks, uncertainties and other factors that may cause the actual results to differ materially from such forward-looking statements. Such factors include, among others, changes in the terms of student loans and the educational credit marketplace arising from the implementation of applicable laws and regulations and from changes in such laws and regulations; changes in the demand for educational financing or in financing preferences of educational institutions, students and their families; and changes in the general interest rate environment. For more information, see our filings with the Securities and Exchange Commission ("SEC").

        Definitions for capitalized terms in this document can be found in the Company's 2003 Form 10-K filed with the SEC on March 15, 2004.

1

RESULTS OF OPERATIONS

        The following table presents the statements of income for the quarters ended June 30, 2004, March 31, 2004, and June 30, 2003 and for the six months ended June 30, 2004 and 2003.

Condensed Statements of Income

		Quarters ended								Six months ended
		June 30, 2004		March 31, 2004			June 30, 2003			June 30, 2004		June 30, 2003
Interest income:
	Federally insured student loans	$	492	$	469		$	462		$	961	$	930
	Private Credit Student Loans		77		77			88			153		176
	Academic facilities financings and other loans		18		18			19			37		39
	Investments		52		43			42			96		70
Total interest income			639		607			611			1,247		1,215
Interest expense			307		285			257			593		515
Net interest income			332		322			354			654		700
Less: provision for losses			28		40			36			68		79
Net interest income after provision for losses			304		282			318			586		621
Other income:
	Gains on student loan securitizations		198		114			314			312		620
	Servicing and securitization revenue		124		137			200			261		389
	Derivative market value adjustment		386		(117	)		(205	)		269		(324	)
	Guarantor servicing fees		23		35			25			58		60
	Debt management fees		70		80			52			150		111
	Other		69		59			60			127		109
Total other income			870		308			446			1,177		965
Operating expenses			206		209			190			415		369
Income before income taxes			968		381			574			1,348		1,217
Income taxes			353		90			201			442		428
Net income			615		291			373			906		789
Preferred stock dividends			3		3			3			6		6
Net income attributable to common stock		$	612	$	288		$	370		$	900	$	783
Diluted earnings per common share		$	1.36	$	.64		$	.80		$	2.00	$	1.68

        Income tax expense includes the permanent tax impact of excluding gains and losses from equity forward contracts from taxable income.

2

Net Interest Income

Taxable Equivalent Net Interest Income

        The amounts in the following table are adjusted for the impact of certain tax-exempt and tax-advantaged investments based on the marginal federal corporate tax rate of 35 percent.

		Quarters ended						Six months ended
		June 30, 2004		March 31, 2004		June 30, 2003		June 30, 2004		June 30, 2003
Interest income
	Student loans	$	569	$	546	$	550	$	1,114	$	1,106
	Academic facilities financings and other loans		18		18		19		37		39
	Investments		52		43		42		96		70
	Taxable equivalent adjustment		1		3		5		5		8
	Total taxable equivalent interest income		640		610		616		1,252		1,223
Interest expense			307		285		257		593		515
Taxable equivalent net interest income		$	333	$	325	$	359	$	659	$	708

Average Balance Sheets

        The following table reflects the rates earned on interest earning assets and paid on interest bearing liabilities for the quarters ended June 30, 2004, March 31, 2004 and June 30, 2003 and for the six months ended June 30, 2004 and 2003.

	Quarters ended
	June 30, 2004				March 31, 2004				June 30, 2003
	Balance		Rate		Balance		Rate		Balance		Rate
Average Assets
Federally insured student loans	$	50,424	3.93	%	$	47,746	3.95	%	$	38,835	4.78	%
Private Credit Student Loans		4,375	7.04			5,146	5.99			5,338	6.60
Academic facilities financings and other loans		982	7.77			1,062	7.36			1,162	7.13
Cash and investments		12,729	1.67			9,025	2.04			6,241	2.93
Total interest earning assets		68,510	3.76	%		62,979	3.90	%		51,576	4.79	%
Non-interest earning assets		6,983				6,046				5,656
Total assets	$	75,493			$	69,025			$	57,232
Average Liabilities and Stockholders' Equity
Six-month floating rate notes	$	2,250	1.19	%	$	2,621	1.04	%	$	2,985	1.18	%
Other short-term borrowings		11,993	1.77			16,208	1.93			21,573	1.69
Long-term notes		55,283	1.80			44,169	1.83			27,675	2.29
Total interest bearing liabilities		69,526	1.77	%		62,998	1.82	%		52,233	1.98	%
Non-interest bearing liabilities		3,141				3,487				2,743
Stockholders' equity		2,826				2,540				2,256
Total liabilities and stockholders' equity	$	75,493			$	69,025			$	57,232
Net interest margin			1.96	%			2.08	%			2.79	%

3

	Six months ended
	June 30, 2004				June 30, 2003
	Balance		Rate		Balance		Rate
Average Assets
Federally insured student loans	$	49,085	3.94	%	$	38,765	4.84	%
Private Credit Student Loans		4,761	6.47			5,401	6.55
Academic facilities financings and other loans		1,022	7.56			1,163	7.36
Cash and investments		10,876	1.82			5,368	2.84
Total interest earning assets		65,744	3.83	%		50,697	4.87	%
Non-interest earning assets		6,515				5,309
Total assets	$	72,259			$	56,006
Average Liabilities and Stockholders' Equity
Six-month floating rate notes	$	2,435	1.11	%	$	2,937	1.23	%
Other short-term borrowings		14,101	1.86			22,223	1.60
Long-term notes		49,726	1.81			25,888	2.50
Total interest bearing liabilities		66,262	1.80	%		51,048	2.03	%
Non-interest bearing liabilities		3,314				2,787
Stockholders' equity		2,683				2,171
Total liabilities and stockholders' equity	$	72,259			$	56,006
Net interest margin			2.02	%			2.82	%

        The decrease in the net interest margin from the second quarter of 2003 to the second quarter of 2004 was primarily due to the decrease in Floor Income and other student loan spread related items as discussed under "Student Loan Spread Analysis after Reclassification of Realized Derivative Transactions—Non-GAAP Presentation." The decrease in the net interest margin was also due to the increase in lower yielding short-term investments caused by the increase in non-GSE funding in connection with the GSE Wind-Down.

Reclassifications

        Certain reclassifications have been made to the balances as of and for the quarter and six months ended June 30, 2003 to be consistent with classifications adopted for 2004.

