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Date

Thursday, Jan. 22, 2026 at 5:30 p.m. ET

Call participants

  • President and Chief Executive Officer — Jonathan Witter
  • Executive Vice President and Chief Financial Officer — Peter Graham
  • Managing Vice President of Strategic Finance — Elizabeth Brinoff
  • Senior Director and Head of Investor Relations — Kate deLacy

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Takeaways

  • GAAP Diluted EPS -- $1.12 for the quarter and $3.46 for the full year, up from $2.68 in 2024.
  • Private Education Loan Originations -- $1.02 billion for the quarter and $7.4 billion for the full year, representing 6% growth.
  • Net Charge Offs -- $98 million for the quarter and $346 million for the year, equal to 2.15% of average loans in repayment; this metric declined by four basis points year over year.
  • Net Interest Margin (NIM) -- 5.21% for the quarter, 29 basis points higher year over year; 5.24% for the full year, up five basis points.
  • Reserve Rate -- 6% at year-end, an increase from 5.93% in the prior quarter and 5.83% in 2024.
  • Loan Delinquencies 30+ Days -- 4% of loans in repayment, unchanged sequentially but up from 3.7% in the prior year.
  • Non-Interest Expenses -- $659 million for the year, up 2.6%, below the midpoint of guidance.
  • Efficiency Ratio -- 33.2% for the year.
  • Liquidity -- Ended the quarter at 18.6% of total assets.
  • Risk-Based Capital Ratio -- 12.4% at year-end; Common Equity Tier 1 capital was 11.1%.
  • Share Repurchases -- 3.8 million shares repurchased in the quarter for $106 million, totaling 12.8 million shares and $373 million for the year; a new $500 million, two-year repurchase authorization was announced.
  • Private Credit Strategic Partnership -- Debuted with a multi-year agreement featuring a $2 billion minimum origination commitment, with no clawbacks and fee structure linked to clear return thresholds.
  • Loan Sale Strategy Change -- Newly originated loans are now included in sales, altering the bank-owned loan portfolio composition and certain reported metrics.
  • Loan Modifications -- More than 80% of borrowers in expanded modification programs made their first six payments, and approximately 75% of the 2023 modification cohort is current as of year-end.
  • 2026 Guidance: Origination Growth -- Private education loan origination growth projected at 12%-14%.
  • 2026 Guidance: Non-Interest Expenses -- Anticipated between $750 million and $780 million, driven by normal market increases (20%), one-time strategic investments (40%), and marketing to capture Plus-related volume.
  • 2026 Guidance: Net Charge Offs -- Expected in the range of $345 million-$385 million for the total loan portfolio.
  • 2026 Guidance: GAAP Diluted EPS -- Forecast between $2.70 and $2.80, attributed to strategic partnership launch and investment in Plus opportunity.
  • Long-Term Origination Opportunity -- Management estimates PlusReform has potential to drive an additional $5 billion in annual originations, or an approximate 70% increase from 2025 levels.

Summary

Management emphasized the significant market opportunity arising from recent federal student lending reforms and projected an acceleration of EPS growth into the high teens to low 20% range beginning in 2027, contingent on Plus TAM materialization. SLM Corporation (SLM +1.02%) expects to maintain a bank portfolio growth rate of 1%-2% annually beyond 2026, while strategic partnerships are anticipated to handle 30%-40% of private student loan originations through a new sale model involving both seasoned and newly originated loans. The company described the current phase as a transition year with outsized expense growth expected to moderate after 2026, targeting a return to low 30s efficiency ratio by 2030.

  • Chief Executive Officer Witter highlighted the high cosigner rate of over 90% for new loan originations as a core differentiator supporting credit performance.
  • Chief Financial Officer Graham stated, "volatility in early-stage delinquency is not necessarily a reliable indicator of future net charge offs," referencing internal findings on the declining predictive value of delinquency trends.
  • Management confirmed expanded loan modification volumes are nearing full seasoning, with further visibility into long-term borrower performance expected in 2026.
  • SLM intends to execute its $500 million buyback authorization in a disciplined and programmatic manner, buying more stock when prices trend down and less when trending up.
  • No material impact is expected from the federal postponement of wage garnishment and treasury offset, as the overlap with SLM’s private loan customers is limited.
  • Guidance and financial targets reflect management's expectation for a temporary spike in expenses, followed by improved margins as volume increases are realized and one-time investments sunset.

