Q2 2026 SLM Corp Earnings Call

Speaker #1: Second quarter 2026 earnings call. It is my pleasure to be here today with John Witter, our CEO, Pete Graham, our co-president and CFO, and Melissa Burnott, managing vice president of strategic finance.

Speaker #1: 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 #1: Actual results in the future may be materially different from those discussed here due to a variety of factors. Listeners should refer to the discussion of those factors in the company's Form 10-Q and other filings with the SEC.

Speaker #1: For Sally Mae, 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.

Speaker #1: 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, July 23, 2026.

Speaker #1: Thank you, and I'll now turn the call over to John.

Speaker #2: Thank you, Kate. Madison, good evening, everyone. Thank you for joining us to discuss Sally Mae's second quarter 2026 results. Before we dive into the quarter's results, it's worth taking a moment to reflect on the strong position we enjoy today as a company.

Speaker #2: It's been just over a year since federal-plus reform reshaped the higher education financing landscape, and created the potential for a 4.5 to 5 billion dollar increase in annual originations for Sally Mae over the next several years.

Speaker #2: Since then, we have been diligently preparing for this exciting opportunity to serve more students and families. Strengthening our product offering, investing in our capabilities, and positioning the company for our first peak season under the revised federal programs.

Speaker #2: At the same time, we have remained focused on supporting our school partners and maintaining our industry-leading status as a preferred lender for more than 2,100 schools.

Speaker #2: I'm pleased to announce that we have successfully delivered all of the additional products, features, and functions we planned for this peak season. Including enhancements to our medical, dental, law, and MBA products, and the launch of our new parent loan.

Speaker #2: While peak season is just beginning, and it's too early for definitive conclusions, the application and volume trends for these new products as shared on page 5 of our earnings presentation are at the higher end of our expectations or better.

Speaker #2: These trends—if sustained, reinforce our confidence in both our 2026 originations estimates and the longer-term opportunity presented by changes to the plus programs. We are pleased with our performance and the positive trends we are seeing in credit.

Speaker #2: The changes we have made in the past to our underwriting standards and loss mitigation practices are bearing fruit. Previously distressed borrowers are successfully navigating their loan modification journey, and enjoying better-than-expected success upon completion.

Speaker #2: Credit trends within our portfolio are generally consistent with or better-than-expectations. We believe these factors position the company for continued success in 2026 and beyond.

Speaker #2: Within that context, let's jump into the details of the quarter. GAAP diluted EPS in the second quarter was 29 cents per share. Loan originations were 716 million, up nearly 4.5% from the prior-year quarter.

Speaker #2: In addition to overall growth, origination credit quality improved modestly year over year, with the average FICO score increasing from 754 to 755, while cosigner rates remained strong at 84%.

Speaker #2: Turning to credit, as discussed at a recent conference, we have observed activity affecting a small segment of borrowers who we believe have both the willingness and capacity to repay, yet are progressing directly through delinquency to default.

Jon Witter: To reinforce our confidence in both our 2026 originations estimates and the longer-term opportunity presented by changes to the PLUS programs. We are pleased with our performance and the positive trends we are seeing in credit. The changes we have made in the past to our underwriting standards and loss mitigation practices are bearing fruit. Previously distressed borrowers are successfully navigating their loan modification journey and enjoying better than expected success upon completion. Credit trends within our portfolio are generally consistent with or better than expectations. We believe these factors position the company for continued success in 2026 and beyond. Within that context, let's jump into the details of the quarter. GAAP diluted EPS in the second quarter was $0.29 per share. Loan originations were $716 million, up nearly 4.5% from the prior year quarter.

Jonathan Witter: To reinforce our confidence in both our 2026 originations estimates and the longer-term opportunity presented by changes to the PLUS programs. We are pleased with our performance and the positive trends we are seeing in credit. The changes we have made in the past to our underwriting standards and loss mitigation practices are bearing fruit. Previously distressed borrowers are successfully navigating their loan modification journey and enjoying better than expected success upon completion.

Speaker #1: These results reinforce our confidence in both our 2026 originations estimates and the longer-term opportunity presented by changes to the PLUS programs. We are pleased with our performance and the positive trends we are seeing in credit.

Speaker #2: Based on our analysis, we believe many of these borrowers are engaging with debt resolution providers who services are being marketed as consolidation or refinancing solutions.

Speaker #1: The changes we have made in the past to our underwriting standards and loss mitigation practices are bearing fruit. Previously distressed borrowers are successfully navigating their loan modification journey and enjoying better-than-expected success upon completion.

Speaker #2: We do not believe that many of these practices are in the customer's best interest, and we are committed to doing what it takes to ensure that customer interests are protected, and that our recovery and settlement strategies are fully aligned with the underlying value of our loans.

Speaker #1: Credit trends within our portfolio are generally consistent with, or better than, expectations. We believe these factors position the company for continued success in 2026 and beyond.

Jonathan Witter: Credit trends within our portfolio are generally consistent with or better than expectations. We believe these factors position the company for continued success in 2026 and beyond. Within that context, let's jump into the details of the quarter. GAAP diluted EPS in the second quarter was $0.29 per share. Loan originations were $716 million, up nearly 4.5% from the prior year quarter.

Speaker #2: In response to this, we have taken deliberate steps to increase control over our post-default recoveries. While these actions create an in-year headroom to potential recoveries, previously estimated at approximately 25 million dollars in 2026, we view the impact as largely a timing dynamic and expect our internal efforts to equal or exceed this recovery level over time.

Speaker #1: Within that context, let's jump into the details of the quarter. GAAP diluted EPS in the second quarter was $0.29 per share. Loan originations were $716 million, up nearly 4.5% from the prior-year quarter.

Speaker #1: In addition to overall growth, origination credit quality improved modestly year over year, with the average FICO score increasing from 754 to 755, while co-signer rates remained strong at 84%.

Jon Witter: In addition to overall growth, origination credit quality improved modestly year over year, with the average FICO score increasing from 754 to 755, while cosigner rates remained strong at 84%. Turning to credit. As discussed at a recent conference, we have observed activity affecting a small segment of borrowers who we believe have both the willingness and capacity to repay, yet are progressing directly through delinquency to default. Based on our analysis, we believe many of these borrowers are engaging with debt resolution providers whose services are being marketed as consolidation or refinancing solutions. We do not believe that many of these practices are in the customer's best interest, and we are committed to doing what it takes to ensure that customer interests are protected and that our recovery and settlement strategies are fully aligned with the underlying value of our loans.

Jonathan Witter: In addition to overall growth, origination credit quality improved modestly year over year, with the average FICO score increasing from 754 to 755, while cosigner rates remained strong at 84%. Turning to credit. As discussed at a recent conference, we have observed activity affecting a small segment of borrowers who we believe have both the willingness and capacity to repay, yet are progressing directly through delinquency to default.

Speaker #2: In this context, we remain optimistic about our credit performance. Net charge-offs for the quarter were 113 million, up from 94 million in the prior-year quarter.

Speaker #2: Approximately 16 million of the year-over-year increase we believe to be attributable to these misaligned third-party debt resolution practices, and the related shifts in our recovery strategies.

Speaker #1: Turning to credit, as discussed at a recent conference, we have observed activity affecting a small segment of borrowers who we believe have both the willingness and capacity to repay, yet are progressing directly through delinquency to default.

Speaker #2: Importantly, we do not view this as a broad-based weakening in credit. While our most recent repayment wave increased by 4%, the net charge-offs for the portfolio—excluding this small impacted segment—grew at a much slower rate.

Speaker #1: Based on our analysis, we believe many of these borrowers are engaging with debt resolution providers whose services are being marketed as consolidation or refinancing solutions.

Jonathan Witter: Based on our analysis, we believe many of these borrowers are engaging with debt resolution providers whose services are being marketed as consolidation or refinancing solutions. We do not believe that many of these practices are in the customer's best interest, and we are committed to doing what it takes to ensure that customer interests are protected and that our recovery and settlement strategies are fully aligned with the underlying value of our loans.

Speaker #2: Supporting this performance is the sustained success of our loan modification programs. Borrowers in all active modification cohorts continue to have payments success rates in excess of 80% over 6 and 12-month periods.

Speaker #1: We do not believe that many of these practices are in the customer's best interest, and we are committed to doing what it takes to ensure that customer interests are protected and that our recovery and settlement strategies are fully aligned with the underlying value of our loans.

Speaker #2: Looking specifically at borrowers who have begun to exit the programs, over 75% are consistently making payments after 3 and 6 months. We are encouraged by these results, which are performing modestly better than our expectations.

Speaker #1: In response to this, we have taken deliberate steps to increase control over our post-default recoveries. While these actions create in-year headroom for potential recoveries, previously estimated at approximately $25 million in 2026, we view the impact as largely a timing dynamic and expect our internal efforts to equal or exceed this recovery level over time.

Jon Witter: In response to this, we have taken deliberate steps to increase control over our post-default recoveries. While these actions create an in-year headroom to potential recoveries, previously estimated at approximately $25 million in 2026, we view the impact as largely a timing dynamic and expect our internal efforts to equal or exceed this recovery level over time. In this context, we remain optimistic about our credit performance. Net charge-offs for the quarter were $113 million, up from $94 million in the prior year quarter. Approximately $16 million of the year-over-year increase we believe to be attributable to these misaligned third-party debt resolution practices and the related shifts in our recovery strategies. Importantly, we do not view this as a broad-based weakening in credit. While our most recent repayment wave increased by 4%, the net charge-offs for the portfolio, excluding this small impacted segment, grew at a much slower rate.

Jonathan Witter: In response to this, we have taken deliberate steps to increase control over our post-default recoveries. While these actions create an in-year headroom to potential recoveries, previously estimated at approximately $25 million in 2026, we view the impact as largely a timing dynamic and expect our internal efforts to equal or exceed this recovery level over time. In this context, we remain optimistic about our credit performance.

Speaker #2: Overall, we remain confident in the underlying health of the portfolio, credit quality remains strong, borrower performance trends are stable, and the current loss pressure is concentrated understood and manageable.

Speaker #1: In this context, we remain optimistic about our credit performance. Net charge-offs for the quarter were $113 million, up from $94 million in the prior-year quarter.

Speaker #2: Pete will now take you through some additional details. Pete?

Jonathan Witter: Net charge-offs for the quarter were $113 million, up from $94 million in the prior year quarter. Approximately $16 million of the year-over-year increase we believe to be attributable to these misaligned third-party debt resolution practices and the related shifts in our recovery strategies. Importantly, we do not view this as a broad-based weakening in credit. While our most recent repayment wave increased by 4%, the net charge-offs for the portfolio, excluding this small impacted segment, grew at a much slower rate.

Speaker #3: Thank you, John. Good evening, everyone. For the second quarter of 2026, we generated 333 million dollars of net interest income, and 45 million dollars of other income.

Speaker #1: Approximately $16 million of the year-over-year increase we believe to be attributable to these misaligned third-party debt resolution practices and the related shifts in our recovery strategies.

Speaker #3: Compared with the prior-year quarter, net interest income decreased by 44 million dollars, while other income increased by 16 million dollars, driven by growth in recurring program management fees from our strategic partnership and growth in servicing fee revenue.

Speaker #1: Importantly, we do not view this as a broad-based weakening in credit. While our most recent repayment wave increased by 4%, the net charge-offs for the portfolio—excluding this small, impacted segment—grew at a much slower rate.

Speaker #3: Net interest margin was 4.75% for the quarter. As previously communicated, we expected NIM to moderate modestly during the quarter, primarily reflecting the higher liquidity levels following the loan sale completed in late March.

Speaker #1: Supporting this performance is the sustained success of our loan modification programs. Borrowers in all active modification cohorts continue to have payment success rates in excess of 80% over six- and twelve-month periods.

Jon Witter: Supporting this performance is the sustained success of our loan modification programs. Borrowers in all active modification cohorts continue to have payment success rates in excess of 80% over 6 and 12-month periods. Looking specifically at borrowers who have begun to exit the programs, over 75% are consistently making payments after 3 and 6 months. We are encouraged by these results, which are performing modestly better than our expectations. Overall, we remain confident in the underlying health of the portfolio. Credit quality remains strong, borrower performance trends are stable, and the current loss pressure is concentrated, understood and manageable. Peter will now take you through some additional details. Peter?

Jonathan Witter: Supporting this performance is the sustained success of our loan modification programs. Borrowers in all active modification cohorts continue to have payment success rates in excess of 80% over 6 and 12-month periods. Looking specifically at borrowers who have begun to exit the programs, over 75% are consistently making payments after 3 and 6 months.

Speaker #3: Looking toward the second half of this year, we expect margin expansion to resume as excess liquidity is deployed into new loan originations during our peak season.

Speaker #1: Looking specifically at borrowers who have begun to exit the programs, over 75% are consistently making payments after three and six months. We are encouraged by these results, which are performing modestly better than our expectations.

Speaker #3: As a result, we believe the second quarter will likely represent the low point for margin this year. Importantly, the underlying earnings power of the portfolio remains strong, supported by disciplined funding, attractive asset yields, and continued growth in fee-based revenue streams.

Jonathan Witter: We are encouraged by these results, which are performing modestly better than our expectations. Overall, we remain confident in the underlying health of the portfolio. Credit quality remains strong, borrower performance trends are stable, and the current loss pressure is concentrated, understood and manageable. Peter will now take you through some additional details. Peter?

Speaker #1: Overall, we remain confident in the underlying health of the portfolio. Credit quality remains strong, borrower performance trends are stable, and the current loss pressure is concentrated, understood, and manageable.

Speaker #3: Private education loans delinquent 30 days or more or 3.7% of loans in repayment. An increase from 3.5% in the year-ago quarter and a decrease from 4% at the end of the first quarter of 2026.

Speaker #1: Pete will now take you through some additional details. Pete?

Speaker #3: Our reserve rate was 5.89% at the end of the quarter, down 6 basis points from the prior-year period. Reflecting the effectiveness of our disciplined underwriting and ongoing efforts to optimize loss mitigation strategies.

