Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion and analysis also contains forward-looking statements and should be read in conjunction with the disclosures and information contained in “Forward-Looking and Cautionary Statements” and Part I, Item 1A. “Risk Factors” in this Annual Report on Form 10-K.
Through this discussion and analysis, we intend to provide the reader with some narrative context for how our management views our consolidated financial statements, additional context within which to assess our operating results, and information on the quality and variability of our earnings, liquidity, and cash flows.
Overview
The following discussion and analysis presents a review of our business and operations as of and for the year ended December 31, 2025.
Changes to Federal Student Loan Programs
On July 4, 2025, H.R.1 (“H.R.1”) was enacted into law. H.R.1 implements significant reforms to the federal student loan program, including:
• Limiting Parent PLUS loans to $20,000 per student, per year, with an aggregate, per student limit of $65,000;
• Eliminating Graduate PLUS loans, which previously allowed graduate students to borrow up to the full cost of attendance; and
• Limiting the amount graduate students can borrow to $20,500 per year with a $100,000 lifetime limit, and the amount professional graduate students can borrow to $50,000 per year with a $200,000 lifetime limit through the Unsubsidized Stafford loan program (these amounts are in addition to the amount borrowed for undergraduate education).
All federal student loan program changes are to be effective for new borrowers beginning July 1, 2026, and will not apply to borrowers who begin borrowing prior to that date.
We anticipate that these changes to the federal student loan program will present opportunities for a gradual and positive impact on our overall Private Student Loan originations volume in the coming years.
As we continue the near-term planning, growth, and scaling of our origination expansion initiative and our strategic partnership funding model, we may see trends or uncertainties from increased marketing, technology, infrastructure, and operational costs, which may result in margin and/or expense pressures. These expected investments are necessary to support the execution of these new initiatives, which address anticipated increases in demand for Private Education Loans and related financial products (particularly in light of recent changes to federal higher education funding).
Strategic Imperatives
To further focus our business and increase stockholder value, we continue to advance our strategic imperatives. Our primary focus is driving innovation to maximize the sustainable growth and profitability of our core private student loan business. Additionally, we aim to accelerate the growth of new lines of business to attract more customers requiring our products and services. We are also focused on building the data infrastructure, technology, and talent required to compete in a digital world. We seek to create a customer-centric brand as an education solutions company that supports students and families through their higher education journey. We are focused on driving greater internal commitment to our mission, brand, and strategy, while we evolve our structure and risk capabilities to support our core private student loan business and emerging new businesses.
Key Financial Measures
Set forth below are brief summaries of our key financial measures. Our operating results are primarily driven by net interest income from our Private Education Loan portfolio, gains and losses on loan sales, provision expense for credit losses, and operating expenses. The growth of our business and the strength of our financial condition are primarily driven
2025 Form 10-K — SLM CORPORATION 47
by our ability to achieve our annual Private Education Loan origination goals while sustaining credit quality and maintaining cost-efficient funding sources to support our originations.
Net Interest Income and Net Interest Margin
Most of our earnings are generated from the interest income earned on assets in our education loan portfolios, net of the interest expense we pay on the funding for those loans. We report these earnings as net interest income. The majority of our interest income comes from our Private Education Loan portfolio.
We also often refer to the net interest margin, which is the net interest yield earned on our interest-earning assets less the rate paid on our related interest-bearing liabilities. As interest rates change, changes in the cost of our interest-bearing liabilities tend to lag slightly compared to changes in the yields on our interest-earning assets, which could impact our net interest margin in any given period.
Loan Sales and Secured Financings
We may sell loans to third parties through whole loan sales, including loans sold to strategic partners, securitizations, or other similar transactions. We typically retain servicing of loans subsequent to their sale and earn revenue for this servicing at prevailing market rates for such services and also earn fee revenue for program management services for loans sold to strategic partners. Selling loans removes the loan assets from our balance sheet and helps us manage our asset growth, capital, and liquidity needs. Alternatively, we may use loans as collateral in connection with the creation of asset-backed securitizations or secured funding facilities structured as financings. These types of transactions may provide us long-term financing, but they do not remove loan assets from our balance sheet, nor do they generate gains on sales of loans, net. Consequently, our operating results may be significantly affected by whether we choose to sell loans and recognize current gains on sale or continue to hold or finance loans, thereby retaining some or all the net interest income from those loans. In 2025, we recognized $369 million in gains from the sale of approximately $4.95 billion of our Private Education Loans, including $4.53 billion of principal and $422 million in capitalized interest, to unaffiliated third parties.