Industry glossary

  • PlusReform: Legislative changes in federal PLUS student lending programs, reducing borrowing caps and expected to shift increased loan volume to private lenders.
  • Held for Sale (HFS): Loans originated with the intent to be sold to third parties or through strategic partnerships rather than retained on the lender’s balance sheet.
  • TAM (Total Addressable Market): The total potential revenue opportunity available from an expanded set of student loan customers resulting from regulatory changes.
  • Efficiency Ratio: Non-interest expense as a percentage of total net revenue, used to measure operational efficiency in financial service companies.

Full Conference Call Transcript

Operator: Welcome to the SLM Corporation Fourth Quarter and Full Year 2025 Earnings Conference Call. At this time, all participants have been placed on a listen-only mode. The floor will be open for your questions following the prepared remarks. We ask that you pick up your handset for best sound quality. Lastly, if you should require operator assistance, please press 0. I would now like to turn the call over to Kate deLacy, Senior Director and Head of Investor Relations. Please go ahead. Thank you, Laurie.

Kate deLacy: Good evening, and welcome to SLM Corporation's Fourth Quarter and Full Year 2025 Earnings Call. It is my pleasure to be here today with Jonathan Witter, our CEO, Peter Graham, our CFO, and Elizabeth Brinoff, Managing Vice President of Strategic Finance.

Operator: After the prepared remarks, we will open the call for questions.

Kate deLacy: Before we begin, keep in mind our discussion will contain predictions, expectations, and forward-looking statements. Actual results in the future may be materially different from those discussed here due to a variety of factors. Listeners should refer to the discussion of those factors in the company's forward 10-Q and other filings with the SEC. For SLM Corporation, these factors include, among others, results of operations, financial conditions, and/or cash flows, as well as any potential impacts of various external factors on our business.

Additionally, this discussion and the earnings presentation include non-GAAP financial information, including non-GAAP delinquencies, including strategic partnerships and repayments, non-GAAP reserve rates, including strategic partnership warehouse loans, and non-GAAP NCOs as a percentage of average loans in repayment. All non-GAAP financial information should be considered as supplemental to, not a substitute for or superior to, the financial measure calculated in accordance with GAAP. The company believes that these non-GAAP financial measures provide users of our financial information with useful supplemental information that enables a better comparison of the company's performance across periods. There are many limitations related to the use of these non-GAAP financial measures. And their nearest GAAP equivalent.

For example, the company's descriptions of non-GAAP financial measures may differ from the non-measures used by other companies. For descriptions of the non-GAAP financial information included herein and reconciliation to the most directly comparable GAAP measures, please refer to the appendix to the earnings presentation beginning at Slide 13. We undertake no obligation to update or revise any prediction expectations or forward-looking statements including non-GAAP forward-looking statements. To reflect events or circumstances that occur after today Thursday, January 22, 2026. Thank you. And now I'll turn the call over to Jonathan Witter. Thank you, Kate and Chloe. Good evening, everyone.

Jonathan Witter: Thank you for joining us to discuss SLM Corporation's fourth quarter and full year 2025 results. I'm pleased to report on a successful year and discuss our strong outlook for 2026. Overall, the private student lending sector remains robust and is positioned for further success. College enrollment and specifically enrollment trends for many of our largest Tier one schools are up. Indicating students and parents continue to see the value of higher education. Our cosigner rates for new originations have also increased. Indicating parents and loved ones are willing to co-invest in the education for their students.

Recognizing that some recent graduates are feeling the impact of current economic uncertainty and technological change, unemployment rates for recent graduates are still comparatively low and most are finding gainful employment within six months of graduation. As AI transforms the professional landscape, we believe education will be even more important as students acquire the skills necessary to remain competitive in the future. Undoubtedly, schools and programs will evolve creating new areas of study to meet those needs. We look forward to supporting our school partners and students throughout this evolution. We are excited about the opportunity created by the recent federal student lending reforms.

These changes should reduce the likelihood of students and families taking on unsustainable levels of student debt. These reforms also create the opportunity for us to help more students and families. We believe that when fully phased in, PlusReform could contribute an estimated $5 billion in annual originations for SLM Corporation, representing approximately 70% originations growth over 2025. In 2025, SLM Corporation delivered our inaugural private credit strategic partnership. This innovative first-of-its-kind agreement combines the more predictable earnings profile of our bank, with the capital efficiency and risk transfer benefits of our loan sale program. We believe the economic value of this partnership is comparable or superior to other funding models.

