Sallie Mae guidance cut follows scrapped loan sale and losses

A steep Sallie Mae guidance cut overshadowed a record lending season. SLM Corp., the biggest name in U.S. private student lending, now expects 2026 earnings of $1.95 to $2.05 a share, down from $3.10 to $3.20, after posting a third-quarter loss and deciding not to go ahead with a planned loan sale. The stock closed down 9.01% at $19.80 on Friday, Oct. 23, Kalkine reported.

What happened

The company lost 19 cents a share in the quarter, against net income of 63 cents a year earlier, according to its earnings release. Investing.com said analysts had expected a profit of 17 cents and revenue of about $457 million; the company delivered roughly $375 million. Credit-loss provisions climbed to $214 million, compared with $179 million.

Lending itself was strong. Private education loan originations reached $3.4 billion, up 15% and the biggest quarter in the company's history, with graduate loan originations up 119% after changes to the federal PLUS program. The average FICO score at approval was 757. Witter said the peak season ran into October because of late federal rule changes and delays in financial-aid packages, with month-to-date October disbursements up 35%, according to Ticker Report.

Credit is the soft spot. Net charge-offs were $90 million, and the full-year range was raised to $400 million to $420 million from $365 million to $385 million. The company blamed "misaligned third-party debt resolution practices" that pushed some borrowers straight into default. Delinquencies were 4.2% of loans in repayment. Management now estimates those practices will add about $45 million to 2026 charge-offs, up from a prior estimate of about $25 million, Ticker Report said.

Why it matters

The main driver of the Sallie Mae guidance cut was a strategic choice. Management said it no longer expects to complete the whole-loan sale it had planned for October, because likely premiums fell below its minimum threshold amid higher rates, Ticker Report said, summarizing the earnings call. Instead, it will keep the loans and earn what chief executive Jon Witter called roughly a 5% net interest margin over time.

That trade swaps a near-term gain for slower income, which is why the earnings forecast fell but origination guidance of 12% to 14% growth was unchanged. Wall Street was unconvinced: Morgan Stanley cut its price target to $26 from $30 and called the reset "disappointing," while KBW and Barclays also lowered targets, Investing.com reported. Other lenders have been trimming costs while profits hold up, as with the Amex job cuts this week.

What's next

Sallie Mae signed a three-year partnership with Sixth Street, which committed to buy at least $1.5 billion of new private student loans a year, starting with a $600 million seasoned portfolio. The deal follows an earlier partnership with KKR and adds recurring servicing and program-management fees. The company also bought back 5.1 million shares in the quarter for $132.2 million. Management said the base case for 2027 assumes loan-sale premiums recover above its threshold.

Investors will now watch whether bond yields ease enough to revive sales, and whether the charge-off fix sticks. Bank shares had enjoyed a six-week winning streak this month; the Sallie Mae guidance cut shows how quickly rate moves can hit lenders that rely on selling loans. Full figures are in the third-quarter earnings release.