For additional information regarding these transactions, see Notes to Consolidated Financial Statements, Note 5, “Loans Held for Investment” and Note 11, “Borrowings — Unconsolidated Funding Vehicles” in this Form 10-K.
During the fourth quarter of 2025, we transferred $933 million from loans held for investment to loans held for sale as we intended to sell the loans to a leading global investment firm (the “Strategic Partner”). In January 2026, we sold the loans to the Strategic Partner. The transaction qualified for sale treatment and removed the balance of the loans from our balance sheet on the settlement date. For additional information, see Notes to Consolidated Financial Statements, Note 6, “Loans Held for Sale”.
During the third quarter of 2024, we transferred our remaining FFELP Loan portfolio to loans held for sale and subsequently sold the FFELP Loan portfolio to an unaffiliated third party in the fourth quarter of 2024. For additional information, see Notes to Consolidated Financial Statements, Note 5, “Loans Held for Investment”.
Allowance for Credit Losses
Management estimates and maintains an allowance for credit losses for the lifetime expected credit losses on loans in our portfolios, as well as for future loan commitments, at the reporting date. See “ — Critical Accounting Estimates — Allowance for Credit Losses” in this Item 7. Allowances for credit losses are an important indicator of management’s perspective on the future performance of a loan portfolio. Each quarter, management makes an adjustment to the allowance for credit losses to reflect its most up-to-date estimate of future losses by recording a charge against quarterly revenues known as provision expense. As they occur, actual loan charge-offs and recoveries are then charged or credited, respectively, against the allowance for credit losses rather than against earnings.
The allowance for credit losses and provision expense rise in periods of high loan origination, when future charge-offs are expected to increase, and fall when future charge-offs are expected to decline. We bear the full credit exposure on our Private Education Loans. Losses on our Private Education Loans are affected by risk characteristics such as loan status (in-school, grace, forbearance, repayment, and delinquency), loan seasoning (number of months in active repayment), underwriting criteria (e.g., credit scores), presence of a cosigner, servicing and collections practices, and the current economic environment. See Item 1A “Risk Factors — CREDIT RISK — Defaults on our loans could adversely affect our business, financial condition, results of operations, and/or cash flows” for additional information. Losses typically emerge once a borrower separates from school and enters full principal and interest repayment after the borrower’s grace
48 SLM CORPORATION — 2025 Form 10-K
period (six months, typically) ends. As a larger proportion of our Private Education Loan portfolio enters full principal and interest repayment in the coming years, we would expect the dollar amount of charge-offs to increase.
Prior to the sale of our remaining FFELP Loan portfolio in the fourth quarter of 2024, our allowance for credit losses for FFELP Loans and related periodic provision expense was small because we generally bore a maximum of three percent loss exposure due to the federal guarantee on such loans. We maintained an allowance for credit losses for our FFELP Loans at a level sufficient to cover lifetime expected credit losses.
Charge-Offs and Delinquencies
Delinquencies are another important indicator of potential future credit performance. Private Education Loans are charged off at the end of the month in which they reach 120 days delinquent or otherwise when the loans are classified as a loss by us or our regulator. Charge-off data provides relevant information with respect to the actual performance of a loan portfolio over time. Management focuses on delinquencies as well as the progression of loans from early to late stage delinquency as a key metric in estimating the allowance for credit losses and tailoring its future collections strategies. We sell a segment of defaulted loans immediately after charge-off, and use in-house collectors and third-party collectors to collect on retained defaulted loans.
As part of our new strategic partnership funding model, we plan to sell newly originated loans for the first time. This shift to selling younger loans is expected to change the composition of our loans in repayment portfolio (which does not include loans held for sale), as loans sold will be younger at the point of sale than in prior periods. As a result, we expect to see increases to our credit metrics that are calculated as percentages using "loans in repayment" as the denominator, including but not limited to, net charge-offs as a percentage of average loans in repayment and delinquencies as a percentage of loans in repayment.
