Anyone earning six figures a year and still owing student debt may feel frustrated, having worked hard to earn a degree and land a job, only to still face financial strain. With a high income, you may be tempted to throw all your earnings at the debt and live frugally for a few years to get on track. But for many high-income earners, other options may be worth considering. Consider an Example To see how debt can still saddle a higher-income earner, let's use a hypothetical example. Maya is 33, a lawyer ...

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]

Financial Data and Key Metrics Changes - GAAP diluted EPS for Q3 2025 was $0.63 per share, with loan originations of $2.9 billion, reflecting a 6.4% increase year-over-year and 6% growth year-to-date [4][5] - Net interest income for Q3 2025 was $373 million, up $14 million from the prior year, with a net interest margin of 5.18%, an increase of 18 basis points year-over-year [6][7] - Provision for credit losses decreased to $179 million from $271 million in the prior year, largely due to a $119 million provision release from the loan sale [6][7] Business Line Data and Key Metrics Changes - The cosigner rate for Q3 was 95%, up from 92% in the year-ago quarter, and the average FICO score at approval increased to 756 from 754, indicating strong underwriting discipline [5] - Private education loan net charge-offs were $78 million, representing 1.95% of average private education loans in repayment, down 13 basis points from the year-ago quarter [5][6] - Non-interest expenses for Q3 were $180 million, compared to $167 million in the prior quarter and $172 million in the year-ago quarter [9] Market Data and Key Metrics Changes - 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, attributed to changes in loan modification eligibility criteria [7][8] - The company has seen stability in late-stage delinquencies and roll rates, with 80% of borrowers in loan modification programs making consistent payments after one year [8][9] Company Strategy and Development Direction - The company is optimistic about the long-term outlook for private student lending and is exploring alternative funding partnerships in the private credit space [10][11] - A first-of-its-kind partnership is expected to be announced soon, aimed at unlocking the value of the customer base and setting the stage for sustainable growth of fee-based revenues [11][12] - The company anticipates selling a small portfolio of seasoned loans and a portion of recent peak season originations, expecting GAAP earnings per common share for 2025 to be between $3.20 and $3.30 [12] Management's Comments on Operating Environment and Future Outlook - Management noted that despite economic ambiguity, there has been no material change in borrowers' ability to meet obligations [5][10] - The company is preparing for the impact of recent federal reforms, which are expected to create opportunities for growth in private student lending [10][11] - Management expressed confidence in maintaining a net charge-off rate in the high 1% to low 2% range over the long term [14][26] Other Important Information - The company has reduced outstanding shares by 55% since initiating its capital return strategy in 2020, repurchasing 5.6 million shares at an average price of $29.45 per share [5][6] - The liquidity ratio at the end of the quarter was 15.8%, with total risk-based capital at 12.6% and CET1 capital at 11.3% [9] Q&A Session Summary Question: Outlook for delinquency performance - Management expressed satisfaction with loan modification programs and expected stability in late-stage delinquencies and roll rates, despite a slight uptick in early-stage delinquencies [14][15] Question: Details on loan sale partnership - Management indicated that details on the loan sale partnership would be released once finalized, emphasizing the importance of the deal [15][20] Question: Impact of modifications on delinquency rates - Management noted that borrowers in modification programs have shown strong payment patterns, and they are optimistic about the upcoming wave of graduates transitioning into repayment [19][48] Question: Credit outlook and potential charge-offs - Management acknowledged the correlation between delinquencies and charge-offs but maintained confidence in their guidance and the effectiveness of their loan modification programs [24][34] Question: Buyback strategy and appetite - Management confirmed a commitment to aggressive share buybacks, with plans to assess timing and quantity post-partnership completion [86][87] Question: Opportunities from Plus Reform - Management sees Plus Reform as a significant opportunity for growth in private student lending, with potential annual origination increases projected in the $4 to $5 billion range [92][93]

Policy & Regulation Impact - Tax legislation is poised to favor companies providing private student loans [1] - The bill restricts the amount students and parents can borrow from the government for college [1] Industry Opportunity - Private student loan companies are set to benefit from the new legislation [1]

If you borrowed money for college for yourself or your child, you may be eligible for the student loan interest deduction, which can reduce your taxable income by up to $2,500. You’re only eligible for the tax deduction if you paid student loan interest during the tax year. If you didn’t make student loan payments in 2025 because your loan was in forbearance, deferment, or default, you won’t qualify to deduct student loan interest. To take advantage of the student loan interest deduction, it’s important ...

Core Insights - The article discusses the financial challenges faced by first-year college students regarding funding their education, highlighting the limitations of federal loans compared to the total cost of attendance at public schools [1] - It emphasizes the role of private student loans as a potential solution for covering the funding gap after exhausting federal loan options [1][3] Summary by Sections Private Student Loans Overview - Private student loans are an alternative to federal loans, issued by banks, credit unions, and other financial institutions [2] - They represent a small portion of the overall student loan market and can be more expensive than federal loans, lacking certain benefits like deferment and forgiveness [3] Types of Private Loans - Private lenders typically offer three types of loans: undergraduate loans, graduate loans, and parent loans [6] - Parent loans can be taken out by family members on behalf of the student, unlike federal parent loans which are limited to parents [6] Borrowing Limits - Federal loans have strict borrowing limits, while private loans can cover up to the school-certified cost of attendance [7] Eligibility Criteria - Private loans are credit-based, requiring good to excellent credit scores (FICO score between 670 and 850) and minimum income levels, often necessitating a co-signer [8][9] Interest Rates - Federal loans have fixed interest rates, while private loans can have variable rates ranging from 3% to over 17%, depending on creditworthiness [10][11] In-School Payment Options - Many private lenders require monthly payments while the student is in college, with various repayment options available [12][14] Repayment Terms - Private loans offer more flexibility in terms of repayment duration, ranging from five to fifteen years, with longer terms resulting in higher overall costs [13] Application Process - The application process for private loans differs from federal loans, requiring individual applications to lenders and often necessitating a co-signer [18][19][21] Final Steps - After approval, borrowers must review and sign the loan agreement, ensuring they understand the terms before accepting the loan [24]