SLM Corp Q3 FY2025 Earnings Call

Thank you, Chloe. Good evening, and welcome to Sallie Mae's Third Quarter 2025 Earnings Call. It is my pleasure to be here today with Jon Witter, our CEO; Pete Graham, our CFO; and Melissa Bronaugh, Managing Vice President of Strategic Finance. After the prepared remarks, we will open the call for questions. Before we begin, keep in mind our discussion will contain predictions, expectations, and forward-looking statements. Actual results in the future may be materially different from those discussed here due to a variety of factors. Listeners should refer to the discussion of those factors in the company's Form 10-Q and other filings with the SEC. For Sallie Mae, these factors include, among others, results of operations, financial conditions, and/or cash flows, as well as any potential impact of various external factors on our business. We undertake no obligation to update or revise any predictions, expectations, or forward-looking statements to reflect events or circumstances that could occur after today, Thursday, October 23, 2025. Thank you. And now I'll turn the call over to Jon.

Thank you, Kate and Chloe. Good evening, everyone. Thank you for joining us to discuss Sallie Mae's Third Quarter 2025 results. I hope you'll take away three key messages today. First, we delivered a successful quarter and peak season. Second, we're pleased with our year-to-date performance and believe we have real momentum that will carry us through the rest of the year. And third, we're optimistic about the long-term outlook for private student lending and the growth of Sallie Mae. Let me begin with the quarter's results. GAAP diluted EPS in the third quarter was $0.63 per share. Loan originations for the third quarter were $2.9 billion, representing 6.4% growth over the year-ago quarter and 6% growth year-to-date. We were pleased to see that the credit quality of originations remains strong, showing incremental improvement year-over-year and steady but meaningful improvement over the last several years. Our cosigner rate for the third quarter was 95% compared to 92% in the year-ago quarter and the average FICO score at approval increased to 756 from 754. These indicators reflect continued discipline in our underwriting standards. We have continued to see positive momentum in our credit performance. Private education loan net charge-offs in Q3 of '25 were $78 million, representing 1.95% of average private education loans in repayment, down 13 basis points from the year-ago quarter. While we are certainly living in a period of economic ambiguity, we have not observed any material change in our borrowers' ability to meet their obligations to Sallie Mae. During the third quarter, we successfully completed the previously announced sale of approximately $1.9 billion in loans, generating $136 million in gains. We continued our capital return strategy in the third quarter, repurchasing 5.6 million shares at an average price of $29.45 per share. Since initiating this strategy in 2020, we have reduced our outstanding shares by 55% with an average price of $16.75. Pete will now take you through some additional financial highlights of the quarter.

Thank you, Jon. Good evening, everyone. Let's continue with a discussion of key drivers of earnings. For the third quarter of 2025, we earned $373 million of net interest income. This is up $14 million from the prior year quarter. Our net interest margin was 5.18% for the quarter, 18 basis points ahead of the year-ago quarter, with 13 basis points behind the prior quarter given the drag from the initial liquidity that we hold to satisfy the requirements of peak season. We continue to believe that an annual NIM target in the low to mid-5% range remains appropriate over the longer term. Our provision for credit losses was $179 million in the third quarter, down from $271 million in the prior year quarter. This was largely due to $119 million of provision release resulting from the third quarter loan sale. Our total allowance as a percentage of private education loan exposure modestly improved to 5.93%, slightly below the prior quarter's 5.95% and just 9 basis points above the year-ago quarter. The change from the year-ago quarter results from a few factors. As we noted last quarter, the Moody's economic forecast that we use in our CECL models has deteriorated, driving a significant portion of the increase to our allowance. This model-driven impact was partially offset, however, by continued improvements in our credit performance and portfolio quality. At the end of the third quarter, 4% of private education loans in repayment were 30 days or more delinquent, up from 3.6% at the end of the year-ago quarter. It's important to note that this year-over-year increase is largely attributable to changes we made last year to our loan modification eligibility criteria. Specifically, since October of last year, we've restricted loan modifications to those who are at least 60 days delinquent. This change was purposeful based on our observation that many early-stage delinquent borrowers tend to self-cure without intervention. We believe that approximately 25 basis points of delinquencies this quarter can be attributed to borrowers who would have qualified for a modification prior to entering our reported delinquency buckets under the prior eligibility criteria. Importantly, we've seen stability in our late-stage delinquencies and roll rates. Our loan modification programs continue to deliver strong results. When we look at borrowers who have been in the programs for over a year, 80% are consistently making payments. Additionally, following the previously mentioned change, monthly loan modification enrollments declined and have now stabilized around half the level that they were prior to the change. We continue to believe that our loss mitigation programs are helping our borrowers manage through periods of adversity and establish positive payment habits. Third quarter noninterest expenses were $180 million compared to $167 million in the prior quarter and $172 million in the year-ago quarter. This aligns with our full year outlook and positions us well as we head into the final months of the year. And finally, our liquidity and capital positions remain strong. We ended the quarter with a liquidity ratio of 15.8%, total risk-based capital was 12.6%, and common equity Tier 1 capital was 11.3%. We're encouraged by the exciting opportunities ahead as we continue to grow and evolve our business, enabling strong return of capital to shareholders moving forward. Now I'll turn the call back to Jon.