Reclassification of Realized Derivative Transactions—Non-GAAP Presentation

        The Financial Accounting Standards Board's Statement of Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," requires net settlement income/expense on derivatives and realized gains/losses on derivative dispositions ("realized derivative transactions") that do not qualify as accounting hedges under SFAS No. 133 to be recorded in a separate income statement line item below net interest income. In response to this interpretation, we believe that it is helpful to the understanding of our business to have two presentations of net interest income and net interest margin. The first is the presentation in accordance with generally accepted accounting principles in the United States of America ("GAAP") that includes realized derivative transactions in the derivative market value adjustment line on the income statement, thus excluding these transactions from the net interest income and margin. In the second presentation we reclassified these realized derivative transactions from the derivative market value adjustment to financial statement line item of the economically hedged item. We believe that this second presentation reflects how we manage interest rate risk through the match funding of interest sensitive assets and

4

liabilities. The non-GAAP presentations of our taxable equivalent net interest income, average balance sheets and student loan spread analysis in the following tables will reflect these reclassifications. In addition we have included a reconciliation of our taxable equivalent net interest income from the GAAP presentation to the non-GAAP presentation.

        The table below details the reclassification of the derivative net settlements and realized gains/losses related to derivative dispositions that is used in the following non-GAAP presentations as discussed above.

		Quarters ended									Six months ended
		June 30, 2004			March 31, 2004			June 30, 2003			June 30, 2004			June 30, 2003
Reclassification of realized derivative transactions:
	Net settlement expense on Floor Income Contracts reclassified to student loan income	$	(102	)	$	(109	)	$	(97	)	$	(211	)	$	(215	)
	Net settlement expense on Floor Income Contracts reclassified to servicing and securitization revenue		(52	)		(58	)		(46	)		(110	)		(82	)
	Net settlement income on interest rate swaps reclassified to interest expense		3			12			9			15			22
	Net settlement expense on interest rate swaps reclassified to servicing and securitization revenue		(22	)		(13	)		(16	)		(35	)		(32	)
	Realized gain/loss on closed Eurodollar futures contracts and terminated derivative contracts reclassified to other income		(8	)		(48	)		(25	)		(56	)		(102	)
Total reclassifications		$	(181	)	$	(216	)	$	(175	)	$	(397	)	$	(409	)

Taxable Equivalent Net Interest Income after Reclassification of Realized Derivative Transactions—Non-GAAP Presentation

        The amounts in the following table are adjusted for the impact of certain tax-exempt and tax-advantaged investments based on the marginal federal corporate tax rate of 35 percent.

		Quarters ended						Six months ended
		June 30, 2004		March 31, 2004		June 30, 2003		June 30, 2004		June 30, 2003
Interest income, non-GAAP
	Student loans	$	467	$	438	$	453	$	903	$	890
	Academic facilities financings and other loans		18		18		19		37		39
	Investments		52		43		42		96		70
	Taxable equivalent adjustment		1		3		5		5		8
	Total taxable equivalent interest income, non-GAAP		538		502		519		1,041		1,007
Interest expense, non-GAAP			304		274		248		578		492
Taxable equivalent net interest income, non-GAAP		$	234	$	228	$	271	$	463	$	515

5

Reconciliation of Taxable Equivalent Net Interest Income as presented in accordance with GAAP to the Non-GAAP Presentation for Realized Derivative Transactions

	Quarters ended									Six months ended
	June 30, 2004			March 31, 2004			June 30, 2003			June 30, 2004			June 30, 2003
Taxable equivalent net interest income, GAAP	$	333		$	325		$	359		$	659		$	708
Settlements on Floor Income Contracts reclassified to student loan income		(102	)		(109	)		(97	)		(211	)		(215	)
Net settlements on interest rate swaps reclassified to interest expense		3			12			9			15			22
Taxable equivalent net interest income, non-GAAP	$	234		$	228		$	271		$	463		$	515

6

Average Balance Sheets after Reclassification of Realized Derivative Transactions—Non-GAAP

        The following table reflects the rates earned on interest earning assets and paid on interest bearing liabilities for the quarters ended June 30, 2004, March 31, 2004 and June 30, 2003 and for the six months ended June 30, 2004 and 2003.

	Quarters ended
	June 30, 2004				March 31, 2004				June 30, 2003
	Balance		Rate		Balance		Rate		Balance		Rate
Average Assets
Federally insured student loans	$	50,424	3.12	%	$	47,746	3.04	%	$	38,835	3.76	%
Private Credit Student Loans		4,375	7.04			5,146	5.99			5,338	6.60
Academic facilities financings and other loans		982	7.77			1,062	7.36			1,162	7.13
Cash and investments		12,729	1.67			9,025	2.04			6,241	2.93
Total interest earning assets		68,510	3.16	%		62,979	3.21	%		51,576	4.03	%
Non-interest earning assets		6,983				6,046				5,656
Total assets	$	75,493			$	69,025			$	57,232
Average Liabilities and Stockholders' Equity
Six-month floating rate notes	$	2,250	1.19	%	$	2,621	1.04	%	$	2,985	1.18	%
Other short-term borrowings		11,993	1.71			16,208	1.78			21,573	1.71
Long-term notes		55,283	1.80			44,169	1.78			27,675	2.11
Total interest bearing liabilities		69,526	1.76	%		62,998	1.75	%		52,233	1.89	%
Non-interest bearing liabilities		3,141				3,487				2,743
Stockholders' equity		2,826				2,540				2,256
Total liabilities and stockholders' equity	$	75,493			$	69,025			$	57,232
Net interest margin, non-GAAP			1.38	%			1.46	%			2.11	%

	Six months ended
	June 30, 2004				June 30, 2003
	Balance		Rate		Balance		Rate
Average Assets
Federally insured student loans	$	49,085	3.08	%	$	38,765	3.71	%
Private Credit Student Loans		4,761	6.47			5,401	6.55
Academic facilities financings and other loans		1,022	7.56			1,163	7.36
Cash and investments		10,876	1.82			5,368	2.84
Total interest earning assets		65,744	3.18	%		50,697	4.00	%
Non-interest earning assets		6,515				5,309
Total assets	$	72,259			$	56,006
Average Liabilities and Stockholders' Equity
Six-month floating rate notes	$	2,435	1.11	%	$	2,937	1.23	%
Other short-term borrowings		14,101	1.75			22,223	1.61
Long-term notes		49,726	1.79			25,888	2.30
Total interest bearing liabilities		66,262	1.76	%		51,048	1.94	%
Non-interest bearing liabilities		3,314				2,787
Stockholders' equity		2,683				2,171
Total liabilities and stockholders' equity	$	72,259			$	56,006
Net interest margin, non-GAAP			1.41	%			2.05	%

