SLM Corporation (NASDAQ:SLM) Q1 2026 Earnings Call Transcript

SLM Corporation (NASDAQ:SLM) Q1 2026 Earnings Call Transcript April 23, 2026

SLM Corporation beats earnings expectations. Reported EPS is $1.54, expectations were $1.14.

Operator: Welcome to the Sallie Mae First Quarter 2026 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Melissa Bronough, Managing Vice President, Strategic Finance. Please go ahead.

Melissa Bronaugh: Thank you, Erica. Good evening, and welcome to Sallie Mae’s First Quarter 2026 Earnings Call. It is my pleasure to be here today with Jon Witter, our CEO; and Pete Graham, our CFO. 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. 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-Q 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 impact 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, April 23, 2026. Thank you. And now I’ll turn the call over to Jon.

Jonathan Witter: Thank you, Melissa and Erica. Good evening, everyone. Thank you for joining us to discuss Sallie Mae’s First Quarter 2026 results. Our performance in the quarter was strong as we continue to reap the benefits of the strategy we have been pursuing for the last several years. Diluted EPS in the first quarter was $1.54 per share as compared to $1.40 in the year ago quarter. Loan originations were $2.9 billion, up 5% from the prior year quarter. These results were driven by strength in our loan disbursement funnel. Importantly, this performance precedes the expected multiyear growth in both undergrad and graduate lending tied to federal reforms, which we believe could increase our originations by up to 70% over the next several years.

We have been actively preparing for this opportunity, driving improvements across our full delivery system from product features to enhance client acquisition strategies and improved servicing and fulfillment capabilities. We have already rolled out several of these enhancements, including our new medical and dental school offering with more to come. Our goal is to serve as many students, families and university partners as possible as the higher education sector navigates this time of change. Net charge-offs and delinquencies were consistent with or slightly better than our expectations. Net charge-offs were $89 million, driven by continued underwriting discipline and the ongoing optimization of our loss mitigation collections and recovery strategies.

Q&A Session

In Q1 of 2025, the granting of disaster-related forbearance tied to the California wildfires and the North Carolina floods temporarily suppressed both net charge-offs and delinquencies, creating tougher year-over-year comparisons. Shifting gears. You will remember customers started exiting our new loan modification program at the end of 2025. I’m happy to report that their performance has been slightly better than what we assumed in our loss outlook, although we will need to see several more months of data to develop full confidence in these trends. These results support our belief that we have built a business and are executing a strategy that is capable of performing in almost any environment. We’ve sharpened our customer acquisition strategies to extend our market-leading position.

We’ve enhanced our underwriting practices and strengthened our credit and collection capabilities to better support borrowers during times of financial distress. We have built an efficient cost structure with diversified efficient funding sources that continues to support strong net interest margins. We have developed a strong capital allocation framework by adding strategic partnerships to our existing portfolio loan sale capabilities, giving us greater ability to grow recurring earnings and return capital. Our belief in our strategy, coupled with the desire to act nimbly and decisively when market opportunities arise, led us to accelerate our already robust capital return program. We executed a $2 billion seasoned loan portfolio sale during the quarter, coupled with a planned 10b5-1 share repurchase plan and also launched a $200 million ASR, all to take advantage of what we believe to be the disconnect between the premium from our whole loan sales and our equity valuation.

Pete will now take you through some additional details. Pete?

Peter Graham: Thank you, Jon. Good evening, everyone. During the first quarter, we executed $3.3 billion in loan sales, generating $146 million in gains at attractive economics. This included $1.3 billion of planned new origination sales through our strategic partnerships business as well as a $2 billion seasoned loan portfolio sale executed at gains in the mid- to high single-digit range. As we have done in the past, when our equity valuation became disconnected from the market value of our loans, we deliberately leaned into our capital flexibility to advance shareholder value. Following the loan sale, we entered into a $200 million accelerated share repurchase program. And year-to-date, we have repurchased approximately 12 million shares, 6% of the outstanding shares at the end of 2025, at an average price of $21.50 per share.