Operating Expenses
The cost of operating our business directly affects our profitability. We strive to manage growth in our business in a prudent fashion by focusing on investments to improve efficiency and while capturing anticipated growth opportunities, including our origination expansion initiative and other initiatives. We monitor and report internally various metrics, including cost to acquire and cost to service our loans (which include both owned and serviced loans), among others. We also monitor and report our efficiency ratio, which is calculated as total non-interest expenses divided by the sum of net interest income plus total non-interest income. For the years ended December 31, 2025, 2024, and 2023, the efficiency ratio was 33.2 percent, 34.7 percent, and 37.9 percent, respectively. The cost to acquire is affected by such variables as technology, personnel, and marketing costs. Servicing expenses primarily include compensation and benefit expenses related to our collections, customer support, and payment processing employees, and technology costs and other expenses associated with facilitating and servicing borrowers. Costs to service can vary period to period based upon seasonality and borrower payment status. The cost to service a delinquent borrower is significantly higher than the cost to service a current or in-school borrower.
Private Education Loan Originations
Private Education Loans are the principal asset on our balance sheet, and the amount of new Private Education Loan originations we generate each year is a key indicator of the trajectory of our business, including our future earnings and asset growth.
Funding Sources
Though we rely primarily on deposits, loan sales, and loan securitizations to fund our loan originations, we also have access to a multi-lender secured borrowing facility (the “Secured Borrowing Facility”) and, from time to time, we access the debt capital markets through unsecured bond issuances. For additional information, see “—Borrowings — Long-term Borrowings” below in this Item 7.
Deposits
We utilize brokered, retail, and other core deposits to meet funding needs and enhance our liquidity position. These deposits can be term or liquid deposits. Our term brokered deposits have original terms from three months to ten years. Retail deposits are sourced through a direct banking platform and serve as an important source of diversified funding. Brokered deposits are sourced through a network of brokers and provide a stable source of funding. In addition, we accept certain deposits considered non-brokered that are held in large accounts structured to allow FDIC insurance to
2025 Form 10-K — SLM CORPORATION 49
flow through to underlying individual depositors. We further diversify our funding sources with deposits from Educational 529 savings plans and Health Savings plans.
Loan Sales
We use proceeds from loan sales to fund Private Education Loan originations, share repurchase programs, and other activities. Historically, we have sold portfolios of Private Education Loans as one-off, seasoned loan sales. As part of our new strategic partnership funding model, we will sell newly originated and not fully-disbursed Private Education Loans to strategic partners, and also plan to continue to execute sales of seasoned Private Education Loans.
Loan Securitizations
Term ABS financing provides long-term funding for our Private Education Loan portfolio at attractive interest rates and at terms that effectively match the average life of the assets. Loans associated with these transactions will remain on our balance sheet if we retain the residual interest in the related trusts.
50 SLM CORPORATION — 2025 Form 10-K
Results of Operations
We present the results of operations below on a consolidated basis in accordance with GAAP.
GAAP Consolidated Statements of Income
Years ended December 31,
(dollars in millions, except per share amounts)
Increase (Decrease)
Interest income:
Loans
Investments
Cash and cash equivalents
Total interest income
Total interest expense
Net interest income
Less: provisions for credit losses
Net interest income after provisions for credit losses
Non-interest income:
Gains on sales of loans, net
Gains (losses) on securities, net
Other income
Total non-interest income
Non-interest expenses:
Total operating expenses
Acquired intangible assets impairment and amortization expense
Total non-interest expenses
Income before income tax expense
Income tax expense
Net income
Preferred stock dividends
Net income attributable to SLM Corporation common stock
Basic earnings per common share
Diluted earnings per common share
Declared dividends per common share
Note: Due to rounding, amounts in this table may not sum to totals.
2025 Form 10-K — SLM CORPORATION 51
GAAP Consolidated Earnings Summary
Year Ended December 31, 2025 Compared with Year Ended December 31, 2024
For the year ended December 31, 2025, net income was $745 million, or $3.46 diluted earnings per common share, compared with net income of $608 million, or $2.68 diluted earnings per common share, for the year ended December 31, 2024. The year-over-year increase was primarily attributable to an increase in total net interest income, a decrease in provisions for credit losses, and an increase in gains on sales of loans, net, and other income, which were offset by an increase in total non-interest expense.