7

        The 58 basis point difference between the second quarter of 2004 non-GAAP net interest margin of 1.38 percent versus the GAAP net interest margin of 1.96 percent is primarily due to the inclusion of payments on Floor Income Contracts in the non-GAAP presentation which reduced net interest income by 59 basis points. The 61 basis point difference between the six months ended June 30, 2004 non-GAAP net interest margin of 1.41 percent versus the GAAP net interest margin of 2.02 percent is also primarily due to the inclusion of payments on Floor Income Contracts in the non-GAAP presentation which reduced net interest income by 65 basis points. (See "Reclassification of Realized Derivative Transactions—Non-GAAP Presentation" above.) For a discussion of other fluctuations between the second quarter 2004 net interest margin versus the second quarter 2003 net interest margin, please see "Net Interest Income—Average Balance Sheets" above.

Student Loans

        For both federally insured and Private Credit Student Loans, we account for premiums paid, discounts received and certain origination costs incurred on the acquisition of student loans in accordance with SFAS No. 91, "Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases." The unamortized portion of the premiums and discounts are included in the carrying value of the student loan on the consolidated balance sheet. We recognize income on our student loan portfolio based on the expected yield of the student loan after giving effect to the amortization of purchase premiums and the accretion of student loan discounts, as well as borrower benefit programs. Origination fees charged on Private Credit Student Loans are deferred and amortized to income over the lives of the student loans. In the "Student Loan Spread Analysis after Reclassification of Realized Derivative Transactions—Non-GAAP" tables below, this amortization of origination fees is netted with the amortization of the premiums.

Student Loan Spread Analysis after Reclassification of Realized Derivative Transactions—Non-GAAP Presentation (see "Reclassification of Realized Derivative Transactions—Non-GAAP Presentation")

        The following table analyzes the reported earnings from student loans both on-balance sheet and those off-balance sheet in securitization trusts. For student loans off-balance sheet, we will continue to earn securitization and servicing fee revenues over the life of the securitized loan portfolios. The off-balance sheet information presented in "Securitization Program—Servicing and Securitization Revenue" analyzes the on-going servicing revenue and Residual Interest earned on the securitized portfolios of student loans. For an analysis of our student loan spread for the entire portfolio of Managed student loans on a similar basis to the on-balance sheet analysis, see " 'Core Cash' Student Loan Spread Analysis."

8

	Quarters ended									Six months ended
	June 30, 2004			March 31, 2004			June 30, 2003			June 30, 2004			June 30, 2003
On-Balance Sheet
Student loan yield, before Floor Income		4.27	%		4.12	%		4.36	%		4.21	%		4.41	%
Floor Income		.04			.13			.42			.08			.36
Consolidation Loan Rebate Fees		(.54	)		(.54	)		(.46	)		(.54	)		(.48	)
Offset Fees		(.05	)		(.06	)		(.08	)		(.06	)		(.08	)
Borrower benefits		(.20	)		(.14	)		(.08	)		(.17	)		(.08	)
Premium and origination fee amortization		(.10	)		(.18	)		(.06	)		(.14	)		(.08	)
Student loan net yield		3.42			3.33			4.10			3.38			4.05
Student loan cost of funds		(1.73	)		(1.60	)		(1.69	)		(1.67	)		(1.72	)
Student loan spread, non-GAAP		1.69	%		1.73	%		2.41	%		1.71	%		2.33	%
Off-Balance Sheet
Servicing and securitization revenue, before Floor Income		1.03	%		1.12	%		1.39	%		1.08	%		1.42	%
Floor Income, net of Floor Income previously recognized in gain on sale calculation		.24			.33			.73			.28			.73
Servicing and securitization revenue		1.27	%		1.45	%		2.12	%		1.36	%		2.15	%
Average Balances
On-balance sheet student loans	$	54,799		$	52,892		$	44,173		$	53,846		$	44,166
Off-balance sheet student loans		39,318			37,786			37,811			38,552			36,527
Managed student loans	$	94,117		$	90,678		$	81,984		$	92,398		$	80,693

Discussion of On-Balance Sheet Student Loan Spread, Non-GAAP

        The decrease in the second quarter of 2004 student loan spread versus the prior quarter is primarily due to lower Floor Income and higher borrower benefits, partially offset by lower premium amortization caused by fewer consolidations to third parties which resulted in less premium balance write-offs for the Company's FFELP Stafford loans.

        When compared with the second quarter of 2003, the decrease in the student loan spread is primarily due to lower Floor Income, higher spreads on our debt funding student loans, the increase in the average balance of Consolidation Loans as a percentage of the on-balance sheet portfolio and higher premium amortization and borrower benefit expense. The increase in the spread to the index on our debt is due to the replacement of lower cost GSE funding with non-GSE funding in connection with the GSE Wind-Down. GSE debt generally has lower credit spreads than non-GSE funding sources and our non-GSE liabilities are significantly longer in duration than our GSE liabilities. Also, we use higher cost, longer-term debt to fund Consolidation Loans.

        Consolidation Loans have lower spreads than other FFELP loans due to the 105 basis point Consolidation Loan Rebate Fee. The negative effect of this fee is partially offset by the absence of the 30 basis point Offset Fee on GSE student loans, higher SAP yield and lower student loan premium amortization discussed below. As long as interest rates remain at historically low levels and absent a program change in the next HEA reauthorization, we expect Consolidation Loans to be actively marketed by the student loan industry and remain an attractive refinancing option for borrowers, resulting in Consolidation Loans representing an increasing percentage of our federally guaranteed student loan portfolio.

9

        The year-over-year increase in the premium amortization and borrower benefit expenses is primarily the result of revised life of loan estimates for higher consolidation activity in the fourth quarter of 2003.

On-Balance Sheet Floor Income

        For on-balance sheet student loans, gross Floor Income is included in student loan income. The following table summarizes the components of Floor Income from on-balance sheet student loans, net of payments under Floor Income Contracts, for the quarters ended June 30, 2004, March 31, 2004, and June 30, 2003 and for the six months ended June 30, 2004 and 2003.

