SLM NASDAQ: SLM executives highlighted higher earnings, modest origination growth, and a shifting funding strategy as the company discussed fourth-quarter and full-year 2025 results and outlined its 2026 outlook. Management also emphasized expected tailwinds from federal student lending reforms and said it plans to step up investment spending to capture anticipated demand.
2025 results and operating backdrop
Chief Executive Officer Jon Witter said the private student lending sector “remains robust,” pointing to improved enrollment trends at many Tier 1 schools and an increase in co-signer rates for new originations, which he said reflects parents and loved ones “willing to co-invest” in students’ education. He acknowledged that some recent graduates are feeling the effects of economic uncertainty and technological change, but said unemployment for recent graduates remains comparatively low and that most are finding employment within six months of graduation.
Witter said the company sees opportunity in “recent federal student lending reforms,” which he believes should reduce the likelihood that students and families take on unsustainable debt and could expand the addressable market for private lending.
Earnings, originations, and credit performance
For the fourth quarter, Sallie Mae reported GAAP diluted EPS of $1.12. Full-year 2025 GAAP diluted EPS was $3.46, compared with $2.68 in 2024, according to management.
Private education loan originations were $1.02 billion in the fourth quarter and $7.4 billion for the full year, which Witter said was 6% higher than 2024 and at the high end of the company’s revised guidance.
On credit, Witter said net charge-offs were $98 million in the fourth quarter and $346 million for the full year, representing 2.15% of average private education loans in repayment, which he noted was down four basis points from 2024.
Chief Financial Officer Pete Graham provided additional detail on reported and adjusted metrics, noting that a change in loan sale strategy is affecting how certain statistics are calculated. He said the total allowance as a percentage of private education loan exposure (the “reserve rate”) was 6% at year-end 2025, up from 5.93% in the prior quarter and 5.83% at the end of 2024; adjusting for the loan sale strategy change, the non-GAAP reserve rate would have been 5.92%.
Graham said fourth-quarter net charge-offs were 2.42% of average loans in repayment, compared with 2.38% in the year-ago quarter; on a non-GAAP basis adjusted for the strategy change, the net charge-off rate would have been 2.40%. Private education loans delinquent 30 days or more were 4% of loans in repayment at year-end, unchanged from the third quarter and up from 3.7% at the end of 2024; adjusting for the strategy change, the non-GAAP delinquency rate would have been 3.88%.
Management addressed concerns raised in the second half of 2025 about early-stage delinquencies, with Graham saying volatility in early-stage delinquency is “not necessarily a reliable indicator” of future charge-offs. He said late-stage delinquencies and roll rates remained stable and that the company continues to expect most early-stage delinquencies to self-cure. He also highlighted performance in expanded loan modification programs, stating that more than 80% of borrowers successfully complete their first six payments, and that close to 75% of borrowers enrolled in a modification in the fourth quarter of 2023 were current at the end of 2025.
Funding model shift and strategic partnership
Witter said the company delivered its “inaugural private credit strategic partnership” in 2025, describing it as a first-of-its-kind agreement that combines the bank’s more predictable earnings profile with “capital efficiency and risk transfer benefits” from its loan sale program. He said the arrangement includes no clawbacks and that a supplemental fee is tied to “clear, reasonably achievable return thresholds.”
Graham said the company is no longer exclusively selling portions of its seasoned loan portfolio and is now also selling newly originated loans. He said Sallie Mae will select a representative portion of new originations each quarter to warehouse for sale in the subsequent quarter, and expects a portion of quarterly originations to be designated as held for sale. Graham stressed that the resulting changes in reported metrics are “primarily driven by calculation mechanics rather than a change in the underlying performance” of the portfolio.
During Q&A, executives said the initial strategic partnership includes a minimum commitment of roughly $2 billion of new originations, timed to the academic year. They indicated that, as a rough estimate, about 30% of originations could be designated for sale into the partnership, with seasonal variability based on origination patterns. Management said the approach to seasoned portfolio sales will remain similar to the past, with sizing and timing dependent on capital needs and market conditions.