Since 2020, we have reduced shares outstanding by approximately 58% at an average price of $17.15 per share, underscoring our disciplined approach to long-term value accretion. We expect to fully utilize our $500 million share repurchase authorization during the calendar year 2026. Strong ongoing investor demand in the structured finance markets continue to support capacity for both seasoned portfolio sales and our strategic partnerships business. We have already completed meaningful groundwork for our next strategic partnership, which we expect to launch before the end of this year. Turning to earnings. Net interest income for the first quarter was $375 million, consistent with the prior year period. Net interest margin of 5.29% increased both sequentially and year-over-year.

reflecting the benefit of lower funding costs and continued discipline in balance sheet management. As we progress through this year, we expect NIM to moderate modestly reflecting the higher liquidity we’re carrying following the loan sale we executed in March. We recorded an $11 million negative provision in the first quarter, driven primarily by $131 million release of reserves associated with loan sales and loans held for sale, partially offset by growth in loan commitments and updates to our economic assumptions. Our reserve rate was 6.05% at the end of the quarter, modestly higher than the prior quarter and reflective of seasonal origination patterns rather than changes in underlying credit performance. Credit quality across new originations remained strong with cosigner rates increasing to 95% and average FICO at approval rising modestly to 754.

It’s interesting to note that just 5 years ago, our cosigner rate was 86% and our average FICO at approval was 750. The change reflects a deliberate multiyear and persistent focus on enhancing credit quality. Across the portfolio, delinquency trends were stable. Loans delinquent 30 days or more were 3.98% of loans in repayment at the end of the quarter, modestly lower than at the end of 2025, with later-stage delinquency buckets remaining steady at 1%. Net charge-offs for the quarter were $89 million, modestly ahead of our expectations. First quarter noninterest expenses were $171 million compared to $155 million in the year ago quarter. This increase primarily reflects targeted investments to support growth particularly across our graduate lending programs, while maintaining a strong efficiency ratio of 30.6% for the quarter.

And finally, our liquidity and capital positions remain solid. We ended the quarter with liquidity of 21.2% of total assets. Total risk-based capital was 13.7%, and common equity Tier 1 capital was 12.4%. We continue to believe we are well positioned to grow our business and return capital to shareholders. I’ll now turn the call back to Jon.

Jonathan Witter: Thanks, Pete. We are pleased with our first quarter performance and the momentum it provides for the year ahead. Let me conclude with a few thoughts about the higher education environment and an update on our guidance. We believe students and families continue to see strong value and higher education. Our upcoming How America Plans for College Report will show that nearly 90% of those surveyed view higher education as an investment, over 80% believe it’s worth the cost and nearly 3/4 would rather borrow than forgo college. This sentiment is also reflected in improving recent college enrollment trends in FAFSA completion rates that are up almost 20% from this time last year. Colleges, universities and other higher education institutions are continuing to innovate to ensure that their students have the skills to compete in the future economy.

We see schools integrating AI-related coursework into new and traditional programs. Students are also responding by better aligning their majors and skill sets with those likely needed in an AI-enabled future. The employment picture for recent college grads remains resilient even during times of economic uncertainty. While unemployment among recent graduates temporarily rose last summer, the gap versus historical norms closed in March. Reflecting this confidence, a recent National Association of Colleges and Employers Survey indicated employers expect to increase new graduate hiring this academic year by 5.6%. With this backdrop, we feel well positioned as we look ahead to the balance of the year and beyond. Let me now turn to our 2026 guidance.

We expect our diluted earnings per common share for 2026 to be between $3.10 and $3.20. This revised outlook assumes the full utilization of our $500 million share repurchase authorization and roughly $1 billion of incremental loan sales beyond our initial plan. At the same time, we are reaffirming all other elements of our 2026 outlook, including originations growth, net charge-offs and noninterest expense metrics. With that, let’s open the call for questions. Thank you.

Operator: [Operator Instructions] We’ll start our questions today with Terry Ma from Barclays.

Terry Ma: You mentioned we should expect another partnership by year-end. Any kind of early color on how we should kind of think about it? And then as we kind of take a step back with an additional partner, and I think you just mentioned an incremental $1 billion of loan sales, are you kind of just transitioning more to a capital-light model? And should we kind of like expect the balance sheet to shrink a little bit more this year?

