Q1 2026 SLM Corp (Sallie Mae) Earnings Call

April 23, 2026

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Speaker #1: Please stand by. Your program is about to begin. Welcome to the SLM First Corp 2026 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 your prepared remarks.

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Speaker #1: If you'd like to ask a question at that time, please press star one on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star two.

Speaker #1: All others can hear your question barely. We ask that you pick up your handset for best sound quality. Lastly, if you should require operator assistance, please press star zero.

Speaker #1: I would like now to turn the call over to Melissa Bernal, Managing Vice President, Strategic Finance. Please go ahead.

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Speaker #2: Thank you, Erica. Good evening and welcome to SLM's First Quarter 2026 earnings call. It is my pleasure to be here today with Jon Witter, our CEO, and Kate Graham, our CFO.

Speaker #2: 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.

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Speaker #2: 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 filing with the SEC.

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Speaker #2: For SLM, 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.

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Speaker #2: 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.

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Speaker #2: Thank you, and now I'll turn the call over to Jon.

Speaker #3: Thank you, Melissa and Erica. Good evening, everyone. Thank you for joining us to discuss SLM'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.

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Speaker #3: Diluted EPS in the first quarter was $1.54 per share, as compared to $1.40 the year-ago quarter. Loan originations were 2.9 billion, up 5% from the prior-year quarter.

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Speaker #3: These results were driven by strength in our loan disbursement funnel. Importantly, this performance precedes the expected multi-year 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.

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Speaker #3: We have been actively preparing for this opportunity, driving improvements across our full delivery system—from products and features to enhanced client acquisition strategies and improved servicing and fulfillment capabilities.

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Speaker #3: 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.

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Speaker #3: 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.

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Speaker #3: In Q1 of 2025, the granting of disaster-related forbearance tied to California wildfires and the North Carolina floods temporarily suppressed both net charge-offs and delinquencies, creating tougher year-over-year comparisons.

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Speaker #3: 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.

Welcome to the Sallie Mae first quarter 2026 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 your prepared the prepared remarks.

Speaker #3: 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 our executing a strategy that's capable of performing in almost any environment.

We would like to ask a question at that time. Please press star one on your telephone keypad.

If at any point. Your question has been answered you may remove yourself from the queue by pressing star two.

So others can hear your question clearly, we ask that you pick up your handset or best Sean quality.

Speaker #3: We have 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.

Lastly, if you should require operator assistance, please press star zero.

I would like now like to turn the call over to Melissa Bernard Managing Vice President Strategic Finance. Please go ahead.

Speaker #3: We have built an efficient cost structure with diversified, efficient funding sources that continue 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.

Thank you Erika good evening and welcome to Sallie Mae's first quarter 2026 earnings call. It is my pleasure to be here today with John Winter, 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.

Speaker #3: Our belief in our strategy, coupled with a desire to act nimbly and decisively when market opportunities arise, led us to accelerate our already robust capital return program.

Speaker #3: We executed a $2 billion season 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.

Actual results in the future.

<unk> materially different from those discussed here due to a variety of factors.

You should refer to the discussion of those factors in the company's Form 10-Q, and other filings with the SEC.

Speaker #3: Kate will now take you through some additional details. Kate, thank you, Jon. Good evening, everyone. During the first quarter, we executed $3.3 billion in loan sales, generating $146 million in gains and attractive economics.

For Sallie Mae. These factors include among others results of operations financial condition, and our cash flows as well as any potential impact of various external factors on our business.

Speaker #3: This included $1.3 billion of planned new origination sales through our strategic partnerships business, as well as a $2.0 billion seasoned loan portfolio sale executed at gains in the mid- to high-single-digit range.

We undertake no obligation to update or revise any predictions expectations are forward looking statements to reflect events or circumstances that occur after today Thursday April 23rd 2026.

Speaker #3: 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.

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

Thank you Melissa and Erika good evening, everyone. Thank you for joining us to discuss Sallie Maes first quarter 2026 results.

Speaker #3: Following the loan sale, we entered into a $200 million accelerated share repurchase program. Year-to-date, we have repurchased approximately 12 million shares, representing 6% of the outstanding shares at the end of 2025.

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.

<unk> EPS in the first quarter was $1 54 per share as compared to $1 40 in the year ago quarter.

Speaker #3: 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.

Loan originations were $2 9 billion.

Up 5% from the prior year quarter.

Speaker #3: Underscoring our disciplined approach to long-term value creation, 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 continued to support capacity for both seasoned portfolio sales and our strategic partnerships business.

These results were driven by strength in our loan disbursement funnel.

Importantly, this performance proceeds expected multiyear growth.

Undergrad and graduate lending tied to federal reforms, which we believe could increase our originations by up to 70% over the next several years.

Speaker #3: 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.

We have been actively preparing for this opportunity driving improvements across our full delivery system from products and features to enhance client acquisition strategies and improved servicing and fulfillment capabilities we have.

Speaker #3: 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.

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.

Speaker #3: As we progressed through this year, we expect NIM to moderate modestly, reflecting the higher liquidity we're carrying following the loan sale we executed in March.

Net charge offs, and delinquent and delinquencies were consistent with or slightly better than our expectations.

Speaker #3: We recorded an $11 million negative provision in the first quarter, driven primarily by $131 million release of reserves associated with loan sales and loan sale per sale.

Net charge offs were $89 million driven by continued underwriting discipline and the ongoing optimization of our loss mitigation collections and recovery strategies.

Speaker #3: 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.

In Q1 of 2025, the granting of disaster related forbearance tied to the California, wildfires and the North Carolina applies.

Early suppressed net charge offs and delinquencies, creating tougher year over year comparisons.

Speaker #3: Credit quality across new originations remained strong, with co-signer rates increasing to 95%, and the average 5-year approval rising modestly to 754. It's interesting to note that just five years ago, our co-signer rate was 86%, and our average 5-year approval was 750.

Shifting gears you will remember customers started exiting our new loan modification program at the end of 2025.

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.

Speaker #3: The change reflects a deliberate multi-year 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.

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.

Speaker #3: 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 non-interest expenses were $171 million, compared to $155 million year-over-year.

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.

Speaker #3: 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 remained solid.

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 on capital.

Our belief in our strategy, coupled with the desire to add nimbly and decisively when market opportunities arise led us to accelerate our already robust capital return program.

Speaker #3: 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.

We executed a $2 billion seasoned loan portfolio sale during the quarter, coupled with a plan to $10 five one share repurchase plan and also launched a $200 million ASR all to take advantage of what we believe to be the disconnect between the premiums from our whole loan sales.

Speaker #3: Now I'll turn the call back to Jon.

Speaker #4: Thanks, Kate. 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.

Speaker #4: We believe students and families continue to see strong value in higher education. Our upcoming How America Plans for College report will show that 90 nearly 90% of those surveyed view higher education as an investment, over 80% believe it's worth the cost, and nearly three quarters would rather borrow than forgo college.

And our equity valuation.

Pete will now take you through some additional details.

Thank you John Good evening, everyone.

During the first quarter.

Executing three 3 billion in loan sales generating $146 million in gains at attractive economics.

Speaker #4: This sentiment is also reflected in improving recent college enrollment trends and FAFSA completion rates that are up almost 20% from this time last year.

This included $1 3 billion.

Planned new origination sales through our strategic partnerships business.

As well as a $2 billion seasoned loan portfolio sale executed that gains from the mid to high single digit range.

Speaker #4: Colleges, universities, and other higher education institutions are continuing to innovate to ensure that their students have the skills to compete in the future.

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 enhance shareholder value.

Speaker #4: 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.

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.

Speaker #4: 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.

The average price of $21 50 per share.

Since 2020, we have reduced shares outstanding by approximately 58% at an average price of $17 <unk> per share underscore.

Speaker #4: Reflecting this confidence, a recent National Association of College and Employer survey indicated employers expect to increase new graduate hiring this academic year by 5.6%.

Underscoring our disciplined approach to long term value creation.

We expect to fully utilize our $500 million share repurchase authorization during the calendar year 2026.

Speaker #4: 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.

Strong ongoing investor demand in the structured finance markets continue to support capacity for both season portfolio sales and.

Speaker #4: We expect our diluted earnings per common share for 2026 to be between $3.10 and $3.20. This would provide an outlook to assume the full utilization of our $500 million share repurchase authorization and roughly $1 billion of incremental loan sales beyond our initial plan.

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.

Speaker #4: At the same time, we are reaffirming all other elements of our 2026 outlook.

<unk> with the prior year period.

Net interest margin for $5 two 9%.

Increased both sequentially and year over year.

Collecting the benefit of lower funding costs and continued discipline and 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.

We 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 pattern chosen changes in underlying credit performance.

Credit quality across new originations remained strong with cosigner rates increasing to 95%.

