Summary of Sallie Mae Investor Forum 2025 Conference Call Company Overview - **Company**: Sallie Mae - **Industry**: Private Education Loans Key Points and Arguments Strategic Updates - Sallie Mae is evolving its strategy to enhance its position in the private education loan market, focusing on customer acquisition and engagement, underwriting capabilities, and funding models [4][5][6] - The company successfully acquired nearly 4 million new members in 2025, including two-thirds of all college-bound freshmen, marking a 30% increase from three years ago [5] - The underwriting model has improved, with a five-point increase in average FICO scores at approval and a four-percentage-point increase in cosign rates [10] Financial Performance - In 2024, Sallie Mae grew originations and market share by 10% and 12% respectively compared to 2023 [9] - The company returned nearly $800 million to shareholders through dividends and share repurchases in 2023 and 2024 [10] - The funding model has maintained net interest margins in the low to mid-5% range, demonstrating resilience across varying rate environments [7] PLUS Program Changes - Anticipated changes to the PLUS program could lead to an additional $4.5-$5 billion in annual private education loan originations once fully implemented [13] - The company is preparing to target new cohorts and improve marketing strategies to capitalize on this opportunity [14] Customer Base and Product Opportunities - Despite acquiring a large customer base, less than 10% of these relationships resulted in private student loans, indicating significant growth potential [15] - The company aims to introduce innovative funding solutions to tap into the remaining high-quality borrowers who did not apply for loans [15] Private Credit Market Growth - The private credit market has grown from $300 billion in 2009 to $2.3 trillion today, with significant opportunities for expansion in the higher education sector [17] - Sallie Mae's partnership with KKR is expected to enhance its ability to originate high-quality loans and diversify revenue streams [18][21] Strategic Partnership Model - The new partnership model is designed to optimize capital efficiency and reduce reliance on traditional loan sales, with expectations of modest EPS decline in the first year but growth returning in subsequent years [22][31] - The partnership approach is anticipated to provide greater flexibility and risk diversification compared to traditional funding methods [21][19] Future Outlook - The company projects a gradual shift in loan sales from traditional methods to strategic partnerships, aiming for a more predictable revenue stream [26][28] - Over the next five years, Sallie Mae expects to generate approximately $2.5 billion to return to shareholders [29] - The strategic evolution aims to build a resilient, growth-focused enterprise that delivers sustainable performance and superior returns [31] Additional Important Content - The company emphasizes the importance of maintaining a robust bank environment alongside private credit partnerships to mitigate risks [34][46] - The management team is committed to disciplined capital allocation and is exploring innovative capital market strategies to optimize capital levels [36][47] - The potential for originating loans outside the bank's typical risk appetite is being considered, which could provide additional upside beyond current projections [59][60]

Core Insights - Today's CD rates are significantly higher than the national average, influenced by the Federal Reserve's recent interest rate cuts [1][3] - The highest CD rate currently available is 4.1% APY, offered by Marcus by Goldman Sachs and Sallie Mae [2] - The national average CD rate for a 1-year term is 1.68%, indicating that current rates are among the highest seen in nearly two decades [3] Best CD Rates - As of December 1, 2025, the top CD rate is 4.1% APY for 14-month and 15-month terms [2] - Online banks and credit unions typically provide more competitive rates compared to traditional banks [3] Finding the Best CD Rates - It is advisable to shop around and compare CD rates from various financial institutions [4] - Online banks often have lower overhead costs, allowing them to offer higher interest rates on CDs [4] - Potential investors should check minimum deposit requirements and review account terms, including early withdrawal penalties [4]