Peter Graham: Yes. Thanks for the question, Terry. On the first part of that, when we launched the inaugural partnership with KKR last year, we indicated that it was our intention to build this into a business. So that’s been part of our plan all along. And we’ve started discussions with some of the folks that are involved in our process last year and weren’t the final sort of partner that we went with. And so those are early days, but well underway, and we’re confident that we’ll get something done by the end of this year. I think in the context of growing the partnerships, I’ll remind that initial KKR partnership was really sized and scoped to deal with our traditional undergrad student loan product. And so we always knew that we were going to need to expand and grow that to be at scale for the grad opportunity, and we’re working on getting ahead of that so that we have something in place in advance of when the major increase in volume from when Grad comes online.

Terry Ma: Got it. And then maybe just on credit. It sounds like the borrowers exiting mod are performing a little bit better than expected. Any mods thus far this year, whether or not that’s in line with your expectations? And then as we kind of look forward, like should we expect the percentage of borrowers in mod to kind of start to come down this like any way to think about that?

Peter Graham: Yes. I think in the context of the exits, as we said, we’re pleased with the early performance in line with the outlook that we had when we set net charge-off guidance for the year. The absolute value of entries to mod will fluctuate as the payment waves come through and depending on the sort of overall size of the waves, nothing really out of the ordinary in that regard for this. and overall level of mods, we believe will begin to stabilize as we move through this year and into next.

Operator: And our next question will come from Moshe Orenbuch from TD Cowen.

Moshe Orenbuch: Great. Jon, could you talk a little bit about how you see the kind of developing competitive environment in the Grad PLUS market saw some announcements this week from one of your major competitors, but haven’t seen that many across the board, but maybe you put a little finer point on that, if you would.

Jonathan Witter: Yes. Moshe, happy to. And obviously, I think everyone understands the opportunity that the plus reform provides, I think, different competitors certainly look at the market opportunity, the segments of the market opportunity differently. I think there are some who have expressed more interest for certain segments than for others. But I think we certainly do expect there to be a heightened level of competition as a new kind of market normal shakes out here over the next couple of years. And we see a little bit of early evidence of that just in things like some of the digital marketing spend, we can see some activity from some players and begin to understand a little bit of the testing and the programs that they are looking to develop.

I think more importantly, though, we have tremendous confidence in our incoming position and we have incredible confidence in the work that we are doing to prepare for this opportunity. I think the credit models, the relationships with schools, organic marketing channels that we have really pioneered here over the last 5 years, serve as a really important foundation. All of those will need to be enhanced and grown and expanded, in particular, to get after the grad opportunity. While there’s a lot of similarities, there are differences. And I think you heard in my prepared remarks, we are leaving no stone unturned in preparing to compete rigorously. So whether it’s a lot more competitive, modestly more competitive or not more competitive at all.

I think we feel really great about what we’re doing, how we’re going to show up and most importantly, our ability to serve students, families and our important university partners because we know every loan we do is enabling someone’s higher education dream.

Moshe Orenbuch: Got it. Maybe as a follow-up, just kind of on the loan sale process, kudos to you and the team for recognizing to do a loan sale and take advantage of that arbitrage. How do you think about the outlook and kind of balancing the various types of loan sale opportunities as you go forward and kind of probably adding in the potential for an incremental partner that you had talked about?

Peter Graham: Yes. Thanks, Moshe. That’s a good question. Just a reminder, the structure, again, focused on traditional undergrad product, and that was sized at a $2 billion a year commitment, think of that roughly academic year. So as we think about this next partnership, we’re looking to build upon that to create capacity for flow sale of grad originations and start to build capacity for the real growth in the grad space that will come ’27 and ’28. As we get that started, I would expect that the way that we will do that will be similar to how we did the first transaction, which is enter into a flow agreement but also start the process with some sort of a seasoned portfolio sale. So that’s kind of within our expectation for the latter part of this year.

And again, I think in terms of overall balance sheet size, our initial — our original guidance and initial plan was kind of a flat-ish balance sheet. I think now with the shift in our approach on accelerating capital return. As Jon said in his prepared remarks, it’s probably an incremental $1 billion of loan sales over our original plan. So that would be flat to down-ish sort of overall balance sheet, and we’ll fine tune that as we see the origination levels coming in during peak, and we have a better line of sight to overall levels of growth in the business.

Operator: And we’ll go next to Jeff Adelson with Morgan Stanley.

