SLM Corp Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Richard Shane - JPMorgan Chase & Co - Analyst : Hey guys, thanks for taking my questions this afternoon. First, can we talk a little bit about the loan sale -- the $1.8 billion loan sale described in the third quarter. Can you help us sort of narrow the channel markers in terms of gain on sale margin in 2024, average gain on sale margin was just below 7%. First quarter this year, it was 9.4%. Where are we sort of in that range for this transaction?

Question: Richard Shane - JPMorgan Chase & Co - Analyst : Got it. Okay. And then just two other quick questions. historically or generally speaking, you guys have done two loan sales a year. There have been years where you've done more. As we think about our 2025 number, should we assume a sale in the fourth quarter? Or should we see the $3.8 billion you guys have done is sort of the total for the year?

Question: Richard Shane - JPMorgan Chase & Co - Analyst : Got it. And then last question for me, and I apologize for so many. But the net charge-off rate for loans and repayment after trending down for four

Question: Richard Shane - JPMorgan Chase & Co - Analyst : Okay, great. Thank you very much, Jonathan.

Question: Terry Ma - Barclays - Analyst : Hey, thank you. Good evening. So it sounds like the changes to federal lending potentially create a lot of upside from private market and in turn Sallie Mae, and it gives you a lot of optionality. If I kind of go back to the last investor forum, you guys kind of laid out a 5-year plan with high

Question: Terry Ma - Barclays - Analyst : Got it. And then maybe just on credit. I noticed the percentage of borrowers on extended grades dropped meaningfully this quarter. Any kind of color on how those borrowers are kind of performing as they exit? And then maybe just any color on the 30 to 59 day delinquency bucket that is

Question: Jeffrey Adelson - Morgan Stanley - Analyst : Hey, good evening, thanks for taking my questions. I just wanted to make sure we understood the $4.5 billion to $5 billion number you put out there on what could potentially come your way once you're fully up and running, once we sort of lap the existing borrowers staying in the program, is that based on what you're seeing in today's run rate or is there any sort of expectation for growth and not borrower cohort versus what you're seeing today? And I guess, just given the dynamic you identified on the a third, a third, a third and a quarter, a quarter, a quarter for Parent PLUS, is that a good ['28, '29] number to be thinking about?

Question: Jeffrey Adelson - Morgan Stanley - Analyst : Okay. Thanks for that. And I guess just to circle back on the private credit exploration here. You've laid out how you kind of want to keep the EPS growth in line with where it's been in recent years. Can you maybe give us any way that you're thinking about the different -- the P&L impacts you're maybe considering here what you're maybe willing to trade-off on take rate in order to have a more efficient cost structure, a more efficient funding structure. I mean the one pushback sometimes we get is you get a really nice gain on sale today with the existing structure. So are you going to have to sacrifice economics to do that? Or how are you thinking about that? Thank you.

Question: Jeffrey Adelson - Morgan Stanley - Analyst : Great. That's great color. Thanks so much. Take care.

Question: Moshe Orenbuch - Cowen and Company LLC - Analyst : Great, thanks. And Jon, it seems to me that if you're talking about a $4.5 billion to $5 billion opportunity that would phase in over several years, most of it over two to three years, that would probably be consistent with just the normal expansion that you could expect from your normal loan sales, if you wanted to. And I understand the comments you made about seeking other structures. Just wondering if as you do that, would some of those structures potentially expand that $4.5 billion to $5 billion by being willing to address some of the areas that you might not want to underwrite for your own balance sheet?

Question: Moshe Orenbuch - Cowen and Company LLC - Analyst : Okay. Thanks very much.

Question: Mark DeVries - Deutsche Bank AG - Analyst : Yeah, thanks. Just a couple more clarifying questions on the market opportunity here. For the $4.5 billion to $5 billion of incremental kind of opportunity you see for Sallie Mae, are you assuming kind of a comparable market share of the new addressable market that you've had recently kind of in the 60%-plus range?