The primary contributors to the drivers of change in net income for the current year period compared with the year-ago period are as follows:
• Net interest income in 2025 increased by $22 million compared with the year-ago period primarily due to a $1.5 billion increase in average Private Education Loans outstanding and a 5-basis point increase in our net interest margin. Our net interest margin increased in the current period from the year-ago period primarily because our cost of funds decreased but the yields on our interest-earning assets were unchanged. Our cost of funds decreased primarily due to the decline in the 30-day average SOFR compared to the year-ago period. The yields on our interest-earning assets were unchanged compared to the year-ago period because the yields on our Private Education Loans decreased but the proportion of total interest-earning assets that were Private Education Loans is higher in the current period than the year-ago period.
• Provision for credit losses in 2025 was $333 million, compared with $409 million in the year-ago period. During 2025, the decrease in the provision for credit losses was primarily due to $297 million in negative provisions resulting from the $4.95 billion in Private Education Loan sales during 2025 and the $44 million in the reversal of provision in fourth quarter of 2025 due to the transfer of loans held for sale. These drivers were offset by new loan commitments, net of expired commitments, and changes in the economic outlook. In the year-ago period, the provision for credit losses was primarily affected by new loan commitments, net of expired commitments, and changes in recovery rates, offset by $236 million in negative provisions resulting from the approximately $3.69 billion in Private Education Loan sales during 2024, an improved economic outlook, and changes in management overlays.
• Gains on sales of loans, net, were $369 million in 2025, compared with $255 million in the year-ago period. The increase in gains on sales of loans was primarily the result of selling approximately $4.95 billion of Private Education Loans in 2025, compared with the sale of approximately $3.69 billion of Private Education Loans in the year-ago period.
• Gains (losses) on securities, net, were $10 million of losses in 2025, compared with less than $1 million in gains in the year-ago period. The change year-over-year was primarily due to an impairment recorded in the first quarter of 2025 on certain non-marketable equity securities, and the change in mark-to-fair value of our trading investments.
• Other income was $123 million in 2025, compared with $113 million in the year-ago period. The increase in other income compared with the year-ago period was primarily the result of a $13 million increase in third-party servicing fees from the year-ago period. The increase in third-party servicing fees was primarily due to an additional approximately $4.95 billion of sold loans that we continue to service on behalf of the owners of the loans. The increase in third-party servicing fees was offset by a $3 million decrease in early withdrawal penalty fee income compared to the year-ago period, which was related to a health savings account provider that redeemed its deposits early and paid an early withdrawal penalty in the first quarter of 2024.
• For the year ended December 31, 2025, total operating expenses were $656 million, compared with $637 million in the year-ago period. The increase in total operating expenses was primarily due to increased marketing spend and higher spending on information technology initiatives, offset by reduced FDIC fees and lower personnel costs.
• In 2025, we recorded $4 million in impairment and amortization of acquired intangible assets, compared with $5 million in the year-ago period. The decrease was a result of an increase in amortization recorded on our customer relationships in 2024 in accordance with the accelerated amortization method, and the impairment write-down of the Scholly partner relationships intangible asset in the fourth quarter of 2024 which resulted in no amortization on that intangible asset in the current period. For additional information, see Notes to Consolidated Financial Statements, Note 9, “Goodwill and Acquired Intangible Assets” in this Form 10-K.
52 SLM CORPORATION — 2025 Form 10-K
• Income tax expense for the year ended December 31, 2025 was $248 million, compared with $190 million in the year-ago period. The effective tax rate increased in 2025 to 25.0 percent from 23.8 percent in the year-ago period. The increase in the effective rate for 2025 was primarily attributable to an increase in state income taxes.
Year Ended December 31, 2024 Compared with Year Ended December 31, 2023
For the year ended December 31, 2024, net income was $608 million, or $2.68 diluted earnings per common share, compared with net income of $581 million, or $2.41 diluted earnings per common share, for the year ended December 31, 2023. The year-over-year increase was primarily attributable to an increase in gains on sales of loans, net and other income and a decrease in total non-interest expense, which were offset by a decrease in total net interest income and an increase in provisions for credit losses.