	Quarters ended
	June 30, 2004								March 31, 2004								June 30, 2003
(Dollars in millions)	Fixed borrower rate			Variable borrower rate		Total			Fixed borrower rate			Variable borrower rate		Total			Fixed borrower rate			Variable borrower rate		Total
Floor Income:
Gross Floor Income	$	108		$	—	$	108		$	124		$	2	$	126		$	127		$	16	$	143
Payments on Floor Income Contracts		(102	)		—		(102	)		(109	)		—		(109	)		(97	)		—		(97	)
Net Floor Income	$	6		$	—	$	6		$	15		$	2	$	17		$	30		$	16	$	46
Net Floor Income in basis points		4			—		4			11			2		13			27			15		42

	Six months ended
	June 30, 2004								June 30, 2003
(Dollars in millions)	Fixed borrower Rate			Variable borrower rate		Total			Fixed borrower Rate			Variable borrower rate		Total
Floor Income:
Gross Floor Income	$	232		$	2	$	234		$	264		$	29	$	293
Payments on Floor Income Contracts		(211	)		—		(211	)		(215	)		—		(215	)
Net Floor Income	$	21		$	2	$	23		$	49		$	29	$	78
Net Floor Income in basis points		8			—		8			23			13		36

10

Securitization Program

Securitization Activity

        The following table summarizes our securitization activity for the quarters ended June 30, 2004, March 31, 2004, and June 30, 2003 and for the six months ended June 30, 2004 and 2003.

	Quarters ended
	June 30, 2004							March 31, 2004							June 30, 2003
	No. of Transactions	Amount Securitized		Pre-Tax Gain		Gain %		No. of Transactions	Amount Securitized		Pre-Tax Gain		Gain %		No. of Transactions	Amount Securitized		Pre-Tax Gain		Gain %
FFELP Stafford/PLUS loans	2	$	5,502	$	71	1.3	%	—	$	—	$	—	—	%	1	$	1,005	$	13	1.3	%
Consolidation Loans	—		—		—	—		—		—		—	—		1		2,251		216	9.6	%
Private Credit Student Loans	1		1,282		127	9.9		1		1,252		114	9.1		1		1,248		85	6.8	%
Total securitizations - sales	3		6,784	$	198	2.9	%	1		1,252	$	114	9.1	%	3		4,504	$	314	7.0	%
Asset-backed commercial paper(1)	1		4,186					—		—					—		—
Consolidation Loans(2)	1		2,446					3		8,023					1		2,256
Total securitizations - financings	2		6,632					3		8,023					1		2,256
Total securitizations	5	$	13,416					4	$	9,275					4	$	6,760

	Six months ended
	June 30, 2004							June 30, 2003
	No. of Transactions	Amount Securitized		Pre-Tax Gain		Gain %		No. of Transactions	Amount Securitized		Pre-Tax Gain		Gain %
FFELP Stafford/PLUS loans	2	$	5,502	$	71	1.3	%	2	$	2,261	$	33	1.5	%
Consolidation Loans	—		—		—	—		2		4,256		434	10.2	%
Private Credit Student Loans	2		2,534		241	9.5		2		2,253		153	6.8	%
Total securitizations — sales	4		8,036	$	312	3.9	%	6		8,770	$	620	7.1	%
Asset-backed commercial paper (1)	1		4,186					—		—
Consolidation Loans(2)	4		10,469					2		4,312
Total securitizations — financings	5		14,655					2		4,312
Total securitizations	9	$	22,691					8	$	13,082

⁽¹⁾

In the second quarter of 2004 the Company closed its first asset-backed commercial paper conduit. The conduit is a multi-seller conduit and allows the Company to borrow up to $5 billion. The conduit is a revolving 364-day facility with annual extensions. The Company may purchase loans out of this trust at its discretion. As a result, the trust did not qualify as a qualifying special purpose entity ("QSPE") and the securitization was accounted for on-balance sheet as a Variable Interest Entity ("VIE").

⁽²⁾

In certain Consolidation Loan securitization structures, the Company holds certain rights that can affect the remarketing of certain bonds. These remarketing rights are not significantly limited in nature. Therefore, these securitizations did not qualify as QSPEs. Accordingly, they are accounted for on-balance sheet as VIEs with the securitized federally insured student loans reflected in the balance sheet as "federally insured student loans in trust."

        The increase in the Private Credit securitization gain for the second quarter of 2004 is primarily due to the underlying student loans having higher spreads.

Servicing and Securitization Revenue

        Servicing and securitization revenue, the ongoing revenue from securitized loan pools accounted for off-balance sheet as QSPEs, includes the interest earned on the Residual Interest asset, the revenue we receive for servicing the loans in the securitization trusts, and Embedded Floor Income on securitized student loans not previously included in the gain on sale calculation. Interest income

11

recognized on the Residual Interest is based on our anticipated yield, determined by periodically estimating future cash flows.

        The following table summarizes the components of servicing and securitization revenue for the quarters ended June 30, 2004, March 31, 2004, and June 30, 2003 and for the six months ended June 30, 2004 and 2003.

	Quarters ended									Six months ended
	June 30, 2004			March 31, 2004			June 30, 2003			June 30, 2004			June 30, 2003
Servicing revenue	$	78		$	76		$	77		$	154		$	152
Securitization revenue, before Embedded Floor Income		23			30			54			53			104
Servicing and securitization revenue, before Embedded Floor Income		101			106			131			207			256
Embedded Floor Income		66			78			109			144			194
Less: Floor Income previously recognized in gain calculation		(43	)		(47	)		(40	)		(90	)		(61	)
Net Embedded Floor Income		23			31			69			54			133
Total servicing and securitization revenue	$	124		$	137		$	200		$	261		$	389
Average off-balance sheet student loans	$	39,318		$	37,786		$	37,811		$	38,552		$	36,527
Average balance of Retained Interest	$	2,468		$	2,442		$	2,695		$	2,455		$	2,446
Servicing and securitization revenue as a percentage of the average balance of off-balance sheet student loans (annualized)		1.27	%		1.45	%		2.12	%		1.36	%		2.15	%

        The decrease in securitization revenue before Embedded Floor Income for the quarters ended June 30, 2004 and March 31, 2004, is generally due to the impact of Consolidation Loan activity, which resulted in impairment of the Residual Interest asset and negatively impacted yields used to recognize income. In addition, for the quarter ended June 30, 2004, as a result of the significant increase in interest rates, we experienced impairment related to the Floor Income component of our Residual Interest asset as future expected Floor Income has decreased. This impairment of our Residual Interest is offset by gains recognized through the derivative market value adjustment for Floor Income Contracts.