Core Insights - Sallie Mae will host an investor forum on December 8, 2025, at 5 p.m. ET, with a live audio webcast available for participants [1][2] Group 1: Corporate Developments - Sallie Mae has announced a multi-year strategic partnership with KKR, expecting KKR to purchase an initial seed portfolio of private education loans, followed by a minimum of $2 billion in newly originated private education loans annually for an initial three-year term [5] - The company has awarded $500,000 in scholarships through its Bridging the Dream Scholarship Program, benefiting 40 high school students and 10 graduate students [6] Group 2: Industry Context - November is recognized as National Scholarship Month, highlighting the importance of scholarship opportunities, yet nearly 40% of families miss out on these opportunities due to misconceptions [7]

Core Insights - Sallie Mae, the largest private student lender in the U.S., has entered a multiyear partnership with KKR, the world's biggest private equity firm, to sell over $6 billion in loans [1][2][6] - This partnership aims to enhance Sallie Mae's ability to originate new loans and serve more students, especially as the federal government reduces its involvement in the student loan market [1][3][6] Partnership Details - KKR will purchase an "initial seed portfolio" of private education loans from Sallie Mae, with plans to acquire an additional $2 billion in loans annually for at least three years [3] - Sallie Mae's CEO, Jon Witter, expressed excitement about the partnership, indicating it is a first-of-its-kind deal and a new business opportunity [2][6] Market Context - The partnership comes at a time when the federal government is scaling back its student loan operations, which is expected to create new opportunities for private lenders like Sallie Mae [3][6] - Recent legislative changes, including the One Big Beautiful Bill Act, are anticipated to impact the student loan landscape, with Sallie Mae projecting an increase of $4.5 billion to $5 billion in new loan originations annually starting in 2026 [4][5]

Core Insights - Sallie Mae has announced a multi-year strategic partnership with KKR to enhance its private student lending capabilities and generate fee income [1][3] - KKR plans to purchase an initial seed portfolio of private education loans and commit to a minimum of $2 billion in newly originated loans annually for an initial three-year term [2][4] - The partnership aims to improve Sallie Mae's loan origination capacity and provide ongoing servicing fees for managing the loans sold to KKR [3][4] Company Overview - Sallie Mae is a leader in private student lending, focusing on providing financing and resources to support access to college [7] - KKR is a global investment firm that specializes in alternative asset management and aims to generate attractive investment returns through disciplined investment strategies [6] Financial Implications - The partnership is expected to create a more resilient and capital-light earnings profile for Sallie Mae, allowing it to serve more students and families [4] - KKR's investment will come from its managed credit funds and accounts, indicating a strategic move to deploy long-term, flexible capital in high-quality financial institutions [4][6]

Core Points - Sallie Mae announced the recipients of its Bridging the Dream Scholarship Program, awarding 40 high school students with a $10,000 scholarship each [1] - The scholarships are aimed at students who excel academically and demonstrate financial need, highlighting the program's focus on supporting underprivileged students [1] - The initiative is in partnership with the Thurgood Marshall College Fund, indicating a collaboration to enhance educational opportunities for students [1] Summary by Categories Scholarship Recipients - 40 high school students received a $10,000 Bridging the Dream Scholarship [1] - 10 graduate students were also recognized, although specific details about their awards were not provided [1] Program Objectives - The program aims to support students who excel both academically and in extracurricular activities while demonstrating financial need [1] - The initiative emphasizes the importance of educational access for underprivileged students [1] Partnerships - The Bridging the Dream Scholarship Program is conducted in partnership with the Thurgood Marshall College Fund, showcasing a collaborative effort to promote educational equity [1]