Speaker #2: Thank you, John. Good evening, everyone. For the second quarter of 2026, we generated $333 million of net interest income and $45 million of other income.

[Company Representative] (SLM Corporation): Thank you, Jon. Good evening, everyone. For Q2 2026, we generated $333 million of net interest income and $45 million of other income. Compared with the prior year quarter, net interest income decreased by $44 million, while other income increased by $16 million, driven by growth in recurring program management fees from our strategic partnership and growth in servicing fee revenue. Net interest margin was 4.75% for the quarter. As previously communicated, we expected NIM to moderate modestly during the quarter, primarily reflecting the higher liquidity levels following the loan sale completed in late March. Looking towards H2 of this year, we expect margin expansion to resume as excess liquidity is deployed into new loan originations during our peak season. As a result, we believe Q2 will likely represent the low point for margin this year.

Pete Graham: Thank you, Jon. Good evening, everyone. For Q2 2026, we generated $333 million of net interest income and $45 million of other income. Compared with the prior year quarter, net interest income decreased by $44 million, while other income increased by $16 million, driven by growth in recurring program management fees from our strategic partnership and growth in servicing fee revenue. Net interest margin was 4.75% for the quarter.

Speaker #3: Our provision for credit losses was 126 million dollars in the second quarter. Down from 149 million dollars in the year-ago quarter. Non-interest expenses were 195 million dollars, up 28 million dollars from the year-ago quarter.

Speaker #2: Compared with the prior-year quarter, net interest income decreased by $44 million, while other income increased by $16 million, driven by growth in recurring program management fees from our strategic partnership and growth in servicing fee revenue.

Speaker #2: Net interest margin was 4.75% for the quarter. As previously communicated, we expected NIM to moderate modestly during the quarter, primarily reflecting the higher liquidity levels following the loan sale completed in late March.

Speaker #3: The majority of this increase was driven by one-time investments in product enhancements as well as strategic initiatives to support anticipated growth from the federal lending workforce.

Pete Graham: As previously communicated, we expected NIM to moderate modestly during the quarter, primarily reflecting the higher liquidity levels following the loan sale completed in late March. Looking towards H2 of this year, we expect margin expansion to resume as excess liquidity is deployed into new loan originations during our peak season. As a result, we believe Q2 will likely represent the low point for margin this year.

Speaker #3: Importantly, revenue growth from servicing and recurring program management fees more than offset a significant portion of these investments, resulting in an efficiency ratio of 48.6%.

Speaker #2: We are looking toward margin expansion to resume as excess liquidity is deployed into new loan originations during our peak season. As a result, we believe the second quarter will likely represent the low point for margin this year.

Speaker #3: An increase of just 7 percentage points year over year. This reflects our ability to invest meaningfully in future growth while continuing to operate from a position of financial strength.

Speaker #2: Importantly, the underlying earnings power of the portfolio remains strong, supported by disciplined funding, attractive asset yields, and continued growth in fee-based revenue streams. Private education loans delinquent 30 days or more are 3.7% of loans in repayment.

[Company Representative] (SLM Corporation): Importantly, the underlying earnings power of the portfolio remains strong, supported by disciplined funding, attractive asset yields, and continued growth in fee-based revenue streams. Private education loans delinquent 30 days or more were 3.7% of loans in repayment, an increase from 3.5% in the year-ago quarter and a decrease from 4% at the end of Q1 2026. Our reserve rate was 5.89% at the end of the quarter, down 6 basis points from the prior year period, reflecting the effectiveness of our disciplined underwriting and ongoing efforts to optimize loss mitigation strategies. Our provision for credit losses was $126 million in Q2, down from $149 million in the year-ago quarter. Non-interest expenses were $195 million, up $28 million from a year ago quarter.

Pete Graham: Importantly, the underlying earnings power of the portfolio remains strong, supported by disciplined funding, attractive asset yields, and continued growth in fee-based revenue streams. Private education loans delinquent 30 days or more were 3.7% of loans in repayment, an increase from 3.5% in the year-ago quarter and a decrease from 4% at the end of Q1 2026.

Speaker #3: As you may remember, earlier this year we took decisive action in response to the market dislocation in our stock. Which allowed us to return a significant amount of capital to shareholders through a 200 million dollar accelerated share repurchase program.

Speaker #2: This represents an increase from 3.5% in the year-ago quarter, and a decrease from 4.0% at the end of the first quarter of 2026. Our reserve rate was 5.89% at the end of the quarter, down 6 basis points from the prior-year period.

Speaker #3: We completed the ASR during the second quarter, repurchasing a total of 9.3 million shares. The final 900,000 shares were recorded on June 30th upon completion of the program.

Pete Graham: Our reserve rate was 5.89% at the end of the quarter, down 6 basis points from the prior year period, reflecting the effectiveness of our disciplined underwriting and ongoing efforts to optimize loss mitigation strategies. Our provision for credit losses was $126 million in Q2, down from $149 million in the year-ago quarter. Non-interest expenses were $195 million, up $28 million from a year ago quarter.

Speaker #3: Year to date, we have repurchased approximately 13 million shares, or 6.5% of the shares outstanding at the end of 2025, at an average price of $21.95 per share.

Speaker #2: This reflects the effectiveness of our disciplined underwriting and ongoing efforts to optimize loss mitigation strategies. Our provision for credit losses was $126 million in the second quarter.

Speaker #3: Since 2020, we have reduced shares outstanding by approximately 59%, at an average price of $17.19 per share. Underscoring our disciplined approach to long-term value creation.

Speaker #2: Down from $149 million in the year-ago quarter. Non-interest expenses were $195 million, up $28 million from the year-ago quarter. The majority of this increase was driven by one-time investments in product enhancements, as well as strategic initiatives to support anticipated growth from the federal lending workforce.

Speaker #3: We have 242 million dollars remaining under our share repurchase authorization, which we expect to substantially deploy throughout the remainder of this year. Finally, our liquidity and capital positions remain solid.

[Company Representative] (SLM Corporation): The majority of this increase was driven by one-time investments in product enhancements, as well as strategic initiatives to support anticipated growth from the federal lending reforms. Importantly, revenue growth from servicing and recurring program management fees more than offset a significant portion of these investments, resulting in an efficiency ratio of 48.6%, an increase of just 7 percentage points year over year. This reflects our ability to invest meaningfully in future growth while continuing to operate from a position of financial strength. As you may remember, earlier this year, we took decisive action in response to the market dislocation in our stock, which allowed us to return a significant amount of capital to shareholders through a $200 million accelerated share repurchase program. We completed the ASR during Q2, repurchasing a total of 9.3 million shares.

Pete Graham: The majority of this increase was driven by one-time investments in product enhancements, as well as strategic initiatives to support anticipated growth from the federal lending reforms. Importantly, revenue growth from servicing and recurring program management fees more than offset a significant portion of these investments, resulting in an efficiency ratio of 48.6%, an increase of just 7 percentage points year over year.

Speaker #2: Importantly, revenue growth from servicing and recurring program management fees more than offset a significant portion of these investments, resulting in an efficiency ratio of 48.6%.

Speaker #3: We ended the quarter with liquidity of 18.6% of total assets. At the end of the second quarter, total risk-based capital was 13.1%, and common equity Tier 1 capital was 11.8%.

Speaker #2: An increase of just 7 percentage points year over year. This reflects our ability to invest meaningfully in future growth while continuing to operate from a position of financial strength.

Pete Graham: This reflects our ability to invest meaningfully in future growth while continuing to operate from a position of financial strength. As you may remember, earlier this year, we took decisive action in response to the market dislocation in our stock, which allowed us to return a significant amount of capital to shareholders through a $200 million accelerated share repurchase program. We completed the ASR during Q2, repurchasing a total of 9.3 million shares.

Speaker #3: We continue to believe in our strategy and the solid foundation it provides to drive sustainable growth and return capital to shareholders. I'll now turn the call back to John.

Speaker #2: As you may remember, earlier this year we took decisive action in response to the market dislocation in our stock. Which allowed us to return a significant amount of capital to shareholders through a $200 million accelerated share repurchase program.

Speaker #2: Thanks, Pete. As we discussed today, our preparation for the evolving market landscape is beginning to translate into encouraging early indicators and we are pleased with the momentum building across the business as we enter peak season.

Speaker #2: We completed the ASR during the second quarter, repurchasing a total of 9.3 million shares. The final 900,000 shares were recorded on June 30th upon completion of the program.

Speaker #2: We believe the recovery actions we have taken have the potential to create better outcomes for both borrowers and Sally Mae. Combined with the continued positive performance of our loan modification programs these factors further strengthen our confidence in the durability of our portfolio.

[Company Representative] (SLM Corporation): The final 900,000 shares were recorded on 30 June upon completion of the program. Year to date, we have repurchased approximately 13 million shares, or 6.5% of the shares outstanding at the end of 2025, at an average price of $21.95 per share. Since 2020, we have reduced shares outstanding by approximately 59% at an average price of $17.19 per share, underscoring our disciplined approach to long-term value creation. We have $242 million remaining under our share repurchase authorization, which we expect to substantially deploy throughout the remainder of this year. Finally, our liquidity and capital positions remain solid. We ended the quarter with liquidity of 18.6% of total assets. At the end of Q2, total risk-based capital was 13.1%, and common equity Tier 1 capital was 11.8%.

Pete Graham: The final 900,000 shares were recorded on 30 June upon completion of the program. Year to date, we have repurchased approximately 13 million shares, or 6.5% of the shares outstanding at the end of 2025, at an average price of $21.95 per share. Since 2020, we have reduced shares outstanding by approximately 59% at an average price of $17.19 per share, underscoring our disciplined approach to long-term value creation.

Speaker #2: Year to date, we have repurchased approximately 13 million shares, or 6.5% of the shares outstanding at the end of 2025, at an average price of $21.95 per share.

Speaker #2: The investments we have made together with strong credit quality and growing customer demand position us well for the remainder of 2026. With that in mind, let's turn to our updated guidance.

Speaker #2: Since 2020, we have reduced shares outstanding by approximately 59%, at an average price of $17.19 per share, underscoring our disciplined approach to long-term value creation.

Speaker #2: At this time, we are narrowing our net charge-off guidance range by maintaining the high end at 385 million and raising the low end to 365 million.

Speaker #2: We have $242 million remaining under our share repurchase authorization, which we expect to substantially deploy throughout the remainder of this year. Finally, our liquidity and capital positions remain solid.

Pete Graham: We have $242 million remaining under our share repurchase authorization, which we expect to substantially deploy throughout the remainder of this year. Finally, our liquidity and capital positions remain solid. We ended the quarter with liquidity of 18.6% of total assets. At the end of Q2, total risk-based capital was 13.1%, and common equity Tier 1 capital was 11.8%. We continue to believe in our strategy and the solid foundation it provides to drive sustainable growth and return capital to shareholders. I will now turn the call back to Jon.

Speaker #2: We are making this change in response to our adjusted recovery practices as detailed on slide 8 in the earnings presentation and discussed earlier in my remarks.

Speaker #2: We ended the quarter with liquidity of 18.6% of total assets. At the end of the second quarter, total risk-based capital was 13.1%, and common equity Tier 1 capital was 11.8%.

Speaker #2: While we continue to expect approximately a 25 million dollar potential impact to recoveries in 2026, a portion of this NCO impact has already been partially offset by slightly better-than-expected performance in the broader portfolio.

Speaker #2: We continue to believe in our strategy and the solid foundation it provides to drive sustainable growth and return capital to shareholders. I'll now turn the call back to John.

[Company Representative] (SLM Corporation): We continue to believe in our strategy and the solid foundation it provides to drive sustainable growth and return capital to shareholders. I will now turn the call back to Jon.

Speaker #2: This reinforces our confidence in the underlying credit performance in the business. We are affirming all other guidance metrics. With that, Pete, why don't we go ahead and open up the call for questions?

Speaker #1: Thanks, Pete. As we discussed today, our preparation for the evolving market landscape is beginning to translate into encouraging early indicators, and we are pleased with the momentum building across the business as we enter peak season.

Jon Witter: Thanks, Peter. As we discussed today, our preparation for the evolving market landscape is beginning to translate into encouraging early indicators, and we are pleased with the momentum building across the business as we enter peak season. We believe the recovery actions we have taken have the potential to create better outcomes for both borrowers and Sallie Mae. Combined with the continued positive performance of our loan modification programs, these factors further strengthen our confidence in the durability of our portfolio. The investments we have made, together with strong credit quality and growing customer demand, position us well for the remainder of 2026. With that in mind, let's turn to our updated guidance. At this time, we are narrowing our net charge-off guidance range by maintaining the high end at $385 million and raising the low end to $365 million.

Jonathan Witter: Thanks, Peter. As we discussed today, our preparation for the evolving market landscape is beginning to translate into encouraging early indicators, and we are pleased with the momentum building across the business as we enter peak season. We believe the recovery actions we have taken have the potential to create better outcomes for both borrowers and Sallie Mae. Combined with the continued positive performance of our loan modification programs, these factors further strengthen our confidence in the durability of our portfolio.

Speaker #1: Thank you. The floor is now open for questions. At this time, if you have a question or comment, please press star 1 on your telephone keypad.

Speaker #1: We believe the recovery actions we have taken have the potential to create better outcomes for both borrowers and Sallie Mae. Combined with the continued positive performance of our loan modification programs, these factors further strengthen our confidence in the durability of our portfolio.

Speaker #1: If at any point your question is answered, you may remove yourself from the queue by pressing star 2. Again, we ask that you pick up your handset when posing your questions to provide optimal sound quality.

Speaker #1: Our first question is coming from Mark DeVries with Deutsche Bank. Please go ahead.

Speaker #1: The investments we have made, together with strong credit quality and growing customer demand, position us well for the remainder of 2026. With that in mind, let's turn to our updated guidance.

Jonathan Witter: The investments we have made, together with strong credit quality and growing customer demand, position us well for the remainder of 2026. With that in mind, let's turn to our updated guidance. At this time, we are narrowing our net charge-off guidance range by maintaining the high end at $385 million and raising the low end to $365 million.

