Sallie Mae Sees Strong Start to 2025 Despite Macro Uncertainty
Sallie Mae has kicked off its 2025 earnings on a high note, reporting a significant increase in loan originations and improved credit performance.
In its Q1 2025 earnings call, the company highlighted several key highlights from the quarter. First among these was the strong start to the year for loan originations, which rose by 7.3% compared to the same period last year. This growth was driven in part by a "mini peak" origination season.
"We're off to a strong start for 2025," said Jon Witter, Sallie Mae's CEO, on the call. He noted that this strong start was fueled by several factors, including seasonality and enhancements in the company's collection practices.
One notable trend observed during Q1 was the improved credit performance of new loan originations. The cosigner rate for these loans rose to 93% compared to 91% in the same period last year. Average FICO scores at approval also increased, reaching 753 compared to 748 in Q1 2024.
This positive trend was underscored by lower net private education loan charge-offs of $76 million, representing 1.88% of average loans and repayment. This figure was down 26 basis points from the same quarter last year and ahead of expectations.
In addition to these financial highlights, Sallie Mae reported a successful $2 billion loan sale in Q1. The company generated gains of $188 million on this sale, an increase of $45 million over the same period last year. This strong performance is expected to be replicated throughout 2025, with further loan sales planned depending on market conditions and the company's growth targets.
The company also continued its capital return strategy in Q1, repurchasing 1 million shares at an average price of $29.65 per share. This move brings the total number of shares reduced since the start of this program to a significant 53%, all at an average price of $16.29.
Looking ahead, Sallie Mae's CFO Pete Graham provided further insight into key drivers of earnings in Q1. Net interest income for the quarter reached $375 million, down slightly from last year but ahead of the previous quarter. The company also completed a $500 million unsecured bond transaction to redeem its November 2025 maturity.
Despite these positive trends and developments, Sallie Mae remains mindful of uncertainties in the broader macroeconomic environment. As CEO Witter noted on the call, "while we are pleased with this early performance, we remain mindful of the uncertainty created by recent policy changes and their potential implications for the broader macroeconomic environment."