Jeffrey Adelson: I was just curious, Jon, you made the comment on the recent college graduate unemployment trends headed in the right direction once again. And you brought up the survey of employers intending to increase hiring by about 5% or 6% this year. I guess my question is, how do you think about the benefit of that flowing through to Sallie Mae? Is that something you think can really start to flatten out your delinquency trends, which look like they kind of continue to uptick a little bit at these levels?

Jonathan Witter: Yes, Jeff, maybe a couple of thoughts here. And Pete, you should jump in if you want to add anything. I’m not sure we yet see the unemployment trends and the hiring as a tailwind. I think what we’re really describing is Yes, the slight air pocket that I think we saw an employment through the course of last summer has normalized. I think we’ve talked for a couple of calls now about the resiliency of students and the fungibility of the skills that are afforded by higher education and their ability to figure out a changing employment landscape. But I think we’ve sort of seen the evidence of that but I’m not sure we’re in a positive enough territory versus historical norms that I would say that’s sort of deserving of a tailwind sort of classification.

In terms of the delinquency trends, we’re very comfortable with the delinquency rates where they are. As I said in my comments, they are in line and slightly better than expectations. I think if you look at, in particular, the stability of the later-stage delinquency trends, they are sort of where we thought we would be I think you always have to be a little bit careful in looking at any ratio because there’s both obviously a numerator and a denominator. When you sell a couple of billion dollars of loans earlier in the year than you expected, that could have a little bit of a denominator effect, I think prudence would suggest that be considered in interpreting the results but we feel very solid about where we are from a delinquency perspective.

Jeffrey Adelson: Okay. Great. And maybe just a quick follow-up on Grad PLUS. Obviously, you’re looking for that to start kicking into gear come July. Maybe just you spoke a lot about how you’re preparing for that and you’re talking to the school. So maybe just quick update on what you’re seeing on the ground and how you think those expectations are going to play out as you hit the back half of the year and recognize it obviously, it’s still pretty early.

Jonathan Witter: Yes, Jeff. Obviously, it’s very early. Peak season really hasn’t started at all yet in any of those the grad segments we’re talking about but maybe a couple of thoughts. One, I think our conversations with schools have been extremely positive. As you can appreciate, their #1 concern, post PLUS reform was what is this going to mean for their ability to fill their classrooms and support their students and sort of their higher education journey. I think the work that we have done around product design, around underwriting, around terms and conditions, as we’ve gone through that with schools. I think they have been quite impressed by the customer-backed thoughtfulness that we have brought to really thinking about these as new products and new businesses and deserving of a fresh set of eyes.

So I think they’ve liked the early reads. And I would say, as we have implemented changes and Grad has obviously been a part of our portfolio for a long time, but a small part. We are starting to see impressive and meaningful increases, percentage increases in our performance. So those are super leading indicators and trends based on small sample sizes. But I think it’s not just the reaction we’re getting from schools. We’re actually seeing that flow through in things like early origination numbers and the like. So we feel good about the guidance that we’ve put out around originations. We haven’t seen anything that leads us to believe it’s not achievable, but we’re going to continue to soldier on and make sure we put ourselves in the best position we can to win.

Operator: And we’d like to take our next question from Don Fandetti with Wells Fargo.

Donald Fandetti: I know it’s early, but I was wondering if you could talk a little bit about ’27. I think last quarter, you provided some thoughts. Obviously, you’re going to have a higher base here in 2026?

Peter Graham: I mean I think the only thing I’m really prepared to talk about with regard to ’27 is kind of like the origination opportunity that we see from Grad. I think we’ve kind of sized that roughly $1 billion incremental opportunity over time. And the way that will size in really will be modest this year and then grow more exponentially as we go to ’27 and into ’28 in terms of overall guidance around earnings or anything like that, I wouldn’t feel comfortable necessarily giving reads on that.

Donald Fandetti: Okay. And I heard the comments on the potential new partners. Obviously, there’s been a lot of dislocation in private credit. It sounds like you’re not seeing any kind of hesitancy or different terms? Is that maybe just because it’s consumer product? Or what are your thoughts on the future demand from private credit?