Speaker #4: Yeah, thanks. Pete, I think you mentioned you expect Q2 to maybe be the low point and then then for the year. Did any color you can give us on kind of the trajectory for that in the back half?

Speaker #1: At this time, we are narrowing our net charge-off guidance range by maintaining the high end at $385 million and raising the low end to $365 million.

Speaker #3: Yeah. Thanks, Mark. Yeah, I think as we deploy the liquidity during the peak season, we'll start to normalize probably long-term target range of kind of 5%.

Speaker #1: We are making this change in response to our adjusted recovery practices, as detailed on slide 8 in the earnings presentation and discussed earlier in my remarks.

Jon Witter: We are making this change in response to our adjusted recovery practices as detailed on slide eight in the earnings presentation and discussed earlier in my remarks. While we continue to expect approximately a $25 million potential impact to recoveries in 2026, a portion of this NCO impact has already been partially offset by slightly better than expected performance in the broader portfolio. This reinforces our confidence in the underlying credit performance in the business. We are affirming all other guidance metrics. With that, Peter, why don't we go ahead and open up the call for questions?

Jonathan Witter: We are making this change in response to our adjusted recovery practices as detailed on slide eight in the earnings presentation and discussed earlier in my remarks. While we continue to expect approximately a $25 million potential impact to recoveries in 2026, a portion of this NCO impact has already been partially offset by slightly better than expected performance in the broader portfolio. This reinforces our confidence in the underlying credit performance in the business. We are affirming all other guidance metrics. With that, Peter, why don't we go ahead and open up the call for questions?

Speaker #3: I don't think we'll get too far up in that normal range, but I think plus or minus we should track there for the full year.

Speaker #1: While we continue to expect approximately a $25 million potential impact to recoveries in 2026, a portion of this NCO impact has already been partially offset by slightly better-than-expected performance in the broader portfolio.

Speaker #4: Okay, got it. And then any updates you can provide. On ongoing conversations with a new loan sale partner. And also any optimism you may have that buyer could help expand your credit box and the TAM.

Speaker #1: This reinforces our confidence in the underlying credit performance in the business. We are affirming all other guidance metrics. With that, Pete, why don't we go ahead and open up the call for questions?

Speaker #3: Yeah, sure. We started this year with the goal of expanding the partnerships. And we ran a mini process similar to what we did last year with a lot of the same participants.

Speaker #3: 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.

Madison: 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 two. Again, we ask that you pick up your handset when posing your questions to provide optimal sound quality. Our first question is coming from Mark DeVries with Deutsche Bank. Please go ahead.

Operator: 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 two. Again, we ask that you pick up your handset when posing your questions to provide optimal sound quality. Our first question is coming from Mark DeVries with Deutsche Bank. Please go ahead.

Speaker #3: If at any point your question is answered, you may remove yourself from the queue by pressing star 2. Again, we ask that you pick up your handset when posing your questions to provide optimal sound quality.

Speaker #3: We selected a partner to go into bilateral negotiations with. That's progressing really well. We're in the stage where documents are being created and traded back and forth with each other.

Speaker #3: Our first question is coming from Mark DeVries with Deutsche Bank. Please go ahead.

Speaker #4: Yeah, thanks. Pete, I think you mentioned you expect Q2 to maybe be the low point, and then for the year. But any color you can give us on the trajectory for that in the back half?

Mark DeVries: Yeah, thanks. Peter, I think you mentioned you expect Q2 to maybe be the low point, and then for the year. Any color you can give us on kind of the trajectory for that in the H2?

Mark DeVries: Yeah, thanks. Peter, I think you mentioned you expect Q2 to maybe be the low point, and then for the year. Any color you can give us on kind of the trajectory for that in the H2?

Speaker #3: And we're negotiating the finer points of the economics. I feel really good about kind of how that process is going there, sort of openness to our asset class and their interest in both the traditional undergrad product that we have traditionally sold, but also at the margins creating some opportunity for credit box expansion.

Speaker #2: Yeah. Thanks, Mark. I think as we deploy the liquidity during the peak season, we’ll start to normalize, probably closer to our long-term target range of around 5%.

[Company Representative] (SLM Corporation): Yeah. Thanks, Mark. I think as we deploy, you know, the liquidity during the peak season, we'll start to normalize, you know, probably closer to our long-term target range of kind of 5%. I don't think we'll get, you know, too far up in that normal range, I think plus or minus, we should track there for the full year.

Pete Graham: Yeah. Thanks, Mark. I think as we deploy, you know, the liquidity during the peak season, we'll start to normalize, you know, probably closer to our long-term target range of kind of 5%. I don't think we'll get, you know, too far up in that normal range, I think plus or minus, we should track there for the full year.

Speaker #2: I don't think we'll get too far up in that normal range, but I think, plus or minus, we should track there for the full year.

Speaker #3: I expect that that will continue at pace and likely close in the third quarter or early fourth quarter at the latest. And time for us to potentially put some of our peak origination volume into the new partnership.

Speaker #4: Okay, got it. And then, any updates you can provide on ongoing conversations with the new loan sale partner, and also any optimism you may have that the buyer could help expand your credit box and the TAM?

Mark DeVries: Okay. Got it. Any updates you can provide on ongoing conversations with the new, you know, loan sale partner? Also any optimism you may have that buyer could help expand your credit box and the TAM.

Mark DeVries: Okay. Got it. Any updates you can provide on ongoing conversations with the new, you know, loan sale partner? Also any optimism you may have that buyer could help expand your credit box and the TAM.

Speaker #4: Great. Thank you.

Speaker #1: Thank you. And our next question is coming from Mosha Orenbuck with TD Cowan. Please go ahead.

Speaker #2: Yeah, sure. We started this year with the goal of expanding the partnerships, and we ran a mini-process similar to what we did last year with a lot of them. We selected a partner to go into bilateral negotiations with.

[Company Representative] (SLM Corporation): Yeah, sure. You know, we started this year with the goal of expanding the partnerships. We ran a mini process similar to what we did last year with a lot of the same participants. We selected a partner to go into bilateral negotiations with. That's progressing really well. You know, we're in the stage where documents are being created and traded back and forth with each other, and we're negotiating the finer points of the economics. I feel really good about kind of how that process is going. Their sort of openness to our asset class and their interest in both the traditional undergrad product that we have traditionally sold, but also at the margins, creating some opportunity for credit box expansion.

Pete Graham: Yeah, sure. You know, we started this year with the goal of expanding the partnerships. We ran a mini process similar to what we did last year with a lot of the same participants. We selected a partner to go into bilateral negotiations with. That's progressing really well. You know, we're in the stage where documents are being created and traded back and forth with each other, and we're negotiating the finer points of the economics.

Speaker #4: Great. I'm hoping that maybe Pete you could give us a little bit of additional details to how the current partnership is going and how we should think about the revenue components both periodic and kind of ongoing from that.

Speaker #4: And if there are any differences that you've kind of incorporated into the discussions with the new partner, or would it be similar? Thanks.

Speaker #2: That's progressing really well. We're in the stage where documents are being created and traded back and forth with each other, and we're negotiating the finer points of the economics.

Speaker #3: Sure, sure. The existing partnership with KKR is going really well according to plan. The volumes that we had anticipated for the year are coming in right in line with expectations.

Speaker #2: I feel really good about how that process is going there—their openness to our asset class and their interest in both the traditional undergrad product that we have traditionally sold, but also, at the margins, creating some opportunity for credit box expansion.

Pete Graham: I feel really good about kind of how that process is going. Their sort of openness to our asset class and their interest in both the traditional undergrad product that we have traditionally sold, but also at the margins, creating some opportunity for credit box expansion. I expect that that will continue at pace and likely close in Q3 or early Q4 at the latest, in time for us to potentially put some of our peak origination volume into the new partnership.

Speaker #3: The structure of the second partnership is largely in line with the economics that we have in the first partnership with some minor tweaks to different components of the structure.

Speaker #2: I expect that that will continue at pace, and likely close in the third quarter or early fourth quarter at the latest—and time for us to potentially put some of our peak origination volume into the new partnership.

[Company Representative] (SLM Corporation): I expect that that will continue at pace and likely close in Q3 or early Q4 at the latest, in time for us to potentially put some of our peak origination volume into the new partnership.

Speaker #3: But we feel really good about how the KKR partnership's gone so far. I think importantly, both KKR as well as the second partner have expressed strong interest in building capabilities for taking grad product.

Speaker #4: Great. Thank you.

Mark DeVries: Great. Thank you.

Mark DeVries: Great. Thank you.

Speaker #3: Thank you. And our next question is coming from Moshe Orenbuch with TD Cowen. Please go ahead.

Madison: Thank you. Our next question is coming from Moshe Orenbuch with TD Cowen. Please go ahead.

Operator: Thank you. Our next question is coming from Moshe Orenbuch with TD Cowen. Please go ahead.

Speaker #3: And so that'll be kind of the next phase after we get through peak originations this year. And have a little more information about what the makeup of our grad originations are.

Speaker #4: Great. I'm hoping that maybe, Pete, you could give us a little bit of additional detail as to how the current partnership is going, and how we should think about the revenue components, both periodic and ongoing, from that.

Moshe Orenbuch: Great. I'm hoping that maybe, Peter, you could give us a little bit of additional detail as to how the current partnership is going, and how we should think about the revenue components, both periodic and kind of ongoing from that. If there are any differences that you've kind of incorporated into the discussions with the new partner, or would it be similar? Thanks.

Moshe Orenbuch: Great. I'm hoping that maybe, Peter, you could give us a little bit of additional detail as to how the current partnership is going, and how we should think about the revenue components, both periodic and kind of ongoing from that. If there are any differences that you've kind of incorporated into the discussions with the new partner, or would it be similar? Thanks.

Speaker #3: And I think also once we've completed the second partnership, we'll be in a position to share more details around components of the fees and ranges of those fees once we get beyond having just one bilateral arrangement.

Speaker #4: And if there are any differences that you've kind of incorporated into the discussions with the new partner, or would it be similar? Thanks.

Speaker #4: Great. Okay, thanks. I wanted to also just talk a little bit about credit performance obviously a pretty hot topic. And it is encouraging that you kept the high end of your charge-off guide range where it was.

Speaker #2: Sure, sure. The existing partnership with KKR is going really well, according to plan. The volumes that we had anticipated for the year are coming in right in line with expectations.

[Company Representative] (SLM Corporation): Sure. The existing partnership with KKR is going really well, according to plan. The volumes that we had anticipated for the year are coming in right in line with expectations. The structure of the second partnership is largely in line with the economics that we have in the first partnership with some minor tweaks to different components of the structure. We feel really good about how the KKR partnership's gone so far. I think importantly, both KKR as well as the second partner have expressed strong interest in building capabilities for taking grad product. That'll be kind of the next phase after we get through peak originations this year and have a little more information about what the makeup of our grad originations are.

Pete Graham: Sure. The existing partnership with KKR is going really well, according to plan. The volumes that we had anticipated for the year are coming in right in line with expectations. The structure of the second partnership is largely in line with the economics that we have in the first partnership with some minor tweaks to different components of the structure.

Speaker #4: But anything that kind of approaches credit kind of gets people a little bit more a little more antsy. And John, you had made a comment saying that you felt good about the current performance that you had already kind of offset or some of the recovery from those kind of deferred recoveries.

Speaker #2: The structure of the second partnership is largely in line with the economics that we have in the first partnership, with some minor tweaks to different components of the structure.

Speaker #2: But we feel really good about how the KKR partnership's gone so far. I think, importantly, both KKR as well as the second partner have expressed strong interest in building capabilities for taking grad product.

Pete Graham: We feel really good about how the KKR partnership's gone so far. I think importantly, both KKR as well as the second partner have expressed strong interest in building capabilities for taking grad product. That'll be kind of the next phase after we get through peak originations this year and have a little more information about what the makeup of our grad originations are. I think also once we've completed the second partnership, we'll be in a position to share more details around components of the fees and ranges of those fees once we get beyond having just one bilateral arrangement.

Speaker #4: And I was hoping you could kind of just expand on that. What aspects of the performance are you seeing that are better? And how does if you can kind of roll that out for us over the next several quarters, how does that manifest itself in your numbers?

Speaker #2: And so, that'll be kind of the next phase after we get through peak originations this year and have a little more information about what the makeup of our grad originations are.

Speaker #2: Yeah. Mosha, let me sort of provide the perspectives I can. I may not be able to give all the detail you're looking for. First of all, we really appreciate credit is a sensitive topic.

Speaker #2: And I think also, once we've completed the second partnership, we'll be in a position to share more details around components of the fees and ranges of those fees once we get beyond having just one bilateral arrangement.

[Company Representative] (SLM Corporation): I think also once we've completed the second partnership, we'll be in a position to share more details around components of the fees and ranges of those fees once we get beyond having just one bilateral arrangement.

Speaker #2: Given broader macroeconomic, technological, sort of concerns and the like. I think that is why we have worked really hard starting at a conference a couple of I guess just a month ago that Pete attended and going through today to really try to provide a lot of detail about what's going on with this particular segment in question.

Speaker #4: Great, okay, thanks. I wanted to also just talk a little bit about credit performance—obviously a pretty hot topic. It is encouraging that you kept the high end of your charge-off guide range.

Moshe Orenbuch: Great. Okay, thanks. I wanted to also just talk a little bit about credit performance. Obviously a pretty hot topic. It was encouraging that you kept the high end of your charge-off guide range where it was. Anything that kind of approaches credit kind of gets people a little bit more antsy. Jon, you had made a comment saying that you felt good about the current performance that you had already kind of offset or some of the recovery from those kind of deferred recoveries. I was hoping you could kind of just expand on that. What aspects of the performance are you seeing that are better? If you can kind of roll that out for us over the next several quarters, how does that manifest itself in your numbers?

Moshe Orenbuch: Great. Okay, thanks. I wanted to also just talk a little bit about credit performance. Obviously a pretty hot topic. It was encouraging that you kept the high end of your charge-off guide range where it was. Anything that kind of approaches credit kind of gets people a little bit more antsy.

