(The following statement was released by the rating agency) Fitch Ratings-New York-08 March 2021: Fitch Ratings has affirmed the Long-Term Issuer Default Ratings (IDRs) of SLM Corporation $(SLM)$ and Sallie Mae Bank (SLM Bank) at 'BB+'. Fitch has also affirmed the Viability Ratings $(VR)$ for SLM and SLM Bank at 'bb+' and the senior unsecured debt rating and preferred stock rating of SLM at 'BB+ and 'B+', respectively. The Rating Outlook has been revised to Stable from Negative. Key Rating Drivers The revision of SLM's Rating Outlook to Stable reflects the stabilization in key macroeconomic indicators and SLM's solid credit performance over the past few quarters following the emergence of the coronavirus pandemic last year. The Outlook revision also reflects increased confidence in a U.S. economic recovery beginning in the second half of 2021, reducing the likelihood that the downside scenario contemplated at the time of Fitch's Negative Outlook assignment in April 2020 will materialize in terms of asset quality and capital ratio degradation.

Specifically, Fitch's forecasts for U.S. unemployment and GDP growth, according to the latest 'Global Economic Outlook' $(GEO)$ published in December 2020 improved meaningfully from the GEO published in March 2020, reflecting the Food and Drug Administration's (FDA) approval of highly effective vaccines, the passage of additional fiscal stimulus, and the likelihood that the Federal Reserve will maintain an accommodative monetary policy for the foreseeable future. Furthermore, the nature of the pandemic has had a more severe negative impact on occupations that do not require a college degree, which when coupled with fact that roughly half of SLM's borrowers are still attending college and not in full principal repayment, should help insulate SLM from experiencing a sharp increase in credit losses over the Outlook horizon.

Although SLM's loan forbearance rates rose sharply into the double digits in 2Q20 and it experienced weaker loan demand as college enrollments declined in the fall, the company's earnings still increased meaningfully in 2020 as a result of completed and pending loan sales. Higher loan loss provisions and net interest margin $(NIM)$ compression in 1H20 were more than offset by the gain on sale of loans realized in 1Q20 and the reserve release in 4Q20 related to the pending sale of loans in 1Q21. As a result, SLM was able to further strengthen its capital ratios, excluding the effect of the implementation of the current expected credit loss $(CECL.UK)$ accounting standard, which was considerably larger for SLM than its consumer bank peers given the longer duration of student loans.

The rating affirmations reflect SLM's leading market position in the U.S. private education loan industry, above average returns and operating performance relative to peer banks, solid asset quality, and sufficient levels of capital and liquidity.

Rating constraints include SLM's monoline business model, heightened legislative/regulatory risk associated with the student lending/servicing business, the duration mismatch between demand deposits and longer-term student loans, and SLM's higher proportion of brokered deposits, which are more sensitive to interest rates.

In January 2020, the company announced a revised strategy, whereby it plans to sell a cross-section of its private student loans annually, with the gains generated as well as the capital freed up from the loan sales deployed toward share repurchases. In 1Q20, SLM sold $3.1 billion of private education loans, realizing a $239 million gain (7.7%), and completed $558 million of share repurchases, $525 million of which was completed through an accelerated share repurchase program with JP Morgan. In January 2021, the company announced that its board approved an additional $1.25 billion share repurchase program, which it planned to fund with the capital generated from the sale of $4 billion of private education loans. SLM entered into an agreement to sell $3 billion in 1Q21 for a low double-digit percentage gain.

Continued loan sales are expected to result in SLM's assets remaining relatively flat over the Outlook horizon. The decision to sell a portion of its loan portfolio was driven by the underperformance of SLM shares in recent years, which management believes provided an arbitrage opportunity whereby there is a dislocation between the pricing in the loan sale market relative to the implied value reflected in its share price. While the gain on sale income will result in higher earnings volatility than holding the loans to term, and the increase in share repurchases is viewed less favorably for debtholders, Fitch expects the impact to SLM's capital ratios and liquidity position to be relatively small. However, the reduction in longer-term profits from selling loans rather than holding them to term is viewed less favorably.

SLM's private education loan originations declined 16% in the seasonally strongest third quarter, yoy, and 5% for all of 2020, to $5.3 billion. Likewise, period end loans (including loans classified as held for sale at 4Q20) declined 10.5% in 2020, driven largely by the aforementioned loan sales, as well as the decline in loan originations. Management is forecasting a rebound in loan originations growth to 6%-7% in 2021, which assumes a more normalized return to campuses in the fall relative to the significant disruption from the pandemic last year.