This arrangement includes no clawbacks, and the supplemental fee which represents the smallest portion of the overall economics, is tied to clear reasonably achievable return thresholds. In addition to the strategic progress, we also delivered well against our guidance for the year. GAAP diluted EPS in the fourth quarter was $1.12 and our full year GAAP diluted EPS was $3.46 compared to $2.68 in 2024. Private education loan originations for the 2025 were $1.02 billion and for the full year, we originated $7.4 billion of private education loans, 6% over 2024 and at the higher end of our revised full year guidance.

Net charge offs for our private education loan portfolio were $98 million in the 2025, $346 million for the full year representing 2.15% of average private education loans in repayment. Which is down four basis points from the full year of 2024. Peter Graham will now take you through some additional highlights. Peter?

Peter Graham: Thank you, Jonathan. Good evening, everyone. We continued our capital return strategy in the fourth quarter. Repurchasing 3.8 million shares for $106 million for a total of 12.8 million shares $373 million over the full year 2025. Since January 1, 2020, we've reduced the shares outstanding by over 55% at an average price of $16.93. Our prior share repurchase authorization was nearing completion, and tonight, we are announcing a new two-year $500 million authorization. Our net interest margin was 5.21% for the quarter. 29 basis points higher than the prior year period and 5.24% for the full year. Up five basis points year over year.

These results demonstrate the effectiveness of our asset and liability management strategies, which delivered NIM in the low to mid 5% range. In the 2025, we reported a $19 million negative provision for credit losses. Largely driven by the release of reserves tied to the $1 billion seasoned loan portfolio sale, the selection of a portion of the 2025 peak season originations for sale to the KKR strategic partnership. In our investor forum last month, we noted that as our updated strategy begins to scale, key performance metrics would begin to shift. As part of our evolve strategy, we are no longer exclusively selling portions of our seasoned loan portfolio.

For the first time, we are also selling newly originated loans. This will change the composition of our bank-owned loan portfolio. Additionally, we are selecting each quarter a representative portion of new originations and warehousing them for sale in the subsequent quarter. As a result, we expect a portion of our new originations each quarter to be designated as held for sale. As many of our credit metrics are calculated using only loans held for investment, or include a portion of newly originated loans as part of their calculation. This change in loan sale strategy has begun to influence a number of reported metrics.

To support your analysis and ensure transparency, we have added an appendix beginning on Page 13 of the earnings presentation furnished with our release this evening. Outlining how these metrics have begun to shift. And providing the clarity needed to establish refresh baselines for forward-looking models. Importantly, the shift in these metrics is primarily driven by calculation mechanics rather than a change in the underlying performance of the loans in our portfolio. It's important to note certain information referenced tonight and provided in the earnings presentation includes non-GAAP metrics. We believe we're useful to understanding the comparative performance of our portfolio.

A reconciliation of the non-GAAP to GAAP metrics can be found in the appendix to the earnings presentation on Pages 18 and 19. With that foundation in place, we can turn to the discussion of our credit metrics. The total allowance as a percentage of private education loan exposure which we refer to as the reserve rate, was 6% at the 2025. Up from 5.93% in the previous quarter and 5.83% at the 2024. As shown on Page 15 of the earnings presentation, when adjusting for the change in loan sales strategy, the non-GAAP reserve rate would have been 5.92%. Net charge offs our private education loan portfolio in the 2025 were 2.42% of average loans in repayment.

Compared to 2.38% in the year-ago quarter. As shown on Page 16 of our earnings presentation, when adjusting for the change in loan sales strategy, the non-GAAP net charge off rate would have been 2.4%. Private education loans delinquent thirty days or more represent 4% of loans in repayment as of the end of the year. Unchanged from the third quarter and up from 3.7% at the 2024. Adjusting for the change in loan sales strategy, the non-GAAP delinquency rate would have been 3.88% as shown on Page 17 of the presentation. Over the 2025, we saw an increase in early-stage delinquencies. Prompting questions whether that was a precursor to higher charge offs.