Speaker #2: And sort of how we are treating it and why. And I think we're also trying to provide a nice amount of data on the performance of sort of the other components of our credit story.

Speaker #4: Where it was. But anything that kind of approaches credit gets people a little bit more, a little more antsy. And John, you had made a comment saying that you felt good about the current performance.

Speaker #2: Let me first start with what was the hot topic for the last couple of years, which is loan modifications. And I think if you rewind the tape motion, you obviously know as well.

Moshe Orenbuch: Jon, you had made a comment saying that you felt good about the current performance that you had already kind of offset or some of the recovery from those kind of deferred recoveries. I was hoping you could kind of just expand on that. What aspects of the performance are you seeing that are better? If you can kind of roll that out for us over the next several quarters, how does that manifest itself in your numbers?

Speaker #4: That you had already kind of offset or some of the recovery from those kind of deferred recoveries. And I was hoping you could kind of just expand on that.

Speaker #2: When we changed the loan modification program, the question was always, how were these customers going to perform when they come out the other side?

Speaker #2: We are now up to six plus six months plus of performance with some of these customers obviously less with others as. Rollout of the mods.

Speaker #4: What aspects of the performance are you seeing that are better? And if you can, can you kind of roll that out for us over the next several quarters? How does that manifest itself in your numbers?

Speaker #2: And I think the data we've provided is, I hope, helpful, useful and encouraging. We are seeing better than 75% success rate after three and six months.

Speaker #5: Yeah. Mosha, let me sort of provide the perspectives I can. I may not be able to give all the detail you're looking for. First of all, we really appreciate credit is a sensitive topic.

Jon Witter: Yeah. Moshe, let me sort of provide the perspectives I can. I may not be able to give all the detail you're looking for. First of all, we really appreciate credit as a sensitive topic, given broader macroeconomic technological sort of concerns and the like. I think that is why we have worked really hard, starting at a conference a couple of, I guess, just a month ago, that Peter attended and going through today, to really try to provide a lot of detail about what's going on with this particular segment in question, and sort of how we are treating it and why. I think we're also trying to provide a nice amount of data on the performance of sort of the other components of our credit story. Let me first start with what was the hot topic for the last couple of years, which is loan modifications.

Jonathan Witter: Yeah. Moshe, let me sort of provide the perspectives I can. I may not be able to give all the detail you're looking for. First of all, we really appreciate credit as a sensitive topic, given broader macroeconomic technological sort of concerns and the like.

Speaker #2: That is higher than our expectations. I think we've given you some of that data in the overall investor presentation. And we feel great about that.

Speaker #5: Given broader macroeconomic, technological, sort of concerns and the like. I think that is why we have worked really hard starting at a conference a couple of I guess just a month ago that Pete attended and going through today to really try to provide a lot of detail about what's going on with this particular segment in question.

Speaker #2: And have not seen any trends in those payment rates over time that would make us anything less than optimistic about their effectiveness. And again, that hasn't happened by accident.

Jonathan Witter: I think that is why we have worked really hard, starting at a conference a couple of, I guess, just a month ago, that Peter attended and going through today, to really try to provide a lot of detail about what's going on with this particular segment in question, and sort of how we are treating it and why. I think we're also trying to provide a nice amount of data on the performance of sort of the other components of our credit story. Let me first start with what was the hot topic for the last couple of years, which is loan modifications.

Speaker #2: Those programs are we think very well designed. They are tightly controlled in terms of entry. The conditions and the requirements for what a customer has to do to get into them are quite diligent.

Speaker #5: And sort of how we are treating it and why. And I think we're also trying to provide a nice amount of data on the performance of the other components of our credit story.

Speaker #2: And we obviously track that regularly to make sure we're getting the performance we like. So I think that is sort of key component number one and obviously something that's going to be important to our credit story for the remainder of this year as those customers come out of their modifications.

Speaker #5: Let me first start with what has been the hot topic for the last couple of years, which is loan modifications. And I think if you rewind the tape, motion, you obviously know as well.

Jon Witter: If you rewind the tape, Moshe, and you obviously know as well, when we changed the loan modification program, the question was always how were these customers going to perform when they come out the other side. We are now up to six months plus of performance with some of these customers. Obviously less with others as they roll out of the mods. The data we've provided is, I hope, helpful, useful, and encouraging. We are seeing better than 75% success rate after three and six months. That is higher than our expectations. I think we've given you some of that data in the overall investor presentation. We feel great about that and have not seen any trends in those payment rates over time that would make us anything less than optimistic about their effectiveness. Again, that hasn't happened by accident.

Jonathan Witter: If you rewind the tape, Moshe, and you obviously know as well, when we changed the loan modification program, the question was always how were these customers going to perform when they come out the other side. We are now up to six months plus of performance with some of these customers. Obviously less with others as they roll out of the mods. The data we've provided is, I hope, helpful, useful, and encouraging. We are seeing better than 75% success rate after three and six months.

Speaker #2: And setting sort of new baseline levels of expectation going forward. In terms of the core performance of the portfolio, I think the simple math I would point you to is I think we've been very clear that the sort of recovery gap has been estimated to be about 25 million dollars on this segment in question.

Speaker #5: When we changed the loan modification program, the question was always: How were these customers going to perform when they came out the other side?

Speaker #5: We are now up to six plus six months of performance with some of these customers—obviously less with others as they roll out of the mods.

Speaker #5: And I think the data we've provided is, I hope, helpful, useful, and encouraging. We are seeing better than 75% success rate after three and six months.

Speaker #2: I think it is notable we have only raised sort of the lower end of our guidance by 20 million dollars. And I think that is reflective of the fact that we are seeing general strength in the portfolio across the rest of our segments and the rest of the components.

Speaker #5: That is higher than our expectations. I think we've given you some of that data in the overall investor presentation, and we feel great about that.

Jonathan Witter: That is higher than our expectations. I think we've given you some of that data in the overall investor presentation. We feel great about that and have not seen any trends in those payment rates over time that would make us anything less than optimistic about their effectiveness. Again, that hasn't happened by accident.

Speaker #2: That obviously more than offset the sort of full 25 million dollar impact there. So I don't think I feel comfortable trying to give specific guidance by quarter.

Speaker #5: And we have not seen any trends in those payment rates over time that would make us anything less than optimistic about their effectiveness. And again, that hasn't happened by accident.

Speaker #2: You're well familiar with the normal seasonal patterns that we have in the business. And those patterns I think continue to sort of mature and set.

Speaker #5: Those programs are, we think, very well designed. They are tightly controlled in terms of entry. The conditions and the requirements for what a customer has to do to get into them are quite diligent.

Jon Witter: Those programs are, we think, very well designed. They are tightly controlled in terms of entry. The conditions and the requirements for what a customer has to do to get into them are quite diligent. We obviously track that regularly to make sure we're getting the performance we like. I think that is Sort of key component number 1, and obviously something that's going to be important to our credit story for the remainder of this year as those customers come out of their modifications and setting sort of new baseline levels of expectation going forward. In terms of the core performance of the portfolio, I think the simple math I would point you to is, I think we've been very clear that the sort of recovery gap has been estimated to be about $25 million on this segment in question.

Jonathan Witter: Those programs are, we think, very well designed. They are tightly controlled in terms of entry. The conditions and the requirements for what a customer has to do to get into them are quite diligent. We obviously track that regularly to make sure we're getting the performance we like. I think that is Sort of key component number 1, and obviously something that's going to be important to our credit story for the remainder of this year as those customers come out of their modifications and setting sort of new baseline levels of expectation going forward.

Speaker #2: But I think we really have gone to great lengths to try to delineate what we see as really a timing of recovery issue versus a credit issue.

Speaker #5: And we obviously track that regularly to make sure we're getting the performance we like. So, I think that is sort of key component number one, and obviously something that's going to be important to our credit story for the remainder of this year as those customers come out of their modifications.

Speaker #2: And remain committed that based on everything we see today, we are optimistic about what we're seeing in the general credit performance.

Speaker #4: Great. Thanks very much.

Speaker #5: And setting sort of new baseline levels of expectation going forward. In terms of the core performance of the portfolio, I think the simple math I would point you to is, I think we've been very clear that the sort of recovery gap has been estimated to be about $25 million on this segment in question.

Speaker #1: Thank you. And our next question is coming from Sanjay Sakrani with KPW. Please go ahead.

Jonathan Witter: In terms of the core performance of the portfolio, I think the simple math I would point you to is, I think we've been very clear that the sort of recovery gap has been estimated to be about $25 million on this segment in question.

Speaker #5: Thank you. Pete, just a quick question on sort of the NIM rebound. Noticing sort of the loan yields, those have come down pretty meaningfully.

Speaker #5: Do you expect a step up in those loan yields as we move through the back part of the year in terms of loan mix just to get back towards the 5%?

Speaker #5: I think it is notable we have only raised the lower end of our guidance by $20 million. And I think that is reflective of the fact that we are seeing general strength in the portfolio across the rest of our segments and the rest of the components.

Jon Witter: I think it is notable we have only raised sort of the lower end of our guidance by $20 million. I think that is reflective of the fact that we are seeing general strength in the portfolio across the rest of our segments and the rest of the components that obviously more than offset the sort of full $25 million impact there. I don't think I feel comfortable trying to give specific guidance by quarter. You're well familiar with the normal seasonal patterns that we have in the business, and those patterns, I think, continue to sort of mature and set.

Jonathan Witter: I think it is notable we have only raised sort of the lower end of our guidance by $20 million. I think that is reflective of the fact that we are seeing general strength in the portfolio across the rest of our segments and the rest of the components that obviously more than offset the sort of full $25 million impact there. I don't think I feel comfortable trying to give specific guidance by quarter. You're well familiar with the normal seasonal patterns that we have in the business, and those patterns, I think, continue to sort of mature and set.

Speaker #4: Yeah. I think some of that a little bit of a distortion by the fact that second quarter is kind of our lowest origination quarter.

Speaker #4: And the mix of loans that are coming in. We fully expect that as we get into the heart of our peak season, that traditional yield patterns will sort of start to re-emerge.

Speaker #5: That obviously more than offset the sort of full $25 million impact there. So I don’t think I feel comfortable trying to give specific guidance by quarter.

Speaker #5: You're well familiar with the normal seasonal patterns that we have in the business, and those patterns, I think, continue to sort of mature and set.

Speaker #5: Got it. And then just another question on sort of the your expected gain on sale. I think when we looked at we calculated this quarter.

Speaker #5: But I think we really have gone to great lengths to try to delineate what we see as really a timing of recovery issue versus a credit issue.

Jon Witter: I think we really have gone to great lengths to try to delineate what we see as really a timing of recovery issue versus a credit issue, and remain committed that based on everything we see today, we are optimistic about what we're seeing in the general credit performance.

Jonathan Witter: I think we really have gone to great lengths to try to delineate what we see as really a timing of recovery issue versus a credit issue, and remain committed that based on everything we see today, we are optimistic about what we're seeing in the general credit performance.

Speaker #5: It seemed to be higher than the typical 2% or so that you've been getting. Is that maybe you could just help us think about what's incorporated in your expectations for this year and if there was anything different in the mix of the loans that you sold this quarter?

Speaker #5: And we remain committed that, based on everything we see today, we are optimistic about what we're seeing in the general credit performance.

Speaker #4: Great. Thanks very much.

Moshe Orenbuch: Great. Thanks very much.

Moshe Orenbuch: Great. Thanks very much.

Speaker #1: Thank you. And our next question is coming from Sanjay Sakrani with KPW. Please go ahead.

Madison: Thank you. Our next question is coming from Sanjay Sakhrani with KBW. Please go ahead.

Operator: Thank you. Our next question is coming from Sanjay Sakhrani with KBW. Please go ahead.

Speaker #5: Thank you.

Speaker #4: Yeah. I think yeah. Certainly can address that. I think one thing to remember is when we're selling the newly originated loans, we're selling the price that we're getting upfront is both the initial disbursement as well as the gain on the second disbursement.

Speaker #6: Thank you. Pete, just a quick question on the NIM rebound. I noticed that loan yields have come down pretty meaningfully.

Sanjay Sakhrani: Thank you. Peter, just a quick question on sort of the NIM rebound. Noticing sort of the loan yields, those have come down pretty meaningfully. Do you expect a step-up in those loan yields as we move through the back part of the year in terms of loan mix just to get back towards the 5%?

Sanjay Sakhrani: Thank you. Peter, just a quick question on sort of the NIM rebound. Noticing sort of the loan yields, those have come down pretty meaningfully. Do you expect a step-up in those loan yields as we move through the back part of the year in terms of loan mix just to get back towards the 5%?

Speaker #6: Do you expect a step-up in those loan yields as we move through the back part of the year, in terms of loan mix, just to get back toward the 5%?

Speaker #4: Because that's just the way the accounting model works for selling an undispersed loan that has two component parts. So that kind of front loads a little bit the gain with the newly originated loans.

Speaker #4: Yeah, I think some of that is a little bit of a distortion by the fact that the second quarter is kind of our lowest origination quarter.

[Company Representative] (SLM Corporation): Yeah, I think some of that's a little bit of a distortion by the fact that Q2 is kind of our lowest origination quarter and the mix of loans that are coming in. We fully expect that as we get into the heart of our peak season, that traditional yield patterns will sort of start to reemerge.

Pete Graham: Yeah, I think some of that's a little bit of a distortion by the fact that Q2 is kind of our lowest origination quarter and the mix of loans that are coming in. We fully expect that as we get into the heart of our peak season, that traditional yield patterns will sort of start to reemerge.

Speaker #4: And the mix of loans that are coming in, we fully expect that as we get into the heart of our peak season, traditional yield patterns will sort of start to re-emerge.

Speaker #4: And so that might be the factor that's sort of putting you off a little bit. I think in totality, though, that kind of kind of 2% ish is a good target.

Speaker #6: Got it. And then just another question on your expected gain on sale. I think when we looked at it, we calculated this quarter, it seemed to be higher than the typical 2% or so that you’ve been getting.