"CORE CASH" RESULTS OF OPERATIONS

Non-GAAP "Core Cash" Earnings

        In accordance with the Rules and Regulations of the SEC, we prepare financial statements in accordance with GAAP. In addition to evaluating the Company's GAAP-based financial information, management, credit rating agencies, lenders and analysts also evaluate the Company on certain non-GAAP performance measures that we refer to as "core cash" measures. While "core cash" measures are not a substitute for reported results under GAAP, we rely on "core cash" measures in operating our business because we believe they provide additional information regarding the operational and performance indicators that are most closely assessed by management.

        We report pro forma "core cash" measures, which are the financial performance measures used by management not only in developing our financial plans and tracking results, but also in establishing corporate performance targets and determining incentive compensation. Our "core cash" measures are not defined terms within GAAP and may not be comparable to similarly titled measures reported by other companies. "Core cash" measures reflect only current period adjustments to GAAP as described below. Accordingly, the Company's "core cash" measures presentation does not represent another comprehensive basis of accounting. A more detailed discussion of the differences between GAAP and "core cash" measures follows.

12

1)

Securitization: Under GAAP, certain securitization transactions are accounted for as sales of assets. Under "core cash," we present all securitization transactions as long-term non-recourse financings. The upfront "gains" on sale from securitization as well as ongoing "servicing and securitization revenue" presented in accordance with GAAP are excluded from "core cash" and replaced by the interest income, provision for loan losses, and interest expense as they are earned or incurred on the securitized loans.

The following table summarizes the securitization adjustments for the quarters ended June 30, 2004, March 31, 2004, and June 30, 2003 and for the six months ended June 30, 2004 and 2003.

	Quarters ended									Six months ended
	June 30, 2004			March 31, 2004			June 30, 2003			June 30, 2004			June 30, 2003
"Core cash" securitization adjustments:
Net interest income on securitized loans, after provision for losses	$	251		$	262		$	266		$	513		$	496
Gains on student loan securitizations		(198	)		(114	)		(314	)		(312	)		(620	)
Servicing and securitization revenue		(124	)		(137	)		(200	)		(261	)		(389	)
Total "core cash" securitization adjustments	$	(71	)	$	11		$	(248	)	$	(60	)	$	(513	)

2)

Derivative Accounting: SFAS No. 133 requires that changes in the fair value of derivative instruments be recognized currently in earnings unless specific hedge accounting criteria, as specified by SFAS No. 133, are met. We believe that our derivatives are effective economic hedges and they are a critical element of our interest rate risk management strategy. However, under SFAS No. 133, some of our derivatives, primarily Floor Income Contracts, Eurodollar futures contracts, certain basis swaps and equity forward contracts (discussed in detail below), do not qualify for "hedge treatment" and the stand-alone derivative must be marked-to-market in the income statement with no consideration for the corresponding change in fair value of the hedged item. The derivative market value adjustment is primarily caused by interest rate volatility and changing credit spreads during the period and the volume and term of derivatives not receiving hedge accounting treatment. "Core cash" earnings exclude the periodic unrealized gains and losses primarily caused by the one-sided derivative valuations, and recognize the economic effect of these hedges, which results in any cash paid or received being recognized ratably as an expense or revenue over the hedged item's life.

Our Floor Income Contracts are written options. SFAS No. 133's hedge criteria regarding effectiveness when using written options is more stringent than other hedging relationships. Because the paydown of principal of the student loans underlying the Floor Income embedded in those student loans does not exactly match the change in the notional amount of our written Floor Income Contracts, the written Floor Income Contracts do not qualify as effective hedges under SFAS No. 133. The Floor Income Contracts effectively fix the amount of Floor Income we will earn over the contract period, thus eliminating the timing and uncertainty associated with Floor Income for that period. Prior to SFAS No. 133, we accounted for Floor Income Contracts as hedges and amortized the upfront cash compensation ratably over the lives of the contracts. Under SFAS No. 133, the upfront payment is deemed a liability and changes in fair value are recorded through income throughout the life of the contract. The change in the value of Floor Income Contracts is caused by changing interest rates that cause the amount of Floor Income earned on the underlying student loans and transferred to the counterparties to vary. The change in the market value of the Floor Income Contracts is economically offset by the change in value of the student loan portfolio earning Floor Income, but that offsetting change in value is not recognized under SFAS No. 133.

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Basis swaps are used to convert the floating rate debt from one interest rate index to another to match the interest rate characteristics of the assets financed by that debt. We primarily use basis swaps to change the index of our fixed rate and LIBOR-based debt to better match the cash flows of our student loan assets that are primarily indexed to commercial paper, Prime or the Treasury bill. SFAS No. 133 requires that the change in the cash flows of the hedge effectively offset both the change in the cash flows of the asset and the change in the cash flows of the liability. Our basis swaps hedge variable interest rate risk and do not meet this effectiveness test because student loans can earn at either a variable or a fixed interest rate depending on market interest rates. We also have basis swaps that do not meet the SFAS No. 133 effectiveness test that economically hedge off-balance sheet instruments. As a result, these swaps are recorded at fair value with subsequent changes in value reflected in the income statement.

Generally, a decrease in current interest rates and the respective forward interest rate curves results in an unrealized loss related to our written Floor Income Contracts and Eurodollar futures contracts. We will experience unrealized gains/losses related to our basis swaps, if the two underlying indexes (and related forward curve) do not move in parallel.

Under SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity," equity forward contracts that allow a net settlement option either in cash or the Company's stock are required to be accounted for in accordance with SFAS No. 133 as derivatives. As a result, we now account for our equity forward contracts as derivatives in accordance with SFAS No. 133 and mark them to market through earnings.

The table below quantifies the adjustments for derivative accounting under SFAS No. 133 on our net income for the quarters ended June 30, 2004, March 31, 2004, and June 30, 2003, and for the six months ended June 30, 2004 and 2003, when compared with the accounting principles employed in all years prior to the SFAS No. 133 implementation.

