SLM (SLM) investor relations material

Credit performance and portfolio management

• Noted recent loss pressure from a small segment with high ability to pay, driven by misaligned debt resolution practices and third-party refinancing schemes.

• Actions taken include terminating flow contracts in charge-off recovery sales and adjusting settlement floors to address the issue.

• Internal recovery efforts are expected to be NPV positive, with a potential $25 million impact if external sales are not restarted this year.

• Loan modification programs show over 80% payment success rates, with early cohorts graduating and performing above expectations.

• Underwriting changes from prior years are now reducing exposure to riskier cohorts, providing a credit tailwind.

Product innovation and market positioning

• New graduate loan products tailored to specific program needs have seen strong early uptake, positioning well for peak season.

• Competitive landscape in graduate lending remains stable, with established players and differentiated offerings through tailored programs.

• Significant investments made in product development, underwriting models, technology, and marketing to support growth.

• Expectation to drive marketing efficiency as scale increases, leveraging learnings from undergrad segment.

Strategic partnerships and funding

• First partnership with KKR performing well; a second similar partnership is in advanced negotiations, expected to close before year-end.

• Partnerships will likely include seasoned portfolio sales to enhance structure and cash flow.

• Long-term strategy involves building a diversified funding base with staggered maturities and multiple partner types.

• Potential to expand credit box for partners as risk appetites allow, especially in undergrad space.

• Partnerships enhance capital efficiency and overall ROE by recycling capital through flow originations.