SLM Corp (SLM) Q2 2026 Earnings Call Transcript

Welcome to the Sallie Mae Second Quarter 2026 Earnings Conference Call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for your questions following the prepared remarks. If you would like to ask a question at that time, please press star 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2. So others can hear your questions clearly, we ask that you pick up your handset for best sound quality. Lastly, if you should require operator assistance, please press star zero. I would now like to turn the call over to Kate DeLacy, Vice President, Investor Relations.

Please go ahead. Thank you, Madison. Good evening and welcome to Sallie Mae's 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 Bernat, 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 10Q 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 impacts of various external factors on our 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 23rd, 2026. Thank you, and I'll now turn the call over to John.

Thank you, Kate and Madison. Good evening, everyone. Thank you for joining us to discuss Sallie 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. It's been just over a year since federal plus reform reshaped the higher education financing landscape and created the potential for a four and a half to five billion dollar increase in annual originations for Sallie Mae over the next several years. 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. 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. 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. 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 five of our earnings presentation are at the higher end of our expectations or better. 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. 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. 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 remain strong at 84 percent. 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. In response to this, we have taken deliberate steps to increase control over our post-default 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. 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 percent over six- and 12-month periods. Looking specifically at borrowers who have begun to exit the programs, over 75 percent are consistently making payments after three and six 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. Pete will now take you through some additional details.

Pete? 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. 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. That interest margin was 4.75% for the quarter. As previously communicated, we expected NIMH to moderate modestly during the quarter, primarily reflecting the higher liquidity levels following the loan sale completed in late March. Looking towards 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. As a result, we believe the second quarter will likely represent the low point per 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. 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 the first quarter of 2026 our reserve rate was 5.89 percent at the end of the quarter down six 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 dollars in the second quarter down from 149 million dollars in the year ago 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 and 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 percent an increase of just seven 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 dollar accelerated share repurchase program. 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. Year-to-date, we have repurchased approximately 13 million shares, or 6.5 percent 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 percent at an average price of 17.19 cents per share underscoring our disciplined approach to long-term value creation 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. 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 one 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'll now turn the call back to John.

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. 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. 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. 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 pete why don't we go ahead and open up the call 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 2 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 yeah thanks um pete i think you mentioned you expect 2q to maybe be the low point and then then for the year um but any color you can give us on kind of the trajectory uh for that in the back half yeah uh thanks mark um yeah i think as we deploy uh you know the liquidity during during the peak season we'll start to normalize uh you know probably closer to our long-term target range of kind of five five percent i don't think we'll get you know too far up in that normal range but i think plus or minus we should track uh there for the for the full year okay got it and then um any updates you can provide on ongoing conversations with a new you know, loan sale partner and also any optimism you may have that buyer could help expand your credit box and the TAM? Yeah, sure. You know, 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. We selected a partner to go into battle 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 there, sort of openness to our asset class and, you know, 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 the third quarter or early fourth quarter at the latest in time for us to potentially put some of our peak origination volume into the new partnership great thank you thank you and our next question is coming from moshe or in book with td calwin please go ahead great um i'm hoping that maybe pete you could give us a little bit of uh you know additional detail as to how the current partnership is going

you know, and how we should think about the revenue components, you know, both periodic and, you know, kind of ongoing from that. And if, you know, if there are any differences that you've kind of incorporated into the discussions with the new partner, or would it be similar? Thanks.

