Sallie Mae cuts 2026 profit outlook on record student loan originations

Sallie Mae (Nasdaq: SLM) lowered its full-year 2026 diluted earnings per common share guidance to a range of $1.95 to $2.05, down from a prior outlook of $3.10 to $3.20, following a third quarter marked by record private education loan originations and a net loss. The company reported third-quarter results on Oct. 22, 2026, noting that the profit reduction reflects recent business developments and broader macroeconomic impacts that have influenced expectations for the fourth quarter and full-year performance.

During the three months ended Sept. 30, 2026, Sallie Mae recorded a GAAP net loss per common share of $0.19. This compares to net income of $0.63 per diluted share in the year-ago quarter. The loss was primarily driven by higher provisions for credit losses and increased expenses associated with the company's highest-ever year-over-year growth in originations.

Private education loan originations reached $3.4 billion in the third quarter, representing a 15% increase from the same period in the prior year. Growth was particularly strong in graduate lending, which rose 119% during the first academic year following changes to federal PLUS loan programs. Credit quality for new originations remained stable, with the average winning FICO score at approval reaching 757 and cosigner rates holding at 92%.

Net charge-offs totaled $90 million in the quarter, an increase from the year-ago quarter. The company attributed this rise primarily to misaligned third-party debt resolution practices affecting a small segment of high-ability-to-pay borrowers who moved directly from delinquency to default. While management stated that strategies to manage this population are gaining traction, borrower adoption has been slower than anticipated. Overall delinquencies represented 4.2% of loans in repayment as of Sept. 30, 2026, compared to 4.0% a year earlier.

Non-interest expenses climbed 22% to $221 million from the prior-year quarter, largely due to costs associated with peak season activities aimed at capturing new volume following PLUS reform. The company noted a lower cost of funds at 4.21% compared to 4.24% previously.

Sallie Mae continued its capital return program by repurchasing 5.1 million shares of common stock for $132.2 million during the third quarter. For the nine months ended Sept. 30, 2026, total repurchases amounted to 18.1 million shares for $415.6 million, with $111 million in capacity remaining under the 2026 Share Repurchase Program.

The company also entered into a new partnership with a leading global investment firm, which included an initial seasoned portfolio loan sale of $143 million in private education loans. Sallie Mae maintains its guidance for private education loan origination growth at 12% to 14% for the full year.

Updated full-year net charge-off guidance was raised to a range of $400 million to $420 million.