The primary contributors to each of the identified drivers of change in net income for 2024 compared with 2023 are as follows:
• Net interest income in 2024 decreased by $82 million compared with 2023 primarily due to a 31-basis point decrease in our net interest margin and an $79 million decrease in average Private Education Loans and FFELP Loans outstanding. Our net interest margin decreased in 2024 from 2023 primarily because our cost of funds increased more than the yields on our interest-earning assets. As interest rates change, changes in the cost of our interest-bearing liabilities tend to lag compared to changes in the yields on our interest-earning assets. In a rising interest rate environment, as we experienced in 2022 and the first part of 2023, our variable-rate interest earning assets repriced faster than our cost of funds. As such, we saw an expansion in our net interest margin throughout most of 2023. As interest rates stabilized in the latter half of 2023 and into the first half of 2024, our cost of funds increased faster than our interest-earning assets yields and reduced our net interest margin.
• Provision for credit losses in 2024 was $409 million, compared with $345 million in 2023. During 2024, the increase in the provision for credit losses was primarily affected by new loan commitments, net of expired commitments, and changes in recovery rates. These drivers were offset by $236 million in negative provisions resulting from the approximately $3.69 billion Private Education Loan sales during 2024, an improved economic outlook, and changes in management overlays. In 2023, the provision for credit losses was primarily affected by new loan commitments, net of expired commitments, slower prepayment rates, management overlays, and changes in economic outlook, which were partially offset by $205 million in negative provisions recorded as a result of the approximately $3.15 billion in Private Education Loan sales during 2023 and an increase in recovery rates (as the result of a 2023 change in our defaulted loan recovery process).
• Gains on sales of loans, net, were $255 million in 2024, compared with $160 million in 2023. The increase in gains on sales of loans was primarily the result of selling approximately $3.69 billion of Private Education Loans in 2024, compared with the sale of approximately $3.15 billion of Private Education Loans in 2023. Additionally, we received lower sales premiums in 2023 as compared to 2024 due to movement in market interest rates in 2023. We also sold our Credit Card loan portfolio in May 2023 and recorded a $4 million loss on the sale in 2023.
• Gains (losses) on securities, net, were less than $1 million in gains in 2024, compared with $3 million in gains in 2023. The decrease from 2023 was due to the change in mark-to-fair value of our trading investments.
• Other income was $113 million in 2024, compared with $84 million in 2023. The increase in other income compared with 2023 was primarily the result of a $21 million increase in third-party servicing fees from 2023. The increase in third-party servicing fees was primarily due to an additional approximately $3.7 billion of sold loans that we continue to service on behalf of the owners of the loans. There was also a $3 million increase in early withdrawal penalty fee income in 2024 compared with 2023, which was related to a health savings account provider that redeemed its deposits early and paid an early withdrawal penalty in the first quarter of 2024.
• For the year ended December 31, 2024, total operating expenses were $637 million, compared with $619 million in 2023. The increase in total operating expenses was primarily driven by higher personnel costs, increased marketing costs, and higher FDIC assessment fees.
• In 2024, we recorded $5 million in impairment and amortization of acquired intangible assets, compared with $66 million in 2023. The decrease is a result of the impairment write-down of the Nitro trade name intangible asset taken in the fourth quarter of 2023. For additional information, see Notes to Consolidated Financial Statements, Note 9, “Goodwill and Acquired Intangible Assets” in this Form 10-K.
2025 Form 10-K — SLM CORPORATION 53
• Income tax expense for the year ended December 31, 2024 was $190 million, compared with $197 million in 2023. The effective tax rate decreased in 2024 to 23.8 percent from 25.3 percent in 2023. The decrease in the effective rate for 2024 was primarily attributable to a decrease in state income taxes.
Financial Condition
Average Balance Sheets - GAAP
The following table reflects the rates earned on interest-earning assets and paid on interest-bearing liabilities and reflects our net interest margin on a consolidated basis.
Years Ended December 31,
(dollars in thousands)
Balance
Rate
Balance
Rate
Balance
Rate
Average Assets
Private Education Loans
FFELP Loans
Credit Cards
Taxable securities
Cash and other short-term investments
Total interest-earning assets
Non-interest-earning assets
Total assets
Average Liabilities and Equity
Brokered deposits
Retail and other deposits
Other interest-bearing liabilities (1)
Total interest-bearing liabilities
Non-interest-bearing liabilities
Equity
Total liabilities and equity
Net interest margin
(1) Includes the average balance of our unsecured borrowings, as well as secured borrowings and amortization expense of transaction costs related to our term asset-backed securitizations and our Secured Borrowing Facility.