	Quarters ended									Six months ended
	June 30, 2004			March 31, 2004			June 30, 2003			June 30, 2004			June 30, 2003
SFAS No. 133 income statement items:
Derivative market value adjustment	$	(386	)	$	117		$	205		$	(269	)	$	324
Plus: Realized derivative transactions		(181	)		(216	)		(175	)		(397	)		(409	)
Unrealized derivative market value adjustment		(567	)		(99	)		30			(666	)		(85	)
Other pre-SFAS No. 133 accounting adjustments		6			—			—			6			—
Total net impact of SFAS No. 133 derivative accounting	$	(561	)	$	(99	)	$	30		$	(660	)	$	(85	)

3)

Floor Income: The timing and amount (if any) of Floor Income earned is uncertain and in excess of expected spreads and, therefore, we exclude such income when it is not economically hedged from "core cash" measures. We employ derivatives, primarily Floor Income Contracts and futures, to economically hedge Floor Income. As discussed below under "Derivative Accounting," these derivatives do not qualify as effective accounting hedges and therefore are marked-to-market through the derivative market value adjustment. For "core cash" measures, we reverse the fair value adjustments on the Floor Income Contracts and futures economically hedging Floor Income and include the amortization of net premiums received (net of Eurodollar futures contracts' realized gains or losses) in income. The following table summarizes the Floor Income adjustments

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for the quarters ended June 30, 2004, March 31, 2004, and June 30, 2003 and for the six months ended June 30, 2004 and 2003.

	Quarters ended									Six months ended
	June 30, 2004			March 31, 2004			June 30, 2003			June 30, 2004			June 30, 2003
"Core cash" Floor Income adjustments:
Floor Income earned on Managed loans, net of payments on Floor Income Contracts	$	(18	)	$	(34	)	$	(103	)	$	(52	)	$	(176	)
Amortization of net premiums on Floor Income Contracts and futures in net interest income		42			45			36			87			74
Net losses related to closed Eurodollar futures contracts economically hedging Floor Income		—			50			3			50			4
Losses on sales of derivatives hedging Floor Income		—			—			20			—			91
Total "core cash" Floor Income adjustments	$	24		$	61		$	(44	)	$	85		$	(7	)

4)

Other items: We exclude certain transactions that are not considered part of our core business, including amortization of acquired intangibles, as well as gains and losses on certain sales of securities.

"Core Cash" Statements of Income

		Quarters ended						Six months ended
		June 30, 2004		March 31, 2004		June 30, 2003		June 30, 2004		June 30, 2003
Managed interest income:
	Managed federally insured student loans	$	710	$	687	$	644	$	1,397	$	1,288
	Managed Private Credit Student Loans		147		114		110		260		209
	Academic facilities financings and other loans		18		18		19		37		39
	Investments		56		48		44		104		73
Total Managed interest income			931		867		817		1,798		1,609
Managed interest expense			486		434		424		920		843
Net Managed interest income			445		433		393		878		766
Less: provision for losses			40		45		29		85		61
Net Managed interest income after provision for losses			405		388		364		793		705
Other income:
	Guarantor servicing fees		23		35		25		58		60
	Debt management fees		70		80		52		150		111
	Other		72		59		60		131		113
Total other income			165		174		137		339		284
Operating expenses			199		202		183		401		356
Income before income taxes			371		360		318		731		633
Income taxes			134		129		108		263		220
"Core cash" net income			237		231		210		468		413
Preferred stock dividends			3		3		3		6		6
"Core cash" net income attributable to common stock		$	234	$	228	$	207	$	462	$	407
"Core cash" diluted earnings per common share		$	.52	$	.51	$	.44	$	1.03	$	0.87

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Reconciliation of GAAP Net Income to "Core Cash" Net Income

		Quarters ended									Six months ended
		June 30, 2004			March 31, 2004			June 30, 2003			June 30, 2004			June 30, 2003
GAAP net income		$	615		$	291		$	373		$	906		$	789
"Core cash" adjustments:
	Net impact of securitization accounting		(71	)		11			(248	)		(60	)		(513	)
	Net impact of derivative accounting		(561	)		(99	)		30			(660	)		(85	)
	Net impact of Floor Income		24			61			(44	)		85			(7	)
	Amortization of acquired intangibles and other		11			7			6			18			21
Total "core cash" adjustments before income taxes			(597	)		(20	)		(256	)		(617	)		(584	)
Net tax effect (A)			219			(40	)		93			179			208
Total "core cash" adjustments			(378	)		(60	)		(163	)		(438	)		(376	)
"Core cash" net income		$	237		$	231		$	210		$	468		$	413

^(A)

Such tax effect is based upon the Company's "core cash" effective tax rate for the year. The net tax effect results primarily from the exclusion of the permanent income tax impact of the equity forward contracts.

"Core Cash" Student Loan Spread Analysis

        The following table analyzes the earnings from our portfolio of Managed student loans, which includes loans both on-balance sheet and off-balance sheet in securitization trusts and excludes Floor Income.

	Quarters ended									Six months ended
	June 30, 2004			March 31, 2004			June 30, 2003			June 30, 2004			June 30, 2003
"Core cash" student loan yields		4.31	%		4.15	%		4.31	%		4.23	%		4.37	%
Consolidation Loan Rebate Fees		(.39	)		(.40	)		(.35	)		(.40	)		(.34	)
Offset Fees		(.03	)		(.03	)		(.04	)		(.03	)		(.04	)
Borrower benefits		(.10	)		(.08	)		(.12	)		(.09	)		(.11	)
Premium and origination fee amortization		(.13	)		(.09	)		(.11	)		(.11	)		(.14	)
"Core cash" student loan net yield		3.66			3.55			3.69			3.60			3.74
"Core cash" student loan cost of funds		(1.75	)		(1.64	)		(1.76	)		(1.69	)		(1.81	)
"Core cash" student loan spread		1.91	%		1.91	%		1.93	%		1.91	%		1.93	%
Average Balances
On-balance sheet student loans	$	54,799		$	52,892		$	44,173		$	53,846		$	44,166
Off-balance sheet student loans		39,318			37,786			37,811			38,552			36,527
Managed student loans	$	94,117		$	90,678		$	81,984		$	92,398		$	80,693

Discussion of "Core Cash" Student Loan Spread

        The second quarter of 2004 "core cash" student loan spread equaled the first quarter of 2004 student loan spread, however there were a number of items that impacted the quarter to quarter spread analysis. In the first quarter of 2004, we increased the term for amortizing premiums and discounts related to our Private Credit Student Loans and loans in our off-balance sheet trusts. This resulted in a net reduction of the premium balance of $16 million to reflect the longer term of the

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related loan portfolios from inception. This increase in premium expense versus the prior quarter was partially offset by lower premium balance write-offs from FFELP Stafford loan consolidations to third parties.