As we noted then and continue to believe now, volatility in early-stage delinquency is not necessarily a reliable indicator of future net charge offs. As shown on Page 10 of the earnings presentation, an analysis of the relationship between annualized thirty-day plus delinquency and net charge off rates shows a 12 percentage point improvement in the LINK ratio since 2022. Demonstrating the diminishing connection between the two metrics. We believe this is driven at least in part by improvements in our collections effectiveness. Moreover, late-stage delinquencies and roll rates have remained stable consistent with our expectation that most early-stage delinquencies self-cure. As discussed for several quarters, our expanded loan modification volumes are nearing the point of being fully seasoned.

And we will begin to see borrowers whose loans were modified under the expanded loss mitigation programs at the 2023. Exiting these programs throughout 2026. While longer-term performance will become clearer throughout the upcoming year, we continue to be pleased by the results we are seeing from borrowers currently enrolled in these programs. As you can see on Page 11 of the earnings presentation, more than 80% of these borrowers successfully complete their first six payments. Additionally, close to 75% of borrowers who are enrolled in a loan modification during the 2023 are current at the 2025. Representing over twenty-four months of positive payment. This performance is consistent with what we are seeing in other modification cohorts.

Non-interest expenses for the full year were $659 million compared to $642 million in 2024, a modest 2.6% increase year over year. And below the midpoint of our guidance. We're pleased with this outcome which reflects our disciplined expense management, continued focus on efficiency. This discipline enabled us to deliver an efficiency ratio of 33.2%. In 2025. And finally, our liquidity and capital positions are solid. We ended the quarter with liquidity of 18.6% of total assets. At the end of the fourth quarter, total risk-based capital was 12.4%, and common equity Tier one capital was 11.1%. We believe we are well-positioned to grow our business and continue to return capital to shareholders.

I'll now turn the call back to Jonathan Witter.

Jonathan Witter: Thanks, Peter. Let me conclude with a discussion of our 2026 guidance. And provide some additional context on potential future trends. 2026 presents an exciting opportunity for our company to serve more students and families. The second half of the year, we expect that the first wave of students subject to the new plus caps will begin their undergraduate and graduate journeys. This impact will be relatively smaller in the first year of phase-in. Nonetheless, we expect full year 2026 private education loan origination growth of 12% to 14%. We believe this is an incredibly attractive opportunity for our company and we need to invest ahead of the anticipated volume.

As such, expected non-interest expenses for the full year of 2026 will be between $750 million and $780 million. Driving this year-over-year increase are three factors. Approximately 20% is growth associated with cost increases tied to normal market conditions. Approximately 40% of the increase reflects one-time investments in product enhancements, refined credit models, and other strategic enablers. And the remainder stems from higher marketing and acquisition costs required to capture the additional Plus-related volume. We do not expect this level of year-over-year expense growth to continue. In 2027, we expect the rate of operating expense growth to be roughly half that of 2026. As the cost of growing volume is offset by efficiency gains and the sunsetting of one-time investments.

Assuming our volume estimates are correct, we anticipate that we will improve our efficiency ratio each year with the goal of being back in the low 30s no later than 2030. Given the strategic and financial attractiveness of our private credit partnership business, we expect to grow that business in 2026. As a result, we anticipate private education loan portfolio growth to be flat to slightly negative year over year. Beyond 2026, we expect to maintain an appropriately sized bank that continues to serve as a strategic growth engine, a funding risk mitigant, and a healthy competitive alternative to our private credit partnerships.

Accordingly, after 2026, we expect to grow the bank portfolio gradually by roughly one to two percentage points per year until reaching a steady-state annual growth rate in the 30% to 40% of our private student lending originations will flow through strategic partnerships with additional balance sheet growth managed through seasoned portfolio loan sales. We expect net charge offs for our total loan portfolio will be between $345 million and $385 million. As shown on Page 16 of our presentation, we believe this is consistent with a stable credit outlook. Let me conclude with a discussion of full-year diluted earnings per common share which we expect to be between $2.7 and $2.8 in 2026.

This range reflects the deliberate choices we made to launch the strategic partnership in 2025, and invest aggressively to capture the plus opportunity. While 2026 is a critical year in our strategic journey, I'm even more excited about what comes after. While we cannot predict the future macroeconomics or other changes. If the plus TAM materializes as we have predicted, we would expect to see EPS acceleration beginning in 2027 with high teens to low 20% growth. Beyond 2027, we expect our EPS growth to remain elevated for several years as the Plus opportunity is fully realized, and our strategic partnership business grows. In closing, we are excited about our company's future and the opportunities ahead.

