SLM Q1 2025 Earnings Report

SLM EPS Results

• Actual EPS: $1.40
• Consensus EPS: $1.19
• Beat/Miss: Beat by +$0.21
• One Year Ago EPS: $1.27

SLM Revenue Results

• Actual Revenue: $374.97 million
• Expected Revenue: $359.83 million
• Beat/Miss: Beat by +$15.14 million
• YoY Revenue Growth: +3.50%

SLM Announcement Details

• Quarter: Q1 2025
• Date: 4/24/2025
• Time: After Market Closes
• Conference Call Date: Thursday, April 24, 2025
• Conference Call Time: 5:30PM ET

SLM (NASDAQ:SLM), through its subsidiaries, originates and services private education loans to students and their families to finance the cost of their education in the United States. It is also involved in the provision of retail deposit accounts, including certificates of deposit, money market accounts, and high-yield savings accounts; and interest-bearing omnibus accounts. The company was formerly known as New BLC Corporation and changed its name to SLM Corporation in December 2013. SLM Corporation was founded in 1972 and is headquartered in Newark, Delaware.

SLM Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Welcome to the Sallie Mae First Quarter twenty twenty five Earnings Conference Call. At this time, all participants have been placed on a listen only mode and the floor will be open for your questions following the prepared remarks. I would now like to turn the call over to Kate DeLacey, Senior Director and Head of Investor Relations. Please go ahead.

[Kate deLacy, Senior Director, Head of Investor Relations at SLM]

Thank you, Margo. Good evening, and welcome to Sallie Mae's first quarter twenty twenty five earnings call. It's my pleasure to be here today with John Witter, our CEO Pete Graham, our CFO and Melissa Verdaugh, Managing Vice President of Strategic Finance. After the prepared remarks, we will open the call for questions. Before we begin, keep in mind our discussion will contain predictions, expectations and forward looking statements.

[Kate deLacy, Senior Director, Head of Investor Relations at SLM]

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 Form 10 ks and other filings with the SEC. For Sallie Mae, 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. We undertake no obligation to update or revise any predictions, expectations or forward looking statements to reflect events or circumstances that occur after today, Thursday, 04/24/2025. Thank you.

[Kate deLacy, Senior Director, Head of Investor Relations at SLM]

And now I'll turn the call over to John.

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

Thank you, Kate and Margo. Good evening, everyone. Thank you for joining us today to discuss Sallie Mae's first quarter twenty twenty five results. I'm pleased to report on a successful quarter and progress toward our 2025 goals. I hope you'll take away three key messages today.

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

First, we're off to a strong start for 2025. Second, we are encouraged by our early credit performance and third, we believe we have positive momentum for the rest of the year despite uncertainties and the broader macroeconomic environment. Let's begin with the quarter's results. GAAP diluted EPS in the first quarter was 1.4 per share as compared to $1.27 in the year ago quarter. Loan originations for the first quarter were $2,800,000,000 an increase of 7.3% from the year ago quarter, a strong start to 2025.

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

The credit quality of originations continues to be solid with incremental improvement compared to Q1 of twenty twenty four. Our cosigner rate for the first quarter was 93% compared to 91% in the year ago quarter and average FICO at approval was 7.53% for the first quarter compared to 7.48% in the first quarter of twenty twenty four. The first quarter also reflected strong credit quality. Net private education loan charge offs in Q1 were $76,000,000 representing 1.88% of average loans in repayment. This is down 26 basis points from the first quarter of twenty twenty positive credit performance in the first quarter of this year was driven by several key factors.

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

Seasonality played a role as the first quarter historically delivers stronger credit outcomes compared to the rest of the year. We also continue to see benefits from enhancements in our collection practices and the effectiveness of our expanded loss mitigation programs. While we are pleased with this early performance, we remain mindful of the uncertainty created by recent policy changes and their potential implications for the broader macroeconomic environment. Executed in the first quarter generated $188,000,000 in gains, a high single digit premium, an increase of $45,000,000 from our Q1 twenty twenty four sale. We expect to sell additional loans this year with market conditions dictating the timing and our private student loan portfolio growth targets dictating the volume.