54 SLM CORPORATION — 2025 Form 10-K
Rate/Volume Analysis - GAAP
The following rate/volume analysis shows the relative contribution of changes in interest rates and asset volumes.
Years Ended December 31,
(dollars in thousands)
Increase
(Decrease)
Change Due To (1)
Rate
Volume
Interest income
Interest expense
Net interest income
Interest income
Interest expense
Net interest income (loss)
(1) Changes in income and expense due to both rate and volume have been allocated in proportion to the relationship of the absolute dollar amounts of the change in each. The changes in income and expense are calculated independently for each line in the table. The totals for the rate and volume columns are not the sum of the individual lines.
Summary of Our Loans Held for Investment Portfolio
Ending Loans Held for Investment Balances, net
Private Education Loans
As of December 31,
(dollars in thousands)
Total loan portfolio:
In-school (1)
Repayment and other (2)
Total, gross
Deferred origination costs and unamortized premium/(discount)
Allowance for credit losses
Total loans held for investment portfolio, net
(1) Loans for customers still attending school and who are not yet required to make payments on the loans.
(2) Includes loans in deferment or forbearance. Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period (but, for purposes of the table, do not include loans in the “loans in forbearance” metric).
2025 Form 10-K — SLM CORPORATION 55
As of December 31, 2023
(dollars in thousands)
Private
Education
Loans
FFELP
Loans
Total Loans
Held for
Investment
Total loan portfolio:
In-school (1)
Repayment and other (2)
Total, gross
Deferred origination costs and unamortized premium/(discount)
Allowance for loan losses
Total loans held for investment portfolio, net
% of total
(1) Loans for customers still attending school and who are not yet required to make payments on the loans.
(2) Includes loans in deferment or forbearance. Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period (but, for purposes of the table, do not include loans in the “loans in forbearance” metric).
As of December 31, 2022
(dollars in thousands)
Private
Education
Loans
FFELP
Loans
Total Loans Held for Investment
Total loan portfolio:
In-school (1)
Repayment and other (2)
Total, gross
Deferred origination costs and unamortized premium/(discount)
Allowance for loan losses
Total loans held for investment portfolio, net
% of total
(1) Loans for customers still attending school and who are not yet required to make payments on the loans.
(2) Includes loans in deferment or forbearance. Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period (but, for purposes of the table, do not include loans in the “loans in forbearance” metric).
56 SLM CORPORATION — 2025 Form 10-K
As of December 31, 2021
(dollars in thousands)
Private
Education
Loans
FFELP
Loans
Credit
Cards
Total Loans Held for Investment
Total loan portfolio:
In-school (1)
Repayment and other (2)
Total, gross
Deferred origination costs and unamortized premium/(discount)
Allowance for loan losses
Total loans held for investment portfolio, net
% of total
(1) Loans for customers still attending school and who are not yet required to make payments on the loans.
(2) Includes loans in deferment or forbearance. Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period (but, for purposes of the table, do not include loans in the “loans in forbearance” metric).
Average Loans Held for Investment Balances (net of unamortized premium/discount)
Years Ended December 31, (dollars in thousands)
Private Education Loans
FFELP Loans
Total portfolio
Loans Held for Investment, Net — Activity
Year Ended December 31, 2025
(dollars in thousands)
Total Loans
Held for
Investment (Private Education Loans), net
Beginning balance
Acquisitions and originations:
Fixed-rate
Variable-rate
Total acquisitions and originations
Capitalized interest and deferred origination cost premium amortization
Sales
Loan consolidations to third parties
Allowance
Transfer to loans held for sale
Repayments and other
Ending balance
2025 Form 10-K — SLM CORPORATION 57
Year Ended December 31, 2024
(dollars in thousands)
Private
Education
Loans
FFELP
Loans
Total Loans
Held for Investment, net
Beginning balance
Acquisitions and originations:
Fixed-rate
Variable-rate
Total acquisitions and originations
Capitalized interest and deferred origination cost premium amortization
Sales
Loan consolidations to third parties
Allowance
Transfer to loans held for sale
Repayments and other
Ending balance
Year Ended December 31, 2023
(dollars in thousands)
Private
Education
Loans
FFELP
Loans
Total Loans
Held for
Investment, net
Beginning balance
Acquisitions and originations:
Fixed-rate
Variable-rate
Total acquisitions and originations
Capitalized interest and deferred origination cost premium amortization
Sales
Loan consolidations to third parties
Allowance
Repayments and other
Ending balance
“Loan consolidations to third parties” and “Repayments and other” are both significantly affected by the volume of loans in our held for investment portfolio in P&I repayment status. Loans in P&I repayment status include loans in full principal and interest repayment status as well as certain loans in short-term interest-only payment programs (such as loans in GRP and loans in a short-term interest only alternative program). The amount of loans in P&I repayment status in our Private Education Loans held for investment portfolio at December 31, 2025 decreased by 0.1 percent compared with December 31, 2024, and now totals 45 percent of our Private Education Loans held for investment portfolio at December 31, 2025. The balance of loans held for investment in P&I repayment status was affected in 2025 and 2024 by loan sales.