We believe students will continue to seek access to higher education to obtain the skills necessary to compete in the future. That plus reform will open the door for SLM Corporation to compete for and win business with an exciting new group of customers. Creating meaningful upside for future originations, And then our private credit strategic partnerships business will give us a capital-efficient and risk-balanced way to fund growth while building more predictable and recurring earnings streams. Taken together, we believe these dynamics should translate to very attractive value creation opportunities for the company, and for our investors. With that, Peter? Go ahead and open up the call for some questions.

Operator: The floor is now open for questions. Again, we ask that you pick up your handset when posing your questions. Our first question comes from Caroline Latta with Bank of America. Line is open.

Caroline Latta: Hi. Can you talk about how you guys think about the postponement of wage garnishment and treasury offset will impact the performance of in-school and private student loans?

Jonathan Witter: Yeah. Sure, Caroline. I'm happy to. First of all, I think it's important to remind folks that while many of our customers have federal loans, most federal loan customers do not have SLM Corporation private student loans. And I think in general and we've talked on past calls about just the difference in performance and impacts that we've been seeing as the federal program has gone through various stages of its evolution. In general, I think for any customers who have federal loans, who are severely delinquent, and I think our estimates suggest that number is quite small. The postponement is obviously a net benefit.

I don't think we would expect that to have a significant impact on our business just given the difference in customer basis.

Caroline Latta: Okay. Thanks. And then a quick follow-up one. You guys highlighted the $5 billion origination or opportunity from the Grad PLUS. Which is driving some of the origination growth year over year. Given those changes come into effect in July, how should we think about modeling 1H versus 2H growth?

Peter Graham: Yes. I think we've talked on prior calls about kind of the staging of this. If you think about it, it is new freshmen in the undergrad class and new to graduate school for graduate programs, you know, beginning in the fall academic period. And so you know, think about that in the context of a four-year program as, like, one-fourth of the volume and you know, grad programs can be some a little shorter and some a little longer than that. So we're expecting the sort of the incremental plus volume this year to be relatively modest and that's included in our guidance on growth for this year.

And we expect that to step up measurably as we move through the next two to three years until it gets to kind of a steady state.

Caroline Latta: Okay. Thank you.

Giuliano Bologna: Mhmm.

Operator: We'll take our next question from Giuliano Bologna with Compass Point. Your line is open.

Giuliano Bologna: Hi.

Peter Graham: Good evening. And a first question perspective, when I think about the partnerships and the loan sales in 2026, is there a rough sense of where the volumes are likely to shake out for both or even some relative context?

Jonathan Witter: Obviously, they'll have a pretty big impact on where the number shakes out for the year. I'm just curious how that looks versus the investor forum numbers.

Peter Graham: Yes. So recall that the agreement for this first strategic partnership is a commitment a minimum commitment of $2 billion of new originations. Roughly time to the academic year. So we designated a portion of our 2025 peak season originations as held for sale at the December. And we will that will be part of our sale in the first quarter as part of the new originations flow. Portion of that commitment. Going forward, each month we'll be selecting representative sample of originations that occur. And be designating that for sale in the partnership. I think Rough Justice, think about that as like 30% of originations.

And so there will be some seasonality as we go through this year in sales of new originations to the partnership just because it's tied to our actual origination pattern. So the highest amount sold of the new originations will be tied to kind of our traditional peak season period. And then in regards to season portfolio sales, I would say that's the approach to that will be similar to what we've employed historically, which is the size and timing of those will be dependent on kind of our capital needs and sort of marketplace conditions. So no real change in that regard.

Giuliano Bologna: That is very helpful. Hopefully, not too convoluted a question, but there's a fairly decent impact from the HFS book on balance sheet. And kind of what that balance will look like. Is it fair to assume that at least in 2026, it will probably be similar to where you are now in terms of balance? Or should we expect that to roll up throughout the year as things accelerate? And is there a reference of how big that HFS book will probably be Yes. This year and how big it'll end up being because it drives some decent NIM even while sitting there from an average balance perspective.