Peter Graham: Yes. I think there’s been — obviously, there’s been pockets of private credit that have been challenged. I think even within the structured finance or ABS part of private credit, there’s been areas where there’s been frauds or other issues. But that’s really caused kind of like more of a flight to quality, and we’ve got a very high-quality asset type that remains — still has very strong demand for it, particularly sort of in the consumer space, given the ability for us to provide duration as well as high yield and low losses. So we’ve continued to see strong demand both for our own funding securitizations, but also the securitizations that we do on behalf of the loan buyers has been subscribed and well priced, and we expect that to continue as we move forward here.

And certainly, in the context of beginning dialogue for setting up next partnerships. We’ve had great engagement from the interested parties and feel like the market demand is still really there for our product.

Operator: Thank you. And we’ll take our next question from Sanjay Sakhrani with KBW.

Sanjay Sakhrani: Jon, maybe just to put a little bit of a finer point on some of the initiatives you have and the step-up in expenses in 2026. I know you guys are — how do we — it sounds like you feel pretty good about it. How do we like see it unfold and measure it as we look out across this year and next? I know Pete talked about a step-up in originations next year from the opportunity. But how do we see it unfold? And like do we get leverage off of that into next year?

Jonathan Witter: Sanjay, thanks and great question. I think I would refer back to maybe also some of the comments I made during the fourth quarter earnings call. I think our view is yes, expenses are elevated this year on both a marketing basis as we start to go after the expanded opportunity, but also a lot of the fixed costs, some of the things we’ve talked about around products and systems and customer experience and the like. I think what we’ve committed to and what we still believe in is that rate of expense growth will moderate after this year. we may see a slight uptick in our efficiency ratio, but we actually expect at the end of the growth period for our efficiency ratio to be better than it was at the starting point.

So to put a little bit of rough justice math to it, if we were at a sort of mid-30s efficiency ratio historically, I think during this time of growth, we make it up to the high 30s, which, by the way, I think is still a pretty compelling efficiency ratio. I think if the market evolves the way we think it’s going to, and if our share evolves the way we think it’s going to I think by the end of the growth period, we said we would hope to be back down in the low 30s. And so I think that is the very definition of operating leverage. And at the end of the day, we recognize the need to invest against what we both think is both a great market opportunity for us, but also a real need for students and university partners. We think that’s a relatively short invest ahead of the curve with real leverage coming in not very many years after that.

Sanjay Sakhrani: Got it. And then, Pete, just so I have the numbers correct in terms of the guidance range, the raise and the fact that you’re selling another $1 billion. By my math, if you kind of use the 6% or so gain and then the reserve release, I mean it sounds like most of that raise is just the mechanics of the $1 billion being sold at some point in the rest of the year? And any idea on timing?

Peter Graham: Yes, sure. I think in the context of sort of the full year guidance, the increase in the EPS guidance for the full year is roughly split half and half between share count reduction and incremental gain from the incremental loan sale. And so if you think about the mechanics of what we discussed here of what’s happened in the first quarter, we really accelerated that through the actions that we’ve taken and have a much lower share count for a longer period during the year. And so that’s how you should really think about that. We haven’t updated any other elements of our original guidance. So the impact is really just the share count reduction. So it’s roughly half and half for the full year.

Operator: And we’ll take our next question from Mark DeVries with Deutsche Bank.

Mark DeVries: Yes. Jon, I believe you indicated that the FAFSA completion rates are up almost 20% from this time last year. Do you have a sense for what’s behind that? Is this a reflection of like a significant increase in just demand for higher education? Is there something wonky behind that? And if it is demand what does it say for your conviction just around your origination guidance?

Jonathan Witter: Yes, Mark, I think it’s probably too early to know exactly all the different factors that are driving that rate. This is obviously sort of in the moment I think what we’ve seen is if you exclude 2 years ago, when you’ll remember the Department of Education rolled out a new FAFSA reform and maybe had a few implementation hiccups along the way. I think what this really reflects is sort of a continued steady drumbeat of sort of growth, which I think matches well with what we’ve seen around general trends in sort of the percentage of eligible high school seniors who are choosing to go to college. And a lot has been made around the demographic trends, but I think that batting average, if you want to call it that, of how many people actually go has also been a nice contributor to the growth in enrollment over a period of time.

