SLM: 3 Key Takeaways for Long-Term Investors

On its third quarter of 2026 earnings call, held on Oct. 22, 2026, SLM (NASDAQ:SLM) announced a new strategic partnership and lowered its full-year earnings guidance after pulling back on planned whole-loan sales. Long-term investors get clarity from this shift, as management prioritized multiyear loan yields over quick transaction premiums. Building alternative funding channels protects the business against volatile interest rate cycles. Three key takeaways from the call explain how these strategic decisions shape the company's trajectory.

1. Sixth Street Partnership Expands Funding Beyond Traditional Bank Deposits

SLM completed a three-year strategic agreement with Sixth Street to sell off newly originated private education loans, securing recurring program management fees and servicing revenue. This second partnership diversifies funding options alongside traditional bank deposits and loan sales.

Sixth Street has committed to purchase a minimum of $1.5 billion in newly originated private education loans annually with the first year inclusive of an initial seed portfolio of $600 million in seasoned loans.
-- Jonathan W. Witter, Chief Executive Officer

2. Balance Sheet Retention Replaces Q4 Loan Sales and Lowers EPS Guidance

Management chose not to execute a planned whole loan sale because choppy capital markets pushed indicated prices below its minimum threshold. Retaining these assets lets the bank capture a 5% net interest margin (the difference between interest earned on loans and interest paid on deposits), even though it reduces 2026 earnings per share (a company's net income divided by its outstanding stock) guidance to $1.95 to $2.05.

In this instance, we determined that we could create more shareholder value by retaining the loans on our balance sheet and earning at roughly 5% NIM over time rather than selling at the current indicated premium levels.
-- Jonathan W. Witter, Chief Executive Officer

3. Misaligned Debt Resolution Practices Drive Up Full-Year Charge-Off Expectations

Third-party debt resolution practices disrupted late-stage delinquent borrowers, forcing SLM to pause certain recovery efforts. Executive leadership raised full-year net charge-off guidance (the value of loans written off as uncollectible) to $400 million to $420 million to absorb these pressures.

As such, we are increasing our full year net charge off guidance to $400 million to $420 million with a midpoint $45 million higher than that of our original range.
-- Jonathan W. Witter, Chief Executive Officer

Looking Ahead

Demand across graduate student lending is expanding rapidly following federal program reforms, and management is positioning product lines to capture that market share. Executives are watching loss mitigation performance and pricing discipline while expanding loan flow capabilities.

In Q3, graduate originations were up 119% year over year, with an average FICO score 9 points higher than the overall average of new origination in the portfolio.
-- Jonathan W. Witter, Chief Executive Officer

Retaining low-cost deposit funding and building recurring fee streams provides structural flexibility through fluctuating rate cycles. The broader capital allocation strategy balances balance sheet retention with disciplined share repurchases.

We are grateful for the strategic flexibility and the competitive advantage of having a well capitalized deposit funded bank now complemented through our emerging strategic partnerships business.
-- Jonathan W. Witter, Chief Executive Officer

SLM is an advertising partner of Motley Fool Money. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.