Sallie Mae’s third quarter results were met with a positive market reaction, despite falling short of Wall Street’s revenue and earnings expectations. Management credited loan origination growth and strong credit quality as key performance drivers, noting a 6.4% year-over-year increase in new loans and improved borrower profiles. CEO Jonathan Witter emphasized the company’s disciplined underwriting, highlighting that “the credit quality of originations remain strong, showing incremental improvement year-over-year.” The quarter also benefited from a completed loan sale, which generated significant gains and contributed to a more favorable operating margin.
Is now the time to buy SLM? Find out in our full research report (it’s free for active Edge members).
Sallie Mae (SLM) Q3 CY2025 Highlights:
- Revenue: $545.7 million vs analyst estimates of $554.2 million (42.1% year-on-year growth, 1.5% miss)
- EPS (GAAP): $0.63 vs analyst expectations of $0.80 (20.8% miss)
- Adjusted EBITDA: $186.7 million (34.2% margin, 420% year-on-year growth)
- EPS (GAAP) guidance for the full year is $3.25 at the midpoint, beating analyst estimates by 5.3%
- Operating Margin: 34.1%, up from -15.5% in the same quarter last year
- Market Capitalization: $5.62 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Sallie Mae’s Q3 Earnings Call
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Moshe Orenbuch (TD Cowen) asked about the sustainability of current delinquency trends into next year. CFO Peter Graham responded that late-stage delinquencies and roll rates remain stable, with net charge-offs expected to stay in the high 1% to low 2% range.
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Jeffrey Adelson (Morgan Stanley) sought details on the performance of loan modification cohorts and the economics of the upcoming private credit partnership. Graham emphasized strong payment patterns among modified borrowers and indicated the partnership would initially use loans from the current book.
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Mark DeVries (Deutsche Bank) questioned whether higher delinquencies might translate into higher charge-offs. CEO Jonathan Witter reiterated that revised modification criteria explain most of the delinquency increase and that charge-offs are expected to remain flat, within normal variability.
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Donald Fandetti (Wells Fargo) inquired about the impact of credit and asset-backed securities (ABS) market volatility on loan sale margins. Graham explained that gain on sale margins can vary with market conditions but are typically in the mid- to high-single-digit range.
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Caroline Latta (Bank of America) asked about the growth potential from PLUS program reforms and differences in graduate versus undergraduate loan performance. Witter noted that the opportunity could add $4-5 billion in annual originations over time and that loan governance standards are consistent across programs.
Catalysts in Upcoming Quarters
Looking ahead, our analysts are focused on (1) the formal launch and initial economics of Sallie Mae’s new private credit partnership, (2) the pace of origination growth in graduate and undergraduate segments as PLUS reform phases in, and (3) evidence that credit quality and delinquency management remain stable despite broader economic uncertainty. The evolving federal policy landscape and execution of loan sales will be critical to monitor as well.
Sallie Mae currently trades at $27.51, up from $26.75 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).
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