        When compared with the second quarter of 2003, the decrease in the "core cash" student loan spread is primarily due to higher spreads on our debt funding student loans and the increase in the average balance of Consolidation Loans as a percentage of the Managed portfolio. The increase in the spread to the index on our debt is due to the replacement of lower cost GSE funding with non-GSE funding in connection with the GSE Wind-Down. GSE debt generally has lower credit spreads than non-GSE funding sources and our non-GSE liabilities are significantly longer in duration than our GSE liabilities. Also, we use higher cost, longer-term debt to fund Consolidation Loans.

        Consolidation Loans have lower spreads than other FFELP loans due to the 105 basis point Consolidation Loan Rebate Fee. The negative effect of this fee is partially offset by the absence of the 30 basis point Offset Fee on GSE student loans, higher SAP yield and lower student loan premium amortization discussed below. As long as interest rates remain at historically low levels and absent a program change in the next HEA reauthorization, we expect Consolidation Loans to be actively marketed by the student loan industry and remain an attractive refinancing option for borrowers, resulting in Consolidation Loans representing an increasing percentage of our federally guaranteed student loan portfolio.

        This year-over-year reduction in the student loan spread was offset by the increase in the average balance of Managed Private Credit Student Loans as a percentage of the average Managed student loan portfolio from 9 percent in the second quarter 2003 to 11 percent in the second quarter 2004, by higher amortization of upfront premiums received on Floor Income Contracts and by reduced borrower benefits expense. The lower borrower benefits in the second quarter of 2004 versus the prior year resulted from the reduction in our estimate of the number of borrowers who qualify for the benefit. Private Credit Student Loans are subject to credit risk and therefore earn higher spreads which averaged 4.72 percent in the second quarter of 2004 for the Managed Private Credit Student Loan portfolio versus a spread of 1.57 percent for the Managed guaranteed student loan portfolio.

Allowance for Private Credit Student Loan Losses—Managed Basis

        The allowance for Private Credit Student Loan losses is an estimate of losses in the portfolio at the balance sheet date that will be charged off in subsequent periods. We estimate our losses using historical data from our Private Credit Student Loan portfolios, extrapolations of FFELP loan loss data, current trends and relevant industry information. As our Private Credit Student Loan portfolios continue to mature, more reliance is placed on our own historic Private Credit Student Loan charge-off and recovery data. We use this data in internally developed models to estimate the amount of losses, net of subsequent collections, projected to occur in the Private Credit Student Loan portfolios.

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        An analysis of our allowance for loan losses for Managed Private Credit Student Loans for the quarters ended June 30, 2004, March 31, 2004, and June 30, 2003 and for the six months ended June 30, 2004 and 2003 is presented in the following table.

		Quarters ended									Six months ended
		June 30, 2004			March 31, 2004			June 30, 2003			June 30, 2004			June 30, 2003
Managed Private Credit Student Loan allowance balance at beginning of period		$	272		$	259		$	218		$	259		$	194
Provision for Managed Private Credit Student Loan losses			38			37			27			75			59
Other			—			—			—			—			7
Charge-offs:
	Managed Private Credit Student Loans		(26	)		(26	)		(19	)		(52	)		(36	)
	Managed Private Credit Student Loan recoveries		4			2			2			6			4
Total charge-offs, net of recoveries			(22	)		(24	)		(17	)		(46	)		(32	)
Managed Private Credit Student Loan allowance balance at end of period		$	288		$	272		$	228		$	288		$	228
Net Managed Private Credit Student Loan charge-offs as a percentage of average Managed Private Credit Student Loans (annualized)			.93	%		1.03	%		.95	%		.98	%		.95	%
Net Managed Private Credit Student Loan charge-offs as a percentage of average Managed Private Credit Student Loans in repayment (annualized)			1.99	%		2.16	%		1.88	%		2.04	%		1.82	%
Managed Private Credit Student Loan allowance as a percentage of average Managed Private Credit Student Loans			2.90	%		2.98	%		3.27	%		3.02	%		3.43	%
Managed Private Credit Student Loan allowance as a percentage of the ending balance of Managed Private Credit Student Loans			2.83	%		2.90	%		3.15	%		2.83	%		3.15	%
Managed Private Credit Student Loan allowance as a percentage of Managed Private Credit Student Loans in repayment			6.00	%		6.16	%		6.29	%		6.00	%		6.29	%
Average balance of Managed Private Credit Student Loans		$	9,909		$	9,142		$	6,982		$	9,526		$	6,654
Ending balance of Managed Private Credit Student Loans		$	10,174		$	9,408		$	7,249		$	10,174		$	7,249
Average balance of Managed Private Credit Student Loans in repayment		$	4,607		$	4,376		$	3,519		$	4,560		$	3,464
Ending balance of Managed Private Credit Student Loans in repayment		$	4,792		$	4,422		$	3,629		$	4,792		$	3,629

        The increase in the provision for Managed Private Credit Student Loan losses for the second quarter of 2004 versus the prior quarter is mainly due to seasonality. The second quarter of the year is traditionally the peak period for students graduating from college. The increase in the provision for Managed Private Credit Student Loan losses for the second quarter of 2004 versus the year-ago quarter is primarily attributed to the growth in the portfolio of Managed Private Credit Student Loans and to the revision of our default assumptions in the fourth quarter of 2003.

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Delinquencies—Managed Basis

        The table below shows our Private Credit Student Loan delinquency trends at June 30, 2004, March 31, 2004, and June 30, 2003 on a Managed Basis. Delinquencies have the potential to adversely impact earnings if the account charges off and results in increased servicing and collection costs.

        Loans in forbearance status decreased from 11.9 percent of loans in repayment and forbearance status at March 31, 2004 to 10.8 percent of loans in repayment and forbearance status at June 30, 2004. The decrease of loans in forbearance status is primarily due to seasonality. The ratio at June 30, 2003 was 10.3 percent. The increase over the year-ago period is associated with several small Private Credit Student Loan programs. The forbearance ratios at June 30, 2004 for all of the primary programs (Signature, LAW, MBA, etc.) are the same or lower than the year-ago period.

