Core Insights - Sallie Mae Corporation (SLM) has introduced a new strategy focused on long-term earnings growth, reduced credit volatility, and expansion into the private credit market, aiming for sustainable earnings per share (EPS) growth and a resilient operating model [1] Business Model Evolution - Historically a leader in the U.S. private student-lending market, SLM is shifting its business model to tap into the growing private credit sector, reflecting a trend among financial institutions towards diversified funding sources and enhanced liquidity [2] - The company has formed a multi-year partnership with KKR & Co. to expand into the private credit market, allowing SLM to generate recurring, fee-based income rather than relying solely on loan origination [2] Market Opportunity - The private credit market is projected to reach $4.5 trillion by 2030, with the total addressable market across various segments exceeding $50 trillion, presenting a significant opportunity for SLM to build a capital-light, fee-based revenue model [3] Revenue Diversification - SLM plans to diversify its revenue streams, expecting that by 2030, 21% of total revenues will come from partnerships, up from 8% currently, as it balances traditional bank-funded loans with asset-light businesses [6] PLUS Loan Reforms Impact - Recent reforms to the federal PLUS loan programs are expected to generate an additional $4.5-$5 billion in annual originations for SLM, as displaced PLUS borrowers transition to the private market [13][14] - The company anticipates a gradual increase in loan originations from $8.46 billion in the first year to $14.43 billion by the fifth year, with a projected EPS growth from $2.63 to $4.70, reflecting a 16% compounded annual growth rate (CAGR) [16] Strategic Shift and Future Outlook - SLM's strategy indicates a move towards a more diversified and capital-efficient business model, combining its strengths in private student lending with scalable fee-based partnerships [20] - If executed effectively, this multi-year roadmap could redefine SLM's long-term valuation and solidify its position in both education finance and the broader private credit ecosystem [21]