And average FICO and approval rising modestly to 754.

It's interesting to note just five years ago, our cosigner rate was 86% and our average FICO and approval of 750.

Operator: If you've answered, you may remove yourself from the queue by pressing star two. Again, we ask that you pick up your handset when posing your question to provide optimal sound quality. Thank you. We'll start our questions today with Terry Ma from Barclays. Please go ahead.

The change reflects a deliberate multiyear a persistent focus on enhancing credit quality.

Across the portfolio delinquency trends were stable.

Loans delinquent 30 days or more were 398% of loans in repayment at the end of the quarter.

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

Modestly lower but at the end of 2020 with later stage delinquency buckets remaining steady at 1%.

Net charge offs for the quarter was $89 million modestly ahead of our expectations.

First quarter noninterest expenses were $171 million compared to $155 million a year ago quarter.

This increase primarily reflects targeted investments to support growth, particularly across our graduate lending programs.

Peter Graham: Yeah. 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. That's been a part of our plan all along. We've started discussions with some of the folks that were involved in our process last year and weren't the final sort of partner that we went with. 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 that initial KKR partnership was really sized and scoped to deal with our traditional undergrad student loan product. We always knew that we were going to need to expand and grow that to be at scale for the grad opportunity.

Pete Graham: Yeah. 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. That's been a part of our plan all along. We've started discussions with some of the folks that were involved in our process last year and weren't the final sort of partner that we went with. 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 that initial KKR partnership was really sized and scoped to deal with our traditional undergrad student loan product. We always knew that we were going to need to expand and grow that to be at scale for the grad opportunity.

While maintaining a strong efficiency ratio of 36% 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 one capital was 12, 4%.

We continue to believe we are well positioned to grow our business and return capital to shareholders I will now turn the call back to John.

Thanks Pete.

We are pleased with our first quarter performance and the momentum it provides for the year ahead, let.

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 in higher education.

Our upcoming how America plans for College report will show that 90% nearly 90% of those surveyed do higher education as an investment over 80% believe it's worth the cost and nearly three quarters, we'd rather borrow then forgo college.

We went with them, so those are early days but still underway, and um, you know, we're confident that we'll get something done by the end of this year. I think in the context of, you know, growing the partnerships, uh, over mind that that initial KKR partnership was really sized and scoped to deal with our traditional

Peter Graham: We're working on getting ahead of that so that we have something in place well in advance of when the major increase in volume from grad comes online.

Pete Graham: We're working on getting ahead of that so that we have something in place well in advance of when the major increase in volume from grad comes online.

The sentiment is also reflected an improving recent college enrollment trends and fast so our completion rates that are up almost 20% from this time last year.

Undergrad student loan product. And so, you know, we always knew that we were going to need to expand and grow that to, uh, be at scale for the, uh, the grad opportunity. Um, and we're, you know, working on getting ahead of that so that we have something in place, only in advance of when the, you know, the major increase in volume from, from line.

Terry Ma: Got it. Maybe just on credit, it sounds like the borrowers exiting mod are performing a little bit better than expected. Any color on new mods thus far this year, whether or not that's in line with your expectations? As we look forward, should we expect the percentage of borrowers in mod to start to come down this year? Any way to think about that? Thank you.

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.

These schools integrating AI related course work into new and traditional programs.

These are also responding by better aligning their majors and skill sets, where those likely needed and an AI enabled future.

Got it and then maybe just on credit, it sounds like the borrowers, everything mod or performing a little bit better than expected. Um, any color, um, um, new mods so far this year, whether or not that's, you know, in line with your expectations and then as we kind of look forward, should we expect the percentage of borrowers about to kind of start to come down this year? Like any? We think about that. Thank you.

Peter Graham: Yeah, I think in the context of the exits, as we said, we're pleased with the early performance, and it's in line with the outlook that we had when we set that 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 those payment waves. Nothing really out of the ordinary in that regard for this. Overall level of new mods, we believe, will begin to stabilize as we move through this year and into next.

Pete Graham: Yeah, I think in the context of the exits, as we said, we're pleased with the early performance, and it's in line with the outlook that we had when we set that 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 those payment waves. Nothing really out of the ordinary in that regard for this. Overall level of new mods, we believe, will begin to stabilize as we move through this year and into next.

The employment picture for recent college grads remains resilient, even during times of economic uncertainty.

While unemployment among recent graduates temporarily rise last summer the gap versus historical norms closed in March.

Yeah, I think in the context of um, you know, the exits as as we said, we're we're pleased with the early performance and it's, you know, uh, in line with the the uh, Outlook that we have. When we set

Up H the, for the year. Um,

Reflecting this confidence a recent National Association of College and employer survey indicated employer is expect to increase new graduate hiring this academic year by five 6%.

With this backdrop, we feel well positioned as we look ahead to the balance of the year and beyond.

Let me now turning to our 2026 guidance.

We expect our diluted earnings per common share for 2026 to be between $3 10, and $3 20.

you know, the, the absolute value of, uh, entries to mod will fluctuate as the payment waves come through and depending on the, you know, sort of overall size of those payment waves. Nothing really out of the ordinary in that regard, uh, for this, um, and overall level of the nods. Um, you know, we believe, we'll begin to stabilize, um, you know, as we move through this year and into next,

Terry Ma: Great. Thank you.

Great. Thank you.

Operator: Thank you. Our next question will come from Moshe Orenbuch from TD Cowen. Please go ahead.

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.

Thank you. And our next question will come from Moshe, from TD. Moshe, please go ahead.

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

At the same time, we are reaffirming all other elements of our 2026 outlook, including originations growth net charge offs and net interest expense metrics with that let's open the call for questions. Thank you.

Thank you the floor is now open for questions. At this time, if you have a question or comment. Please press star one on your telephone keypad. If at any point. Your question is answered you may remove yourself from the queue by pressing star too again, we ask that you pick up your handset when posing your question to provide optimal sound quality.

Great. Uh thanks. Uh, John, 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, you know, 1 of your major competitors that haven't seen that many across the board. Maybe a little finer point on that, if you would

Jonathan Witter: Yeah. Moshe, happy to. 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've expressed more interest for certain segments than for others. I think we certainly do expect there to be a heightened level of competition as a new kind of market normal shapes up here over the next couple of years. 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.

Jon Witter: Yeah. Moshe, happy to. 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've expressed more interest for certain segments than for others. I think we certainly do expect there to be a heightened level of competition as a new kind of market normal shapes up here over the next couple of years. 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.

So happy to, and you know, obviously,

We'll start our question today with Terry MA from Barclays. Please go ahead.

Hey, Thank you good evening.

So 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.

Could you kind of just transitioning more to a capital light model when should we kind of like expect the balance sheet to shrink a little bit more this year.

Good thanks for the question Terry.

Jonathan Witter: 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, the organic marketing channels that we have really pioneered here over the last five 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. I think you heard in my prepared remarks, we are leaving no stone unturned in preparing to compete rigorously.

Jon Witter: 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, the organic marketing channels that we have really pioneered here over the last five 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. I think you heard in my prepared remarks, we are leaving no stone unturned in preparing to compete rigorously.

On the first part of that.

We launched the inaugural partnership, particularly our last year, we indicated that it was our intention to build this into a business that's been part of our plan all along.

And.

We have started discussions with some of the folks that were involved in our process last year and work for final sort of partner that we work. So those are early days, but it's well underway.

We're confident that we'll get something done by the end of this year I think in the context.

Growing the partnerships or remind the initial KKR partnership.

It was really sized scopes to deal with our traditional.

Jonathan Witter: 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.

Jon Witter: 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.

Undergrad student loan product.

So we always knew that we were going to need to expand and grow there ought to be.

<unk> scaled for.

The ground opportunity.

And we're working on getting ahead of that so that we have something in place.

In advance of Windows.

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, the organic marketing channels that we have really pioneered here over the last five years serve 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, you know, we are leaving no stone unturned in preparing to compete rigorously. Um, 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, you know, students, families, and our important university partners, because we know every loan we do is enabling some higher education brand.

Major increase in volume.

Moshe Orenbuch: Got it. Thanks. Maybe as a follow-up, just 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 balancing the various types of loan sale opportunities as you go forward and probably adding in the potential for an incremental partner that you had talked about?

Cool.

Got it and then maybe just on credit it sounds like the borrowers exiting mod are performing a little bit better than expected.

Got it. Thanks, uh, maybe as as a follow-up just kind of on the loan sale process, uh, you know, you know kudos to

Any color on new 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 and mod to kind of start to come down this year like any way to think about that thank you.

Yes, I think in the context of.