But if I broaden it out a little bit and look at our soon-to-be released survey because I think that gives Mark, a little bit more detailed insight I think what it really shows is the promise of higher education and the dream of higher education continues to be really a kind of key thing for many, many students and families out there. And there’s been a lot of talk about sort of the change in cost of higher education and is it worth it. I think our survey says pretty conclusively that the vast majority of American families out there really see that it is and understand the job creation skills are the key to sort of economic mobility and understand the role that I think it’s played historically that we believe it will play going forward. So I look forward to the survey coming out that will probably add, I think a lot of great data in there that, Mark, will give you even more insight into your question.

Operator: And we’ll take our next question from Caroline Latta from Bank of America.

Caroline Latta: I think you mentioned last quarter that you expect after 2026 that the private education portfolio will, in fact, up to like 1% to 2% growth. Is that expectation changed if you were to add another private credit partner? Or did that contemplate another capital partner?

Peter Graham: Yes. Thanks, Caroline. I think in our original sort of leverage planning that form the basis of our original guidance for this year, we kind of assumed a flattish balance sheet this year, and we assumed that kind of 1% to 2% growth going into ’27 and sort of getting up to the kind of mid-single digits over time line. I think we’ll — obviously, with the change in approach around the acceleration of the share repurchase this year will probably be a little down this year, call it $1 billion lower than flattish. And we would look to kind of still step back into growth over time. I don’t think new partnership really changes that dynamic. We still have a broad opportunity around originations growth. If not, if we don’t do those partnerships or other types of loan sales, we’re driving a much higher rate of balance sheet growth in that.

So we do have lots of different levers that we can choose to optimize that. What it will impact, though, is sort of the mix of season sale versus new origination sale as we step into ’27 and beyond. And again, that’s purposeful because the grad opportunity for which we don’t currently have a flow arrangement for will begin to become a much larger portion of our originations as we move into ’27 and then again into 2028. So we want to make sure we’ve got a good complement of funding capabilities to meet that need.

Caroline Latta: Great. And then maybe just like given the buyback this year if you complete the plan will be a pretty big step up. How should we be thinking about the kind of buybacks and capital returns further out into like 2027 and 2028?

Peter Graham: Yes. Again, I think if you look at our sort of original sort of plan, we were targeting roughly 5%, 6% of outstanding share count would be part of the buyback within a year. And I think as we start to normalize, that’s probably a reasonable sort of benchmark going forward. And as always, as markets change and if there’s an opportunity to do more than that than we would do what we did in the first quarter, which is accelerating some loan sales and take advantage of that market dislocation.

Operator: And we’ll take our next question from John Hecht with Jefferies.

John Hecht: Maybe any just relative to our forecast, you had a beat on OpEx or upside EPS on lower OpEx. Maybe can you talk about the cadence on investments in the Plus program over the year? .

Peter Graham: Yes, sure. We’re getting ready for peak season, which starts in the kind of the summer. And so if you think about the comments we made at year-end when we talked about expenses of the increase year-over-year, we said roughly 1/3 was increase around marketing and customer acquisition and roughly 1/3 was the preparation opportunity in terms of the things Jon talked about around program design and customer experience and some of the tech changes we’ll need to enable. And so that readiness will be more front-loaded before peak and the marketing spend will be more in the moment in that peak season. So again, our sort of staging of expenses and our plan for expenses, we were modestly ahead of plan for the first quarter, but we feel still comfortable with our overall guidance range for the full year.

John Hecht: Okay. And then second question is kind of the evolution of the program management servicing fees. Was there anything in this quarter with that? And then how do we think that grows over the course of this year?

Peter Graham: Sure. So the inaugural partnership that we linked with KKR in the fourth quarter of last year has the program management fee built into that. And so as we have completed sales of assets into that, those program management fees will start to earn on sort of the AUM, if you will, under management. So we did another $1.3 billion of sales to that partnership in the quarter, and we will continue to build on that. And as we grow the next partnership, our expectation is that those partner management fees are something akin to those program management. These will be part of the economics of those deals as well. So our intent, again, with this is we continue to build more recurring fee-based revenue over time and give ourselves a different sort of capital allocation capability with these forward flow sales.

Operator: And we’ll go next to the line of Rick Shane with JPMorgan.