In 2020, roughly $1.5 billion in loans were refinanced away from SLM; effectively flat with 2019. Still, Fitch views this amount to be high, particularly given the retrenchment of refi lenders due to heightened uncertainty related to the pandemic in 2Q20, and the disincentive for many borrowers to consolidate their private and federal student loans after the federal government allowed for the suspension of payments and accrued interest on federal student loans following the emergence of the pandemic. Negative ratings pressure could occur should loans being refinanced away from SLM remain elevated and lead to a sustained negative impact on SLM's earnings and credit performance.

Asset quality was solid in 2020 as the unprecedented amount of government stimulus and monetary easing coupled with widespread loan forbearance programs and a contraction in consumer discretionary spending helped to counter the rise in unemployment. At Dec. 31, 2020, 49% of the private education loan portfolio was in full principal and interest repayment; up from 46% a year ago. Fitch estimates net charge-offs as a percentage of loans in full principal and interest repayment declined to 1.82% in 2020 from 1.86% in 2019. Reserve coverage on private education loans increased sharply in 2020 to 6.9% of loans at year-end and 7.6x trailing twelve-month $(TTM)$ net charge-offs, compared with 1.6% and 2.0x, respectively, a year ago. The increase was driven by both the deterioration in the macroeconomic outlook as a result of the pandemic and the implementation of CECL, which reflects life of loan loss expectations rather than incurred losses, at the beginning of 2020.

Forbearance as a percentage of loans in repayment rose to 4.3% at YE20 from 4.1% a year ago, but declined from the double-digit levels reached in 2Q20. Despite the regulatory exclusion provided to lenders in categorizing forbearance and loan modifications related to the coronavirus from being classified as troubled debt restructurings (TDRs), TDRs remained elevated at 8.9% of loans in repayment at the end of 2020, down slightly from 9.4% a year ago. Student loans tend to have higher TDRs relative to other loans because of the use of forbearance by many students post-graduation. Loans that are in forbearance for more than 90 days are classified as TDRs. Fitch expects delinquencies and credit losses to trend higher over the near term as the portfolio continues to season and the stimulative effect of the actions taken by the federal government and Federal Reserve to counter the effects of the pandemic begin to recede, although additional government stimulus could push the timeframe for credit normalization.

SLM's operating performance was strong in 2020 despite the severe effects of the pandemic on the U.S. economy. Pre-tax income increased 55% from the prior year driven by gains and reserve releases from loan sales and pending loan sales, partially offset by a 13% decline in net interest income compared with 2019. SLM's NIM declined to 4.81% from 5.76% in the prior year. The decline was primarily driven by the Fed rate cuts and an increase in cash and short-term liquidity over the past year.

As part of its new CEO's outline of SLM's strategic objectives in 3Q20, the company restructured its senior management team and initiated a cost restructuring program to improve operating efficiencies. This resulted in a $24 million restructuring charge aimed at better aligning its organizational structure and targeted headcount reductions, which management believes will result in $50 million of run rate expense savings beginning this year. Fitch views the cost restructuring initiatives as reasonable and prudent in light of a more challenged economic environment.

SLM Bank's risk-based capital ratios moved higher in 2020 as loan growth moderated and liquidity increased. SLM Bank's stated common equity Tier 1 (CET1) ratio increased by 180 bps, to 14% at the end of 2020 compared with the prior year. The bank's regulatory capital ratios at Dec. 31, 2020 are unlikely to be sustained in 2021, as the reserves released in 4Q20 that flowed into equity capital are expected to be deployed toward share repurchases this year. Following the emergence of the pandemic in March, regulators allowed banks to exclude the impact of CECL from their regulatory capital ratios through the end of 2021, before phasing it in over the following three years. Excluding the CECL phase-in adjustment, Fitch estimates SLM Bank's CET1 ratio would have been 10.5% at YE20. While this level is considerably below the 12.2% level at the end of 2019, Fitch believes the significantly higher loss reserve coverage created by CECL is a mitigating factor in assessing SLM's capital strength. Still, Fitch expects SLM to maintain its CET1 ratio above 10% following the full phase in of CECL.

Whereas SLM's liquidity (cash and short-term investments) as a percentage of assets has historically been low relative to peer banks, at the prompting of its regulators in 2019, SLM increased its liquidity portfolio to 18.8% of assets as of YE19 compared with 10.5% in the prior year. Following the emergence of the pandemic, SLM further increased its liquidity portfolio as a percentage of assets to 21.3%, as the loan portfolio declined and deposit inflows remained strong. While Fitch views the increase in liquidity held at SLM Bank favorably, it is mitigated by the increase in deposits over that time, which are expected to be prioritized relative to unsecured debt in a default scenario.