It'll be exits as we said we were pleased with the early performance.

to you and a team for, you know, for recognizing, you know, to do a loan sale and take advantage, you know, if that that Arbitrage, um, how do you think about, you know, the Outlook and kind of balancing the the various types of loan sale opportunities, you know, as you as you go forward um and you know kind of probably adding in the you know the the potential for for an incremental partner that you uh you know that you had talked about

Peter Graham: Thanks, Moshe. That's a good question. Just a reminder, the KKR structure, again, focused on traditional undergrad product, and that was sized at a $2 billion a year commitment. Think of that roughly academic year. 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 2027 and 2028. 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. That's kind of within our expectation for the latter part of this year.

Pete Graham: Thanks, Moshe. That's a good question. Just a reminder, the KKR structure, again, focused on traditional undergrad product, and that was sized at a $2 billion a year commitment. Think of that roughly academic year. 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 2027 and 2028. 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. That's kind of within our expectation for the latter part of this year.

In line with the.

Outlook that we have when we saw that.

Net charge off guidance for the year.

Yeah, thanks for... That's a good question. Um, you know, just a reminder, the, you know, the KTR—

Okay.

structure again, focused on

The absolute value of.

Increased demand will fluctuate as the payment waves come through independent on the sort of overall size of those payment ways nothing really out of the ordinary in that regard.

This.

And overall level of logs.

We believe we will begin to stabilize.

As we move through this year and into next.

Great. Thank you.

Thank you and our next question will come from Moshe Orenbuch from TD Cowen. Please go ahead.

Traditional unread product. And that was eyes, that a $2 billion-a-year commitment, thinking about roughly academic year. Um, so as we think about this next partnership, we're looking to build upon that to create capacity for, um, flow sale of grad originations, um, and start to build capacity for, you know, the real growth in the grad space that will come in '27 and '28. Um, the, um, you know, as we get that started, I would expect that

Great.

Thanks, Sean.

Sean 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.

the the way that we will do, that will be similar to how we did the the first transaction, which is, you know, enter into a flow agreement, but also start the process with some sort of a, a seasoned portfolio sale

Haven't seen back many.

Peter Graham: I think in terms of overall balance sheet size, our original guidance and initial plan was kind of a flat-ish balance sheet. I think now with this shift in our approach on accelerating capital return, as John said in his prepared remarks, it's probably an incremental $1 billion of loan sales over our original plan. That would be flat to down-ish, sort of overall balance sheet. 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.

Across the board, but maybe.

Pete Graham: I think in terms of overall balance sheet size, our original guidance and initial plan was kind of a flat-ish balance sheet. I think now with this shift in our approach on accelerating capital return, as John said in his prepared remarks, it's probably an incremental $1 billion of loan sales over our original plan. That would be flat to down-ish, sort of overall balance sheet. 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.

Little finer point on that if you would.

Yeah, Moshe happy too and obviously.

Thank everyone.

Understand the opportunity that the plus reform provides I think.

Different competitors, certainly look at the market opportunity the segments of the market opportunity differently.

Yes, I think there are some who have expressed more interest for certain segments and for others.

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 getting things like.

Uh, so that's kind of within our, you know, expectation for the latter part of this year. And again, I think in terms of overall balance sheet size, our original guidance and initial plan was kind of a flat-ish balance sheet. Um, I think now there's a shift in our approach on accelerating capital return. You know, as John said in his prepared remarks, there's probably an incremental $1 billion of loan sales over our original plan. So that would be flat to down-ish, you know, in terms of overall balance sheet. We'll fine-tune that as we see the origination levels coming in during peak, and, you know, have better line of sight to overall levels.

In the, in the business.

Moshe Orenbuch: Thanks very much.

Thanks very much.

Operator: Thank you. We'll go next to Jeffrey Adelson with Morgan Stanley. Please go ahead.

Some of the digital marketing spend we can see some activity from some players do you begin to understand a little bit of that testing and the programs that they are looking to develop I.

Thank you. And we'll go next to Jeff Aiden with more and family. Please go ahead.

Jeffrey Adelson: Hey, good evening, John and guys. I'm just curious if, John, 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?

Jeff Adelson: Hey, good evening, John and guys. I'm just curious if, John, 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?

I think more importantly, though we have tremendous confidence in our incoming physician and we have incredible confidence and the work that we're doing to prepare for this opportunity I think.

<unk> models that relationships with schools.

Hey, good evening John and uh got I was just curious. Um if if you made the comment on um the the recent college graduate unemployment Trends headed in the right direction, once again and you know, you brought up the survey of employers intending to increase hiring by 5 or 6 or 7 this year. I I guess my question is

Organic marketing channels that we have really pioneered here over the last five 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 theres a lot of similarities there are differences I think.

How do you think about the benefit of that flowing through Sally? Is that something you think can really start to flatten out your delinquency Trends? Um, which you know look like they kind of continue to to uptick a little bit at these levels.

Jonathan Witter: Yeah, 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 the slight air pocket that I think we saw in 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, the fungibility of the skills that are afforded by higher education, and their ability to figure out a changing employment landscape. I think we've sort of seen the evidence of that. 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.

Jon Witter: Yeah, 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 the slight air pocket that I think we saw in 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, the fungibility of the skills that are afforded by higher education, and their ability to figure out a changing employment landscape. I think we've sort of seen the evidence of that. 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.

You heard in my prepared remarks, we are leaving no stone unturned and preparing to compete rigorously.

So weather is 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.

Yeah, Dev, um, you know, maybe a couple of thoughts here, and, uh, you should jump in if you want to add anything. Um, you know, I'm not sure we yet see the unemployment trends, you know, and the hiring, uh, as a tailwind. I think what we're really describing is, you know, the slight air pocket that I think we saw in employment through the course of last summer has normalized. I think we've talked for a couple of calls now about

Students families and are important University partners.

Because we know every loan we do as enabling some of those higher education DRAM.

Got it thanks, and maybe as.

A follow up just kind of on the loan sale process.

Yeah, find your ability of the skills that are afforded by higher education and their ability to figure out a changing employment landscape. And I think we've seen the evidence of that. Um, but I'm not sure we're in a positive enough territory versus historical norms that I would say, you know, that's sort of deserving of a tailwind.

Kudos to.

Jonathan Witter: 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 $2 billion of loans earlier in the year than you expected, that can have a little bit of a denominator effect. I think prudence would suggest that be considered in interpreting the results. We feel very solid about where we are from a delinquency perspective.

Jon Witter: 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 $2 billion of loans earlier in the year than you expected, that can have a little bit of a denominator effect. I think prudence would suggest that be considered in interpreting the results. We feel very solid about where we are from a delinquency perspective.

You and the team for.

We're 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 we've kind of currently adding into that the potential.

For for an incremental partner that you add.

You had talked about.

Thanks for sure that's a good question.

Just a reminder, the KKR structure again focus on.

Traditional underwriting product and that was sized at about $2 billion a year commitment, we think of that roughly academic year.

We're very comfortable with the delinquency rate where they are, as I said in my comments they are in line and slightly better than expectations. You know, I think if you look at in particular, this ability of the later stage delinquency Trends, you know, they are they are sort of where we thought we would be. You know, I think you always have to be a little bit careful in looking at any ratio because they're both. Obviously a numerator and a denominator. When you sell a couple of billion dollars of loans, uh, earlier in the year and you expected that could have a little bit of a denominator of fact, I think you know, fruits would suggest you know that be considered an interpreting the results, but we feel we feel very solid about where we are from a delicacy perspective.

Jeffrey Adelson: Okay, great. Thank you. Maybe just quick follow-up on Grad PLUS. Obviously, you're looking for that to start kicking into gear come July. You spoke a lot about how you're preparing for that and you're talking to the schools. Maybe just a quick update of 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 recognizing, obviously, it's still pretty early.

Jeff Adelson: Okay, great. Thank you. Maybe just quick follow-up on Grad PLUS. Obviously, you're looking for that to start kicking into gear come July. You spoke a lot about how you're preparing for that and you're talking to the schools. Maybe just a quick update of 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 recognizing, obviously, it's still pretty early.

So as we think about this next partnership we're looking to build upon.

To create capacity for.

Flow sale of Grad originations.

And starting to build capacity for.

The real growth in the ground space that will come 2028.

Okay, great, thank you. And let me just, um, click follow up on GRAD. Obviously, you're looking for that to start kicking into gear come July. Maybe just, um, you know, you spoke a lot about how you're preparing for that and you're talking to the school. So maybe just a quick update of 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. Recognize, obviously, it's still pretty early.

The.

Jonathan Witter: Yeah, Jeff Adelson. Obviously, it's very early. Peak season really hasn't started at all yet in any of the grad segments we're talking about. Maybe a couple of thoughts. One, I think our conversations with schools have been extremely positive. As you can appreciate, their number one 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, new businesses, and deserving of a fresh set of eyes. I think they've liked the early reads.