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

For the first quarter of twenty twenty five, we continued our capital return strategy, repurchasing 1,000,000 shares at an average price of $29.65 per share. We have reduced the shares outstanding since we began this strategy in 2020 by 53% at an average price of $16.29 We expect to continue to programmatically and strategically buyback stock throughout the year. Pete will now take you through some additional financial highlights of the quarter. Pete, over to you.

[Pete Graham, EVP & CFO at SLM]

Thank you, John. Good evening, everyone. Let's continue with a discussion of key drivers of earnings. For the first quarter of twenty twenty five, we earned $375,000,000 of net interest income. This is down $12,000,000 from the prior year quarter, but ahead of the fourth quarter of twenty twenty four by $13,000,000 During the first quarter, we completed a $500,000,000 unsecured bond transaction, which was used to redeem our November 2025 maturity.

[Pete Graham, EVP & CFO at SLM]

Our net interest margin was 5.27% for the quarter, 35 basis points ahead of the prior quarter. We continue to believe that over the longer term, low to mid 5% is an appropriate NIM target. Our provision for credit losses was $23,000,000 in the first quarter of twenty twenty five, up from $12,000,000 in the prior year quarter. The increase was largely driven by loan growth related to the mini peak origination season and partially offset by $116,000,000 reserve release associated with the $2,000,000,000 loan sale completed during the quarter. Despite the higher provision, our allowance as a percentage of total private education loan exposure was 5.97%, slightly down from 5.99% in the year ago quarter.

[Pete Graham, EVP & CFO at SLM]

This represented a 14 basis point increase from the fourth quarter, which is consistent with the seasonal impact of higher originations in the first quarter of the year. Our reserve rate has remained relatively consistent year over year, reflecting a balanced view of credit performance and the broader macroeconomic environment. While we are encouraged by the ongoing benefits from our loan modification programs and the continued strength in the credit quality of originations, we remain cautious. The economic outlook continues to be a key variable in our reserve modeling, and we will closely monitor any changes in the environment that could impact future estimates. Private education loans delinquent thirty days or more were 3.6% of loans in repayment, a decrease from 3.7 at the end of twenty twenty four, although higher than the 3.4% at the end of the year ago quarter.

[Pete Graham, EVP & CFO at SLM]

We remain pleased with the performance of our enhanced loss mitigation programs, which we've now had the opportunity to observe over more than a full year. The volume of loan modification enrollments has decreased by approximately 50% from highs in the third quarter of twenty twenty four as we have optimized our eligibility criteria. We're pleased with the trajectory of this program and the positive performance is an important step towards achieving our long term net charge off targets. First quarter non interest expenses were $155,000,000 compared to $150,000,000 in the prior quarter and $162,000,000 in the year ago quarter. This was a 4% decrease compared to the first quarter of twenty twenty four despite an increase in application and originations volume in the quarter.

[Pete Graham, EVP & CFO at SLM]

Finally, our liquidity and capital positions remain solid. We ended the quarter with liquidity of 16.8% of total assets. At the end of the first quarter, total risk based capital was 12.9% and common equity Tier one capital was 11.6%. Another measure of loss absorption capacity of the balance sheet is GAAP equity plus loan loss reserves over risk weighted assets, which was a very strong 16.4%. We continue to believe we're well positioned to grow our business and return capital to shareholders going forward.

[Pete Graham, EVP & CFO at SLM]

I'll now turn the call back to John.

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

Thanks, Pete. I hope you agree that we executed well in the first quarter and that you share my belief that we have positive momentum for the full year of 2025. Let me close with a few comments on our 2025 guidance. As I mentioned earlier this evening, the strength of our first quarter origination season, the positive momentum in credit performance and the successful execution of our first loan sale this year reflect a solid start and meaningful progress toward our goals. While we remain confident in our trajectory and expect performance of our programs over the medium term, we also recognize the broader macroeconomic uncertainty that persists.

