As a parent, it’s natural to want to try to help your child pay for college. In a 2024 Northwestern Mutual survey, 95% of parents said they expect to pay for more than half of their kids' college education costs, and 36% said they plan to cover the entire cost. (1) Must Read But no matter how much you expect to contribute, it’s important to understand what your child is studying and what their long-term goals look like. It’s equally important to set expectations about how much financial help you can rea ...

Core Insights - The article addresses the challenges faced by recent graduates, particularly in managing student loans before securing employment [1][2] Group 1: Deferment Options - New graduates often struggle to manage living expenses and loan payments without income, making deferment options crucial [3] - Federal student loans typically offer a six-month grace period post-graduation, during which payments are not required, although interest may accrue on private loans [3] - Making small payments during the grace period can help reduce long-term interest costs [3] Group 2: Income-Driven Repayment Plans - Most federal borrowers qualify for income-driven repayment plans, which adjust monthly payments based on income [4] - Plans such as Pay As You Earn (PAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR) provide options for managing payments and potential forgiveness of remaining balances after a set term [5] - PAYE caps payments at 10% of discretionary income, while IBR bases payments on income and family size, forgiving balances after 20 or 25 years [5]

Financial Data and Key Metrics Changes - GAAP diluted EPS for Q2 2025 was $0.032 per share, with loan originations at $686 million, roughly in line with the same period last year [6][10] - Net interest income for Q2 2025 was $377 million, up $5 million from the prior year, with a net interest margin of 5.31% [11] - Provision for credit losses increased to $149 million in Q2 2025 from $17 million in the prior year, reflecting a more cautious macroeconomic outlook [12] - Private education loans delinquent for 30 days or more were 3.5%, a decrease from 3.6% at the end of Q1 2025 [13] Business Line Data and Key Metrics Changes - The credit quality of originations showed improvement, with a cosigner rate of 84%, up from 80% in the year-ago quarter [8] - Net private education loan charge-offs in Q2 were $94 million, representing 2.36% of average loans in repayment, an increase of 17 basis points year-over-year [14] - Non-interest expenses for Q2 were $67 million, significantly lower than $155 million in the prior quarter and $159 million in the year-ago quarter [15] Market Data and Key Metrics Changes - The company anticipates that new federal lending limits could generate an additional $4.5 billion to $5 billion in annual private education loan origination volume once fully realized [21] - The reforms will take effect on July 1, 2026, with existing borrowers grandfathered into current programs, potentially impacting near-term originations [20] Company Strategy and Development Direction - The company plans to maintain a strategy of mid to high single-digit private student loan portfolio growth, supported by loan sales and other structures [24] - The management is exploring new alternative funding partnerships in the private credit space to support growth while preserving balance sheet capacity [23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term outlook for private student lending, particularly due to recent federal student loan reforms [6][19] - The company is closely monitoring the impacts of federal lending reforms and other policy developments on its business [7][20] Other Important Information - The company repurchased 2.4 million shares at an average price of $29.42 per share, reducing shares outstanding by over 53% since the start of the buyback strategy in 2020 [9] - The liquidity ratio at the end of Q2 was 17.8%, with total risk-based capital at 12.8% and common equity Tier 1 capital at 11.5% [16] Q&A Session Summary Question: Can you discuss the $1.8 billion loan sale and gain on sale margin? - The company is in line with expectations for the transaction, with modest adjustments in pricing due to changes in the rates environment [26] Question: Should we expect another loan sale in Q4 2025? - The company will monitor the peak season and evaluate capital levels before deciding on additional sales [27] Question: Can you explain the uptick in net charge-off rates? - The increase is attributed to disaster forbearance related to the California wildfires, which shifted some charge-off timing [28][30] Question: How does the new federal lending reform impact your growth algorithm? - The company maintains its growth framework but may trend towards higher growth rates due to the new opportunities presented by the reforms [34] Question: What is the expected market share for the new addressable market? - The company expects to maintain a market share in the 60% range for the new opportunities presented by the reforms [58] Question: What is the timing for the new private credit partnerships? - The company aims to have partnerships in place before the additional volume from reforms comes into effect [65]

Core Insights - Earning a college degree significantly enhances career prospects, but many students incur debt, with 50% of bachelor's degree recipients graduating with student loan debt [1] Federal vs. Private Loans - Experts recommend exhausting federal loan options before considering private loans due to generally lower interest rates and better borrower protections [2][4] - Federal student loans account for over 90% of the $1.77 trillion in national student loan debt [3] - Federal loans have fixed interest rates, while private loans can have either fixed or variable rates [7][18] Types of Federal Loans - There are three main types of federal loans: Direct Subsidized, Direct Unsubsidized, and Parent PLUS loans, all with fixed interest rates [5][9] - Grad PLUS Loans will be eliminated as of July 1, 2026, due to the OBBB [5] Private Loans Overview - Private student loans constitute about 8% of the overall student loan market and are offered by banks and other financial institutions [6] - Private loans are credit-based, requiring borrowers to meet strict credit and income criteria [8][16] Key Differences Between Federal and Private Loans - **Borrowing Limits**: Federal loans have established caps, while private loans allow borrowing up to the total cost of attendance [11][13] - **Credit and Income Criteria**: Federal loans are easier to qualify for, with no minimum income requirements, while private loans require a FICO score of 670 or higher [14][16] - **Interest Rates and Fees**: Federal loans have fixed rates and may include disbursement fees, while private loans can have variable rates and typically do not have origination fees [17][18] - **In-School Payment Plans**: Federal loans do not require payments while in school, whereas private loans may require payments during this period [19][20] - **Repayment and Hardship Options**: Federal loans offer more borrower protections and options for deferment and income-driven repayment plans [20][21] - **Loan Forgiveness Eligibility**: Federal loans are often eligible for forgiveness programs, while private loans are not [21][23] Conclusion - Federal loans remain a favorable option for most students, especially undergraduates without established credit histories, while private loans may be necessary for those reaching federal borrowing limits [24][25]

With another Federal Reserve meeting on the horizon, many borrowers are watching closely to see whether interest rates will change again. Student loan interest rates are influenced by a variety of factors, including the monetary policy of the Federal Reserve. But exactly how the Fed's decision to raise or lower its federal funds rate affects you depends on the type of student loans and interest rate you have. If you're concerned about rising interest rates or simply want to better understand how student ...