Company Overview - Michael Burry's Scion Asset Management has taken a new position in SLM Corporation (Sallie Mae), a significant player in the student loan sector, diverging from the tech and healthcare focus prevalent among many investors [1][2] - Sallie Mae specializes in private student loans and is currently navigating a complex regulatory environment and changing borrower demographics [2] Financial Performance - Sallie Mae reported strong third-quarter results, with diluted earnings of $0.63 per share and a 6.4% increase in loan originations, totaling $2.9 billion [4] - The credit quality of new loans has improved, with a cosigner rate of 95% compared to 92% the previous year, and average FICO scores at approval rising to 756 from 754, indicating disciplined underwriting practices [5] - Net charge-offs decreased to 1.95% of loans in repayment, down 13 basis points year-over-year, suggesting borrowers are managing their obligations effectively [6] Strategic Initiatives - Management executed a $1.9 billion loan sale during the quarter, generating $136 million in gains, while continuing a capital return strategy that included repurchasing 5.6 million shares at an average price of $29.45, resulting in a total share reduction of 55% since 2020 [6] - Sallie Mae is expected to benefit from upcoming federal student loan reforms, which could add $4.5 billion to $5 billion in annual originations, enhancing growth in the current $14 billion private student loan market [7]

Core Insights - Nearly 40% of families miss out on scholarship opportunities, leaving millions of dollars unclaimed each year [1][2] - Common misconceptions about scholarships include beliefs that they are only for students with exceptional grades (46%), only for incoming freshmen (36%), or that families earn too much money (32%) [2][3] Scholarship Utilization - Scholarships are an effective way to reduce out-of-pocket college costs but are often underutilized or unclaimed [2][3] - Sallie Mae emphasizes the importance of raising awareness and dispelling myths surrounding scholarships [3] Sallie Mae's Initiatives - Sallie Mae offers free resources and tips to help students find and apply for scholarships [3] - The Sallie Mae Fund, in partnership with the Thurgood Marshall College Fund, has awarded nearly $4 million since 2021 through the Bridging the Dream Scholarship Program [4] - Sallie Mae provides a $2,000 no-essay scholarship each month to simplify the application process for students [4] Scholarship Application Tips - Students are encouraged to start early and apply for scholarships every year, as nearly half of all scholarships are available to current college students [5] - Completing the FAFSA is crucial for accessing billions in scholarships and federal financial aid [5] - Free scholarship search tools, such as Scholly Scholarships, can help students find scholarships tailored to their interests [5] - Unique scholarships exist for various interests, and many do not require essays [5]

Core Insights - Sallie Mae (SLM) reported third-quarter 2025 earnings per share (EPS) of 63 cents, missing the Zacks Consensus Estimate of 84 cents, but showing improvement from a loss of 23 cents per share in the prior-year quarter [1][8] - The company's GAAP net income was $136 million, compared to a net loss of $45 million in the prior-year quarter [2] Financial Performance - Third-quarter net interest income (NII) totaled $372.9 million, up 3.8% year over year, but missed the Zacks Consensus Estimate by 0.8%. The net interest margin was 5.18%, an increase of 18 basis points from the prior-year quarter [3] - Non-interest income reached $172.7 million, significantly up from $24.5 million in the year-ago quarter [3] - Non-interest expenses rose 4.9% year over year to $180.4 million [3] Credit Quality - Provision for credit losses was $179.4 million, down 33.8% from the prior-year quarter [4] - Net charge-offs for private education loans were $78 million, up 1.3% year over year, with a percentage of average private education loans held for investment in repayment at 1.95%, contracting 13 basis points year over year [4] Balance Sheet Position - As of September 30, 2025, deposits were $20 billion, down 2.3% sequentially [5] - Private education loans held for investment were $21.6 billion, up 5.6% from the prior-year quarter, with loan originations increasing by 6% from the year-ago quarter [5] Share Repurchase - In the third quarter, SLM repurchased 5.6 million shares for $166 million under its 2024 share buyback program [6] 2025 Outlook - The company expects diluted EPS in the range of $3.20-$3.30 and anticipates total loan portfolio net charge-offs as a percentage of average loans in repayment of 2.0%-2.2% [7][9] - Private education loan originations are expected to grow 5%-6% year over year, with non-interest expenses projected to be in the range of $655-$675 million [9] Overall Assessment - Sallie Mae's financial performance appears decent, with robust loan origination, rising net interest income, and higher non-interest income being encouraging factors. However, rising expenses present a significant near-term challenge [10]

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