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

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

Yeah, Moshe, let me sort of provide the perspective as 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, you know, given, you know, broader macroeconomic, technological, you know, sort of concerns and the like. I think that is why we have worked really hard, you know, 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, you know, with this particular segment in question 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. You know, let me first start with what was the hot topic for the last couple of years, which is loan modifications. And, you know, I think if you rewind the tape motion, 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, you know, six plus, six months plus of performance with some of these customers, you know, obviously less with others as they roll out of the mods. And I think the data we've provided is, I hope, helpful, useful, and encouraging. You know, 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, you know, in the overall investor presentation. And we feel great about that and, you know, have not seen, you know, 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. 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, 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 and setting sort of new baseline levels of expectation going forward. You know, in terms of the core performance of the portfolio, you know, I think the simple math, you know, I would point you to is I think, you know, we've been very clear that the The sort of recovery gap has been estimated to be about $25 million on this, you know, segment in question. You know, I think it is notable we have only, you know, raised, you know, sort of 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, you know, the rest of our segments and the rest of the components, you know, 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. You're well familiar with the normal seasonal patterns that we have in the business. And, you know, those patterns, I think, continue to, you know, sort of mature and set. 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 and remain committed that based on everything we see today, you know, we are optimistic about what we're seeing in the general credit performance.

Great. Thanks very much.

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

Just a quick question of the pretty meeting fleet. Do you expect loan yields as we move through the back part of the year in terms of?

Yeah, I think some of that's a little bit of a distortion by the fact that second quarter is kind of our lowest origination quarter and the mix of loans that are coming in. You know, we fully expect that as we get into the heart of our peak season that, you know, traditional yield patterns will sort of start to reemerge. incorporated in your expectations for this year, and if there was any... Yeah, I think, yeah, certainly can address that. I think one thing to remember is, you know, when we're selling the newly originated loans, we're selling the price that we're getting up front, the initial disbursement, as well as the gain on the second disbursement, because that's just the way the accounting model works for selling, you know, an undisbursed loan that has two component parts. So that kind of front loads a little bit the gain with the newly originated loans. 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, you know, 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.

Thank you. And our next question is coming from Terry Maugh with Barclays. Please go ahead.

Hi, thank you. Maybe just starting off 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. So, like, any color on the moving pieces would be helpful.

Yeah. Thanks, Jerry. Again, I think, you know, there's some moving parts here. Obviously, you know, we talked about the change in our net charge-offs guidance. So, like, you know, we're operating in the higher end of our original plan there. And we, although we've covered a portion of, you know, the anticipated impact from this segment of borrowers and changing our recovery strategy, you know, we still got to get through that over the second half of this year. But that, based on, you know, 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, you know, last quarter. So we feel good about both our net charge-off updated range as well as the previously released, you know, range of earnings per share. Got it. Okay.

And then if I think about credit for the second half, you know, 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? You guys did have a sizable cohort exit extended grace this quarter.

Yeah, Terry, I think the general seasonal patterns are probably right. You know, there's a few things that will affect delinquency trends that are worth just considering. You know, 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, you know, 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, you know, Terry, over time, you know, a modest impact driven by the fact that, you know, we are selling new originations now for the first time. And some of those new originations, you know, are defined as in repayment based on their, you know, sort of deferral status. And we know that loans that are in school, you know, tend to experience financial distress at a much lower rate. So, you know, I think you've got a couple of those factors that are working that, you know, can move some of the seasonal patterns a little bit on the margin. But I think, you know, sort of the seasonal patterns, plus or minus, keeping in mind those types of considerations, you know, is probably the right zip code for you to be thinking about. Great. Thank you.

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

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, you know, enable you to turn those back on or is this more of a permanent change?

Sure, 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. 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, you know, resolution companies that we talked about are really targeting customers that do have an ability to pay and are relying on kind of the backdoor in our recoveries process to pick up the loans at a discount in a way that disadvantages the borrowers. 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. 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. But in the short run, this is a way for us to get controllers charge-off recovery strategies. And, you know, 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. And so it's really a question of, you know, in-year recoveries versus collecting over time.

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

Yeah, sure. You know, when we started the year, we anticipated loan sales to sort of manage a flattish 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 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. 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. Probably a billion dollars more loan sales than we otherwise would have done in our original guidance.

Got it. Thanks.