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

As such, we will continue to monitor developments closely and we'll provide updates in future earnings calls as we gain greater clarity throughout the year. At this time, we are reaffirming the 2025 guidance that we shared on our last earnings call for all key metrics. With that, Pete, why don't we go ahead and open up the call for some questions?

[Operator]

We'll take our first question from Jeff Adelson with Morgan Stanley. Please go ahead.

[Jeffrey Adelson, Executive Director at Morgan Stanley]

Yes. Hey, thanks for taking my questions. Your credit your charge offs did really well this quarter. I know you gave some color on the seasonality and you continue to be pleased with the loss mitigation programs. Would you attribute most of that outperformance versus what you've seen over the last few years to the loss mitigation programs you're putting on?

[Jeffrey Adelson, Executive Director at Morgan Stanley]

Or is there anything else we should be aware of under the hood? And then, any sort of early color or anything you're noticing or expecting from some of the impact to the government programs where recently we saw the announcement that the government is intending to turn back on collections and wage garnishment for those in default and there's been a number that in the federal program have not been paying their loans for some time?

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

Yes, Jeff, it's John. Let me take both of those and I'll invite Pete to chime in if I miss anything. On the charge offs, I think we've been pretty consistent about this. I think we would point to a number of contributing factors. As I said in my comments, there's obviously a little bit of seasonality.

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

If you looked back at Q1 of last year, for example, you would see a net charge off rate that was a little bit lower than the full year. So that is certainly a part of it. I think the loss mitigation programs is a part of it and it's not just the introduction of those programs, but really the continued optimization of those programs over time. I think Pete mentioned the fact that we're optimizing around enrollments, but we're also optimizing around other components of the programs as well so that they better meet the needs of our customers. And as I think we've said sort of repeatedly, we've also over the last number of years engaged in on the margin, but we think powerful sort of changes and enhancements to our underwriting capabilities.

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

Those are a little bit of a longer burn time item just given the amount of time our students spend in school before they enter repayment. But that's obviously a part of the answer as well and will continue to be a part of the answer in the future. So I don't think there's anything new that I would add to that. I think it's the same basic recipe that we have that we've talked about. To your second question, which we could probably spend all night talking about, obviously there's a lot of changes in sort of focus of this administration.

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

They have talked about a whole variety of different things. First and foremost, reporting of delinquency and default status in federal loans to the bureaus. There was a number of articles that came out several weeks ago about that. And I think really spearheaded by an op ed piece in the last couple of days by the Secretary of Education, a focus on more active sort of collections and sort of payment activities related to that population. We've dug into this a number of different ways.

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

And I'll preface this by saying we don't have perfect data on our customers and their federal loan programs and use. But we look pretty carefully, for example, at FICO. And we have seen for our customers who have federal loans, no material sort of change in the average FICO performance. There's always, as you would expect, some people who go a little bit up and some people who go a little bit down, but the averages have stayed very, very steady. And even as we've dug into some of those sort of joint customers, customers of us and the federal government whose FICOs have declined, we've not seen any material or meaningful reduction in their ability to pay or payment sort of metrics or behaviors or patterns.

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

The FICO stuff seems to be really pretty steady. We also did a fair amount of sort of what I would describe as one time special analysis on this. And we looked at all of our customers who also have federal loans. And I think there were some things that we saw that were pretty interesting there. Our joint customers, again, and Sallie Mae, seem to have a lower delinquency rate on their federal loans than the federal population as a whole.

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

And I need to caveat that by saying the data on delinquencies out of the federal loan program is not great, but the best that we've been able to piece that together. And I think even more interestingly, if you look at those customers, those joint customers who are delinquent on their federal loans, 85 of those joint customers are actually current on their Sallie Mae loans. And so I think when you put all of that together, Jeff, it says at least to me, it suggests two really important things. One, our average customer is just different from the federal customer as a whole. Said simply, most of Sallie Mae's customers have a federal loan, but lots of federal borrowers do not have Sallie Mae loans, right?