“Loan consolidations to third parties” for the year ended December 31, 2025 total 10.6 percent of our Private Education Loans held for investment portfolio in P&I repayment status at December 31, 2025, or 4.8 percent of our total Private Education Loans held for investment portfolio at December 31, 2025, compared with the year-ago period of 8.7 percent of our Private Education Loan held for investment portfolio in P&I repayment status, or 3.9 percent of our total Private Education Loans held for investment portfolio, respectively. The increase in consolidations compared to the year-ago period is primarily attributable to lower interest rates in 2025. Historical experience has shown that loan consolidation activity is heightened in the period when the loan initially enters full principal and interest repayment status and then subsides over time.
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The “Repayments and other” category includes all scheduled repayments, as well as voluntary prepayments, made on loans in repayment and also includes charge-offs. Consequently, this category can be significantly affected by the volume of loans in repayment.
Private Education Loan Originations
The following table summarizes our Private Education Loan originations. Originations represent loans that were funded or acquired during the period presented.
Years Ended December 31,
(dollars in thousands)
Smart Option - interest only (1)
Smart Option - fixed pay (1)
Smart Option - deferred (1)
Graduate Loan (2)
Parent Loan (3)
Total Private Education Loan originations
Percentage of loans with a cosigner
Average FICO at approval (4)
(1) Interest only, fixed pay and deferred describe the payment option while in school or in grace period. See Item 1. “Business - Our Business - Private Education Loans” for a further discussion.
(2) For the year ended December 31, 2025, the Graduate Loan originations include $24.7 million of Smart Option Loans where the student was in a graduate status. For the year ended December 31, 2024, the Graduate Loan originations include $32.2 million of Smart Option Loans where the student was in a graduate status. For the year ended December 31, 2023, the Graduate Loan originations include $29.4 million of Smart Option Loans where the student was in a graduate status.
(3) In December 2021, we discontinued offering our Parent Loan product. Applications for those loans received before the offering termination date were processed, and final disbursements under those loans occurred in February 2023.
(4) Represents the higher credit score of the cosigner or the borrower.
Private Education Loan Maturitie s
The following table summarizes the remaining maturities of our Private Education Loan portfolio.
As of December 31, 2025
(dollars in thousands)
One year or less
After one year to five years
After five years to 15 years
After 15 years
Total
Fixed-rate
Variable-rate
Total Private Education Loans, gross
2025 Form 10-K — SLM CORPORATION 59
Allowance for Credit Losses
Allowance for Loan Losses Activity
Years Ended December 31,
(dollars in thousands)
Total Portfolio (Private
Education
Loans)
Private
Education
Loans
FFELP
Loans
Total
Portfolio
Beginning balance
Transfer from unfunded commitment liability (1)
Less:
Charge-offs
Write-downs arising from transfer of loans to held for sale (2)
Plus:
Recoveries
Provisions for loan losses:
Provision, current period
Loan sale reduction to provision
Loans transferred to held for sale
Total provisions for loan losses (3)
Ending balance
Years Ended December 31, (dollars in thousands)
Private
Education
Loans
FFELP
Loans
Total
Portfolio
Private
Education
Loans
FFELP
Loans
Credit Cards
Total
Portfolio
Beginning balance
Transfer from unfunded commitment liability (1)
Less:
Charge-offs
Plus:
Recoveries
Provisions for loan losses:
Provision, current period
Loan sale reduction to provision
Loans transferred to held for sale
Total provisions for loan losses (3)
Ending balance
(1) See Notes to Consolidated Financial Statements, Note 7, “Allowance for Credit Losses and Unfunded Loan Commitments,” in this Form 10-K for a summary of the activity in the allowance for and balance of unfunded loan commitments, respectively.