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

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

Yeah, let me start with the question about yields on the loan sales. I think, you know, 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, you know, is driven by the concentration limits that the rating agencies put around the ultimate securitization takeout. 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. So no adverse selection one way or the other between our bank book for investment and the partnership programs. in terms of, you know, the path from here to the end of the year, you know, keep in mind that carrying the extra liquidity is the real thing more so than yields on the loans. And so we're carrying around a lot of extra liquidity that's invested in at cash rates 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. 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.

Now, you know, we'll be a little bit above five percent or a little bit below five percent that'll be dependent on how the the rest of the year materializes but i think again it's a temporary thing in year driven largely by timing of uh when we generated that liquidity okay thank you and and um you know pete you you talked uh over the quarter about um 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, median-term path here, what that looks like, and, you know, how long it might take you to get back down to a mid-30%? And just maybe talk about how the second strategic partnership helps you get there in that journey.

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. 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. With regard to the partnerships, you know, as we build this fee-based revenue, you know, that obviously adds to the mix in terms of the top-line denominator of the efficiency ratio. So, you know, 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 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. 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. 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. So, like, that's all building towards a really positive trajectory for capital IP-based revenue as well as, you know, we will get past this year one investment that we've needed to make to get ready for PLUS and we'll start to normalize and get more efficient in our, you know, our marketing efforts and other efforts around the core business 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 um growth once that comes through i think you know again for this year we're probably uh flat to a little down depending on um you know know, what the overall level of originations are during the peak season, I think we would have some modest growth aspirations for the balance sheet in 2027, and then we'll probably start to trend back to kind of a low-to-mid single-digit kind of rate of growth of the bank's balance sheet, you know, as we move forward.

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. I don't think our thinking has changed at all since that.

Okay, perfect. Thank you, guys. Yep.

Thank you. And our next question is coming from John Hecht with Jeffries. Please go ahead.

Hello, this is Yuna on John Hecht's line. I had one more question on the name. So with, you know, 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 kind of factors or moving pieces would get you to re-evaluate the medium-term NIM target, and is that kind of how you're thinking about it for 2027?

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, and certainly I don't think it's necessarily a shorter duration. I think there will be a mix issue of, you know, 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. 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. 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, you know, close to that 5%, if not a little bit over. And over the longer term, we have not updated our point of view that deviates from our past long-term guidance, so kind of low to mid-5% range for now.

Got it. And maybe on the after the 2026 class graduating in May slash 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? On that note, I think it's too early.

I mean, those grads are still in their grace period. So, like, 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, you know, the headlines are indicating that employers are hiring, which is, you know, 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.

Thank you so much.

Thank you. And we will take our last question from Caroline Lauda with Think of America. Please go ahead.

So maybe just heading into peak season, can you give us an update on the competitive landscape and the graduate market in terms of, like, any changes in pricing or the credit bar stocks? 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?

Yeah, Caroline, you know, sitting here in middle of July, peak is really just a couple of days old. And so I think it's hard to, you know, sort of infer too much at this point. You know, I think most of what we could talk about are sort of things that we've seen leading up to peak. And, you know, as I've described this in the past, I think, you know, typically, you know, we have seen pretty rational pricing. I think that continues. I think we have seen some 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. So I think it's sort of progressing, you know, as, you know, as we thought it would at this point, again, with maybe a little bit of sort of upward, you know, upward marketing pressure. But I think it's fair to say we will know, you know, much more over the course of, you know, the next month or two. And peak season is, you know, it's not long. It's, you know, eight, ten 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, you know, 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 sort of best early indicator that we have of general activity levels. And as I said in my comments, I think we are encouraged by those activity levels. They are by product listed out and, you know, sort of at or slightly above our expectations for this point. But again, all of that with the caveat of it's early, but we like what we are seeing so far.

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

Great. Thank you. 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 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. And, Sally Mae, have a good evening. Oh, I'm sorry, Kate, we're turning it back to you for some closing business.

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

Thank you. This concludes today's Sally May second quarter 2026 earnings conference call and webcast. Please disconnect your line at this time and have a wonderful