Sanjay Sakhrani: Got it. Just another question on sort of your expected gain on sale. I think when we calculated this quarter, it seemed to be higher than the typical 2% or so that you've been getting. Maybe you could just help us think about what's incorporated in your expectations for this year, and if there was anything different in the mix of the loans that you sold this quarter. Thank you.

Sanjay Sakhrani: Got it. Just another question on sort of your expected gain on sale. I think when we calculated this quarter, it seemed to be higher than the typical 2% or so that you've been getting. Maybe you could just help us think about what's incorporated in your expectations for this year, and if there was anything different in the mix of the loans that you sold this quarter. Thank you.

Speaker #4: For the gain on sale, for the flow related loans. It'll move around a little bit based on the pricing grids and other things. But I think in terms of trying to set a benchmark, that's probably a good place to start.

Speaker #5: Okay. Great. Thank you so much.

Speaker #1: Thank you. And our next question is coming from Terry Mall with Barclays. Please go ahead.

Speaker #6: Is that—maybe you could just help us think about what's incorporated in your expectations for this year? And was there anything different in the mix of the loans that you sold this quarter?

Speaker #6: Hi. Thank you. Good evening. Maybe just starting off the EPS guide. Can you kind of talk about what's kind of contemplated in the back half EPS guide?

Speaker #6: Thank you.

Speaker #4: Yeah, I think, yeah, we certainly can address that. I think one thing to remember is, when we're selling the newly originated loans, the price that we're getting upfront is both the initial disbursement as well as the gain on the second disbursement.

[Company Representative] (SLM Corporation): Yeah, certainly can address that. I think one thing to remember is when we're selling the newly originated loans, the price that we're getting upfront is both the initial disbursement as well as the gain on the second disbursement. That's just the way the accounting model works for selling an undispersed loan that has two component parts. That kind of front loads a little bit the gain with the newly originated loans. That might be the factor that's sort of putting you off a little bit. I think in totality, though, that kind of 2%-ish is a good target for the gain on sale for the flow-related loans. It'll move around a little bit based on the pricing grids and other things, but I think in terms of trying to set a benchmark, that's probably a good place to start.

Pete Graham: Yeah, certainly can address that. I think one thing to remember is when we're selling the newly originated loans, the price that we're getting upfront is both the initial disbursement as well as the gain on the second disbursement. That's just the way the accounting model works for selling an undispersed loan that has two component parts.

Speaker #6: It seems to be about 15% higher than street expectations right now. So like any color on the moving pieces. Would be helpful.

Speaker #4: Yeah. Thanks, Terry. Again, I think there's some moving parts here. Obviously, we talked about the change in our net charge ops guidance. So like we're operating in the higher end of our original plan there.

Speaker #4: Because that's just the way the accounting model works for selling an undisbursed loan that has two component parts. So that kind of front-loads, a little bit, the gain with the newly originated loans.

Speaker #4: And although we've covered a portion of the anticipated impact from this segment of borrowers and changing our recovery strategy, we still got to get through that over the second half of this year.

Pete Graham: That kind of front loads a little bit the gain with the newly originated loans. That might be the factor that's sort of putting you off a little bit. I think in totality, though, that kind of 2%-ish is a good target for the gain on sale for the flow-related loans. It'll move around a little bit based on the pricing grids and other things, but I think in terms of trying to set a benchmark, that's probably a good place to start.

Speaker #4: And so that might be the factor that's sort of putting you off a little bit. I think in totality, though, that kind of 2%-ish is a good target.

Speaker #4: But that based on other activities that we have in the second half of the year, we still feel there's a viable path for us to get up into the range that we had previously raised to.

Speaker #4: For the gain on sale for the flow-related loans, it'll move around a little bit based on the pricing grids and other things. But I think in terms of trying to set a benchmark, that's probably a good place to start.

Speaker #4: Last quarter. So we feel good about both our net charge off updated range. As well as the previously released range of earnings per share for the full year.

Speaker #6: Okay, great. Thank you so much.

Sanjay Sakhrani: Okay, great. Thank you so much.

Sanjay Sakhrani: Okay, great. Thank you so much.

Speaker #1: Thank you. And our next question is coming from Terry Mall with Barclays. Please go ahead.

Madison: Thank you. Our next question is coming from Terry Ma with Barclays. Please go ahead.

Operator: Thank you. Our next question is coming from Terry Ma with Barclays. Please go ahead.

Speaker #6: Got it. Okay. And then if I think about credit for the second half, obviously delinquencies, this quarter improved sequentially. But as we look out to the back half, should we kind of expect the same seasonality that we saw last year with elevated delinquencies in the back half?

Speaker #7: Hi, thank you. Good evening. Maybe just starting off with the EPS guide, can you talk about what's contemplated in the back half EPS guide?

Terry Ma: Hi, thank you. Good evening. Maybe just starting off with the EPS guide. Can you kind of talk about what's kind of contemplated in the back half EPS guide? Seems to be about 15% higher than street expectations right now. Any color on the moving pieces would be helpful.

Terry Ma: Hi, thank you. Good evening. Maybe just starting off with the EPS guide. Can you kind of talk about what's kind of contemplated in the back half EPS guide? Seems to be about 15% higher than street expectations right now. Any color on the moving pieces would be helpful.

Speaker #7: It seems to be about 15% higher than street expectations right now, so any color on the moving pieces would be helpful.

Speaker #6: You guys did have a sizable cohort exit extended grace this quarter.

Speaker #4: Yeah. Thanks, Terry. Again, I think there are some moving parts here. Obviously, we talked about the change in our net charge-off guidance. So, we're operating at the higher end of our original plan there.

[Company Representative] (SLM Corporation): Yeah. Thanks, Terry. Again, I think there's some moving parts here. Obviously, we talked about the change in our net charge-offs guidance. We're operating in the higher end of our original plan there. Although we've covered a portion of the anticipated impact from this segment of borrowers and changing our recovery strategy, we still got to get through that over the H2 of this year. That based on other activities that we have in the H2 of the year, we still feel there's a viable path for us to get up into the range that we had previously raised to last quarter. We feel good about both our net charge-off updated range as well as the previously released range of EPS for the full year.

Pete Graham: Yeah. Thanks, Terry. Again, I think there's some moving parts here. Obviously, we talked about the change in our net charge-offs guidance. We're operating in the higher end of our original plan there. Although we've covered a portion of the anticipated impact from this segment of borrowers and changing our recovery strategy, we still got to get through that over the H2 of this year.

Speaker #2: Yeah. Terry, I think the general seasonal patterns are probably right. There's a few things that will affect delinquency trends that are worth just considering.

Speaker #2: Obviously, the size of the repayment wave. We know early to repayment borrowers tend to experience financial distress at a higher level. So if you have a larger wave this year, then last year, but a comparably sized portfolio, there can be some numerator denominator effect of that.

Speaker #4: And although we've covered a portion of the anticipated impact from this segment of borrowers and changed our recovery strategy, we still have to get through that over the second half of this year.

Speaker #4: But, based on other activities that we have in the second half of the year, we still feel there's a viable path for us to get up into the range that we had previously raised to.

Pete Graham: That based on other activities that we have in the H2 of the year, we still feel there's a viable path for us to get up into the range that we had previously raised to last quarter. We feel good about both our net charge-off updated range as well as the previously released range of EPS for the full year.

Speaker #2: There will also be Terry, over time, a modest impact driven by the fact that we are selling new originations now for the first time.

Speaker #4: Last quarter, so we feel good about both our net charge-off updated range as well as the previously released range of earnings per share for the full year.

Speaker #2: And some of those new originations are defined as in repayment based on their sort of deferral status. And we know that loans that are in school tend to experience financial distress at a much lower rate.

Speaker #2: So I think you've got a couple of those factors that are working that can move some of the seasonal patterns a little bit on the margin.

Speaker #7: Got it. Okay. And then, if I think about credit for the second half, obviously delinquencies this quarter improved sequentially. But as we look out to the back half, should we kind of expect the same seasonality that we saw last year with elevated delinquencies in the back half?

Terry Ma: Got it. Okay. If I think about credit for the H2, obviously delinquencies this quarter improved sequentially. As we look out to the H2, should we kind of expect the same seasonality that we saw last year with elevated delinquencies in the H2? You guys did have a sizable cohort exit extended grace this quarter.

Terry Ma: Got it. Okay. If I think about credit for the H2, obviously delinquencies this quarter improved sequentially. As we look out to the H2, should we kind of expect the same seasonality that we saw last year with elevated delinquencies in the H2? You guys did have a sizable cohort exit extended grace this quarter.

Speaker #2: But I think sort of the seasonal patterns plus or minus keeping in mind those types of considerations is probably the right zip code for you to be thinking about.

Speaker #7: You guys did have a sizable cohort exit extended grace this quarter.

Speaker #6: Great. Thank you.

Speaker #1: Thank you. And our next question is coming from Don Vandetti with Wells Fargo. Please go ahead.

Speaker #5: Yeah, Terry, I think the general seasonal patterns are probably right. There are a few things that will affect delinquency trends that are worth just considering.

Jon Witter: Yeah, Terry, I think the general seasonal patterns are probably right. There's a few things that will affect delinquency trends that are worth just considering. Obviously, the size of the repayment wave, we know early to repayment borrowers tend to experience financial distress at a higher level. If you have a larger wave this year than last year, but a comparably sized portfolio, there can be some numerator-denominator effect of that. There will also be, Terry, over time, a modest impact driven by the fact that we are selling new originations now for the first time. Some of those new originations are defined as in repayment based on their sort of deferral status. We know that loans that are in school tend to experience financial distress at a much lower rate.

Jonathan Witter: Yeah, Terry, I think the general seasonal patterns are probably right. There's a few things that will affect delinquency trends that are worth just considering. Obviously, the size of the repayment wave, we know early to repayment borrowers tend to experience financial distress at a higher level. If you have a larger wave this year than last year, but a comparably sized portfolio, there can be some numerator-denominator effect of that.

Speaker #7: Hi. Good evening. I was wondering if you could just talk a little bit more about the debt resolution situation and just trying to better understand why the pause on all recovery sales couldn't you just sort of say we're not really open to debt resolutions?

Speaker #5: Obviously, the size of the repayment wave. We know early-to-repayment borrowers tend to experience financial distress at a higher level. So, if you have a larger wave this year than last year, but a comparably sized portfolio, there can be some numerator-denominator effect of that.

Speaker #7: Just kind of walk through that a little bit. And is there anything that could change that would enable you to turn those back on?

Speaker #7: Or is this more of a permanent change?

Speaker #4: Sure. Sure. So our broader recovery strategies are really based on an assumption that by the time the borrower gets into that part of our collection cycle, they've already gone through evaluation of their ability to pay.

Speaker #5: There will also be, Terry, over time, a modest impact driven by the fact that we are selling new originations now for the first time.

Jonathan Witter: There will also be, Terry, over time, a modest impact driven by the fact that we are selling new originations now for the first time. Some of those new originations are defined as in repayment based on their sort of deferral status. We know that loans that are in school tend to experience financial distress at a much lower rate.

Speaker #5: And some of those new originations are defined as "in repayment" based on their sort of deferral status. And we know that loans that are in-school tend to experience financial distress at a much lower rate.

Speaker #4: And the settlement levels in our traditional strategy was really based on an assumption that those borrowers didn't have an ability to pay. These resolution companies that we talked about are really targeting customers that do have an ability to pay.

Speaker #5: So, I think you've got a couple of those factors that are working that can move some of the seasonal patterns a little bit on the margin.

Jon Witter: I think you've got a couple of those factors that are working that can move some of the seasonal patterns a little bit on the margin. I think sort of the seasonal patterns plus or minus, keeping in mind those types of considerations, is probably the right ZIP code for you to be thinking about.

Jonathan Witter: I think you've got a couple of those factors that are working that can move some of the seasonal patterns a little bit on the margin. I think sort of the seasonal patterns plus or minus, keeping in mind those types of considerations, is probably the right ZIP code for you to be thinking about.

Speaker #4: And are relying on kind of the back door in our recovery's process to pick up the loans at a discount. In a way that disadvantages the borrowers.

Speaker #5: But I think sort of the seasonal patterns, plus or minus, keeping in mind those types of considerations, is probably the right zip code for you to be thinking about.

Speaker #4: So we made a decision, which I talked at length at the prior conference about, to sort of halt all of our debt sales and pull for a time period all recoveries in-house.

Speaker #7: Great. Thank you.

Terry Ma: Great. Thank you.

Terry Ma: Great. Thank you.

Speaker #1: Thank you. And our next question is coming from Don Vandetti with Wells Fargo. Please go ahead.

Madison: Thank you. Our next question is coming from Don Fandetti with Wells Fargo. Please go ahead.

Operator: Thank you. Our next question is coming from Don Fandetti with Wells Fargo. Please go ahead.

Speaker #8: Hi, good evening. I was wondering if you could just talk a little bit more about the debt resolution situation, and help us better understand why the pause on all recovery sales? Couldn't you just sort of say you're not really open to debt resolutions?

Don Fandetti: Hi, good evening. I was wondering if you could just talk a little bit more about the debt resolution situation and just kind of better understand why the pause on all recovery sales. Couldn't you just sort of say we're not really open to debt resolutions? Just kind of walk through that a little bit. Is there anything that could change that would enable you to turn those back on, or is this more of a permanent change?

Donald Fandetti: Hi, good evening. I was wondering if you could just talk a little bit more about the debt resolution situation and just kind of better understand why the pause on all recovery sales. Couldn't you just sort of say we're not really open to debt resolutions? Just kind of walk through that a little bit. Is there anything that could change that would enable you to turn those back on, or is this more of a permanent change?

Speaker #4: Once we get a handle on how this is going to play out, we certainly have an ability to change our strategies and turn that back on.

Speaker #4: But in the short run, this is a way for us to get control of post-charge off recovery strategies. And it's a timing issue in large part because when we started our champion challenger a few years ago, what we've learned over time is our internal recovery strategies yield on balance a higher return.

Speaker #8: Just kind of walk through that a little bit. And is there anything that could change that would enable you to turn those back on?