Jon Witter: Yeah, Jeff Adelson. Obviously, it's very early. Peak season really hasn't started at all yet in any of the grad segments we're talking about. Maybe a couple of thoughts. One, I think our conversations with schools have been extremely positive. As you can appreciate, their number one 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, new businesses, and deserving of a fresh set of eyes. I think they've liked the early reads.

As we did that started or would you expect.

The way that we will do that will be similar to how we do.

First transaction, which as you enter into a flow agreement, but also started the process with some sort of a.

Seasonal portfolio sale.

So thats kind of within our.

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.

Flattish balance sheet I think now with this shift in our approach on accelerating capital return.

John said in his prepared remarks is 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 will fine tune that.

We see the origination levels coming in during peak.

We have a better line of sight to overall levels of growth.

Jonathan Witter: 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. Those are super leading indicators and trends based on small sample sizes. 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. 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 away and make sure we put ourselves in the best position we can to win.

Jon Witter: 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. Those are super leading indicators and trends based on small sample sizes. 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. 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 away and make sure we put ourselves in the best position we can to win.

Yeah. And Jeff, um, you know, obviously it very early, uh, there's um uh, you know, p p season, uh, really hadn't started at all yet in, in any of the, the Brad segments, we're talking about. But, uh, maybe a couple of thoughts 1. I think our conversations with schools have been, uh, extremely positive, uh, as you can appreciate their number 1 concern post. Plus reform was, you know, what is this going to mean for their ability uh, to fill their classrooms and support their students? And, you know, so if they're 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, uh, with schools, I think they have been quite impressed by the customer back thoughtfulness that we have brought to really thinking about these new products and new businesses and, and deserving of of the fresh set of eyes. Um, so I think they, they like the early reads, um, and I would say

In the business.

Thanks very much.

Thank you and we'll go next to Jeff Adelson with Morgan Stanley. Please go ahead.

Hey, good evening gentlemen.

Got it I'm just curious.

If.

John 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 and tenant increased hiring by about five or 6%. This year I guess my question is.

You know, as we have implemented changes and you know, grad has obviously been a part of our portfolio for a long time but a small part we are starting to see, uh, impressive and meaningful increases percentage increases in our performance. Uh, so those are super leading indicators and, you know, Trends based on small, uh, small sample sizes, uh, but I think it's not just the reaction, we're getting from schools. We're actually seeing that flow through, uh, in things like, you know, early

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 looked like they kind of continue to uptick a little bit at these levels.

Yes, Jeff.

Maybe a couple of thoughts here.

Origination numbers and the like—so, uh, we feel good about the guidance that we've put out around origination. We haven't seen anything that leads us to believe it's not achievable, but we're going to continue to soldier away and make sure we put ourselves in the best position we can to win.

Operator: Okay, great. Thank you. Thank you. We'd like to take our next question from Don Sidoti with Wells Fargo. Please go ahead.

Jeff Adelson: Okay, great. Thank you.

Okay, great. Thank you.

As you jump in if you want to add anything.

Operator: Thank you. We'd like to take our next question from Don Sidoti with Wells Fargo. Please go ahead.

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, but I think we saw an unemployment during the course of last summer has normalized I think we've talked for a couple of calls now about.

Thank you and we'd like to take our next question from Don fedi with Wells Fargo. Please go ahead.

Don Sidoti: Hi, good evening. I know it's early, but I was wondering if you could talk a little bit about 2027. I think last quarter you provided some thoughts. Obviously, you're going to have a higher base here in 2026.

Don Fandetti: Hi, good evening. I know it's early, but I was wondering if you could talk a little bit about 2027. I think last quarter you provided some thoughts. Obviously, you're going to have a higher base here in 2026.

Hey, good evening. Um I know it's early but I was wondering if you could talk a little bit about 27, I think last quarter, you provide some thoughts. Obviously you're gonna have higher base here in 2026

Peter Graham: I think the only thing I'm really prepared to talk about with regard to 2027 is kind of like the origination opportunity that we see from Grad. I think we've kind of sized that at roughly a $5 billion incremental opportunity over time. The way that will size in really will be modest this year and then grow more exponentially as we go 2027 and into 2028. In terms of overall guidance around earnings or anything like that, I wouldn't feel comfortable this early giving any reads on that.

Pete Graham: I think the only thing I'm really prepared to talk about with regard to 2027 is kind of like the origination opportunity that we see from Grad. I think we've kind of sized that at roughly a $5 billion incremental opportunity over time. The way that will size in really will be modest this year and then grow more exponentially as we go 2027 and into 2028. In terms of overall guidance around earnings or anything like that, I wouldn't feel comfortable this early giving any reads on that.

The resiliency of students and the Fungibility of the skills that are afforded by higher education and their ability to figure out and 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 sort of deserving of a of a tailwind sort of classification.

I mean, I think the only thing I really prepared to talk about with regard to 27 and 7, like the origination opportunity that we see from grad, I think we've customized that, um, you know, roughly $55 billion incremental opportunity over time. And the way that will size in really well, um, be modest this year and then grow, you know, more, uh,

In terms of the delinquency trends were very comfortable with the delinquency rates, where they are as I said in my comments they are in line and slightly better than expectations.

Exponentially as we go '27 and into '28. Um,

I think if you look at in particular, the stability of the later stage delinquency trends. Yes. They are 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 a ratio because there is obviously, a numerator and denominator when you sell a couple of billion.

But in terms of overall guidance around earnings or anything like that, I, I wouldn't feel comfortable this early uh giving me 3. So,

Don Sidoti: Okay. 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?

Don Fandetti: Okay. 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?

Just because the consumer knows about it.

Of loans.

What are your thoughts on the future demand from private credit?

Peter Graham: Yeah, I think, obviously there's been pockets of private credit that have been challenged. I think even within the structured finance or ABF part of private credit, there's been areas where there's been frauds or other issues. That's really caused kind of like a more of a flight to quality, and we've got a very high-quality asset type that 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. 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 have been well subscribed and well priced, and we expect that to continue as we move forward here. Certainly in the context of beginning dialogue for setting up next partnerships.

Pete Graham: Yeah, I think, obviously there's been pockets of private credit that have been challenged. I think even within the structured finance or ABF part of private credit, there's been areas where there's been frauds or other issues. That's really caused kind of like a more of a flight to quality, and we've got a very high-quality asset type that 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. 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 have been well subscribed and well priced, and we expect that to continue as we move forward here. Certainly in the context of beginning dialogue for setting up next partnerships.

Earlier in the year than you expected that could have a little bit of a denominator of fact I think.

yeah, I think, um,

You know, I think there's still—obviously, there's been pockets.

Prudence would suggest that would be considered in interpreting the results, but we feel we feel very solid about where we are from Italy, let's say perspective.

Private credit that have been challenged.

Okay, great. Thank you and maybe just quick follow up on Grad, plus obviously youre looking for that to start kicking into gear.

July maybe just.

You spoke a lot about how you're preparing for that and you're talking to the schools. So maybe just quick update on what youre 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 recognizing obviously, it's still pretty early.

Yes, Jeff obviously, it's very early.

Peak season.

Really hasnt started at all yet in any of the Grad segment, we're talking about.

Maybe a couple of thoughts one I think our conversations with the schools have been extremely positive.

As you can appreciate their number one concern post plus reform wise, yes, what is this going to mean for their ability to.

Peter Graham: We've had great engagement from the interested parties and feel like the market demand is still really there for our product.

Pete Graham: We've had great engagement from the interested parties and feel like the market demand is still really there for our product.

I think even within the, you know, structured Finance or part of um of private credit, there's been you know, areas where there's been frauds or other other issues, but that's really caused kind of like a more of a flight to Quality. And we've got a very high quality asset type that remains, uh, you know, has has has very strong land for it. Uh, particularly, you know, sort of in the consumer space, you know, given the the ability for us to do provide duration as well as, you know, high yield and, and low losses. So, we've continued to see strong demand both for our own funding secure, but also, uh, the securitizations that we do on behalf of Bill and buyers, uh, has been, uh, you know, well subscribed and well priced. And we expect that to continue, you know, as we as we move forward here and certainly in the context of beginning dialogue for, um, you know, setting up next Partnerships, we've had great engagement from

Fill their classrooms and support their students and sort of their higher education journey.

Definitely interested parties, and I feel like, you know, the market demand is still really good for our—

I think the work that we've done around product design around underwriting around terms and conditions as we've gone through that.

Don Sidoti: Thank you.

Don Fandetti: Thank you.

Operator: Thank you. We'll take our next question from Sanjay Sakhrani. Sakhrani, please go ahead, with KBW.

With schools I think they have been quite impressed by that customer back thoughtfulness that we have brought to <unk>.

Thank you. And we'll take our next question from San Jose.

Really thinking about these as new products and new businesses and deserving of a fresh set of eyes.

Tech.