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

The two populations we really believe are different. And I think that performance also speaks to the strategy that we enacted several years ago of getting our customers back into positive repayment habits sort of early after the coronavirus situation abated. And I think we are seeing sort of the positive impact of those credit habits. And I think that says, or at least validates to a certain amount that overall strategy. So probably more data than you were looking for, but at least as of this time, we're just not seeing a lot impact of that.

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

Obviously, as those federal strategies continue to season, we'll continue to monitor. And if we see something different that we think is material, of course, we'll talk about that.

[Jeffrey Adelson, Executive Director at Morgan Stanley]

That's great. Thanks for all that color. That's really helpful. Maybe the other side of that coin is some of the changes or forthcoming changes of the Department of Education are also maybe incentivizing some more activity from borrowers to go private. I'm just wondering if you're seeing any of that yet.

[Jeffrey Adelson, Executive Director at Morgan Stanley]

And I know we're still waiting on changes in the Plus programs potentially down the line, but are you noticing an uptick in graduate borrowers maybe coming to you or maybe you could share any what percent of your originations are coming from graduate if that's increased at all?

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

Jeff, first of all, I think it is sort of early and hard to know. As we have talked about I think often in our business spring follows fall, fall doesn't follow spring. So an awful lot of the originations and disbursements that we're doing now are really follow on business from the fall. With that said, I think there are some very sort of initial signs that there may be some increased activity there, but it is way too early for us to have a strong point of view on that. I think in terms of that swap inswap out behavior, if that happens, we would really expect to see that during peak season this summer.

[Jeffrey Adelson, Executive Director at Morgan Stanley]

Great. Thanks for taking my questions. Good night.

[Operator]

We'll next go to Terry Ma with Barclays. Please go ahead.

[Terry Ma, Senior Equity Research Analyst at Barclays]

Hey, thank you. Good evening. Just wanted to follow-up on credit. The delinquency rate improved sequentially, but it was up 18 basis points year over year. A lot of that was driven by the early stage bucket.

[Terry Ma, Senior Equity Research Analyst at Barclays]

That bucket was pretty flat year over year last two quarters. So any color on kind of what went on there?

[Pete Graham, EVP & CFO at SLM]

I think one of the things that's sort of impacting delinquencies in the quarter is sort of the impact of the folks that are in their qualifying periods in the mod programs. And comparing prior first quarter to this quarter, that's a significant change in practice. If you adjust for those folks in the mod programs that are in the delinquency buckets, that number for this quarter is a 3% number. So I think that's a big piece of some of the trend that you're referring to there.

[Terry Ma, Senior Equity Research Analyst at Barclays]

Got it. All right. So if I look at kind of your extended grace, there's been much higher usage over the last year. I guess like how should we kind of interpret that? And is there kind of any color that you can give on borrower behavior kind of once they exit extended Grace?

[Terry Ma, Senior Equity Research Analyst at Barclays]

Thank you.

[Pete Graham, EVP & CFO at SLM]

Yes. I think the changes we made to the provide that extra assistance that was allowed under the regulations for those borrowers that are new to repayment, that's the highest period of stress that we see in the portfolio as people are graduating, getting their lives in order and going into establishing good payment patterns in their life. And so we feel like the usage of that as we've rolled out that program is probably indicative of it operating as intended. At the margins, the level of people applying to that, I don't think are indicative of anything broader in the overall economy. And we view that as a very strong program that are helping people be successful.

[Operator]

Thank you. We'll next go to Moshe Orenbuch with TD Cowen. Please go ahead.

[Moshe Orenbuch, Managing Director & Senior Analyst at TD Cowen]

Great, thanks. John, I know that you mentioned that the growth of the balance sheet would kind of be driven or I should say the amount of the loan sales would be driven by your balance sheet growth targets. Maybe if you could just kind of talk a little bit about now that the CECL is in the rearview mirror, the CECL phase in, how you are thinking about both growth in the balance sheet and capital return?