Thanks, Pete. I hope you share my belief that our third quarter performance reflects strong execution and positions us well to sustain momentum through the remainder of 2025. As we look ahead, we're optimistic about the impact of recent federal reforms and the opportunities they create for our industry and for Sallie Mae to better serve students and families. As the leading private student lender, Sallie Mae is well positioned to support them through this transition. At the same time, we recognize that these changes create new challenges for our school partners. We are proud to be working closely with many of them to design innovative solutions that help ensure students can access and complete their desired degrees. In parallel, we have been actively exploring alternative funding partnerships in the private credit space to expand our ability to serve students. We expect to announce a first-of-its-kind partnership in the near term, and we'll share more details soon after. We view this as a strategic step toward unlocking the value of our attractive customer base, setting the stage for sustainable growth of capital-light fee-based revenues. We are looking forward to sharing more at a second investor forum later this year. Let me conclude with a discussion of 2025 guidance. To kick off this partnership, we anticipate selling both a small portfolio of seasoned loans and a portion of our recent peak season originations either in the fourth quarter or early in 2026. Accordingly, we expect to designate a portion of our loans as held for sale prior to the end of the year. As a result, we now expect our GAAP earnings per common share for 2025 to be between $3.20 and $3.30. At the same time, we are reaffirming all other elements of our 2025 outlook, including originations growth, net charge-offs, and noninterest expense metrics, reflecting continued confidence in our strategic trajectory. With that, Pete, why don't we go ahead and open up the call for some questions?

Our first question is coming from Moshe Orenbuch with TD Cowen.

Great. I have a couple of thoughts and questions. First, is there a way to consider the performance of the current delinquency beyond the end of the year? I know it's not typical for you to provide guidance past the current year, but we've looked at roll rates and noticed some improvement, although there are concerns about the level of delinquency. Could you give us any insight into how you expect the current book to perform over the next several quarters?

Yes, Moshe, it's Pete here. I think, look, we've been really pleased with the performance of the loan modification programs. We are encouraged by the stability we've seen in terms of new entrants to the programs that we've seen over the last few quarters. Given the seasonality of our business, yes, early-stage delinquencies ticked up a little bit in this quarter, but we don't view that as anything troubling in terms of longer-term trends. And we expect to continue to see stability in the late-stage delinquencies and our roll rates. And so we're comfortable with the guidance we've given through the end of this year, and we continue to believe that kind of high 1s, low 2% net charge-off rate is the right way to think about us over a longer term.

Got it. I assume your new partner in this sale has also considered this. Can you provide us with more details on how to approach that sale and what the terms would be like?

We are in the final stages of finalizing the deal, and we will share more details once it is completed. We are eager to discuss what this means for our future during the upcoming investor forum, as Jon mentioned.

We'll take our next question from Jeff Adelson with Morgan Stanley.

Just wanted to circle back on the modification question. Listen, I recognize that the pace of modifications has slowed. And if we look at the 10-Q disclosure on the payment status table, the volume of modifications over the past 12 months has come down a lot. But if we do look at that table, it does seem like there's a higher percentage of 12-month modifications rising on a delinquency basis. So just maybe some color there. And how are you thinking about the roll-off of those modifications as borrowers are graduating out over the next 12 months?