Peter Graham: Yes. So, you think about it as and I mentioned this in my prepared remarks, we're going to select loans each month we'll warehouse them at the end of a quarter and then have a subsequent takeout transaction for sale into partnership trust. Structure in the subsequent quarters. So that absolute amount of held for sale in the balance sheet will vary each quarter depending on the origination profile in that quarter. For instance, the fourth quarter will be the largest, so there will be a selection of sort of fall peak season originations and the second quarter will be the lowest because that's traditionally our lowest origination quarter of the year.

Giuliano Bologna: That is helpful. Then I realize there's obviously, the increased loan sales also changed the portfolio mix. In near term. And you guys have it very well in the appendix slides. Should we expect a little bit of change in just the seasoning of the portfolio because you've had excess sales in '25, you're selling a fair amount in '26 as well. But change the seasoning and kind of roll through repayment? Over the next few years? Or is that not a or should looking down the wrong path in terms of the materiality of that?

Peter Graham: Yes. I think at the margins, Will, I think the larger impact will be the fact that a portion of our new originations are going to be going off book. At originations. So that'll tend to cause a slower sort of replenishment of the overall season book and it'll gradually get a little more seasoned than what has been. But I think that's kind of at the margins. I don't think it's going be a dramatic shift.

Giuliano Bologna: That's very helpful. I appreciate the time and I will jump back in the queue. Okay. Thank you.

Operator: We'll move next to Terry Ma with Barclays. Your line is open. Terry, you may need to check the mute function on your device.

Terry Ma: Oh, hey. Sorry about that hopping in between calls. So I appreciate some of the color you gave on non-interest expense. Earlier on the call. But like if I look at the range for this year, it is obviously still quite a step up than what you guys had last year. And then even the post '26 kind of growth rate that you indicated is kind of higher than what you've seen historically. Can you kind of help us think about how you measure, the ROI of those kind of investment dollars? Yes, Terry.

Jonathan Witter: Probably a couple of different levels to that conversation. First, I think it is important to start with why we are stepping up the investment opportunity. And we've said it a couple of times, This represents, in our mind, sort of the clearest opportunity to have really significant TAM growth up to 70% over the course of the next couple of years. Again, assuming the analysis and the estimates that we put together are meaningful. So I think it's important to start with this is not to be cliche, but really as close to a once-in-a-lifetime opportunity yeah, to expand a business as I think we're gonna see in our private student lending space.

I think if you model through what is the impact when fully realized of a 70% increase in originations. Heck for the sake of conservatorship, cut it to 50% increase. It is a really meaningful increase in earnings potential and market cap. And so I think you have to start there and understand that is the mental model that we as a management team bring to this investment opportunity. We have and I think have always had and this has been demonstrated I think by our strong efficiency ratio performance over the last couple of years.

Really good governance around, for example, how we do return measurement on marketing spend, how we do return measurement on sort of new product innovation and development. And I think investors should rest assured that we are bringing that very same discipline to bear in this opportunity. I think what's important to recognize and maybe one of the source of disconnect is, you know, for a whole myriad of reasons, in particular, we do not expect our marketing to be as effective or as efficient in year one of this sort of opportunity as it will likely be in years two, years three and sort of beyond.

And if you think about it, there's a whole myriad of reasons for that. We are phasing in the you know, the eligibility of the new caps. You know, so when we market in year one, depending on whether you're talking in grad or undergrad, there will only be a portion of those students who will be interested in private student loans because many will still be you know, supported by the federal program. In year one in particular, for example, there's no serialization benefit. We know it's a lot less expensive for us to get a serialized loan than a new customer than to acquire a new customer.

And I haven't even started, Terry, to talk about just it takes a little bit of time and enrollment season or two to really fully optimize all of your various both digital and traditional marketing channels. And so we don't view that as a permanent impairment to our efficiencies. But I think we do bring a slightly different view to how you stand up a marketing program for, let's say, new medical students than what has been the primary part of our business over the last several years, which has been serving disproportionately undergrads. So we're excited about it. We think it is again in service of a really fabulous market opportunity.

We hope you all agree that market opportunity is right in front of us. And we feel like we're bringing great discipline to how we're thinking about that spend.

Peter Graham: I think the other thing I would add there is just context around efficiency. Like we have a very good efficiency rate ratio now, even at the midpoint of the range we've guided to for 2026. We're kind of still in the high 30s. And I think on a relative basis compared to others in this space, that's a really efficient operation. And we've said over the coming years, we're going to drive that back down to low 30s. So look, I think that's an additional context. That's important.

Terry Ma: Got it. That's helpful color.