Speaker #8: Or is this more of a permanent change?

Speaker #4: Sure. So, our broader recovery strategies are really based on the assumption that by the time the borrower gets into that part of our collection cycle, they've already gone through an evaluation of their ability to pay.

Jon Witter: Sure. Our broader recovery strategies are really based on an assumption that by the time the borrower gets into that part of our collection cycle, they've already gone through evaluation of their ability to pay. The settlement levels in our traditional strategy was really based on an assumption that those borrowers didn't have an ability to pay. These resolution companies that we talked about are really targeting customers that do have an ability to pay and are relying on kind of the back door in our recoveries process to pick up the loans at a discount in a way that disadvantages the borrowers. We made a decision, which I talked at length at the prior conference about to sort of halt all of our debt sales and pull, for a time period, all recoveries in-house.

Jonathan Witter: Sure. Our broader recovery strategies are really based on an assumption that by the time the borrower gets into that part of our collection cycle, they've already gone through evaluation of their ability to pay. The settlement levels in our traditional strategy was really based on an assumption that those borrowers didn't have an ability to pay.

Speaker #4: And so it's really a question of in-year recoveries versus collecting over time.

Speaker #4: And the settlement levels in our traditional strategy were really based on an assumption that those borrowers didn't have an ability to pay. These resolution companies that we talked about are really targeting customers that do have an ability to pay.

Speaker #7: Got it. And then could you also talk about plans for season loan sales this year and just kind of balance sheet growth expectations?

Jonathan Witter: These resolution companies that we talked about are really targeting customers that do have an ability to pay and are relying on kind of the back door in our recoveries process to pick up the loans at a discount in a way that disadvantages the borrowers. We made a decision, which I talked at length at the prior conference about to sort of halt all of our debt sales and pull, for a time period, all recoveries in-house.

Speaker #4: Yeah. Sure. When we started the year, we anticipated loan sales to sort of manage a flat-ish balance sheet this year. And when we accelerated the loan sale in the first quarter, that I talked about, and that allowed us to do the ASR program, we indicated that we likely would do modestly more loan sales this year.

Speaker #4: And are relying on kind of the back door in our recoveries process to pick up the loans at a discount, in a way that disadvantages the borrowers.

Speaker #4: So, we made a decision—which I talked at length about at the prior conference—to sort of halt all of our debt sales and, for a time period, pull all recoveries in-house.

Speaker #4: And size that at sort of a billion-ish dollars more than what we otherwise would. Which would imply all things equal, maybe a little bit of a down balance sheet.

Speaker #4: Once we get a handle on how this is going to play out, we certainly have the ability to change our strategies and turn that back on.

Jon Witter: Once we get a handle on how this is going to play out, we certainly have an ability to change our strategies and turn that back on. In the short run, this is a way for us to get control of post-charge-off recovery strategies. It's a timing issue in large part because when we started our champion challenger a few years ago, what we've learned over time is our internal recovery strategies yield, on balance, a higher return. It's really a question of in-year recoveries versus collecting over time.

Jonathan Witter: Once we get a handle on how this is going to play out, we certainly have an ability to change our strategies and turn that back on. In the short run, this is a way for us to get control of post-charge-off recovery strategies. It's a timing issue in large part because when we started our champion challenger a few years ago, what we've learned over time is our internal recovery strategies yield, on balance, a higher return. It's really a question of in-year recoveries versus collecting over time.

Speaker #4: I think that's all contingent on what the level of originations we have during peak this year. But that's how you should think about it.

Speaker #4: But in the short run, this is a way for us to get control of post-charge-off recovery strategies. And it's a timing issue in large part, because when we started our champion-challenger a few years ago, what we've learned over time is our internal recovery strategies yield, on balance, a higher return.

Speaker #4: It would probably a billion dollars more loan sales than we otherwise would have done in our original guidance.

Speaker #7: Got it. Thanks.

Speaker #1: Thank you. And our next question is coming from Jeff Adelson with Morgan Stanley. Please go ahead.

Speaker #4: And so, it's really a question of in-year recoveries versus collecting over time.

Speaker #5: Hey. Good evening, guys. Thanks for taking my questions. I just wanted to circle back on the loan yield question real quickly. I think we looked at some of the typical seasonal trends you've seen historically.

Speaker #8: Got it. And then could you also talk about plans for seasonal loan sales this year, and just kind of balance sheet growth expectations?

Don Fandetti: Got it. Could you also talk about plans for seasoned loan sales this year and just kind of balance sheet growth expectations?

Donald Fandetti: Got it. Could you also talk about plans for seasoned loan sales this year and just kind of balance sheet growth expectations?

Speaker #5: It didn't seem like the second quarter tended to be down that much. I know there's more noise with the sales you've been doing. I guess I was just wondering, were there more higher yielding loans being sold in the last two quarters?

Speaker #4: Yeah, sure. When we started the year, we anticipated loan sales to sort of manage a flat-ish balance sheet this year. And when we accelerated the loan sale in the first quarter that I talked about, and that allowed us to do the ASR program, we indicated that we likely would do modestly more loan sales this year.

Jon Witter: Yeah, sure. When we started the year, we anticipated loan sales to sort of manage a flattish balance sheet this year. When we accelerated the loan sale in the first quarter that I talked about and that allowed us to do the ASR program, we indicated that we likely would do modestly more loan sales this year and size that at sort of a $1 billion-ish more than what we otherwise would, which would imply, all things equal, maybe a little bit of a down balance sheet. I think that's all contingent on what the level of originations we have during peak this year. That's how you should think about it. Probably $1 billion more loan sales than we otherwise would have done in our original guidance.

Jonathan Witter: Yeah, sure. When we started the year, we anticipated loan sales to sort of manage a flattish balance sheet this year. When we accelerated the loan sale in the first quarter that I talked about and that allowed us to do the ASR program, we indicated that we likely would do modestly more loan sales this year and size that at sort of a $1 billion-ish more than what we otherwise would, which would imply, all things equal, maybe a little bit of a down balance sheet.

Speaker #5: And I guess as we think about the yield recovery from here, you mentioned how do we balance that against I think one of the questions we've gotten from investors is with the partnership or not the partnership, the grant opportunity and the parent opportunity.

Speaker #5: Those might be a little bit lower yielding. So just help us understand those puts and takes there a little bit better.

Speaker #4: And size that at sort of a billion-ish dollars more than what we otherwise would, which would imply, all things equal, maybe a little bit of a down balance sheet.

Speaker #4: Yeah. When we start with the question about yields on the loan sales, I think our practice on loan sales has been pretty consistent over time.

Speaker #4: I think that's all contingent on what the level of originations we have during peak this year, but that's how you should think about it.

Jonathan Witter: I think that's all contingent on what the level of originations we have during peak this year. That's how you should think about it. Probably $1 billion more loan sales than we otherwise would have done in our original guidance.

Speaker #4: We attempt to select sort of random sample of our existing book largely that is driven by the concentration limits that the rating agencies put around the ultimate securitization takeout.

Speaker #4: It would probably be a billion dollars more in loan sales than we otherwise would have done in our original guidance.

Speaker #4: So that really hasn't changed. And that's been pretty consistent over time. The partnership loan selection process follows a similar kind of concentration approach and grid for pricing.

Speaker #8: Got it. Thanks.

Don Fandetti: Got it. Thanks.

Donald Fandetti: Got it. Thanks.

Speaker #1: Thank you. And our next question is coming from Jeff Adelson with Morgan Stanley. Please go ahead.

Madison: Thank you. Our next question is coming from Jeff Adelson with Morgan Stanley. Please go ahead.

Operator: Thank you. Our next question is coming from Jeff Adelson with Morgan Stanley. Please go ahead.

Speaker #6: Hey, good evening, guys. Thanks for taking my questions. I just wanted to circle back on the loan yield question real quickly. I think we looked at some of the typical seasonal trends you've seen historically.

Jeff Adelson: Hey, good evening, guys. Thanks for taking my questions. I just wanted to circle back on the loan yield question real quickly. I think we looked at some of the typical seasonal trends you've seen historically. It didn't seem like Q2 tended to be down that much. I know there's more noise with the sales you've been doing. I guess I was just wondering, were there more higher-yielding loans being sold in the last 2 quarters? I guess as we think about the yield recovery from here, you mentioned, Peter, how do we balance that against, I think one of the questions we've gotten from investors is, with the partnership or not the partnership, the grad opportunity and the parent opportunity, those might be a little bit lower yielding. Just help us understand those puts and takes there a little bit better.

Jeffrey Adelson: Hey, good evening, guys. Thanks for taking my questions. I just wanted to circle back on the loan yield question real quickly. I think we looked at some of the typical seasonal trends you've seen historically. It didn't seem like Q2 tended to be down that much. I know there's more noise with the sales you've been doing. I guess I was just wondering, were there more higher-yielding loans being sold in the last 2 quarters?

Speaker #4: So no adverse selection one way or the other between our bank book for investment and the partnership programs. In terms of the path from here to the end of the year, keep in mind that carrying the extra liquidity is the real thing more so than yields on the loans.

Speaker #6: It didn't seem like the second quarter tended to be down that much. I know there's more noise with the sales you've been doing, but I guess I was just wondering, were there more higher-yielding loans being sold in the last two quarters?

Speaker #6: And I guess as we think about the yield recovery from here—you mentioned Pete—how do we balance that against, I think, one of the questions we've gotten from investors: with the partnership, or not the partnership, the grad opportunity, and the parent opportunity.

Jeffrey Adelson: I guess as we think about the yield recovery from here, you mentioned, Peter, how do we balance that against, I think one of the questions we've gotten from investors is, with the partnership or not the partnership, the grad opportunity and the parent opportunity, those might be a little bit lower yielding. Just help us understand those puts and takes there a little bit better.

Speaker #4: And so we're carrying around a lot of extra liquidity that's invested in at cash rates that we wouldn't have otherwise done. And in our original plan, we would have done a loan sale in the second quarter much closer to when we need the liquidity for our peak season.

Speaker #6: Those might be a little bit lower-yielding, so just help us understand those puts and takes there a little bit better.

Speaker #4: Yeah. Let me start with the question about yields on the loan sales. I think our practice on loan sales has been pretty consistent over time.

[Company Representative] (SLM Corporation): Yeah. Let me start with the question about yields on the loan sales. I think our practice on loan sales has been pretty consistent over time. We attempt to select a sort of random sample of our existing book. Largely, that is driven by the concentration limits that the rating agencies put around the ultimate securitization takeout. That really hasn't changed, and that's been pretty consistent over time. The partnership loan selection process follows a similar kind of concentration approach and grid for pricing. No adverse selection one way or the other between our bank book for investment and the partnership programs. In terms of the path from here to the end of the year, keep in mind that carrying the extra liquidity is the real thing, more so than yields on the loans.

Pete Graham: Yeah. Let me start with the question about yields on the loan sales. I think our practice on loan sales has been pretty consistent over time. We attempt to select a sort of random sample of our existing book. Largely, that is driven by the concentration limits that the rating agencies put around the ultimate securitization takeout. That really hasn't changed, and that's been pretty consistent over time.

Speaker #4: So as that investment balance gets pulled down and reinvested into higher yielding loans, we'll blend back to an overall NIM level that's more in line for the full year with our long-term guidance.

Speaker #4: We attempt to select a sort of random sample of our existing book. Largely, that is driven by the concentration limits that the rating agencies put around the ultimate securitization takeout.

Speaker #4: Now, we'll be a little bit above 5% or a little bit below 5%. That'll be dependent on how the rest of the year materializes.

Speaker #4: But I think, again, it's a temporary thing in-year driven largely by timing of when we generated that liquidity.

Speaker #4: So that really hasn't changed, and that's been pretty consistent over time. The partnership loan selection process follows a similar kind of concentration approach and grid for pricing.

Pete Graham: The partnership loan selection process follows a similar kind of concentration approach and grid for pricing. No adverse selection one way or the other between our bank book for investment and the partnership programs. In terms of the path from here to the end of the year, keep in mind that carrying the extra liquidity is the real thing, more so than yields on the loans.

Speaker #6: Okay. Thank you. And Pete, you talked over the quarter about the opportunity to get the efficiency ratio down to the low 30 once you exit this growth phase.

Speaker #4: So, no adverse selection one way or the other between our bank book for investment and the partnership programs. In terms of the path from here to the end of the year, keep in mind that carrying the extra liquidity is the real thing, more so than yields on the loans.

Speaker #6: How should we think about the near-term and medium-term path here? What that looks like? And how long it might take you to get back down to a mid 30%?

Speaker #6: And just maybe talk about how the second strategic partnership helps you get there in that journey.

Speaker #4: And so we're carrying around a lot of extra liquidity that's invested at cash rates that we wouldn't have otherwise done. In our original plan, we would have done a loan sale in the second quarter, much closer to when we need the liquidity for our peak season.

[Company Representative] (SLM Corporation): We're carrying around a lot of extra liquidity that's invested in at cash rates, that we wouldn't have otherwise done. In our original plan, we would've done a loan sale in Q2, much closer to when we need the liquidity for our peak season. As that investment balance gets pulled down and reinvested into higher yielding loans, we'll blend back to an overall NIM level that's more in line for the full year, with our long-term guidance. Now, will we be a little bit above 5% or a little bit below 5%? That'll be dependent on how the rest of the year materializes. I think, again, it's a temporary thing in year, driven largely by timing of when we generated that liquidity.

Pete Graham: We're carrying around a lot of extra liquidity that's invested in at cash rates, that we wouldn't have otherwise done. In our original plan, we would've done a loan sale in Q2, much closer to when we need the liquidity for our peak season. As that investment balance gets pulled down and reinvested into higher yielding loans, we'll blend back to an overall NIM level that's more in line for the full year, with our long-term guidance.

Speaker #4: Yeah. Sure. When we set out our guidance for this year on non-interest expenses, we kind of gave an additional bit of information that sort of a little bit of a forward look on 27 that we thought the rate of growth going into next year would be roughly half the rate of growth that we've had from last year to this year.