Yes. Again, we're happy with the performance of people in the modifications. For those that have been in for 12 months or longer, there's strong sort of payment patterns among that cohort. And we believe that these programs have been successful in helping people through a period of stress and to establish positive payment patterns. And so we're optimistic as we look to those sort of first graduating wave from these that will have a high degree of success, and that's something that we're keeping an eye on.

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

Yes. Again, we're close to being done, but we're not done. So I can't share too much detail. We've said pretty consistently that we were looking to establish a multiyear arrangement with a strategic partner, and that still holds true. I think if you consider Jon's comments around our revision of guidance, the fact that we're designating a portion of our portfolio of loans as held for sale as we go into the fourth quarter, that's an indicator that we have loans in the current book that are going to be part of it.

We'll move next to Mark DeVries with Deutsche Bank.

I have a follow-up question on Moshe's first question regarding the outlook for credit, considering the current delinquency trends. I understand that you mentioned approximately 25 basis points of the delinquencies are related to changes in eligibility for loan modifications, but that still suggests we're seeing an increase year-over-year. You've indicated that roll rates are stable, not necessarily improving. So, is it accurate to assume that delinquencies, at best, or charge-offs as we look ahead will be flat or possibly slightly higher, given the year-over-year increase in net delinquencies?

Yes, Mark, it's Jon. I'm not sure I have a lot to add over what Pete said to Moshe. But look, I think if you look at the overall delinquency trend, I think the change in program terms really accounts for the majority of the change in the delinquency rate year-over-year. We obviously have a methodology for figuring that out that points to the specific cases that we know with certainty. By the way, there's a sort of confidence band around that; it could be even a little bit higher. But I sort of consider delinquencies to be sort of plus or minus flat within sort of normal operational variability that we're seeing in the book. And I think as Pete said, we feel pretty comfortable about the roll rates being consistent and flat and the performance of the modifications. So as I mentioned, we are certainly in an ambiguous economic environment. It's hard to make predictions now 15 months out if you start to think about the end of next year. So we're not going to do that here today. But I think we continue to feel confident in sort of the long-term through-the-cycle sort of metrics that we laid out before, the 1.9% to sort of 2.1% numbers that have been commonly cited. And I think we believe that we're delivering on those commitments pretty well and are excited to continue that progress next year.

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

Yes. I mean, I think, Mark, a couple of thoughts. One, I think we put up over 6% origination growth for the quarter year-over-year. That's really strong and I think attractive origination growth that I think probably fares and compares well with what a lot of other consumer credit-oriented companies would do. So one, I don't think we're making any apologies for the level of originations growth that we've seen. Two, as I think Pete shared at a conference earlier this fall, there are gives and gets every year in how we think about originations growth. We, every year, strive to be better, more efficient, and more effective in our marketing. I think we've done that. You've seen that in our cost of acquisition coming down over time. We've also been really thoughtful about ways that we can continue to hone and refine our underwriting models to make sure that we are sort of getting the very best type of customer that we can and the ones that will really maximize our ROEs. And I think Pete shared that over the last 3 or 4 years, we've taken roughly $600 million to $700 million a year out of our annual originations. So the growth rates that we're talking about, which I think are really attractive growth rates are happening simultaneously to us improving pretty dramatically the quality of our originations. I think that's a trade our investors really do like and should like. That's value creation. I think this year, we had a plan that we thought would get us to slightly higher originations growth in light of the headwinds of sort of those underwriting changes. I think we executed most of it. We didn't quite get all of it. But again, I think we believe we are on a trajectory, and we've built a marketing machine that will allow us to continue to sort of maintain and at times, potentially grow our already industry-leading market share. We see no reason to believe that we won't continue our successful growth next year. And we look forward to not only competing for the traditional business we have, but quite frankly, also competing very hard for the emerging PLUS opportunity as it unfolds.

We will take our next question from Terry Ma with Barclays.

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

Yes. I think I covered it in my prior comments, Terry, that like we feel like the combination of the loan modification programs we put in place are going to behave as we intended them to do when we designed the programs. And what we're seeing so far with those programs is that we've got stable levels of late-stage delinquency and the roll rates are stabilized as well. So like that's our expectation going forward. Again, barring any exogenous sort of market event, we feel like we're set up for success there. And we reconfirmed our guidance for this year, and we reconfirmed our longer-term read on destination net charge-off range. I'm not sure what more we can say.

