SLM Corp Q3 2025 Earnings Call Transcript

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

Question: Moshe Orenbuch - Cowen and Company LLC - Analyst : Great. I guess maybe two thoughts and questions. The first, I guess, is, is there a way to kind of think about the performance of the current delinquency out a little further than the end of the year. I guess, I know it's not your custom to give guidance past the current year, but -- and we've looked at roll rates and we see that they've gotten somewhat better, but there has been some concern about the level of delinquency. So could you -- is there any way to kind of give us a sense as to how you expect that -- the current book to perform over the next several quarters?

Question: Moshe Orenbuch - Cowen and Company LLC - Analyst : Got it. And obviously, your new partner in terms of this sale is obviously also, I would assume, given that some thought. Is there any way to give us any further texture around how to think about that sale and how -- what the terms would be like?

Question: Moshe Orenbuch - Cowen and Company LLC - Analyst : Got it. Thank you.

Question: Jeffrey Adelson - Morgan Stanley - Analyst : Hey, good morning. Thanks for taking my question. I mean, good evening, sorry, it's been a long day for taking my question. Just wanted to circle back on the modification question. Listen, I recognize that the pace of modifications has slowed. And if we look at the 10-Q disclosure on the payment status table, the volume of modifications over the past 12 months has come down a lot. But if we do look at that table, it does seem like there's a higher percentage of 12-month mods rising on a delinquency basis. So just maybe some color there. And how are you thinking about the roll-off of those modifications as borrowers are graduating out over the next 12 months? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 23, 2025 / 9:30PM, SLM.OQ - Q3 2025 SLM Corp Earnings Call

Question: Jeffrey Adelson - Morgan Stanley - Analyst : And just on a partnership opportunity, any sort of early details you can give us ahead of the Investor Forum later this year, just maybe any sort of insight into the economics, length of the terms? And are you going to potentially be starting to use some of the current book? Or will that be more for the forthcoming opportunity with Grad PLUS going away? And just any sort of like high-level commentary on how that might shift economics.

Question: Jeffrey Adelson - Morgan Stanley - Analyst : Okay, thank you.

Question: Mark DeVries - Deutsche Bank AG - Analyst : Yeah, thanks. I have a follow-up question on Moshe's first question about kind of the outlook for credit, given where we are with the delinquency trends. I mean I get that -- I think you indicated roughly 25 basis points of the delinquencies are due to kind of changes in eligibility for the loan mods, but that would still imply we're kind of up year-over-year on -- I think you commented on stable, not necessarily improving roll rates. So is it still right to assume that delinquencies at best or kind of I mean, charge-offs as we look forward, are going to be kind of flat, if not slightly

Question: Mark DeVries - Deutsche Bank AG - Analyst : Okay. Fair enough. And then just turning to, I think the marketing strategies that you talked about being kind of the reason that you had to kind of reduce the origination guidance for this year. Are these strategies that you've kind of revisited and potentially looking for ways to kind of reaccelerate origination growth as we look into 2026?

Question: Terry Ma - Barclays Services Corp - Analyst : Hey, thank you. Just wanted to follow up on credit. If I just think simplistically, historically, there's a positive correlation between delinquencies and net charge-offs. So when you sit here today and look at the 4%, like any color you can kind of give us on, like why that wouldn't kind of imply maybe higher charge-offs for 2026?

Question: Terry Ma - Barclays Services Corp - Analyst : Okay. Fair enough. And I guess, like in your deck, you mentioned Grad originations are up 11% year-over-year. Any color you can give us on kind of what's driving that, whether it's behavioral changes from borrowers as a result of the bill that passed earlier? Or are you just kind of gaining share? Thank you.

Question: Moshe Orenbuch - Cowen and Company LLC - Analyst : Got it. Thank you.

Question: Donald Fandetti - Wells Fargo Securities LLC - Analyst : Hi, good evening. In terms of the recent credit and ABS market volatility, do you think that's going to impact your gain on sale margins for the Q4, Q1 production? And is the 7% this quarter sort of a good base level run rate?

Question: Donald Fandetti - Wells Fargo Securities LLC - Analyst : Got it. Thank you.

Question: Sanjay Sakhrani - Keefe Bruyette & Woods Inc - Analyst : Thank you. Pete, I just want to make sure I understood sort of the fourth quarter impact on moving those loans to held for sale. Does that mean that you sort of recognize -- do you move provisions over? I'm just trying to think about like it has an earnings benefit, correct? It's not the actual gain on sale that you recognize.

Question: Sanjay Sakhrani - Keefe Bruyette & Woods Inc - Analyst : Got it. And is there any way to sort of dimensionalize that as far as sort of what the contribution was to the annual guide?

Question: Sanjay Sakhrani - Keefe Bruyette & Woods Inc - Analyst : Okay. You guys haven't disclosed that yet what you've reclassified?

Question: Sanjay Sakhrani - Keefe Bruyette & Woods Inc - Analyst : Okay. And then, Jon, just one follow-up on this repayment wave that's coming through in November. Obviously, lots of discussion about graduates and the challenging job market. I mean, is there any -- I know all the commentary that you have was pretty constructive in terms of what you're seeing. I mean, do you guys have any foresight into sort of how those cohorts will behave as they come into repayment? Or is that sort of a point of scrimmage type of event?