		June 30, 2004					March 31, 2004					June 30, 2003
		Balance			%		Balance			%		Balance			%
Loans in-school/grace/deferment(1)		$	4,802				$	4,386				$	3,202
Loans in forbearance(2)			580					600					418
Loans in repayment and percentage of each status:
	Loans current		4,441		93	%		4,090		92	%		3,356		92	%
	Loans delinquent 30-59 days(3)		147		3			126		3			110		3
	Loans delinquent 60-89 days		83		1			82		2			62		2
	Loans delinquent 90 days or greater		121		3			124		3			101		3
	Total Managed Private Credit Student Loans in repayment		4,792		100	%		4,422		100	%		3,629		100	%
Total Managed Private Credit Student Loans			10,174					9,408					7,249
Managed Private Credit Student Loan allowance for losses			(288	)				(272	)				(228	)
Managed Private Credit Student Loans, net		$	9,886				$	9,136				$	7,021
Percentage of Managed Private Credit Student Loans in repayment			47	%				47	%				50%
Delinquencies as a percentage of Managed Private Credit Student Loans in repayment			7	%				8	%				8%

⁽¹⁾

Loans for borrowers who still may be attending school or engaging 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.

⁽²⁾

Loans for borrowers who have temporarily ceased making full payments due to hardship or other factors, consistent with the established loan program servicing procedures and policies. Additionally, the forbearance balance at June 30, 2004 and March 31, 2004 included $5 million and $7 million, respectively, of career training loans in "closed school" status.

⁽³⁾

The period of delinquency is based on the number of days scheduled payments are contractually past due.

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"Core Cash" Other Income

        When compared with GAAP other income, "core cash" other income excludes gains on student loan securitizations, servicing and securitization revenue, the derivative market value adjustment per SFAS No. 133 and certain gains and losses on sales of investment securities and student loans. The following table summarizes the components of "core cash" other income for the quarters ended June 30, 2004, March 31, 2004 and June 30, 2003 and for the six months ended June 30, 2004 and 2003.

Guarantor Servicing Fees, Debt Management Fees and Other Income

		Quarters ended						Six months ended
		June 30, 2004		March 31, 2004		June 30, 2003		June 30, 2004		June 30, 2003
Guarantor servicing and debt management fees:
	Guarantor servicing fees	$	23	$	35	$	25	$	58	$	60
	Debt management fees		70		80		52		150		111
Total guarantor servicing and debt management fees		$	93	$	115	$	77	$	208	$	171
Other income:
	Late fees	$	30	$	21	$	15	$	51	$	32
	Third party servicing fees		12		13		13		25		28
	Gains on sales of mortgages and other loan fees		6		5		15		11		21
	Other		24		20		17		44		32
Total other income		$	72	$	59	$	60	$	131	$	113

        The $16 million and $37 million increase in guarantor servicing and debt management fees in the three and six months ended June 30, 2004, respectively, versus the year-ago periods is due to the growth in the debt management business. The $12 million and $18 million increase in other income for the three and six months ended June 30, 2004, respectively, versus the year-ago periods is mainly attributed to an accrual for late fees in the second quarter of 2004, partially offset by lower gains on sales of mortgage loans.

        The $12 million decrease in guarantor servicing fees in the second quarter of 2004 versus the first quarter of 2004 is mainly due to the seasonal nature of the guarantor servicing business as certain fees are recognized upon loan disbursements. The $10 million decrease in debt management fees in the second quarter of 2004 versus the first quarter of 2004 is mainly due to the holding of Consolidation Loan disbursements, which delays the recognition of certain fee income earned when defaulted FFELP Stafford loans are consolidated. The $13 million increase in other income in the second quarter of 2004 versus the prior quarter is primarily due to the accrual for late fees.

"Core Cash" Operating Expenses

        Second quarter operating expenses were $199 million versus $183 million in the year-ago quarter and $202 million in the first quarter of 2004. The increase in operating expenses versus the year-ago quarter can mainly be attributed to the acquisition of Academic Management Services Corp. in the fourth quarter of 2003, increased servicing and debt management expenses consistent with the growth in borrowers and the growth in the debt management business. Student loan servicing expenses as a percentage of the average balance of student loans serviced was .14 percent, .15 percent and

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.16 percent for the quarters ended June 30, 2004, March 31, 2004 and June 30, 2003, respectively and .15 percent and .16 percent for the six months ended June 30, 2004 and 2003, respectively.

RECENT DEVELOPMENTS

        On July 2, 2004, we announced that Bank One gave notice that they intend to terminate the marketing agreement between Bank One and our subsidiary, Education One Group, through which we market FFELP loans and other student loan products under the Bank One brand. Upon termination of the agreement, Bank One plans to bring the marketing of the Bank One brand for higher education lending in house. Management believes that Bank One is not permitted to terminate the marketing agreement and "in-source" the marketing function, while Bank One contends that its July 1, 2004 merger with JPMorgan Chase allows it to do so.

        Under the marketing agreement, Bank One pays us marketing fees to market to schools the Bank One brand for both FFELP loans and Private Credit Student Loans. In instances where Bank One is a Sallie Mae Preferred Lender, and sells the loans to us, these marketing fees are capitalized as a reduction in student loan premiums paid to Bank One upon purchase of the loans. Otherwise, when Bank One sells loans originated under this agreement to third parties, we recognize the marketing fees currently. For the six months ended June 30, 2004, marketing fees received under this arrangement totaled $22 million, of which $9 million was capitalized and $13 million was recognized currently.

        We also have two separate loan purchase agreements with Bank One, under which, we purchase Bank One branded FFELP loans and Private Credit Student Loans originated by Bank One using our origination platform. These loan purchase agreements are not subject to the termination notice and remain in place. For the six months ended June 30, 2004, Bank One originated $1.5 billion of FFELP loans and $405 million of Private Credit Student Loans under these loan purchase agreements. Our separate joint venture with JPMorgan Chase also remains in place. The Company is exploring with Bank One a mutually beneficial resolution of this matter.

PRIVATIZATION ACT—GSE WIND-DOWN UPDATE

        Under the Privatization Act, the GSE must wind down its operations and dissolve on or before September 30, 2008. In June 2004, the Company announced that it is planning to dissolve the GSE in early 2005. The Company had previously announced a target Wind-Down date of June 30, 2006.

        The Privatization Act provides generally that the GSE's non-GSE affiliates cannot purchase FFELP loans until the time that the GSE ceases acquiring such loans. As a part of the Wind-Down process, on July 1, 2004, the Company began purchasing FFELP loans through non-GSE affiliates and the GSE terminated all such activity.

        In June 2004, the Company announced that the GSE will no longer issue short-term floating rate notes. The GSE will continue to issue other short-term debt, however, until all current GSE assets are refinanced.

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SLM CORPORATION SUPPLEMENTAL FINANCIAL INFORMATION SECOND QUARTER 2004 (Dollars in millions, except per share amounts)