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

Terry, we won't have share numbers for the quarter for probably another month plus on that. We have always had a grad business. It is one that, in the grand scheme of all the Grad business out there, was relatively small because of the Grad PLUS position from the government. There were only pockets where we felt like we could really profitably compete with the Grad PLUS program. We have obviously, since PLUS reform was announced, started to pay a lot more attention to the opportunities to innovate in our graduate marketing. I think we felt like it was important to sort of continue to break out our sort of Grad performance. And so my guess is the result is probably in part the change of a little bit of customer behavior. I think we don't quite know that yet, but it wouldn't surprise me. I think it's also just a focus of us beginning to gear up and get ready for what we think will be a much larger opportunity ahead. But we see it as an exciting opportunity for us, not only in next year's volume, which given the phase-in of the PLUS reform is going to be smaller, but really playing out here over the course of the next couple of years.

We'll move next to Don Fandetti with Wells Fargo.

In terms of the recent credit and ABS market volatility, do you think that's going to impact your gain on sale margins for the Q4, Q1 production? And is the 7% this quarter sort of a good base level run rate?

Yes. I think what I would say there is, there's different phases in the cycle. We've done over time, pretty successful loan sales over a multiyear period in kind of that mid- to high single-digit range. Sometimes we've gotten above that. Sometimes we're a little below that. But I think it's really tied to kind of where spreads are in general at any point in time when we're executing a trade. At the margins, it can also be impacted by the implied structure that the purchaser is intending to use for their leverage takeout as well.

We'll take our next question from Sanjay Sakhrani with KBW.

Pete, I want to clarify the impact of the fourth quarter on moving those loans to held for sale. Does that mean you recognize provisions? I'm trying to understand if this provides an earnings benefit, rather than just the actual gain on sale that you recognize.

Correct. When accounting for loans held for sale, it is essentially valued at a lower market cost. If you expect a premium, there is no change in the value of the loans themselves, and you can continue to carry them at their original value. Additionally, since they are held for sale, there is no need to allocate a CECL provision against them. Therefore, the impact reflected in our updated guidance is the release of that provision.

Got it. And is there any way to sort of dimensionalize that as far as sort of what the contribution was to the annual guide?

Again, you need to know the exact amount of loans that have been reclassified, which we haven't disclosed. And it's roughly the CECL reserve rate that we talk about each quarter that gets released.

Okay. You guys haven't disclosed that yet what you've reclassified?

Correct.

Okay. Jon, I'd like to follow up on the repayment wave expected in November. There's been a lot of discussion about graduates facing a tough job market. Do you have any insights into how these cohorts might behave as they start repayment, or is it more of an uncertain situation?

Yes, Sanjay, that's a great question. I've read the same articles as you and have noted the same facts. Let me clarify a few points. First, the transition period for students graduating and entering adulthood has always been challenging and will likely continue to be. This is evident as nearly half of all financial distress occurs within the first year or two after they complete their education and begin repayment. It's a time when unemployment tends to be higher and financial difficulties more common. This is why we have developed our programs; we are skilled at educating and guiding our students and their cosigners through the transition to higher education. This period is crucial for our performance. Secondly, if we examine early graduate unemployment rates, particularly for those aged 20 to 24, and exclude the unusual impact of the COVID years, we find that in the past three years, these rates have remained slightly elevated compared to pre-COVID levels. Interestingly, despite concerns about the current graduating class, the unemployment rate for early-stage graduates has only increased by about 10 basis points from last year, which is a smaller percentage than anticipated. While I previously mentioned that we are navigating ambiguous economic times, it's important to note that these conditions have yet to be reflected in our results. As the leader of a credit-focused company, I refrain from speculating on future economic conditions, but I acknowledge the challenges presented by unemployment. We are well-prepared to tackle this issue, and the year-over-year impacts are not as severe as commonly perceived. The data supports this, and our performance remains steady. However, we are not complacent; we are actively engaging with our borrowers and enhancing our outreach programs for upcoming graduates to assist them during this critical transition as we prioritize their success and that of their families.

We'll move next to Rick Shane with JPMorgan.