Richard Shane: I’d like to talk a little bit about credit, and you guys provided an update on your net charge-off guidance for the year and reiterated your prior guide. I’m curious when you think about the credit performance of — the credit performance of the portfolio, whether is where it is in your targeted range? Is it within the range? Is it above the range? Is it below the range long term? And to the extent it is varying from the range, is there anything you’re doing on the underwriting side to either tighten or widen the credit bucket in order to sort of meet that efficient frontier?

Jonathan Witter: Rick, it’s Jon. A couple of thoughts, and tell me if this gets to your question. First of all, I think we are operating within sort of long-term credit range that we talked about. I think we said a couple of years ago, we thought the right destination was high 1s to low 2s. I think we spent a lot of time in the fourth quarter earnings call when we were laying out guidance, doing a bit of a crosswalk around that percentage to the loan or the charge-off guidance that we’ve given for this year, recognizing that the wildcard there was the shift in strategy to sell new originations versus seasoned portfolios and a little bit of the distortive effect that, that had on our legacy ratio. But I think we believe we’re operating within that range and certainly feel good about the guidance that we’ve given out.

I think it’s important to remember how we got there. And we’ve talked about this a bit over the years, but we started 3 or 4 years ago, a very persistent, purposeful program to really look at and to optimize the credit buybacks that we have and to make sure that we felt great about all of those originations. And we’ve chronicled a couple of different times the extent of that but suffice it to say that, I think the changes that we made had a meaningful impact on origination volume and one of our great sources of pride was our ability to grow both nominal levels of originations and share while still tightening the credit box during that whole time. I do think there is still a tail to come, and we’ve provided these details from time to time, but we still do have people who took those loans as freshmen and sophomores and maybe haven’t entered full P&I yet who are still coming into the heart of their repayment and sort of maximum stress period underneath the old sort of underwriting regime.

So I think in some respects, the full effect has yet to be felt in the portfolio. But we feel great about those credit changes, underwriting changes we’ve made we feel great about how our loss mitigation programs are performing, and we think we are generating the exact loss profile that we would hope for during the time that I would point out has been relatively stressed for some of these borrowers with the elevated unemployment rate that I talked about before over the last 6 months. So I think all in all, we feel really good about these results and look forward to the portfolio continuing to season.

Richard Shane: I appreciate that. I’m curious, and I apologize if maybe — I don’t know if I’m missing something, do you provide an average loan in repayment number anywhere in the disclosures? And the reason I ask is, obviously, this quarter when we calculated a net charge-off rate as a function of loans in repayment. I’m trying to understand how much that might be distorted by loan sales. And one question I guess I should know the answer to and I just don’t off the top of my head is, are there seasoned loans in repayment that are part of the pools that you’re selling? Or should we assume it is predominantly new originations that are less than 12 months seasoned?

Peter Graham: All of our portfolio sales are sort of representative samples of the book. really the only exclusions there are loans that are in later stages of delinquency are typically excluded from those pools. So as we move as we make portfolio sales, as Jon said, that can have an impact depending on when in the quarter or when in the year we make those sales. because it does impact the denominator of some of those ratio calculations. I would also highlight again some of the commentary we made in the fourth quarter, surrounding our disclosures in the 10-K because we calculate most of our loan disclosures on loans held for investment because we are moving loans to held-for-sale status in association with these forward flow agreements, that does also have a nominal impact on some of the calculation. .

Jonathan Witter: And Rick, yes, just for the avoidance of any confusion, I think Pete did a nice job of laying out in his talking points also what were the new origination sales, which were $1.3 billion, those are obviously what the name would suggest, new origination. So I think we do try to break it out separately and obviously, understand the importance of needing to continue to do that, both in understanding credit metric impacts but also premium impacts.

Operator: Thank you. This concludes the Q&A portion of today’s call. I would now like to turn the floor over to Mr. Jon Witter for closing remarks.

Jonathan Witter: Erica, thank you, and thank you, everyone, who joined this evening. We appreciate your interest in Sallie Mae and look forward to updating you again when we get together in 3 months for our second quarter earnings call. With that, Melissa, I’ll turn it back to you for some closing business.

Melissa Bronaugh: Thanks, Jon. 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 salliemae.com. If you have any further questions, feel free to contact me directly. This concludes today’s call.

Operator: Thank you. This concludes the Sallie Mae First Quarter 2026 Earnings Conference Call and Webcast. Please disconnect your line at this time and have a wonderful evening.