Sanjay Sakhrani: Thank you. John, 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 it sounds like you feel pretty good about it. How do we 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 do we get leverage off of that into next year?

They widened the early rates.

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.

Um, John, maybe just to put a little bit of a finer point on, um, some of the initiatives you have in the step-up in expenses in 2026. I know you guys are.

Impressive and meaningful increases percentage increases in our performance.

So those are super leading indicators and <unk>.

Trends based on small small sample sizes.

But I think it's not just the reaction we're getting from schools, we're actually seeing that flow through.

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, um, across this year? And actually, you talked about, um, you know, a step up in originations next year from the opportunity. But how do we see it unfold, and, like, do we get off of that in 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 Q4 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, 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. We actually expect at the end of the growth period for our efficiency ratio to be better than it was at the starting point.

Jon Witter: Sanjay, thanks and great question. I think I would refer back to maybe also some of the comments I made during the Q4 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, 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. We actually expect at the end of the growth period for our efficiency ratio to be better than it was at the starting point.

Things like early origination numbers and the like so we feel good about the <unk>.

Guidance that we've put out around originations.

Haven't seen anything that leads us to believe that it's not achievable but.

We're going to continue to soldier away and make sure we put ourselves in the best position, we can to win.

Okay, great. Thank you.

Thank you and we'd like to take our next question from John Adobe with Wells Fargo. Please go ahead.

Hi, good evening.

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.

Thanks, and great question. Um, you know, I think I would refer back to, you know, maybe also some of the comments I made during the fourth quarter earnings call. You know, I think our view is, yes, expenses are elevated this year on, you know, 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 talked about around, you know, products and systems and customer experience and the like. I think what we've committed to, and we still believe in, is, uh, you know, that rate of expense growth,

I mean, I think the only thing I really prepared to talk about with regard to 2007 is kind of like the origination opportunity that we see from ground I think.

Jonathan Witter: 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 may get 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. I think that is the very definition of operating leverage. 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.

Jon Witter: 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 may get 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. I think that is the very definition of operating leverage. 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've kind of sized.

Uh huh.

The incremental opportunity over time.

And the way that we will size and really will be.

The modest this year and then grows via a more.

Exponentially our regulatory relief accordingly.

In terms of overall guidance around earnings or anything like that or I wouldn't feel comfortable this early.

<unk>.

Okay.

I heard the comments on the.

Potential new partners, obviously, theres been a lot of dislocation in private credit or it sounds like youre not seeing.

I will moderate after the year. Um, you know, we may see a slight uptick in our efficiency ratio, uh, but we actually expect at the end of the growth period for our efficiency ratio to be, you know, better than it was at the starting point. So to put, you know, a little bit of rough justice, uh, math to it. You know, if, uh, if we were at a, you know, sort of, you know, mid-30s efficiency ratio historically, I think during this time of growth we may get up to the high 30s. Which, by the way, I think is still a pretty compelling efficiency ratio. Uh, I think if, you know, 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 to low 30s, and so I think that is the very definition of operating leverage.

Seeing any kind of hesitancy or different terms.

Maybe just because its consumer product or.

What are your thoughts on the future demand from private credit.

Jonathan Witter: We think that's a relatively short invest ahead of the curve, with real leverage coming in not very many years after that.

Jon Witter: We think that's a relatively short invest ahead of the curve, with real leverage coming in not very many years after that.

Yeah I think.

I think there's been obviously, there's been pockets of private credit that had been challenged.

Um, and at the end of the day, we recognize the need to invest again in what we really 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, uh, with real leverage coming in.

I think even within the structured finance or maybe a part of.

Sanjay Sakhrani: Got it. Pete, just so I have the numbers correct in terms of the guidance raise, the raise, and the fact that you're selling another $1 billion. By my math, if you use the 6% or so gain and then the reserve release, 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. Any idea on timing? Thanks.

Private credit.

Areas, where theres been fraud or other other issues.

Thats really cause kind of like a more of a flight to quality and we've got a very high quality.

Asset type remains.

And peace. Just, um, just so I have the numbers correct in terms of the guidance rates, the rates, and the fact that you're selling another $1 billion, I might not—if you want to use the 6% or so gain—and then the reserve release. I mean, it sounds like most—

Is it still has very strong demand for it.

Particularly for really consumer space.

Given the ability for us to to provide duration as well as high.

Of that raise, is the mechanics of the building being sold? Um, at this point in the rest of the year, any idea on timing? Thanks.

High yield losses, So we've continued to see strong demand.

Peter Graham: Yeah, sure. I think in the context 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. If you think about the mechanics of what we discussed here of what's happened in Q1, 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. That's how you should really think about that. We haven't updated any other elements of our original guidance. The impact is really just that, the incremental loan sale gain and the share count reduction. It's roughly half and half for the full year.

Pete Graham: Yeah, sure. I think in the context 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. If you think about the mechanics of what we discussed here of what's happened in Q1, 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. That's how you should really think about that. We haven't updated any other elements of our original guidance. The impact is really just that, the incremental loan sale gain and the share count reduction. It's roughly half and half for the full year.

Context.

For our own funding Securitizations, but also.

The securitizations that we do on behalf of the loan buyers.

Ben <unk>.

Well subscribed in oil price and we expect that to continue.

Of, um, you know, sort of the full-year guidance. Um, the increase in, uh, in EBS guidance for the full year is roughly

Split between.

As we move forward here and certainly in the context.

Beginning dialogue for.

Setting up mixed partnerships, we've got great engagement.

For me interested parties and the bill.

Bill it.

As the market demand is still really there for our product.

Shift out reduction and incremental gain, uh, from incremental loan sale. And so, if you think about the mechanics that we discussed here of what's happened in the first quarter, we really accelerated that through the actions that we've taken, have, you know, a much lower account for a long period of time during the year.

Thank you.

And so, that’s how you should really think about that.

Thank you and we'll take our next question from Sandy it's.

We haven't updated any other elements.

Okay.

Please go ahead with Ww.

Thank you.

Of our, uh, original guidance. Um, so the impact is really, you know, just that the incremental load show gain and the share count reduction. So it's roughly, um, you know, roughly half.

John maybe just to put it a little bit of a finer point on some.

Sanjay Sakhrani: Got it. Okay. Thank you very much.

Some of the initiatives you have in the step up in expenses in 2026, I know you guys are.

Got it. Okay, thank you very much.

Peter Graham: Yep.

Pete Graham: Yep.

Yeah.

Operator: Thank you. We'll take our next question from Mark DeVries with Deutsche Bank. Please go ahead.

How do we see.

It sounds like you feel pretty good about it how do we like to see it unfold and measure and as we look out.

Thank you, and we'll take our next question from Mark with Dosha. Please go ahead.

Mark DeVries: Yeah. Thanks. John, I believe you indicated you're up almost 20% from this time last year. Do you have a sense for what's behind that? Is this a reflection of a significant increase in just demand for higher education? Is there something wonky behind that? If it is demand, what does it say for your conviction just around your origination guidance?

Across this year and next I know you talked about.

A step up in originations next year from the opportunity, but how do we see it unfold and Mike can we get leverage off of that into next year.

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.

Yeah. Um thanks. Um Jonathan, I believe you indicated up on the 20th from this time last year give us not sure what's behind that is this a reflection of like a a significant increase in this demand for higher education. Is there something wonky dine out? And if you know if it is a man you know what does it say to your conviction? Just run your origination guns.

Jonathan Witter: Yeah. 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 two years ago, when you'll remember the Department of Education rolled out a new FAFSA form 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.

Jon Witter: Yeah. 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 two years ago, when you'll remember the Department of Education rolled out a new FAFSA form 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.

I think our view is gas 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 cost some of the things we've talked about talked about around in our.

Products and systems and customer experience and the like I think what we've committed to and what we still believe it 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 break period for our efficiency ratio to be.

Jonathan Witter: 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. 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 a key thing for many students and families out there. There's been a lot of talk about sort of the changing 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.

Jon Witter: 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. 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 a key thing for many students and families out there. There's been a lot of talk about sort of the changing 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 then it was at the starting point, so to put a little bit of rough justice math to it.

If I, if we were at sort.

Sort of.

Mid thirties efficiency ratio historically I think during this time of growth, we may get up to the high thirties.

Which by the way I think is still a pretty compelling efficiency ratio.

I think yes.