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

Yes, Rick, let me address those points in reverse order, and I'll ask Pete to add anything I might overlook at the end. We have not included any assumptions about a gain on sale in our guidance. We have clearly stated that the actual loan sale is expected to occur either in the fourth quarter or the first quarter, but we do not have a specific timeline yet. We felt it was not appropriate to factor the gain into our outlook. Therefore, there is nothing regarding the gain in our guidance. What we mentioned is that we anticipate finalizing this deal soon. When that happens, we will identify the loans involved in that initial deal, and as part of proper accounting practices, we will start accounting for those loans differently at that point, regardless of whether the closing date occurs in 2025 or 2026. Hopefully, that clarifies your question. We've tried to provide you with clear information so that you can model it correctly. I'm sorry, what was your question?

I was going to say that's helpful. Basically, the reserve release is contemplated in that guidance, but you're not embedding a gain on sale. If the deal closes in the fourth quarter, it's probably upside to the number?

Correct. Regarding your question about what has strategically changed, the short answer is nothing, but it is a bit more nuanced. We remain very committed to the strategy we presented at the Investor Forum two years ago in December, which focuses on modest balance sheet growth for the bank, utilizing loan sales to manage that growth, and maintaining an aggressive return of capital. What has changed since then are two main factors: first, the PLUS reform, which when fully implemented, could significantly boost our annual originations, as we have discussed in past calls. The second change is the growth in both the size and sophistication of private credit, as well as our capability to develop a new third funding source and a legitimate business around it. We see a spectrum where one end focuses on growing the bank’s balance sheet, which results in stable, high-quality earnings but requires substantial capital. On the opposite end, we have our traditional loan sale program, which offers attractive earnings and capital benefits but with more earnings volatility, as mentioned by Pete earlier. We believe we can create a model that falls in between, potentially leading to more stable long-term earnings. This new approach would be easier to manage and model, almost resembling an asset under management structure, while also maintaining attractive capital characteristics. As you know well, we prioritize capital efficiency and returns as our guiding principle. What we have been discussing lately is the excitement around developing this third component of our strategy, especially as we approach the implementation of PLUS reform. This will likely prompt us to reconsider our balance sheet growth levels in the coming quarters as we initiate this new venture. Overall, our core strategy remains unchanged, but we are enthusiastic about this new opportunity that we believe will enhance our capabilities.

We'll move next to Giuliano Bologna with Compass Point.

I appreciate the feedback regarding the new program. Regarding that program and its accounting aspects, I'm interested in knowing about the loans being transferred to held for sale. Is this just for the initial sale you have planned, or will you continue to roll loans into held for sale as you execute the program? Also, will those increase similarly to the current loan sales?

Yes. So the idea and the intent is to create a multiyear partnership arrangement. The specific loans that we've identified are sort of the start of that relationship. And so over time, we would have ideally some portion of our new originations that would go into this new partnership.

That's helpful. We should expect a continuous flow of loans to be directed into held for sale at a lower cost of market moving forward. When considering the guidance range, it seems that to align with it, a figure well into the $1 billion, possibly even close to $2 billion, would need to be moved to held for sale regarding the reserve releases. Is that completely inaccurate, or am I on the right track?

I mean, again, the simple math would be our reserve rate times a notional number. So that's probably about all I'm comfortable giving you on the call.

That's helpful. Just one quick question. I realize that the previous questions have been raised several times. There has clearly been a structural change in how you're handling forbearance modifications and addressing delinquencies. You've provided a lot of commentary about your expectations for ultimate improvements. I'm interested in your thoughts on the overall accounting impact. Will the reduced use of forbearance and increased use of modifications in the post-COVID period and moving forward be beneficial in terms of fewer interest rate reversals, potentially affecting the delinquency rate and improving charge-offs over time? Or is it possible that charge-offs could be higher, but you have fewer interest rate reversals because more loans are reperforming, resulting in a net benefit?

Yes. If you take a step back and look at our use of forbearance to manage early-stage repayment stress, the levels of individuals in forbearance compared to those in modification programs are quite consistent. While it isn't a perfect one-to-one comparison, the overall trend is similar. We shifted from using forbearance as a temporary measure to a more systematic approach that adjusts based on the borrower’s payment capability. We believe that the new programs we've implemented are well-suited to the needs of borrowers. The performance metrics from these programs are encouraging and indicate they are structured correctly. As borrowers transition out of these programs and return to their original payment terms, we anticipate a high level of success.

We'll move next to John Arfstrom with RBC Capital.