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

Yeah, Moshe happy to and again Pete jump in if I miss anything here. And for anyone who was not a part of it, I would encourage folks to go back and look at our December 2023 investor forum presentation. While that was certainly not meant to be kind of a multi year commitment in any way shape or form, I think it was really meant to sort of give as clear evidence as we can of sort of how we think strategically about the business. And I think Moshe to answer your question, what we really like in the business right now as we move past full CECL phase in is moderate accelerating and predictable balance sheet growth. We think there's a real value in growing the balance sheet.

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

We think there's a real value in the kind of growth of predictable steady kind of NIM based earnings that come from that. And we like that overall view. We do though want to put sort of thoughtful kind of limits or governors if you will on how quickly we do grow the balance sheet. Growing the balance sheet consumes meaningful capital, growing the balance sheet puts stress on the liquidity portion of our business. And by the way, you know for how our strategy has evolved over the last five years, I am as committed to strong capital return and capital discipline as I think anybody.

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

And we also like saving room in our plan to continue to return meaningful capital to shareholders. So that kind of moderate plan allows us to in our mind get a little bit of a Goldilocks where we can grow the balance sheet thoughtfully and still every year have meaningful capital to return in the form of share buybacks really fueled through our loan sale proceeds. But also what we also like is sort of the potential for a strong and over time potentially growing that would really be fueled by that balance sheet growth. So I think we laid all of that out in sort of that investor form document in more detail. I think the guidance that we've given for this year is completely consistent with that.

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

In fact, I think we're sort of a year ahead of where we thought we would be on that journey on sort of virtually every metric. And we feel great about the value that that's been able to create for us so far.

[Moshe Orenbuch, Managing Director & Senior Analyst at TD Cowen]

Great. And then you did mention that expenses were down 4% year on year despite higher applications. And I know that kind of driving that better unit economics has always been part of the thesis. Could just talk a little bit about what you've done to achieve that and how sustainable is that or how you think about that going forward?

[Pete Graham, EVP & CFO at SLM]

I'll take that one. Yes, I think as you stated, it's been an ongoing focus of ours to continue to drive operating leverage in the business. And each year as we set out our guidance, we have that in mind as we set our targets for the year. I think in regards to any one quarter, there can be gives and gets in the quarter that swing things one way or the other. But we're happy with the expense performance we've had and committed to the overall guidance that we put out for this year.

[Moshe Orenbuch, Managing Director & Senior Analyst at TD Cowen]

Thanks very much.

[Operator]

Thank you. And we'll take our next question from Michael Kaye with Wells Fargo. Please go ahead.

[Michael Kaye, Equity Research Analyst at Wells Fargo Securities]

Hi, good evening. EPS, it's off to a really good start this year, much higher than Q1 consensus estimates. Though, you know, your EPS guidance for the year was unchanged. Trying to figure out is that just cautiousness as we're early in the year and maybe some pickup in macro uncertainty that's keeping the guidance unchanged or something else at play? Are you actually running ahead of plan thus far?

[Pete Graham, EVP & CFO at SLM]

Yes. Hey, Michael, it's Pete here. I guess what I would say is I would break that down as follows. Kind of one of the key performance drivers for the quarter was the loan sale that we completed in February. And we knew what the results of that were when we set our guidance out for this year.

[Pete Graham, EVP & CFO at SLM]

So again, we're committed to our overall guidance for the year. I think there is some amount of macro uncertainty in the world, but we haven't seen anything that's impacting our results yet. So we haven't made any real adjustments yet as regards to that.

[Michael Kaye, Equity Research Analyst at Wells Fargo Securities]

Just back to the buyback, it seems like it's off to a very slow start this year just and just like $31,000,000 I mean, you plan to come anywhere near close to completing that? I think it's $272,000,000 that's left.

[Pete Graham, EVP & CFO at SLM]

Yes. I think our if you look at the share buyback pattern that we had in 2024 and you compare that our start to the year, I think they're relatively consistent. I'll remind everyone that last year, we set out to create a more programmatic approach to share buybacks, and we fund those share plans with the proceeds from the loan sales as they occur. And we're running the same sort of playbook this year. So we completed a loan sale in February, and we put in a program with the proceeds from that loan sale that started executing very shortly thereafter.