Mark, I think it's probably too early to know exactly. All the different factors that are driving. You know, that rate that is obviously, you know. So in a moment, um, I think what we've seen is, if you exclude 2 years ago, when you remember the Department of Education, rolled out a new Fast performance. Um, may have a few implementation hiccups along the way. You know, I think what this really reflects is so they continued steady drum beat of a sort of growth. What I think matches, well, with what we've seen around, you know, General Trends in, um, uh, sort of the percentage of eligible High School seniors who are using go, you know, go to college. And, you know, a lot has been made around the demographic trend. But I think that that 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. Um, but you know if I you know, broaden it out a little bit and look at our, you know, soon to be really survey. I think that gives more a little bit more detailed Insight. Uh, I think what it really shows is

The market evolves the way, we think it's going to end up our share evolves. The way, we think it's going to I think by the end of the Grace period. We said, we would hope to be back down in the low thirty's. 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 think is about a great market opportunity for us, but also a real need for students and University partners.

Jonathan Witter: Understand the key to sort of job creation skills, understand 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. I look forward to the survey coming out. I think that will probably happen next week. I think a lot of great data in there that, Mark, will give you even more insight into your question.

Jon Witter: Understand the key to sort of job creation skills, understand 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. I look forward to the survey coming out. I think that will probably happen next week. I think a lot of great data in there that, Mark, will give you even more insight into your question.

Thank God.

Relatively short invest ahead of the curve.

With real leverage coming in not very very many years after that.

The promise of higher education and the dream of higher education continues to be, uh, really a kind of a key thing for many, many students and families out there. And there's been a lot of talk about, you know, the changing 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 key, you know, sort of job creation skills, understand the key—so that economic mobility.

Got it.

And then Pete just.

Just so I have the numbers correct in terms of the guidance range the raise and the fact that youre selling another $1 billion by my math, if you kind of use a 6% or so.

And understand the role that I think it's played historically, that we believe it will take going forward. So I look forward to the survey coming out, and that will probably—

Last week, um, and I think a lot of great data in there that Mark will give you even more insight into your question.

Mark DeVries: Okay, great. Thank you.

Okay, great. Thank you.

And then the reserve release I mean, it sounds like.

Operator: Thank you. We'll take our next question from Caroline Latta from Bank of America. Please go ahead.

Most of that raise is just the mechanics of the $1 billion being sold.

Thank you. And we'll take our next question from Carolyn.

America.

Caroline Latta: Hi, guys. I think you mentioned last quarter that you expect after 2026 that the private education portfolio will inflect up to 1% to 2% growth. Has that expectation changed if you were to add another private credit partner, or did that comment contemplate another potential partner?

And at some point in the rest of the year and any idea on timing.

Yes, sure I think in the context of.

Is sort of a full year guidance.

Last quarter, you expected that after 2026 the private education portfolio would, in fact, be up, like 1 to 2% growth. Has that expectation changed? And were you or another partner—did that comment come from you or another, dental partner?

Peter Graham: Yeah. Thanks, Carolyn. I think in our original sort of long-range planning that formed the basis of our original guidance for this year, we kind of assumed flattish balance sheet this year, and we assumed that kind of 1% to 2% growth going into 2027 and sort of getting up to kind of mid-single digits over time. I think we'll obviously, with the change in approach around acceleration of the share repurchase this year, we'll probably be a little down this year, call it $1 billion lower than flat-ish. We would look to still step back into growth over time. I don't think the creation of a new partnership really changes that dynamic. We still have a broad opportunity around originations growth that will drive, if we don't do those partnerships or other types of loan sales, would drive a much higher rate of balance sheet growth than that.

Pete Graham: Yeah. Thanks, Carolyn. I think in our original sort of long-range planning that formed the basis of our original guidance for this year, we kind of assumed flattish balance sheet this year, and we assumed that kind of 1% to 2% growth going into 2027 and sort of getting up to kind of mid-single digits over time. I think we'll obviously, with the change in approach around acceleration of the share repurchase this year, we'll probably be a little down this year, call it $1 billion lower than flat-ish. We would look to still step back into growth over time. I don't think the creation of a new partnership really changes that dynamic. We still have a broad opportunity around originations growth that will drive, if we don't do those partnerships or other types of loan sales, would drive a much higher rate of balance sheet growth than that.

The increase in AR and the EPS guidance for the full year is roughly split.

Often have between share count reduction and incremental game.

From the incremental loan sale and so if you think about the.

The mechanics of what we discussed here of what's happened in the first quarter, we really.

Accelerated through the actions that we've taken.

I'm not sure where should it go 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.

The impact is really.

Uh, yeah, thanks Carolyn. Um, I think, um, in the original sort of, you know, low range planning, that formed the basis of our original guns for this year, we kind of assumed blood cells. She this year, and we assumed they kind of went to 2% growth, going into the going into 27, sort of hitting up to kind of mix in digits over time. Um, I think we'll, you know, obviously with the the change in approach around acceleration and share repurchase this year, we'll probably be a little down this year, probably the billion dollars lower than than flattish. Um,

Just the incremental low sodium and the share count reduction so it's roughly.

Over time.

For the full year.

Got it okay. Thank you very much.

Yeah.

I don't think the creation of a new partnership, um, really changes that dynamic. The, you know, we still have, um,

Thank you and we will take our next question from Mark Devries with Deutsche Bank. Please go ahead.

You know.

That will.

Yes.

Thanks, John I believe you indicated that the SaaS with completion rates are up almost 20% from this time last year give a sense for whats behind that is this a reflection of like the most significant increase in the demand for higher education or something lumpy behind that and as you know.

If not, uh, if we don't do these partnerships or other types of loan sales, which are at the much higher rate,

Peter Graham: 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 2027 and beyond. 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 2027 and then again into 2028. We want to make sure we've got a good complement of funding capabilities to meet that need.

Pete Graham: 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 2027 and beyond. 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 2027 and then again into 2028. We want to make sure we've got a good complement of funding capabilities to meet that need.

Than that. So, we do have lots of different levels.

Choose to optimize that.

And if it is demand.

What does it say if your conviction just around your origination guidance.

Yeah, Mark I think it's probably too early to know exactly all the different factors that are driving that range and this is obviously sort of in a moment.

I think what we've seen is if you exclude two years ago when Youll remember the department of education and rolled out a new fast performing.

But it will. In Echo, it's sort of the mix of seasoned sales versus new origination sales as we step into '27 and beyond. And again, that's purposeful because the grant opportunity, for which we don't really have a flow arrangement for, will begin to become a much larger portion of our originations as we move into '27, and then we get into 2028. So we want to make sure we got—

a good compliment.

It's a week that

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

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.

Um, great, thank you. And then maybe just like, given that, by accident this year, you complete, the plan will be a pretty big step up. Attachment would be thinking about the cadence of buybacks and capital returns, or they're out until 2027 and 2028.

Peter Graham: Yeah. Again, I think if you look at our original plan, we were targeting roughly 5%, 6% of outstanding share count would be part of a buyback within a year. I think as we start to normalize, that's probably a reasonable sort of benchmark going forward. As always, as market conditions change, and if there's an opportunity to do more than that, then we would do what we did in Q1, which is accelerate some loan sales and take advantage of that market dislocation.

Pete Graham: Yeah. Again, I think if you look at our original plan, we were targeting roughly 5%, 6% of outstanding share count would be part of a buyback within a year. I think as we start to normalize, that's probably a reasonable sort of benchmark going forward. As always, as market conditions change, and if there's an opportunity to do more than that, then we would do what we did in Q1, which is accelerate some loan sales and take advantage of that market dislocation.

And sort of the percentage of eligible high school seniors, who are choosing to go go to college.

<unk> 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.

Yeah. Again, I think if you look at our sort of original, sort of, plan, we were targeting roughly 5–6% of outstanding, you know, share count would be further to buy back with—

But if I broaden it out a little bit and look at our soon to be released survey.

Think that gives a mark a little bit more detailed insight.

Within a year and I think as we start to normalize that's probably a reasonable sort of Benchmark. Um you know, going forward and as always is, Mark conditions change and if there's an opportunity to do more than that, uh then then we would do what we did in the first quarter, which is accelerate some windows and take advantage of that market.

Caroline Latta: Okay. Thanks, guys.

I think what it really shows is the <unk>.

Thanks.

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

Promise.

Your education in the Dream of higher education continues to be a.

Thank you. And we'll take our next question from John X with Jeffrey. Please go ahead.

John Hecht: Yeah, thanks, guys. Maybe 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?

Really a kind of a key fang.

Yeah, thanks guys.

Maybe.

For many many students and families out there and theres been a lot of talk about.

You know.

The changing cost of higher education is a word that I think our survey says pretty conclusively that the vast majority of American families out there really see that it is.

You had a beat on Opex or OpEx. Maybe, can you talk about the case on investments in the Quest program over the years?

Peter Graham: Yeah, sure. We're getting ready for peak season, which starts in the summer. If you think about the comments we made at year-end when we talked about expenses for this year, of the increase year over year, we said roughly a third was increase around marketing and customer acquisition, and roughly a third was the preparation for the opportunity in terms of the things John talked about around program design, customer experience, and some of the tech changes we'll need to enable. That readiness will be more front-loaded before peak, and the marketing spend will be more in the moment in that peak season. Our sort of staging of expenses and our plan for expenses, we were modestly ahead of plan for Q1. We feel still comfortable with our overall guidance range for the full year.