How are you thinking about buyback appetite at this point and the authorization as well?

John, it's Jon. I think the way that I would say that is, first of all, we are delighted with how our buyback program has performed through the course of this year. If you look at the numbers we just announced, we were obviously very active in the marketplace over the last couple of months during this period of dislocation. And I think bought back stock on attractive terms and at prices that I think when we look back in a month or two or a quarter or two, we're going to feel absolutely great about. We've obviously talked a lot about the partnership on this deal. We've talked a lot about sort of the various gives and takes to sort of our balance sheet and business model over the course of the next quarter or two. I think our view is we will sit back as we get this partnership across the goal line. We will look at the exact timing of that. We will determine, therefore, what's our appetite to do sort of additional share buybacks, how much of that we're going to do. And we'll set up our plan to sort of execute that over the course of this and coming quarters. So I can't comment today any more specifically on what it's going to be. I think we have to get through a couple of these sort of moving pieces. But I think you should expect, as has been the case for the last five years, we remain really committed to buying back our stock aggressively. It's something that we feel is an important thing that drives shareholder value. And we'll continue to do so at the time and in the quantity that we deem to be correct.

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

I believe this quarter is particularly a peak season due to the timing of repayment waves. Therefore, I anticipate this to be a high point for delinquencies within any year. Regarding absolute levels, we are not overly concerned about those figures. Our focus is on late-stage delinquency levels, roll rates, and how these factors relate to net charge-offs. We feel confident in the programs we've implemented and their performance.

Okay. If I could ask one more thing, Jon, from a broader perspective. There's a lot of noise surrounding consumer health, job market entrants, and delinquencies. Given the volatility in your stock this quarter, do you think we're being too pessimistic about the credit outlook? Are we overreacting, or do you have any larger thoughts on this matter?

Yes, John, I don't have much to add to my previous response. We've observed a minimal change year-over-year in the unemployment rate among early college grads or young college grads aged 20 to 24. As I mentioned earlier, we haven't seen this uncertain economic environment affect our customers' ability to meet their financial commitments to Sallie Mae. It's difficult for me to determine if the concerns are overstated. I can say we have not experienced the outcomes suggested by some reports. We are taking this matter seriously and will keep monitoring it. Graduation time often brings higher unemployment and increased financial stress, but I don't see anything unusual at the moment compared to our expectations.

We'll move next to Caroline Latta with Bank of America.

I just wanted to ask, how are you guys thinking about the opportunity from the PLUS program and other federal government policy changes?

Yes, Caroline, I probably won't do it justice here today. I think we see it as an important opportunity for the private student lending market to step in and help support families and students through sort of this time of transition. We gave some numbers on the last call of what we thought that could be worth in terms of annual origination changes to us when fully implemented. And I think we were thinking about that, if memory serves in the sort of $4 billion to $5 billion range. That will not all be sort of recognized in year one. The PLUS reform phases in sort of each year. So if you're enrolled in a program and you've taken a loan before, I think it's July 1 of next year, you're grandfathered in under the old program. So that means it's really next year's undergraduate freshmen and graduate school first years that are sort of under the new program. So you have to sort of build it up over time based on the average length expectancy of sort of each of those programs. But if you go back and you look at sort of the details we provided on the last call, I think you'll get a pretty good sense of that.

Awesome. And then maybe just a follow-up. Are you seeing any differences in how graduate loans are performing versus undergraduate loans in terms of like entry into delinquency and roll rates?

Yes. We have a number of different grad programs. It is an apples-to-oranges comparison. All the different programs perform differently. But all of them are sort of governed under the same kind of return and lifetime loss thresholds and standards that we hold. So while the timing and the patterns might be a little bit different, the underlying sort of decision and governance matrix and framework is the same. So yes, they're different on the surface, but we like those loans every bit as much as we like our other loans.

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.

Chloe, thank you, and thank you to everyone who joined today. We appreciate your ongoing interest in Sallie Mae. We look forward to speaking with all of you at the upcoming Investor Forum, which we will schedule here in the weeks ahead, but will happen before the end of the year and obviously look forward to continuing the conversation as well next quarter. With that, Kate, we'll turn it over to you for some closing business.

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

This concludes today's Sallie Mae Third Quarter 2025 Earnings Conference Call and Webcast. Please disconnect your line at this time, and have a wonderful evening.