Speaker #4: So, as that investment balance gets pulled down and reinvested into higher-yielding loans, we'll blend back to an overall NIM level that's more in line, for the full year, with our long-term guidance.

Speaker #4: And we're not ready to update that at this point. I'd say we'd like to do better than that. And if we do better than that, then we'll get to that kind of low to mid 30s rate in a much more rapid fashion.

Speaker #4: Now, we'll be a little bit above 5% or a little bit below 5%. That will depend on how the rest of the year materializes.

Pete Graham: Now, will we be a little bit above 5% or a little bit below 5%? That'll be dependent on how the rest of the year materializes. I think, again, it's a temporary thing in year, driven largely by timing of when we generated that liquidity.

Speaker #4: With regard to the partnerships, as we build this fee-based revenue, that obviously adds to the mix in terms of the top line denominator of the efficiency ratio.

Speaker #4: But I think, again, it's a temporary thing in-year, driven largely by the timing of when we generated that liquidity.

Speaker #6: Okay, thank you. And Pete, you talked over the quarter about the opportunity to get the efficiency ratio down to the low 30s once you exit this growth phase.

Jeff Adelson: Okay. Thank you. Pete, you talked over the quarter about the opportunity to get the efficiency ratio down to the low 30 once you exit this growth phase. How should we think about the near term, medium term path here, what that looks like, and how long it might take you to get back down to a mid-30%? Just maybe talk about how this second strategic partnership helps you get there in that journey.

Jeffrey Adelson: Okay. Thank you. Pete, you talked over the quarter about the opportunity to get the efficiency ratio down to the low 30 once you exit this growth phase. How should we think about the near term, medium term path here, what that looks like, and how long it might take you to get back down to a mid-30%? Just maybe talk about how this second strategic partnership helps you get there in that journey.

Speaker #4: So we've had a growth in fee-based revenue in excess of 50% year over year off a small base, admittedly. But based on the scaling that's happening with these loan sales, we'll continue to build even with just the first partnership, we'll build significantly going into from this year to next.

Speaker #6: How should we think about the near-term and medium-term path here—what that looks like, and how long it might take you to get back down to a mid-30% range?

Speaker #6: And just maybe talk about how the second strategic partnership helps you get there in that journey.

Speaker #4: On both basis of the program management fees, the base fees there, as well as we'll start to get to the point where we kick into the additional performance fees.

Speaker #4: Yeah, sure. When we set out our guidance for this year on non-interest expenses, we kind of gave an additional bit of information that was a little bit of a forward look on '27, that we thought the rate of growth going into next year would be roughly half the rate of growth that we've had from last year to this year.

[Company Representative] (SLM Corporation): Yeah, sure. When we set out our guidance for this year on non-interest expenses, we kind of gave an additional bit of information that sort of a little bit of a forward look on 2027, that we thought the rate of growth going into next year would be roughly half the rate of growth that we've had from last year to this year. We're not ready to update that at this point. I'd say we'd like to do better than that. If we do better than that, then we'll get to that kind of low to mid-30s rate in a much more rapid fashion. With regard to the partnerships, as we build this fee-based revenue, that obviously adds to the mix in terms of the top line denominator of the efficiency ratio.

Pete Graham: Yeah, sure. When we set out our guidance for this year on non-interest expenses, we kind of gave an additional bit of information that sort of a little bit of a forward look on 2027, that we thought the rate of growth going into next year would be roughly half the rate of growth that we've had from last year to this year.

Speaker #4: The servicing fees will continue to build as we get scale in these partnerships. And the second partnership will just add additional scale to that.

Speaker #4: I also mentioned that we intend to expand the partnerships going into next year before next year's peak to cover grad volume that we'll start to originate this year and that will be important for us to have those facilities as we have the real increases in opportunity from the plus reform.

Speaker #4: And we're not ready to update that at this point. I'd say we'd like to do better than that, and if we do better than that, then we'll get to that kind of low- to mid-30s rate in a much more rapid fashion.

Pete Graham: We're not ready to update that at this point. I'd say we'd like to do better than that. If we do better than that, then we'll get to that kind of low to mid-30s rate in a much more rapid fashion. With regard to the partnerships, as we build this fee-based revenue, that obviously adds to the mix in terms of the top line denominator of the efficiency ratio.

Speaker #4: So that's all building towards a really positive trajectory for Capitalized fee-based revenue, as well as we will get past this year one investment that we've needed to make to get ready for plus.

Speaker #4: With regard to the partnerships, as we build this fee-based revenue, that obviously adds to the mix in terms of the top-line denominator of the efficiency ratio.

Speaker #4: And we'll start to normalize and get more efficient in our marketing efforts and other efforts around the core business.

Speaker #4: So, we've had a growth in fee-based revenue in excess of 50% year over year, off a small base, admittedly. But based on the scaling that's happening with these loan sales, we'll continue to build; even with just the first partnership, we'll build significantly going from this year to next.

[Company Representative] (SLM Corporation): We've had a growth in fee-based revenue in excess of 50% year-over-year off a small base, admittedly. Based on the scaling that's happening with these loan sales, we'll continue to build even with just the first partnership, we'll build significantly, going into from this year to next on both the basis of the program management fees, the base fees there, as well as we'll start to get to the point where we kick into the additional performance fees. The servicing fees will continue to build as we get scale in these partnerships. The second partnership will just add additional scale to that.

Pete Graham: We've had a growth in fee-based revenue in excess of 50% year-over-year off a small base, admittedly. Based on the scaling that's happening with these loan sales, we'll continue to build even with just the first partnership, we'll build significantly, going into from this year to next on both the basis of the program management fees, the base fees there, as well as we'll start to get to the point where we kick into the additional performance fees. The servicing fees will continue to build as we get scale in these partnerships. The second partnership will just add additional scale to that.

Speaker #6: Okay. Great. If I could just squeeze in a third, I apologize. Just what about the balance sheet growth impact of the third? I mean, just any update on how you're thinking about the balance sheet growth once that comes through?

Speaker #4: I think, again, for this year, we're probably flat to a little down depending on what the overall level of originations are during the peak season.

Speaker #4: On both the basis of the program management fees—the base fees there—as well as we'll start to get to the point where we kick into the additional performance fees.

Speaker #4: I think we would probably have some modest growth aspirations for the balance sheet. In 2027. And then we'll probably start to trend back to kind of a mid low to mid single digit kind of rate of growth of the bank's balance sheet as we move forward.

Speaker #4: The servicing fees will continue to build as we get scale in these partnerships, and the second partnership will just add additional scale to that.

[Company Representative] (SLM Corporation): I also mentioned that we intend to expand the partnerships going into next year, before next year's peak, to cover grad volume that will start to originate this year, and that will be important for us to have those facilities as we have the real increases in opportunity from the PLUS reform. That's all building towards a really positive trajectory for capitalized fee-based revenue as well as we will get past this year 1 investment that we've needed to make to get ready for PLUS, and we'll start to normalize and get more efficient in our marketing efforts and other efforts around the core business.

Pete Graham: I also mentioned that we intend to expand the partnerships going into next year, before next year's peak, to cover grad volume that will start to originate this year, and that will be important for us to have those facilities as we have the real increases in opportunity from the PLUS reform. That's all building towards a really positive trajectory for capitalized fee-based revenue as well as we will get past this year 1 investment that we've needed to make to get ready for PLUS, and we'll start to normalize and get more efficient in our marketing efforts and other efforts around the core business.

Speaker #4: I also mentioned that we intend to expand the partnerships going into next year, before next year's peak, to cover grad volume that we'll start to originate this year. That will be important for us, to have those facilities as we see the real increases in opportunity from the PLUS reform.

Speaker #3: Yeah. And I would just add, I think we provided a little bit of commentary on this in the fourth quarter earnings announcement in January.

Speaker #3: I don't think our thinking has changed at all since that time.

Speaker #6: Okay. Perfect. Thank you, guys.

Speaker #4: Yep.

Speaker #1: Thank you. And our next question is coming from John Huck, with Jefferies. Please go ahead.

Speaker #4: So that's all building towards a really positive trajectory for capitalized fee-based revenue, as well as we will get past this year-one investment that we've needed to make to get ready for Plus.

Speaker #7: Hello. This is Yuna on John Huck's line. I had one more question on the name. So with as previously mentioned on the grad program, likely bearing lower yield, shorter duration, mixed with the forward flow, additional forward flow that may or may not change how you think about the balance sheet growth, what would what kind of factors or moving pieces would get you to reevaluate the medium-term NIM target and is that kind of how you're thinking about it for 2027?

Speaker #4: And we’ll start to normalize and get more efficient in our marketing efforts, and other efforts around the core business.

Speaker #6: Okay, great. If I could just squeeze in a third—I apologize. Just, what about the balance sheet growth impact of the third? I mean, any update on how you're thinking about the balance sheet growth once that comes through?

Jeff Adelson: Okay, great. If I could just squeeze in a third, I apologize. What about the balance sheet growth impact of the third? I mean, any update on how you're thinking about the balance sheet growth once that comes through?

Jeffrey Adelson: Okay, great. If I could just squeeze in a third, I apologize. What about the balance sheet growth impact of the third? I mean, any update on how you're thinking about the balance sheet growth once that comes through?

Speaker #4: I think, again, for this year, we're probably flat to a little down, depending on what the overall level of originations is during the peak season.

[Company Representative] (SLM Corporation): I think, again, for this year, we're probably flat to a little down depending on what the overall level of originations are during the peak season. I think we would probably have some modest growth aspirations for the balance sheet in 2027, we'll probably start to trend back to low to mid single-digit kind of rate of growth of the bank's balance sheet as we move forward.

Pete Graham: I think, again, for this year, we're probably flat to a little down depending on what the overall level of originations are during the peak season. I think we would probably have some modest growth aspirations for the balance sheet in 2027, we'll probably start to trend back to low to mid single-digit kind of rate of growth of the bank's balance sheet as we move forward.

Speaker #4: I think we would probably have some modest growth aspirations for the balance sheet. In 2027. And then we'll probably start to trend back to kind of a mid low to mid single digit kind of rate of growth of the bank's balance sheet as we move forward.

Speaker #4: Yeah. First, let me just address a couple of the points you made on the grad opportunity. I don't know that it's necessarily significantly lower yields on the certainly, I don't think it's necessarily a shorter duration.

Speaker #4: I think there's there will be a mix issue of MBA loans will be very short, but medical and dental programs like that will be much longer than and much.

Speaker #1: Yeah, and I would just add, I think we provided a little bit of commentary on this in the fourth quarter earnings announcement in January.

Jon Witter: Yeah, I would just add, I think I provided a little bit of commentary on this in the Q4 earnings announcement in January. I don't think our thinking has changed at all since that time.

Jonathan Witter: Yeah, I would just add, I think I provided a little bit of commentary on this in the Q4 earnings announcement in January. I don't think our thinking has changed at all since that time.

Speaker #1: I don't think our banking has changed at all since that time.

Speaker #4: Balances than are traditional undergrad products. So I think it's hard for us to answer that perfectly until we get through our first peak season of originations and understand what the mix of this opportunity is going to look like.

Speaker #6: Okay. Perfect. Thank you, guys.

Jeff Adelson: Okay, perfect. Thank you, guys.

Jeffrey Adelson: Okay, perfect. Thank you, guys.

Speaker #4: Yep.

[Company Representative] (SLM Corporation): Yep.

Pete Graham: Yep.

Speaker #2: Thank you. And our next question is coming from John Huck with Jefferies. Please go ahead.

Madison: Thank you. Our next question is coming from John Hecht with Jefferies. Please go ahead.

Operator: Thank you. Our next question is coming from John Hecht with Jefferies. Please go ahead.

Speaker #7: Hello. This is Yuna on John Huck's line. I had one more question on the name. So with as previously mentioned on the grad program, likely bearing lower yield, shorter duration, mixed with the forward flow, additional forward flow that may or may not change how you think about the balance sheet growth, what would what kind of factors or moving pieces would get you to reevaluate the medium-term NIM target and is that kind of how you're thinking about it for 2027?

[Analyst] (Jefferies): Hello, this is Yuna on John Hecht's line. I had one more question on the NIM. With, as previously mentioned on the grad program likely bearing lower yield, shorter duration mixed with the additional forward flow that may or may not change how you think about the balance sheet growth, what kind of factors or moving pieces would get you to reevaluate the medium-term NIM target? Is that kind of how you're thinking about it for 2027?

Yuna Sohn: Hello, this is Yuna on John Hecht's line. I had one more question on the NIM. With, as previously mentioned on the grad program likely bearing lower yield, shorter duration mixed with the additional forward flow that may or may not change how you think about the balance sheet growth, what kind of factors or moving pieces would get you to reevaluate the medium-term NIM target? Is that kind of how you're thinking about it for 2027?

Speaker #4: So as a result of that, it's really hard for me to give any other guidance on forward look other than I think by the end of this year, for the full year, we'll be close to that 5%, if not a little bit over.

Speaker #4: And over the of view that deviates from our past long-term guidance of kind of low to mid 5% range for NIM.

Speaker #7: Got it. And maybe on the after the 2026 class graduating in May/June, is there any data that you can share about their employment trends, what you see or what your expectation might be for the repayment for the second half of that new program?

Speaker #4: Yeah. First, let me just address a couple of the points you made on the grad opportunity. I don't know that it's necessarily significantly lower yields on the assets.

[Company Representative] (SLM Corporation): Yeah. First, let me just address a couple of the points you made on the grad opportunity. I don't know that it's necessarily significantly lower yields on the assets. Certainly, I don't think it's necessarily a shorter duration. I think there will be a mix issue of MBA loans will be very short, but medical and dental and other programs like that will be much longer than, and much higher balances than our traditional undergrad products. I think it's hard for us to answer that perfectly until we get through our first peak season of originations and understand what the mix of this opportunity is going to look like.