Pete Graham: Yeah, sure. We're getting ready for peak season, which starts in the summer. If you think about the comments we made at year-end when we talked about expenses for this year, of the increase year over year, we said roughly a third was increase around marketing and customer acquisition, and roughly a third was the preparation for the opportunity in terms of the things John talked about around program design, customer experience, and some of the tech changes we'll need to enable. That readiness will be more front-loaded before peak, and the marketing spend will be more in the moment in that peak season. Our sort of staging of expenses and our plan for expenses, we were modestly ahead of plan for Q1. We feel still comfortable with our overall guidance range for the full year.

I understand the key.

Job creation skills, I understand that Takeda sort of economic mobility.

Yeah, sure. Um, you know, we're, we're, um,

And I 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 I think that will probably happen next week.

Getting ready for peak season, which starts in, you know, kind of a summer. And so, if you think about, um, you know, the comments we made that year when we talked about expenses for this year,

And I think a lot of great data in there that Mark will give you even more insight into your question.

Okay, great. Thank you.

Thank you and we'll take our next question from Caroline <unk> from Bank of America. Please go ahead.

Hi, guys.

Thank you mentioned last quarter that you expect after 2020, the private education portfolio in fact up to like 1% to 2% growth.

That expectation changed if you were in a I don't know if theyre private credit partner did that comment contemplate another potential partner.

You know, of the increased year-over-year, we said roughly a third was, you know, increased around marketing, customer acquisition, and roughly a third was, um, you know, the, uh, the preparation for, uh, the opportunity. In terms of the things John talked about around program design, the customer experience, and some inflections you will need to enable. Um, and so, you know, that readiness will be more front-loaded.

Yeah. Thanks Carolyn.

You know what I think.

In our original sort of low range planning that form the basis of our original guidance for this year.

Kind of assumed flattish balance sheet. This year, we assumed they were kind of 1% to 2% growth.

And the marketing spend will be more, you know, enrollment, uh, in that PC. And so again, our, um, you know, sort of staging of expenses in our plan for expenses through—modestly ahead of plan for, uh, for the first quarter. But, um, you know, we feel still comfortable with our overall guidance range for the full year.

John Hecht: Okay. 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?

Going into the going into 'twenty saw them and sort of doing.

Getting up to the kind of mid single digits over time.

I think we will.

Sorry, Bruce.

Change in approach around acceleration of the share repurchase this year.

It'd be a little down this year call it $1 billion lower than the flattish.

And then, uh, second question, you know, is kind of the evolution of the program management servicing fees, you know? Yeah. Was there anything in this quarter, um, with that? And then how do we think that grows over the course of this year?

Peter Graham: Sure. The inaugural partnership that we inked with KKR in Q4 of last year has the program management fee built into that. 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. We did another $1.3 billion of sales to that partnership in the quarter, and we will continue to build on that. As we grow the next partnership, our anticipation is that those program management fees, or something akin to those program management fees, will be part of the economics of those deals as well. 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.

Pete Graham: Sure. The inaugural partnership that we inked with KKR in Q4 of last year has the program management fee built into that. 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. We did another $1.3 billion of sales to that partnership in the quarter, and we will continue to build on that. As we grow the next partnership, our anticipation is that those program management fees, or something akin to those program management fees, will be part of the economics of those deals as well. 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.

And we would look to to kind of still step back into growth overtime.

The creation of a new partnership.

Really changes that dynamic.

We still have.

A broad opportunity around originations growth that will drive.

Uh, sure. Uh, so you know the inaugural partnership that we linked with KKR in the fourth quarter of last year has, you know, program management built into that. And so, as we have completed, um, you know, sales of

its into that.

program management fees, which are

If not if.

If we don't do those partnerships or other types of loan sales, we drove a much higher rate. Although she goes so we do have lots of different levers that we can.

for the

so,

Um, you know, we did another, uh,

Choose to optimize that what it will impact, though is sort of a mix of season sale versus new origination sale as we step into 2007.

And again, that's purposeful because.

Billion 3 in sales to that partnership in the quarter, and we will continue to build on that. And as we grow the next partnership, our anticipation is that those program management fees, or something akin to those program management fees, will be part of the economics of those deals as well.

Grant opportunity for which we don't currently have.

So a range before we will begin to become a much larger portion of our originations as we move into 2017, when we get into 2020 years. So we want to make sure we've got.

Time, um, and do ourselves a different, uh, sort of capital allocation capability with, um, with these forward flow sales.

John Hecht: Okay, thanks.

Good supplemental funding capabilities to meet that need.

Peter Graham: Yep.

Pete Graham: Yep.

Operator: Thank you. We'll go next to the line of Richard Shane with JP Morgan. Please go ahead.

Great. Thank you and then maybe just like given that the buyback. This year as you complete the plan will be a pretty big step up how should we be thinking about the cadence of buybacks and capital returns or they're out into like 2027 and 2028.

Thank you. And we'll go next to the line of Shane with JP Morgan. Please go ahead.

Richard Shane: Hey, guys. Thanks for taking my questions this afternoon. 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 portfolio, where it is in your targeted range. Is it within the range? Is it above the range? Is it below the range long term? 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?

Yeah again, I think if you look at our sort of original solar plan, we were targeting roughly five 6% of the outstanding shares would be partly the buyback with them within a year.

I think as we start to normalize as probably a reasonable sort of benchmark.

Going forward.

As always as market conditions change and if there is an opportunity to do more of them.

And then.

So we would do what we did in the first quarter, which is accelerating so that we can.

You can take advantage of that market dislocation.

Okay. Thanks, guys.

Thank you and we'll take our next question from John Hecht with Jefferies. Please go ahead.

Hey guys, thanks for taking my questions. This afternoon. Um, 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, reiterating, your prior guide. Um, I'm curious when you think about the credit for performance of the low of the, the credit performance of the portfolio, uh whether it is where it is, in your target range within the range, is it above the range? Is it below the range, uh, 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 Biden? The credit in order to sort of meet that vision from here.

Jonathan Witter: Rick, it's John. A couple of thoughts and tell me if this gets to your question. First of all, I think we are operating within the 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 Q4 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 wild card 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. I think we believe we're operating within that range and certainly feel good about the guidance that we've given out.

Jon Witter: Rick, it's John. A couple of thoughts and tell me if this gets to your question. First of all, I think we are operating within the 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 Q4 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 wild card 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. I think we believe we're operating within that range and certainly feel good about the guidance that we've given out.

Yes, thanks, guys.

And maybe just.

Just.

Relative to our forecast you had.

You had a beat on opex or upside.

Yes at a lower Opex, maybe can you talk about the cadence on investments in the plus program over the years.

Yes sure.

We're <unk>.

Getting ready for peak season, which starts in the kind of the summer and so.

Uh, Rick, it's, uh, a couple of thoughts and, um, uh, tell me if this gets to your question. Um, first of all, I think we are operating within the sort of long-term credit range that we talk about. Um, you know, I think we said a couple of years ago, we thought the right destination was high 1Ls. I think we spent a lot of time in the fourth quarter, brains call, we were laying out guidance, doing a bit of a cross.

Think about.

The comments, we made at year end when we when we talked about expenses for this year.

Of the increase year over year, we said roughly a third was increase around marketing and customer acquisition and roughly a third was.

Crosswalk around, you know, that percentage to, uh, the, uh, the loan or the charge up guidance. That we've given for this year, recognizing that the wild card, there was the shift in strategy to sell new originations versus season portfolios and a little bit of the the sort of a fact that they had on our Legacy ratio.

The preparation for the.

But I think we believe we're operating within

The opportunity in terms of the things John talked about a real program design and customer experience.

Jonathan Witter: I think it's important to remember how we got there. 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 buy box that we have, and to make sure that we felt great about all of those originations. 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. 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.

Jon Witter: I think it's important to remember how we got there. 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 buy box that we have, and to make sure that we felt great about all of those originations. 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. 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.

engine and certainly feels good about the guidance that we can have.

So when you check changes will lead to a label.

And so.

Readiness will be more frontloaded before peak.

Our marketing spend will be more.

In the moment in that peak season, so it.

Again R R.

I think it's important to remember how we got there. And, you know, we've talked about this, you know, a bit over the years. But, you know, we started three or four years ago a very persistent, purposeful program to really look at and to optimize the credit of the I box that we have.

Sort of staging of expenses in our plan for expenses, we will.

We're modestly ahead of plan for.

For the first quarter, but we.

We feel still comfortable with our overall guidance range for the full year.

Yeah.

And then.

Second question.

The evolution of the program management and servicing fees.