Although SLM has diversified its funding profile over the past couple of years, it remains a relative ratings constraint. SLM has historically targeted a funding mix of 80% deposits and 20% securitization. The company completed its second unsecured debt issuance in October 2020, but the mix of unsecured debt in SLM's capital structure remains relatively low at roughly 2% at YE20. The securitization funding mix was below the targeted level, at 16% of total funding at Dec. 31, 2020, but is expected to trend higher over time. The majority of SLM's deposits are brokered (52%), which are more price sensitive than traditional retail deposits. Fitch also believes that the duration of brokered deposits does not align as well with student loan assets as securitizations and unsecured debt, particularly during periods of rising interest rates. Although the company does enter into swaps to hedge a portion of the repricing risk, Fitch views SLM's deposit franchise as weaker than its online bank and regional bank peers.

SUPPORT RATING AND SUPPORT RATING FLOOR

SLM has a Support Rating of '5' and Support Rating Floor of 'NF'. In Fitch's view, SLM is not systemically important, and therefore the probability of sovereign support is unlikely. SLM's IDRs and VRs do not incorporate any support.

SUBORDINATED DEBT AND OTHER HYBRID SECURITIES

Fitch's 'B+' rating on the series B preferred shares reflect their linkage to the VR. The notching reflects the subordinated payment priority and weaker recovery prospects for these instruments, in accordance with Fitch's "Global Bank Rating Criteria." The series B preferred shares are rated three notches below the VR, reflecting the instrument's non-performance and relative loss severity risk profile in addition to their non-cumulative nature.

DEPOSIT RATINGS

SLM Bank's uninsured long-term deposit ratings are rated one-notch higher than SLM's Long-Term IDR and senior unsecured debt because U.S. uninsured deposits benefit from depositor preference. U.S. depositor preference gives deposit liabilities superior recovery prospects in the event of default. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade include a sustained erosion in SLM's CET1 ratio (fully phased in for CECL) below 10%, meaningful deterioration in portfolio credit quality, a greater emphasis on brokered deposits and secured funding, or legislative actions aimed at reducing demand and/or profitability for private education loans. Negative ratings momentum could also be driven by significant erosion in the importance of the school financial aid office channel for student loan originations that could be detrimental to SLM's franchise, or further increases in loans being refinanced from SLM that would result in meaningful margin pressure and/or weaker credit performance.

Positive ratings momentum is unlikely in the near term but factors that could, individually or collectively, lead to positive rating action include an improvement in the company's funding profile, with a de-emphasis on brokered deposits in relation to retail deposits, and/or an increase in unsecured debt issuance. Positive momentum could also be supported by more meaningful revenue diversification without a corresponding increase in SLM's risk profile, and credit performance that is consistent with management's cumulative loss expectations through a full credit cycle.

SUPPORT RATING AND SUPPORT RATING FLOOR

Since SLM's Support Rating and Support Rating Floor are '5' and 'NF', respectively, there is limited likelihood that these ratings will change over the foreseeable future.

SUBORDINATED DEBT AND OTHER HYBRID SECURITIES

The preferred stock ratings are sensitive to any changes in SLM's VR and would be expected to move in tandem.

DEPOSIT RATINGS

The long- and short-term deposit ratings are sensitive to any change in SLM's Long- and Short-Term IDRs and would be expected to move in tandem. Best/Worst Case Rating Scenario International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit [ REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG Considerations SLM's has an ESG Relevance Score of 4 for Exposure to Social Impacts due to its exposure to shift in social or consumer preferences as a result of an institution's social positions, or social and/or political disapproval of core activities which, in combination with other factors, impacts the rating.

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit Sallie Mae Bank; Long Term Issuer Default Rating; Affirmed; BB+; Rating Outlook Stable ; Short Term Issuer Default Rating; Affirmed; B ; Viability Rating; Affirmed; bb+ ; Support Rating; Affirmed; 5 ; Support Rating Floor; Affirmed; NF ----long-term deposits; Long Term Rating; Affirmed; BBB- ----short-term deposits; Short Term Rating; Affirmed; F3 SLM Corporation; Long Term Issuer Default Rating; Affirmed; BB+; Rating Outlook Stable ; Short Term Issuer Default Rating; Affirmed; B ; Viability Rating; Affirmed; bb+ ; Support Rating; Affirmed; 5 ; Support Rating Floor; Affirmed; NF ----preferred; Long Term Rating; Affirmed; B+ ----senior unsecured; Long Term Rating; Affirmed; BB+

Contacts: Primary Rating Analyst Michael Taiano, Senior Director +1 646 582 4956 Fitch Ratings, Inc. Hearst Tower 300 W. 57th Street New York, NY 10019

Secondary Rating Analyst Shampa Bhattacharya, Director +1 212 908 9119

Committee Chairperson Johann Juan, Senior Director +1 312 368 3339

Media Relations: Jessica Torchia, New York, Tel: +1 212 908 0653, Email: jessica.torchia@thefitchgroup.com

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