Pete Graham: Yeah. First, let me just address a couple of the points you made on the grad opportunity. I don't know that it's necessarily significantly lower yields on the assets. Certainly, I don't think it's necessarily a shorter duration. I think there will be a mix issue of MBA loans will be very short, but medical and dental and other programs like that will be much longer than, and much higher balances than our traditional undergrad products. I think it's hard for us to answer that perfectly until we get through our first peak season of originations and understand what the mix of this opportunity is going to look like.

Speaker #7: Thank you so much.

Speaker #4: I think it's too early. I mean, those grads are still in their grace period. So we won't really start to see any meaningful data on that until we get into the fall and they get into repayment.

Speaker #4: And certainly, I don't think it's necessarily a shorter duration. I think there will be a mixed issue of MBA loans, which will be very short, but medical and dental and other programs like that will be much longer and have much higher balances than our traditional undergrad products.

Speaker #4: I think broadly, the headlines are indicating that employers are hiring. Which is a little different than the headlines last summer. But I think it's really just too early to make a call on anything like that.

Speaker #4: So, I think it's hard for us to answer that perfectly until we get through our first peak season of originations and understand what the mix of this opportunity is going to look like.

Speaker #7: Thank you so much.

Speaker #1: Thank you. And we will take our last question from Caroline Lada with Bank of America. Please go ahead.

Speaker #4: So, as a result of that, it's really hard for me to give any other guidance on the forward look, other than I think by the end of this year, for the full year, we'll be close to that 5%, if not a little bit over.

Speaker #7: Hi. So maybe just heading into peak season, can you give us an update on the competitive landscape in the graduate market in terms of any changes in pricing or the credit box?

[Company Representative] (SLM Corporation): As a result of that, it's really hard for me to give any other guidance on forward look other than, I think by the end of this year, for the full year, we'll be close to that 5%, if not a little bit over. Over the longer term, we have not updated our point of view that deviates from our past long-term guidance. Kind of low to mid 5% range for now.

Pete Graham: As a result of that, it's really hard for me to give any other guidance on forward look other than, I think by the end of this year, for the full year, we'll be close to that 5%, if not a little bit over. Over the longer term, we have not updated our point of view that deviates from our past long-term guidance. Kind of low to mid 5% range for now.

Speaker #7: And then also, I think you guys talked about how the new products are trending pretty well, but are there any specific products or markets where you're sort of meaningfully exceeding the expectations you guys had internally?

Speaker #4: And over the longer term, we have not updated our point of view that deviates from our past long-term guidance of kind of low to mid-5% range for NIM.

Speaker #3: Yeah, Caroline. Sitting here in the middle of July, peak is really just a couple of days old. And so I think it's hard to sort of infer too much at this point.

Speaker #7: Got it. And maybe after the 2026 class graduates in May or June, is there any data that you can share about their employment trends—what you see, or what your expectation might be for the repayment for the second half of that new program?

[Analyst] (Jefferies): Got it. Maybe after the 2026 class graduating in May/June, is there any data that you can share about their employment trends? What you see or what your expectation might be for the repayment for the H2 on that note forward? Thank you so much.

Yuna Sohn: Got it. Maybe after the 2026 class graduating in May/June, is there any data that you can share about their employment trends? What you see or what your expectation might be for the repayment for the H2 on that note forward? Thank you so much.

Speaker #3: I think most of what we could talk about are sort of things that we've seen leading up to peak. And as I've described this in the past, I think typically, we have seen pretty rational pricing I think that continues.

Speaker #4: I think it’s—I think it’s too early. I mean, those grads are still in their grace period, so we won’t really start to see any meaningful data on that until we get into the fall and they get into repayment.

[Company Representative] (SLM Corporation): I think it's too early. Those grads are still in their grace period, so we won't really start to see any meaningful data on that until we get into the fall and they get into repayment. I think broadly, the headlines are indicating that employers are hiring, which is a little different than the headlines last summer. I think it's really just too early to make a call on anything like that.

Pete Graham: I think it's too early. Those grads are still in their grace period, so we won't really start to see any meaningful data on that until we get into the fall and they get into repayment. I think broadly, the headlines are indicating that employers are hiring, which is a little different than the headlines last summer. I think it's really just too early to make a call on anything like that.

Speaker #3: I think we have seen some modest pressure on sort of marketing expense and some modest increases in marketing activity. Nothing that I think we would view as being particularly out of the norm or things that we did not anticipate as a potential eventuality in plan for in sort of our outlook and sort of strategy.

Speaker #4: I think, broadly, the headlines are indicating that employers are hiring, which is a little different than the headlines last summer. But I think it's really just too early to make a call on anything like that.

Speaker #7: Thank you so much.

[Analyst] (Jefferies): Thank you so much.

Yuna Sohn: Thank you so much.

Speaker #3: So I think it's sort of progressing as we thought it would at this point. Again, with maybe a little bit of sort of upward marketing pressure.

Speaker #2: Thank you. And we will take our last question from Caroline Lada with Bank of America. Please go ahead.

Madison: Thank you. We will take our last question from Caroline Lara with Bank of America. Please go ahead.

Operator: Thank you. We will take our last question from Caroline Lara with Bank of America. Please go ahead.

Speaker #7: Hi, so as we head into peak season, can you give us an update on the competitive landscape in the graduate market in terms of any changes in pricing or the credit box?

Caroline Lara: Hi. Maybe just heading into peak season, can you give us an update on the competitive landscape in the graduate market in terms of any changes in pricing or the credit box? Also, I think you guys touched about how the new products are trending pretty well, but are there any specific products or markets where you're meaningfully exceeding the expectations you guys had internally?

Caroline Lara: Hi. Maybe just heading into peak season, can you give us an update on the competitive landscape in the graduate market in terms of any changes in pricing or the credit box? Also, I think you guys touched about how the new products are trending pretty well, but are there any specific products or markets where you're meaningfully exceeding the expectations you guys had internally?

Speaker #3: But I think it's fair to say we will know much more over the course of the next month or two and peak season is not long.

Speaker #7: And then also, I think you guys talked about how the new products are trending pretty well. But are there any specific products or markets where you're meaningfully exceeding the expectations you had internally?

Speaker #3: It's 8, 10 weeks. And certainly by the time we get to the third quarter, we'll have a good sense of that. And I think likewise in terms of volumes, it's hard to know.

Speaker #3: Obviously, the most important measure is disbursements. It's just we haven't started disbursing yet. That's not the point we are in in the academic calendar.

Speaker #1: Yeah, Caroline. Sitting here in the middle of July, peak is really just a couple of days old. And so, I think it's hard to sort of infer too much at this point.

Jon Witter: Yeah, Caroline. Sitting here in middle of July, peak is really just a couple of days old, I think it's hard to infer too much at this point. I think most of what we could talk about are things that we've seen leading up to peak, as I've described this in the past, I think typically, we have seen pretty rational pricing. I think that continues. I think we have seen some modest pressure on marketing expense and some modest increases in marketing activity. Nothing that I think we would view as being particularly out of the norm or things that we did not anticipate as a potential eventuality and plan for in our outlook and strategy. I think it's progressing as we thought it would at this point.

Jonathan Witter: Yeah, Caroline. Sitting here in middle of July, peak is really just a couple of days old, I think it's hard to infer too much at this point. I think most of what we could talk about are things that we've seen leading up to peak, as I've described this in the past, I think typically, we have seen pretty rational pricing. I think that continues.

Speaker #3: I think the data we provided in the investor presentation on application rates is probably the sort of best early indicator that we have of general activity levels.

Speaker #1: I think most of what we could talk about are the sorts of things that we've seen leading up to peak. And, as I've described this in the past, I think typically we have seen pretty rational pricing—and I think that continues.

Speaker #3: And as I said in my comments, I think we are encouraged by those activity levels. They are by product listed out in sort of at or slightly above our expectations for this point.

Speaker #1: I think we have seen some modest pressure on sort of marketing expense and some modest increases in marketing activity. Nothing that I think we would view as being particularly out of the norm or things that we did not anticipate as a potential eventuality and plan for in sort of our outlook and sort of strategy.

Jonathan Witter: I think we have seen some modest pressure on marketing expense and some modest increases in marketing activity. Nothing that I think we would view as being particularly out of the norm or things that we did not anticipate as a potential eventuality and plan for in our outlook and strategy. I think it's progressing as we thought it would at this point.

Speaker #3: But again, all of that with the caveat of it's early, but we like what we are seeing so far.

Speaker #7: Okay. Great. Thanks.

Speaker #1: Thank you. This concludes the Q&A portion of today's call. I would now like to turn the floor over to Mr. John Butter for closing remarks.

Speaker #3: Great. Thank you, Madison. Appreciate your help today and appreciate everyone's time and attention this afternoon. Obviously, if you have questions, please feel free to reach out to our IR team.

Speaker #1: So I think it's sort of progressing as we thought it would at this point—again, with maybe a little bit of upward market pressure.

Jon Witter: Again, with maybe a little bit of upward marketing pressure. I think it's fair to say we will know much more over the course of the next month or two. Peak season is not long. It's eight, 10 weeks, certainly by the time we get to Q3, we'll have a good sense of that. I think likewise, in terms of volumes, it's hard to know. Obviously, the most important measure is disbursements. It's just we haven't started dispersing yet. That's not the point we are in in the academic calendar. I think the data we provided in the investor presentation on application rates is probably the best early indicator that we have of general activity levels. As I said in my comments, I think we are encouraged by those activity levels.

Jonathan Witter: Again, with maybe a little bit of upward marketing pressure. I think it's fair to say we will know much more over the course of the next month or two. Peak season is not long. It's eight, 10 weeks, certainly by the time we get to Q3, we'll have a good sense of that. I think likewise, in terms of volumes, it's hard to know. Obviously, the most important measure is disbursements. It's just we haven't started dispersing yet. That's not the point we are in in the academic calendar.

Speaker #3: They stand by ready and willing to help. We look forward to talking to you again in the third quarter and updating you on what we hope will be a really successful peak season and until then, again, thank you for your interest in Sally Mae.

Speaker #1: But I think it's fair to say we will know much more over the course of the next month or two, and peak season is not long.

Speaker #1: It's eight to ten weeks. And certainly, by the time we get to the third quarter, we'll have a good sense of that. I think likewise, in terms of volumes, it's hard to know.

Speaker #3: Have a good evening. Oh, I'm sorry. Kate, we're turning it back to you for some closing business.

Speaker #1: Thanks, John. Thank you for all your time and questions today. A replay of this call, the presentation will be available on the investor's page at sallymae.com.

Speaker #1: Obviously, the most important measure is disbursements. It's just that we haven't started disbursing yet. That's not the point we are in on the academic calendar.

Speaker #1: If you have any further questions, feel free to contact me directly. This concludes today's call. Thank you. This concludes today's Sally Mae second quarter 2026 earnings conference call and webcast.

Speaker #1: I think the data we provided in the investor presentation on application rates is probably the best early indicator that we have of general activity levels.

Jonathan Witter: I think the data we provided in the investor presentation on application rates is probably the best early indicator that we have of general activity levels. As I said in my comments, I think we are encouraged by those activity levels. They are by product listed out and sort of at or slightly above our expectations for this point. Again, all of that with the caveat of it's early, but we like what we are seeing so far.

Speaker #1: And as I said in my comments, I think we are encouraged by those activity levels. They are, by product, listed out sort of at or slightly above our expectations for this point.

Jon Witter: They are by product listed out and sort of at or slightly above our expectations for this point. Again, all of that with the caveat of it's early, but we like what we are seeing so far.

Speaker #1: But again, all of that with the caveat that it's early, but we like what we are seeing so far.

Speaker #7: Okay. Great. Thanks.

Caroline Lara: Okay, great. Thanks.

Caroline Lara: Okay, great. Thanks.

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

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

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

Speaker #1: Great. Thank you, Madison. I appreciate your help today, and I appreciate everyone's time and attention this afternoon. Obviously, if you have questions, please feel free to reach out to our IR team.

Jon Witter: Great. Thank you, Madison. Appreciate your help today and appreciate everyone's time and attention this afternoon. Obviously, if you have questions, please feel free to reach out to our IR team. They stand by ready and willing to help. We look forward to talking to you again in Q3 and updating you on what we hope will be a really successful peak season. Until then, again, thank you for your interest in Sallie Mae. Have a good evening. Oh, I'm sorry. Kate, we're turning it back to you for some closing business.

Jonathan Witter: Great. Thank you, Madison. Appreciate your help today and appreciate everyone's time and attention this afternoon. Obviously, if you have questions, please feel free to reach out to our IR team. They stand by ready and willing to help. We look forward to talking to you again in Q3 and updating you on what we hope will be a really successful peak season. Until then, again, thank you for your interest in Sallie Mae. Have a good evening. Oh, I'm sorry. Kate, we're turning it back to you for some closing business.

Speaker #1: They stand by, ready and willing to help. We look forward to talking to you again in the third quarter and updating you on what we hope will be a really successful peak season. Until then, again, thank you for your interest in Sallie Mae.

Speaker #1: Have a good evening. Oh, I'm sorry. Kate, we're turning it back to you for some closing business.

Speaker #6: Thanks, John. Thank you for all your time and questions today. A replay of this call and the presentation will be available on the investors' page at salliemae.com.

[Company Representative] (SLM Corp): Thanks, John. Thank you for all your time and questions today. A replay of this call and the presentation will be available on the investor page at salliemae.com. If you have any further questions, feel free to contact me directly. This concludes today's call.

Kate deLacy: Thanks, John. Thank you for all your time and questions today. A replay of this call and the presentation will be available on the investor page at salliemae.com. If you have any further questions, feel free to contact me directly. This concludes today's call.

Speaker #6: If you have any further questions, feel free to contact me directly. This concludes today's call.

Speaker #2: Thank you. This concludes today's Sally Mae second quarter 2026 earnings conference call and webcast. Please disconnect your line at this time and have a wonderful evening.

Madison: Thank you. This concludes today's Sallie Mae Q2 2026 earnings conference call and webcast. Please disconnect your line at this time and have a wonderful evening.

Operator: Thank you. This concludes today's Sallie Mae Q2 2026 earnings conference call and webcast. Please disconnect your line at this time and have a wonderful evening.