Sallie Mae cuts EPS outlook to $1.95–$2.05 after quarterly loss
Key Facts
On October 22, Sallie Mae cut its 2026 diluted EPS outlook to a range of $1.95 to $2.05, from $3.10 to $3.20 previously, after posting a quarterly loss and reporting higher charge-offs. The company also raised its net loan charge-off outlook to $400–$420 million, compared with its previous range of $365–$385 million. It said the outlook revision reflected multiple business developments and the effects of the macroeconomic environment, rather than credit costs alone. The company posted a net loss of $32 million in the third quarter, compared with net income of $136 million in the same period of 2025. Diluted loss per share was $0.19, compared with earnings of $0.63 a year earlier.
The result fell short of analysts’ expectations: coverage published on the day of the results compared the $0.19 loss per share with their estimate of earnings of $0.17. The midpoint of the new guidance range is also below analysts’ consensus of $3.11 per share for 2026. Shares of the company, which trade under the ticker SLM, closed 4.49% lower on October 22, then fell 3.9% in after-hours trading. The market reaction coincided with the shift from quarterly profit to a loss and the cut to the annual outlook, despite loan growth. The company held its earnings call on October 22 at 5:30 p.m. Eastern time.
Private education loan originations totaled $3.4 billion in the third quarter, up 15% year over year, marking the largest quarterly volume of originations in the company’s history. Graduate loan originations surged 119%. Chief Executive Jonathan Witter said the company had delivered a “record season” and that credit quality for originated loans remained strong. He pointed to graduate loan growth following changes to federal loan programs. The company maintained its 2026 private education loan origination growth outlook at 12% to 14%, and kept its noninterest expense outlook at $750 million to $780 million.
By contrast, net loan charge-offs rose to $90.386 million in the third quarter, from $77.531 million a year earlier. The company attributed the increase mainly to noncompliant debt settlement practices at a third party that affected a small segment of borrowers, and said the adoption of remediation strategies was slower than expected. Delinquencies stood at 4.2% of loans in repayment on September 30, 2026, compared with 4.0% on the same date a year earlier. The provision for credit losses rose to $214 million from $179 million. The company raised its annual net charge-off guidance to $400–$420 million from $365–$385 million.
Net interest income fell to $339 million in the third quarter from $373 million a year earlier, despite funding costs improving to 4.21% from 4.24%. Management said net interest income declined $34 million year over year, as the net interest margin contracted 33 basis points and average private education loans fell by $0.6 billion. It said asset yields declined before funding costs did. For the first nine months of 2026, net income attributable to common stock fell to $323 million, or $1.68 per diluted share, from $500 million and $2.35 per share in the corresponding period. The company attributed part of the pressure on earnings for the period to lower interest income and a decline in gains on loan sales to $165 million from $324 million.
Noninterest expenses rose to $221 million in the third quarter from $180 million a year earlier, an increase of 22%. The company said much of the increase was related to the peak season for customer acquisition and business volumes following the PLUS program overhaul. The provision for credit losses was $214 million, compared with $179 million, while the company linked expenses and losses to provisions and costs associated with origination growth. Sallie Mae repurchased 5.1 million of its common shares during the quarter for $132.2 million. This places record loan growth alongside higher operating and credit costs and lower interest income, factors the company said collectively contributed to its revised annual outlook.