Terry Ma: And then I guess like maybe just a follow-up on credit. Your percentage of loans in extended grace ticked up meaningfully I think that's pretty consistent with the June wave exiting regular grace. But as we kind of think about credit for 2026 and just the guidance range that you gave, like any color on like your confidence level because I think you also have a way or exiting mod in December. Like as we look out into twenty sixth, I think by all measures, it is still a pretty kind of tough job environment for kind of new grads.

So kind of maybe help us think about what's kind of embedded in your charge off assumption range for the year and your level of confidence? Thank you.

Peter Graham: Yes, sure. I'll take the mod piece and then Jonathan, you can maybe recap some of your comments around the overall environment. Sure. On the loan mods, we've been tracking now for some time and talking about successful performance in making payments. And there's an additional slide in the deck that sort of highlights that. I think the from my perspective, thinking about kind of the 2023 cohort of, you know, mod enrollments The fact that 75% of them at the end of the year are current is another really strong indicator of success. And again, we'll see how that sort of moves through the year in terms of people graduating out. And stepping back into their contractual obligations.

But we feel good that we've designed a well-functioning program at met a it's met a need of a borrower in stress. And we feel like the positive payment habits that have been demonstrated over now twenty-four months in that cohort are a powerful indicator of their likelihood of success as they come out this year. And all of that's baked into the range that we've given for net charge offs for 2026.

Jonathan Witter: Yes. And Terry, maybe if I step back and give a little bit more context I think there's clearly been a whole series of pretty high catching stories that have come out in the past months about of AI and impact on the job market and so forth. I think the data that we see from a number of different sources tells perhaps a little bit more of a balanced story. And there is no doubt that unemployment rates for new college grads are slightly elevated today. There is no doubt that it is taking a little bit longer for new college grads to find jobs.

To put that in context, if you look at the monthly unemployment data for new college grads, you see typically a spike in unemployment over the summer and then a normalization period And we are sitting here today based on December 25 data you know, at effectively the same unemployment rate that we would have seen, again, for new college grads in November '23 or '24. Yes, so it is a slightly slower ramp to sort of full employment normalization But it is measured in sort of a month, month and a half delta if you look at those rates. Not something that is more substantial.

I think it's important also to kind of put that in the broader context and I've raised on a couple of calls or said this on a couple of calls. This is a pattern that we are well used to. We know for many years in this business the single greatest point of financial stress on average for our customers is going to be when they're going through this transition from school to full-time employment.

It's why we invest disproportionately in the programs that we have to help customers during that time and to give them sort of the flexibility and whether that's programs like you mentioned, Grace, that's potentially loan modifications for the small number who need that or other programs that we may have we feel like we are really well set up to do that. By the way, this is also a time where our 90% plus cosigner rate is critically important. And we know both numerically and we know anecdotally from our surveys, parents, loved ones expect to support their students during this time of transition. And that's a great answer for the student.

That's also a great answer for us and for our shareholders. And so when you put all that together, no CEO of a credit-oriented company is ever gonna be dismissive of credit. We take it seriously and watch it like a hawk. But I think what we are seeing in the patterns sort of fits the comments that I've made and is certainly all baked into the that we have just provided you.

Giuliano Bologna: Great. Thank you. Yes.

Operator: We'll move next to Jon Arfstrom with RBC Capital Markets. Your line is open.

Peter Graham: Thanks. Good afternoon.

Giuliano Bologna: Good afternoon. Hey,

Peter Graham: Question for you, Jonathan. Your comments on the EPS outlook I guess, obviously, the market can be pretty short-term focused and that initial reaction was pretty negative to the new model on your stock. But you framed up the strong EPS growth potential for '27. I think you'd mentioned high teens to low 20s potential for '27. In your prepared comments, Do you feel like you have high visibility on that for 2027? And does the visibility become a little more blurred beyond 2027? Or is it pretty clear to you in terms of what that runway could be?

Caroline Latta: Yes, Jon.

Jonathan Witter: I think the way that I would answer that is there are really a couple of things that in my mind have a disproportionate impact on our stock. Or on our performance. Obviously, broad macroeconomic environment and the impact that has on credit you know, I'm not sure I or any other bank or consumer finance CEO is going to feel comfortable looking out more than kind of a twelve-month timeframe. But if you kind of look at the rest of our model I think it really comes down to do we realize the TAM opportunity, you know, that is in front of us?