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

Question: Richard Shane - JPMorgan Chase & Co - Analyst : Hey guys, thanks for taking my question this afternoon. A couple of things. Look, the decision to sell loans in the fourth quarter, doing some rough math, it looks a little bit different from what you guys outlined strategically two years ago in terms of growing the book a little bit faster and reducing or at least keeping flat the actual dollar volume of loans sold. So I'm curious sort of what shifted in your thinking there. And then I want to make sure I understand the answer to Sanjay's question because it sounds like there are basically two scenarios here. One scenario where loans are held for sale, you release the reserves, but you don't recognize the gain on sale. Second scenario is you complete the sale and you get both the gain on sale and the reserve release. Given where gain on sale margins are, it would seem that the variance between those two scenarios is significantly more greater than the variance between the high end and low end of your guidance. And so I'm trying to make sure I understand this fully.

Question: Richard Shane - JPMorgan Chase & Co - Analyst : I was going to say that's helpful. Basically, the reserve release is contemplated in that guidance, but you're not embedding a gain on sale. If the deal closes in the fourth quarter, it's probably upside to the number? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 23, 2025 / 9:30PM, SLM.OQ - Q3 2025 SLM Corp Earnings Call

Question: Richard Shane - JPMorgan Chase & Co - Analyst : Got it. Okay. I suspect we'll see a slide on this in a few months.

Question: Richard Shane - JPMorgan Chase & Co - Analyst : Terrific. Thank you, guys.

Question: Giuliano Bologna - Compass Point Research and Trading LLC - Analyst : Well, thanks for the question. I appreciate a lot of the commentary around the new program. Maybe touching on the -- on that program and a little bit of the accounting around that. I'm curious when you talk about the loans that are being moved to held for sale, is that just for the initial sale that you're planning? Or is there -- or will you continue to roll loans into held for sale as you kind of keep executing to the program? Or will those go up more similarly to the current loan sales?

Question: Giuliano Bologna - Compass Point Research and Trading LLC - Analyst : That's helpful. So we should see kind of an ongoing flow of loans that just go directly into held for sale at lower cost of market going forward. And then when I think about the -- I realize that there are limitations in terms of how much you can say, but in order to kind of get within the guidance range, it seems like it's -- you need to have a number that's well into the $1 billion, even close to $2 billion that would have to move to held for sale in terms of the reserve releases. Is that wildly off base? Or am I thinking about the right ZIP code?

Question: Giuliano Bologna - Compass Point Research and Trading LLC - Analyst : That's helpful. And then maybe just one quick one. I realize that the prior questions come up a few times. I mean there's obviously been a bit of a structural change in the way that you're approaching the forbearance modifications and how to deal with delinquencies. And we had all the commentary in terms of what you expect when it comes to the ultimate improvements. I'm curious when you think about the overall kind of accounting impact, is the kind of lower usage of forbearance and higher usage of modifications post-COVID or in the current time frame and going forward, something that will have a benefit when it comes to more -- less interest rate reversals and that might move around the actual delinquency rate and benefit charge-offs over time? Or is there a potential that charge-offs might be higher, but you have less interest rate reversals because you're getting more loans to reperform and still benefiting on a net basis?

Question: Giuliano Bologna - Compass Point Research and Trading LLC - Analyst : Very helpful. Appreciate the time and answers to all my questions. I'll jump back in the queue.

Question: Jon Arfstrom - RBC Capital Markets Inc - Analyst : Thanks, good afternoon, everyone. How are you thinking about buyback appetite at this point and the authorization as well?

Question: Jon Arfstrom - RBC Capital Markets Inc - Analyst : Okay. Fair enough. And then just an optics question, the 4% delinquency rate. Is that a level that we should expect to continue to trend up over time? Or is it not clear? Or is that not the right way to really look at it?

Question: Jon Arfstrom - RBC Capital Markets Inc - Analyst : Okay. And then if I can ask one more, Jon, for you. Just very big picture. The noise is kind of deafening on consumer health and students entering the job market and delinquencies. Do you feel like we're all -- it's been a wild quarter in your stock. Do you feel like we're all too pessimistic on the credit outlook? Are we overreacting to it? Or do you have any thoughts on that, just bigger picture?

Question: Jon Arfstrom - RBC Capital Markets Inc - Analyst : Okay, thank you very much.

Question: Caroline Latta - Bank of America - Analyst : I just wanted to ask, how are you guys thinking about the opportunity from the PLUS program and other federal government policy changes?

Question: Caroline Latta - Bank of America - Analyst : Awesome, thank you. And then maybe just a follow-up. Are you seeing any differences in how graduate loans are performing versus undergraduate loans in terms of like entry into delinquency and roll rates? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 23, 2025 / 9:30PM, SLM.OQ - Q3 2025 SLM Corp Earnings Call

Question: Caroline Latta - Bank of America - Analyst : Okay, thanks, that was really helpful.