Capital return, expenses, and 2026 guidance
Sallie Mae continued share repurchases in 2025, with Graham reporting 3.8 million shares repurchased for $106 million in the fourth quarter and 12.8 million shares for $373 million for the full year. Since Jan. 1, 2020, the company has reduced shares outstanding by more than 55% at an average price of $16.93, he said. With the prior authorization nearing completion, the company announced a new two-year $500 million repurchase authorization.
Graham said net interest margin was 5.21% in the fourth quarter, up 29 basis points year over year, and 5.24% for the full year, up five basis points. He also said the company recorded a $19 million negative provision for credit losses in the fourth quarter, largely driven by the release of reserves tied to a $1 billion seasoned loan portfolio sale and the selection of a portion of peak-season originations for sale to the KKR strategic partnership.
Non-interest expenses were $659 million for 2025, compared with $642 million in 2024, which Graham described as a 2.6% increase and below the midpoint of guidance. He said the company delivered an efficiency ratio of 33.2% in 2025. On capital and liquidity, Graham said Sallie Mae ended the quarter with liquidity of 18.6% of total assets; total risk-based capital was 12.4% and Common Equity Tier 1 capital was 11.1%.
For 2026, Witter guided to full-year private education loan origination growth of 12% to 14%, with the first wave of students subject to new PLUS caps expected to begin in the second half of the year. He said the first year of phase-in should have a relatively smaller impact, with incremental volume stepping up over the next two to three years. Witter reiterated management’s estimate that, when fully phased in, PLUS reform could contribute about $5 billion in annual originations for Sallie Mae, which he said would represent approximately 70% growth over 2025.
The company expects non-interest expenses of $750 million to $780 million in 2026, which Witter said reflects investment ahead of anticipated volume. He attributed the year-over-year increase to normal market cost increases (about 20%), one-time investments in product enhancements, refined credit models, and other strategic enablers (about 40%), and higher marketing and acquisition costs tied to capturing PLUS-related volume. He said the company does not expect that level of expense growth to continue, and projected that 2027 operating expense growth would be roughly half the 2026 rate, with a goal of returning the efficiency ratio to the low 30s “no later than 2030.”
Witter said he expects growth in the private credit partnership business in 2026, which he said should leave private education loan portfolio growth flat to slightly negative year over year. Beyond 2026, he said Sallie Mae expects to grow the bank portfolio gradually by about 1% to 2% per year until reaching a steady-state annual growth rate in the mid-single digits. He added that the company estimates roughly 30% to 40% of originations will flow through strategic partnerships, with additional balance sheet growth managed through seasoned portfolio loan sales.
On credit for 2026, Witter guided net charge-offs for the total loan portfolio to be between $345 million and $385 million, which he said is consistent with a stable credit outlook. For earnings, he forecast full-year diluted EPS of $2.70 to $2.80 in 2026, reflecting the strategic partnership launch and investment to pursue the PLUS opportunity. Looking further out, he said that if the PLUS total addressable market materializes as the company expects, Sallie Mae would anticipate EPS acceleration beginning in 2027, with “high teens to low 20%” growth.
About SLM NASDAQ: SLM
SLM Corporation, operating as Sallie Mae Bank, is a leading U.S.-based consumer banking company specializing in education financing and related banking products. The company provides a range of private student loans for undergraduate and graduate studies, Parent PLUS loans, and specialized financing for career and certificate programs. In addition to its core lending services, Sallie Mae offers deposit products including savings accounts, checking accounts, money market accounts, certificates of deposit, and credit cards tailored to students and young adults.
Founded in 1972 as the Student Loan Marketing Association—a government-sponsored enterprise—Sallie Mae was privatized in 2004 and has since focused on expanding its private education loan offerings and digital banking solutions.
Further Reading
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