[Pete Graham, EVP & CFO at SLM]

So I wouldn't necessarily read anything into the pace of the start to the year.

[Michael Kaye, Equity Research Analyst at Wells Fargo Securities]

Okay. All right. Thank you.

[Operator]

We'll next go to Nate Richem with Bank of America. Please go ahead.

[Nathaniel Richam-Odoi, Equity Research Associate at Bank of America]

Good afternoon and thanks for taking my question. Originations in the quarter were pretty solid, but I would have thought growth would have been a little faster given the share gains you made late last year and the strength we saw in two ways 2024. And I realize you're reiterating guidance for the full year, but just curious to hear your thoughts on how the quarter shook out versus your expectations. And like if you expect a relatively consistent growth rate from here or the normal step down that we'd probably expect from like from you lapping that share gain?

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

Yes. Nate, I think in terms of originations, I think we're sort of well within our expectations for the year. We had a lot of discussion last year when we set guidance about the fact that with the competitive changes in the marketplace, those changes would be spread over two years. There'd be a fall effect, which we really experienced last year and there'd be a spring effect, which we experienced this year a little bit smaller. I think we feel like we're sort of right on our plan and right where we expected to be for the spring effect.

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

I do think you should expect that this fall will not sort of match last fall in terms of the overall growth rate because you don't get competitors leaving the marketplace the same competitor leaving the marketplace two years in a row. But I think we believe what we're seeing in the first quarter is consistent with the guidance that we've given for the year.

[Nathaniel Richam-Odoi, Equity Research Associate at Bank of America]

Got it. Thank you. And then I want to go back to Moshe's question really quickly. The expense efficiencies were really solid in 1Q, but I'm just curious if you can give us some additional color on the puts and takes for the full year outlook. And like what could push you to the high end of the range at this point?

[Nathaniel Richam-Odoi, Equity Research Associate at Bank of America]

Is it like variability on the loan volumes you do in the fall season? Or is it other spending like investments in just marketing in general?

[Pete Graham, EVP & CFO at SLM]

Yes. Again, we're off to a good start for this year. And we feel good about the level of efficiency we've been driving into the business, to a degree that we can generate more efficiencies that will give us some flexibility to accelerate investment in other technologies or other things that will have further efficiency gains in the future. We've got a fairly tight expense range of guidance for the full year. And so I think that's appropriate for us to sort of keep to our commitment at this juncture in the year.

[Pete Graham, EVP & CFO at SLM]

I don't see anything that's going to wildly swing us beyond the guidance that we've given.

[Nathaniel Richam-Odoi, Equity Research Associate at Bank of America]

Got it. Thank you.

[Operator]

We'll take our next question from John Hecht with Jefferies. Please go ahead.

[John Hecht, Managing Director at Jefferies Financial Group]

Afternoon. Thanks for taking my questions. First question, I'm just going back to some policy stuff. I think we've all become aware of some headlines about some potential changes or reduction in funding of several large universities you know, along with just sort of general over government cutbacks and a lot of factors or segments. But I'm wondering, if that happens, it seems like some of that would also some of that deficit would go to the private markets.

[John Hecht, Managing Director at Jefferies Financial Group]

Have you guys given that much consideration? And is there anything else we should be thinking about if that trend does occur?

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

Yes. John, it's John. We've been following the same news reports that you are. And I think it's a little bit of a difficult question because the unknown at this point is how do colleges and universities respond and how long lasting and how sort of how fully are the various proposed actions followed through on. But I think there are gives and gets.

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

Certainly if universities are under greater financial pressure, it implies perhaps for some that there is less money there for financial aid. That probably leaves a larger gap for families to make up on and that is the core of our business that gap financing. That could certainly be a slight positive to our originations outlook. I would also say on the opposite side just as an example, if for example fewer international students come because of Visa or other issues, That's not a big part of our business today. But we do business with some international students if they have an appropriate cosigner.