Question: Mark DeVries - Deutsche Bank AG - Analyst : Okay. Simple enough. And then as we think about the incremental volume that comes on over and above what you would have planned for originally. Is there a percentage of that volume that we should think of as you kind of needing to sell versus retain to kind of maintain capital sufficiency going forward?

Question: Mark DeVries - Deutsche Bank AG - Analyst : Okay. Great. And then one of the questions we've been getting from investors is whether this new kind of expanded opportunity is going to make the market more attractive all of a sudden and attract new competitors. Maybe, Jon, just kind of talk about how you think this new broader opportunity ultimately gets distributed. And what, if any, kind of barrier centuries are there that I think will enable you to really kind of protect your market share.

Question: Mark DeVries - Deutsche Bank AG - Analyst : Okay, great. Thank you.

Question: Michael Kaye - Wells Fargo Securities LLC - Analyst : I just had another follow-up on that private partnership. I know you're still working on it, but what's the timing goal to get something like this potentially done. Would this be before the federal loan reform takes place next year?

Question: Michael Kaye - Wells Fargo Securities LLC - Analyst : And then the partnership, would this just be these new incremental loans as part of this reform? Or would this be across like the whole stack, everything you originate, including the undergrad that you currently focus on today?

Question: Michael Kaye - Wells Fargo Securities LLC - Analyst : Okay. And then add another quick question on the loan modifications. I mean you've made a lot of enrollments and loan mods in the first half of last year. So like what do you -- what siding prepare these borrowers when these long logs and two years from then, which will be the first half of next year.

Question: Michael Kaye - Wells Fargo Securities LLC - Analyst : Okay. Thank you.

Question: Sanjay Sakhrani - Keefe Bruyette & Woods Inc - Analyst : Thank you. Going back on credit quality and some of those California impacts. As we think about the next couple of quarters, do you not expect a significant impact? Is there specific data points that sort of give you confidence that you won't see them? And does credit have to perform better in the second half versus the first half to sort of hit your targeted range?

Question: Sanjay Sakhrani - Keefe Bruyette & Woods Inc - Analyst : Okay. And Jon, just that $4 billion to $5 billion incremental, how much of it is Grad PLUS versus Parent PLUS? I mean, is it probably the bulk of it is Grad PLUS. I'm just trying to think about how to dimensionalize that one-third and quarter stat that you gave?

Question: Sanjay Sakhrani - Keefe Bruyette & Woods Inc - Analyst : Okay, great. Thank you.

Question: Sanjay Sakhrani - Keefe Bruyette & Woods Inc - Analyst : Got it. Thanks.

Question: Giuliano Bologna - Compass Point Research and Trading LLC - Analyst : Good afternoon, I'll address congrats on the results. Maybe jumping off and expanding on that -- the topic of this $1.5 billion to $5 billion. As you just mentioned, it's all two-thirds ads or somewhere in that ZIP code. When I think about that transition, historically, been 8%, 9% graduate loan originations from a mix perspective. And having a disproportionate large growth in grad will obviously shift to the next your balance sheet. Would you consider selling loans in a different way or selling Grad ones separately going forward as a way to kind of keep your mix where it is -- and then how should we think about those loans on a relative basis versus kind of your current core loans? Are they -- how much sort of duration are they? How much lower the yield be? And just thinking about some rough parameters in for exact numbers here.

Question: Giuliano Bologna - Compass Point Research and Trading LLC - Analyst : That's very helpful. And one thing just to ensure understanding to answer a previous question correctly. I think there's questions kind of implying sounds like you guys might be making a similar assumption market share was around 60%. Is that just for the undergrad or Parent PLUS capture? Because in your prepared remarks, you referred to the grad out opportunity as being about one-third to half of the opportunity. I just want to make sure if that's the right way to look at it as a separate 60% underground and third task on the grad side?

Question: Giuliano Bologna - Compass Point Research and Trading LLC - Analyst : That is very helpful, and I appreciate all the answers. Thank you, and I'll jump back into the queue.