Are we successful at regaining the kind of efficiency ratio that Peter and I have both now talked about. And a little bit a choice we get to make, which is how which do we want to grow our bank balance sheet versus fund that business in other ways. I think we have done more disciplined work than probably many. And as I can imagine on really understanding the TAM opportunity. And that's not to say that there is not risk there and that there won't be competition. But I think we understand what the market opportunity is going to be.

And I think you know, we feel like it is a, you know, it is a real opportunity for us moving forward. I think, you know, I would say our expense management discipline speaks for itself. And I think, again, we get to make the decisions about the right way to business with the growth of our bank balance sheet. And I think when you put those things together, we can't overlook the other uncertainties in our model, but I think those are all things that one can look at and assign their own sort of likelihood of success to.

And I think those are really kind of the major drivers of our confidence in some of the comments that we've made about 2027 and beyond.

Peter Graham: Okay, fair enough. Thank you very much.

Operator: We'll move next to Melissa Weddle with JPMorgan.

Kate deLacy: Melissa on for Rick this today.

Operator: Appreciate you taking our questions. First one would be around gain on sale margin.

Kate deLacy: That looked like it came down a little bit versus prior sales that we've seen earlier this year. If you transition to sort of more of a combo approach to spot loan and transfer to strategic partners, how should we be thinking about that gain on sale margin and any volatility that we could see quarter to quarter in that

Peter Graham: Yeah. I think that it's that's a good question. I think if you look at sort of a longer history of our execution on these seasoned portfolio sales. Do you see a broader distribution than what you've seen in the current year. I'd say over a longer period of time, if you kind of throw out the highest the highest ratios and throw out the lowest gain on sale ratios, you'd probably be kind of in a somewhere one zero six, one zero seven ish on average. In that context. I think there's also a timing within the year component to those sales.

I think if you go back and look at the sort of quarterly sort of history of our portfolio sales. Those that are done in the first quarter tend to be at a higher premium than those that are done in the fourth quarter. For a variety of a variety of reasons. And so look, the portfolio sale that we did in the fourth quarter here was in the context of a broader strategic partnership but it also was part of a transaction that had a great deal of scrutiny around true sale and things being done at fair value. So it's well supported by sort of statistics on the portfolio itself and the environment in the fourth quarter.

Operator: Thanks for that.

Kate deLacy: I have one more follow-up question for you. And this is around the share repurchase authorization announced today.

Operator: The time period on that was twenty-four months. The question is, given the investment you intend to make in the platform,

Kate deLacy: in this next year in 2026, should we be thinking about that repurchase deployment possibly being a little bit back end loaded in 2027? Thank you.

Peter Graham: Yeah. I think we've we've demonstrated over the last few years that we're going to be pretty disciplined and programmatic around share buyback. And we intend to operate that way with regard to this new authorization that we've been granted. We've got very strong capital at the bank and a strong earnings profile. We tend to set in place programs that will have kind of a targeted amount of buying and be in the market every day that the market is open. And then a bias towards buying more shares on days when the stock price is trending down and less on days when the stock price is trending up.

That served us well in terms of deploying the last you know, authorization that we have and we intend to kind of continue to operate in that manner going forward.

Giuliano Bologna: Thanks very much.

Operator: And this concludes the Q and A portion of today's call. I would now like to turn the floor over to Mr. Jonathan Witter for closing remarks.

Jonathan Witter: Chloe, thank you, and thank you for everyone who joined call tonight. Obviously, Peter and I on behalf of the entire company are proud and happy to talk to you about our 2025 performance. But I think even more importantly, hope you walk away tonight with a real sense of sort of how strongly we feel about our strategic positioning and what that means for 2026 and beyond. As always, the IR team is here to be helpful to you in whatever way they can. And we hope everyone has a great rest of the January and a great weekend. And thank you again for your time this evening. I'll now turn it over to Kate for some concluding business.

Kate deLacy: Thanks, Jonathan. Thank you all for your time and questions today. A replay of this call and the presentation will be available on the Investors page at salliemaine.com. If you have any further questions, feel free to contact me directly. This concludes today's call.

Operator: Thank you. This concludes today's SLM Corporation Fourth Quarter and Full Year 2025 Earnings Conference Call and Webcast. Please disconnect your line at this time, and have a wonderful evening.