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

And that could be a very slight sort of headwind to the overall origination. So I think it's really too early to tell. I think there's too many gives and gets there. I don't think we are envisioning it having a material impact as we know it at this point for this year. But certainly as the breadth and depth of those policy changes comes more into focus, breadth being number of schools impacted and depth of course being the magnitude of the impact, I think we'll be in a better position to understand.

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

And if that changes our originations outlook, we'll of course update that in a future earnings call.

[John Hecht, Managing Director at Jefferies Financial Group]

Okay. That's helpful. Thanks. And then second question, big sale this quarter and a really strong gain. I'm wondering the character of the buyers, has that been changing?

[John Hecht, Managing Director at Jefferies Financial Group]

I mean, I think we're all aware of the massive amount of flows in the private credit funds. Are you seeing a shift toward more bids from that group? Is it still or is it still kind of ABS and more general credit buyers at this point?

[Pete Graham, EVP & CFO at SLM]

No real difference in the process this year versus last. No real change in makeup of the bidders on the transactions. And although it hasn't occurred yet, my expectation is that the buyer will be using our securitization framework for their funding takeout sometime here in the near future.

[John Hecht, Managing Director at Jefferies Financial Group]

Okay. Thanks very much. Yes.

[Operator]

We'll take our next question from Rick Shane with JPMorgan. Please go ahead.

[Richard Shane, Stock Analyst at JP Morgan]

Hey, guys. Thanks for taking my questions. Look, one of the things that's emerging is that the job market for graduating seniors is going to be a little bit more challenging this year than we've seen in the last four or five years. I'm curious when you might start to see that or how that plays through your numbers? Is it something we would see in the third quarter or does it not really emerge until the following year if that becomes a challenge?

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

Yes. Rick, I've seen I'm sure some of the same articles and coverage there that you have seen. A couple of thoughts and perspectives. One, as you can imagine, we do regular kind of research and touch bases with our customers and try to understand how they are feeling about things. As recently as work that we did late last fall, we were still seeing a very high degree of optimism among sort of recent grads about their ability to meet their financial obligations.

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

So a lot can change in a few months, but I think that is sort of a relevant sort of data point or sort of factoid to sort of start with. I think the second thing is college kids transitioning and finding that first job and recognizing that it may take in some instances more or less time for people to find and land their right first opportunity, that's been happening to greater or lesser extent since we started in this business. And there is a reason why we invest as deeply and thoughtfully in communication programs, readiness programs, but also things like our extended grace program and really target them at that transition point because we know it's always going to be a hard point. And quite frankly, if there's a little more or a little less unemployment during that period, I'm not sure it changes sort of the stress of that sort of materially. And I think kind of a good case in point of that is even with the slightly elevated unemployment rates that we're seeing today among recent college grads, you're not seeing that flow through into our net charge off rates in the quarter.

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

So this is a part of the business we are well familiar with. This is not a new phenomenon for us. This is something that if you're a private student lender and you're good at your craft, you kind of know how to deal with it. To answer your question specifically, I think if you were to see stress, it would be associated with the same kind of repayment waves, the fall and the spring repayment waves that you're used to seeing. And I think if you look back at sort of delinquency trends over quarters, you would expect if you were to have real issues being caused by early to graduate unemployment rates, I think you would expect them to play out over roughly those same time lines.

[Richard Shane, Stock Analyst at JP Morgan]

Got it. Okay. That's helpful. Look, actually ties into the second part of my question, which is that I assume that the extended grace forbearance extended grace loans on extended grace period are particularly correlated to loans in the one to twelve month payment bucket perhaps leaking into the thirteen to twenty four. If we look at the growth in extended grace, it's been about 2x the growth of loans in the first twelve month bucket.

[Richard Shane, Stock Analyst at JP Morgan]

Is that really a reflection of the change in policy? Is that what we should sort of expect to see going forward? Or is that starting to incorporate some of the economic factors that we're describing here?