Was there anything in this quarter.

With that and then how do we think that grows over the course of this year.

Jonathan Witter: I do think there is still a tale 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 maximum stress period underneath the old underwriting regime. I think in some respects, the full effect has yet to be felt in the portfolio. 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 a 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 six months.

Jon Witter: I do think there is still a tale 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 maximum stress period underneath the old underwriting regime. I think in some respects, the full effect has yet to be felt in the portfolio. 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 a 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 six months.

Oh sure. So you know that.

The inaugural partnership that we inked with particular in the fourth quarter of last year has the program management fee built into that and so as we have completed.

Uh, and to make sure that we build great about all of those relations and we Chronicle the couple of different times the extent of that but just like just to say that I think the changes that we made had a meaningful impact on origination volume and, you know, 1 of our great source of Pride, was our ability to grow, uh, you know, nominal levels of origination and share while still tightening the credit box Journey, uh, during that whole time. Um, I do think there is still a tail to come uh, 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 you know, maybe have an Ender full pni yet who are still coming into the heart of their repayments and

Sales process into the.

Those program management fees will starting to earn on sort of the AUM. If you will on the other management so.

We did another.

Three are sales to the partnership in the quarter and we will continue to build on that and as we grow. The next partnership our anticipation is that those program management fees or something akin to those program management fees will be part of the economics of those deals as well so our intent again with doses.

We can either continue to go more recurring fee based revenue overtime.

Jonathan Witter: I think all in all, we feel really good about these results and look forward to the portfolio continuing to season.

Jon Witter: I think all in all, we feel really good about these results and look forward to the portfolio continuing to season.

And give ourselves a different sort of careful allocation capability with what these forward flow cells.

Uh, sort of maximum stress period, underneath the old sort of underwriting regime. So, you know, I think in some respects, the full effect has yet to be felt in the portfolio. Uh, but we feel great about those credit change underwriting changes we made. We feel great about how, uh, our loss mitigation programs are performing. Uh, and we think we are generating the exact loss profile that we would hope for during a time that, I would point out, you know, has been relatively stressed for, you know, some of these borrowers, with the elevated unemployment rate that I talked about before over the last six months. Um, so I think, all in all, we feel we

Okay. Thanks.

Good about these results. And I look forward to the portfolio continuing to, uh, to season.

Richard Shane: I appreciate that. I am curious, and I apologize if maybe, I don't know if I'm missing something, but do you provide an average loan in repayment number anywhere in the disclosures? 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. 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?

Okay.

Thank you and we'll go next to the line of Rick Shane with Jpmorgan. Please go ahead.

Hey, guys. Thanks for taking my questions. This afternoon.

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 I I appreciate that and I apologize that maybe I don't know if I'm missing something, but do you provide an average Loan in repayment, number anywhere in the disclosure? And the reason I ask is obviously this quarter when we calculate a charge off rate.

I'm curious when you think about the credit performance of the loan.

The credit performance of the portfolio.

Weather.

It is where it is in your targeted range is it within the range is it above the range is below the range.

The long term.

And to the extent it is varying from the range is there anything youre doing on the underwriting side, either tightening or widening of credit bucket in order to sort of meet that efficient frontier.

Payments that are part of the pools that you're selling, or should we assume it's predominantly new originations that are less than a couple months seasoned?

Peter Graham: All of our portfolio sales are 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. As we make portfolio sales, as John 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 Q4 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 a held for sale status in association with these forward flow agreements. That does also have a nominal impact on some of the calculation.

Pete Graham: All of our portfolio sales are 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. As we make portfolio sales, as John 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 Q4 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 a held for sale status in association with these forward flow agreements. That does also have a nominal impact on some of the calculation.

Um,

Uh, portfolio sales are sort of represented samples of the book.

Rick its John a couple of thoughts and.

Tell me if this gets to your question.

First of all I think we are operating within.

Really, the only X, please. There are, um, loads that are in later stage, the delinquency, or typically from those pools. So, as we move,

Set of long term credit range that we talked about I.

I think we said a couple of years ago, we thought the right destination wise high ones to low twos 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.

The loan or the charge off guidance that we've given for this year recognizing that the wildcard there was a shift in strategy to solve new originations versus seasoned portfolios in a little bit distortive effect that that had on our legacy ratio.

I think we believe we're operating within that range and certainly feel good about the guidance that we've given out.

Um, you know, as we make portfolios, as John said that can have an impact in the quarter, or when, in the year, we, we make those sales because those impact the denominator of, some of those ratio calculations. I would also highlight, um, again, some of the commentary we made in the fourth quarter, um, surrounding our disclosures in the, uh, in the 10K because we calculate most of our loan disclosures on loans out for investment because we are moving uh, loans to help for sale status in association with these orders for agreements. That does also have a novel impact on some calculations.

Richard Shane: Got it.

Jonathan Witter: Rick,

Jon Witter: Rick,

Richard Shane: Sorry, go ahead.

Jonathan Witter: Yeah. 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. 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.

Jon Witter: Yeah. 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. 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.

Got it. And Rick, um, just go ahead.

It's important to remember how we got there and we've talked about this a bit over the years, but we started three or four years ago, a very persistent purposeful.

Program to really look at and to optimize the credit buy box that we have and to make sure that we felt great about all of those originations and.

And waited chronicle the couple of different times, the extent of that but suffice it to say that I think that changes that we made had a meaningful impact on origination volume in one of our great sources of pride was our ability to grow both.

Any confusion—I think he did a nice job of laying out his talking point. Also, what were the new origination sales, which were $1.2 billion? Those are obviously, as the name would suggest, new originations. So, um, I think we do try to break it out late, and obviously understand the importance of being able to continue to do that, both in understanding credit metric impacts but also premium impacts.

Richard Shane: Okay. I appreciate it, guys. Thank you very much.

Okay.

I appreciate it, guys. Thank you very much.

Operator 2: Thank you. This concludes the Q&A portion of today's call. I would now like to turn the floor over to Mr. Jonathan Witter for closing remarks.

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

Thank you. This concludes.

Nominal levels of originations and share while still tightening the credit box during during that whole time.

With the Q&A portion of this call now concluded, I would like to turn the floor over to Mr. John Wooder 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 three months for our Q2 earnings call. With that, Melissa, I'll turn it back to you for some closing business.

Jon 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 three months for our Q2 earnings call. With that, Melissa, I'll turn it back to you for some closing business.

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 lungs as freshmen and sophomores and.

Melissa Bronaugh: Thanks, John. 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.

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 all of that set of underwriting regime. So.

Erica: Thank you, and thank you to everyone who joined this evening. We appreciate your interest in Sallie Mae, uh, 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 bring it back to you for some closing minutes. Melissa: Thank you all for your time and questions today. The 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 2: Thank you. This concludes the Sallie Mae Q1 2026 earnings conference call and webcast. Please disconnect your line at this time and have a wonderful evening.

Operator: Thank you. This concludes the Sallie Mae Q1 2026 earnings conference call and webcast. Please disconnect your line at this time and have a wonderful evening.

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.

Thank you. This concludes this. I meant first quarter 2026 conference call with Kathleen at this time, and have a wonderful evening.

The exact loss profile.

We would hope forward during a time that I would point out that has been a relatively stressed for some of these borrowers with the elevated unemployment rate that I talked about before over the last six months or.

So I think all in all we feel we feel really good about these results and look forward to the portfolio continuing to just seasoning.

Okay.

I appreciate that I am curious.

Apologies, maybe I don't know if im missing something.

You provide any average loans in repayment number anywhere in the disclosures and the reason I ask is obviously this quarter when we calculate our 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 you and I just don't know off the top of my head is are their season loans in repayment that are part of the pools that you are selling or should we assume it is predominantly.

New originations that are less than 12 months season.

All of our portfolio sales are sort of representative samples of the book.

Really the only exclusions there or.

Loans that are in later stages of delinquency or took were excluded from those pools.

So as we move.

Field.

We make portfolio sales as John said that can have an impact depending on when in the quarter within the year, we make those sales.

Does 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 sort of the calculation.

Got it and a red Tom just sorry go ahead.

Yes, just for your volumes if 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 no origination so.

I think we do try to break it out separately and obviously I understand the importance of needing to continue to do that.

And understanding credit metric impacts, but also premium impacts.

Okay I appreciate it guys. Thank you very much.

Thank you. This concludes the Q&A portion of today's call I would now like to turn the floor over to Mr. John <unk> for closing remarks.

Erika. 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 three months for our second quarter earnings call with that Melissa I will turn it back to you for some closing business.

Hmm.

And final question.

A replay of this call and the presentation will be available on the investors page at Sallie Mae Dot com.

You have any further questions feel free to contact me directly.

On today's call.

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.

Yeah.

Hum.

[music].

Mhm.

[music].

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