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

Yes. Rick, my sense of it Extended Grace is a program that has a tight eligibility window. You are only eligible for that program within very certain time periods of coming out of school. One of the strategic decisions that we made as we transitioned away from our former forbearance programs, because that is a kind of a stipulated program, was to do a lot more work about educating our customers as to the availability of that program for them. Because if you miss the on ramp, you miss the on ramp as the regulations go.

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

And so I think our view is what we're seeing is a very positive outcome. We are educating our students on the programs that are available to them. We are helping them make use of a program that's only available to them at the very beginning. If they miss that on ramp, they would have to go to a different program which then limits their eligibility for other programs down the road through various restrictions and counters. And so we view this as a really positive thing.

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

And as Pete said, we do not view those volume trends as being sort of unhealthy. We view it as a really positive step in us helping these customers as they go through that transition.

[Richard Shane, Stock Analyst at JP Morgan]

Got it. I appreciate it. And as the parent of a graduating senior, I will embrace your enthusiasm for the market as it evolves.

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

Yes. Appreciate that Rick and good luck to your child.

[Richard Shane, Stock Analyst at JP Morgan]

Thank you. Take care guys.

[Operator]

We'll take our next question from Mark DeVries from Deutsche Bank. Please go ahead.

[Mark Devries, Director at Deutsche Bank]

Yeah. How has student loan ABS traded, since you did your loan sale? Any sense for, what type of gain you would generate today if you sold at the current spreads?

[Pete Graham, EVP & CFO at SLM]

That's a very good question. I think there's been as with all the markets, there's been a good amount of volatility in the last, call it, month or so.

[Pete Graham, EVP & CFO at SLM]

My understanding, the market currently is fairly stable. There's somewhat of a cyclicality of issuances coming after earnings calls, typically led each quarter by the auto issuers primarily, and that those have been in market this week. My understanding is the market's functioning pretty well. So I don't have a specific answer in terms of the gain on sale as it pertains to spreads in February versus now. But I don't believe that there's been a material widening of spreads that has been persistent.

[Pete Graham, EVP & CFO at SLM]

I think there's been some points in time, obviously, where because of the broader macro volatility spreads have blown out and then come back in. But yes, that's my point of view. I think the market's functioning well and we'll monitor it as we go into the rest of the year here for the optimal time to do the next sale. Okay, got it. That's helpful.

[Pete Graham, EVP & CFO at SLM]

Thanks.

[Operator]

This concludes the Q and A portion of today's call. I would now like to turn the floor over to Mr. John Witter for closing remarks.

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

Well, thank you everyone for dialing in. I'm sure everyone is anxious to get off to the NFL draft this evening. I hope your team gets the selection that they wanted. Appreciate your interest in Sallie Mae. And obviously, if you have follow-up questions, Kate and her team are more than happy to be standing by and we'll take whatever you need from here.

[Jonathan Witter, CEO & Director at Sallie Mae Bank]

And so I think with that, Kate, I'm going turn it back over to you for some last minute business.

[Kate deLacy, Senior Director, Head of Investor Relations at SLM]

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

[Operator]

Thank you. And this concludes today's Sallie Mae's first quarter twenty twenty five earnings conference call and webcast. Please disconnect your line at this time and have a wonderful evening.

Participants

Executives

• Kate deLacy, Senior Director, Head of Investor Relations
• Pete Graham, EVP & CFO

Analysts

• Jonathan Witter, CEO & Director at Sallie Mae Bank
• Jeffrey Adelson, Executive Director at Morgan Stanley
• Terry Ma, Senior Equity Research Analyst at Barclays
• Moshe Orenbuch, Managing Director & Senior Analyst at TD Cowen
• Michael Kaye, Equity Research Analyst at Wells Fargo Securities
• Nathaniel Richam-Odoi, Equity Research Associate at Bank of America
• John Hecht, Managing Director at Jefferies Financial Group
• Richard Shane, Stock Analyst at JP Morgan
• Mark Devries, Director at Deutsche Bank