(2) Represents fair value adjustments on loans transferred to held for sale.
(3) See “ — Financial Condition — Allowance for Credit Losses — Provision for Credit Losses” in this Item 7 for a reconciliation of the provisions for credit losses reported in the consolidated statements of income.
60 SLM CORPORATION — 2025 Form 10-K
Year Ended December 31,
(dollars in thousands)
Private
Education
Loans
FFELP
Loans
Credit
Cards
Total
Portfolio
Beginning balance
Transfer from unfunded commitment liability (1)
Less:
Charge-offs
Plus:
Recoveries
Provisions for loan losses:
Provision, current period
Loan sale reduction to provision
Loans transferred from held for sale
Total provisions for loan losses (2)
Ending balance
(1) See Notes to Consolidated Financial Statements, Note 7, “Allowance for Credit Losses and Unfunded Loan Commitments,” in this Form 10-K for a summary of the activity in the allowance for and balance of unfunded loan commitments, respectively.
(2) See “ — Financial Condition — Allowance for Credit Losses — Provision for Credit Losses” in this Item 7 for a reconciliation of the provisions for credit losses reported in the consolidated statements of income.
Provision for Credit Losses
Below is a reconciliation of the provisions for credit losses reported in the consolidated statements of income.
Consolidated Statements of Income
Provisions for Credit Losses Reconciliation
Years Ended December 31,
(dollars in thousands)
Private Education Loan provisions for credit losses:
Provisions for loan losses
Provisions for unfunded loan commitments
Total Private Education Loan provisions for credit losses
Other impacts to the provisions for credit losses:
FFELP Loans
Credit Cards
Total
Provisions for credit losses reported in consolidated statements of income
2025 Form 10-K — SLM CORPORATION 61
Private Education Loan Allowance for Credit Losses
In establishing the allowance for Private Education Loan losses as of December 31, 2025, we considered several factors with respect to our Private Education Loan held for investment portfolio, in particular, credit quality and delinquency, forbearance, and charge-off trends.
Private Education Loans held for investment in P&I repayment status were 45 percent of our total Private Education Loans held for investment portfolio at December 31, 2025, compared with 44 percent at December 31, 2024.
For a more detailed discussion of our policy for determining the collectability of Private Education Loans and maintaining our allowance for Private Education Loans, see “— Critical Accounting Estimates — Allowance for Credit Losses” in this Item 7 and Notes to Consolidated Financial Statements, Note 5, “Loans Held for Investment — Certain Collection Tools — Private Education Loans” in this Form 10-K.
62 SLM CORPORATION — 2025 Form 10-K
The table below presents our Private Education Loans held for investment portfolio delinquency trends. Loans in repayment include loans making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period (but, for purposes of the following table, do not include loans in the “loans in forbearance” metric).
Private Education Loans Held for Investment
As of December 31, (dollars in thousands)
Balance
Balance
Balance
Loans in-school/grace/deferment (1)
Loans in forbearance (2)
Loans in repayment and percentage of each status:
Loans current
Loans delinquent 30-59 days (3)
Loans delinquent 60-89 days (3)
Loans 90 days or greater past due (3)
Total Private Education Loans in repayment
Total Private Education Loans, gross
Private Education Loans deferred origination costs and unamortized premium/(discount)
Total Private Education Loans
Private Education Loans allowance for losses
Private Education Loans, net
Percentage of loans in repayment
Delinquencies as a percentage of loans in repayment
Percentage of loans in forbearance:
Percentage of loans in an extended grace period (4)
Percentage of loans in hardship and other forbearances (5)
(1) Deferment includes customers who have returned to school or are engaged in other permitted educational activities and are not yet required to make payments on the loans (e.g., residency periods for medical students or a grace period for bar exam preparation).
(2) Loans for customers who have requested extension of grace period generally during employment transition or who have temporarily ceased making full payments due to hardship or other factors (other than delinquent loans in disaster forbearance), consistent with established loan program servicing policies and procedures.
(3) The period of delinquency is based on the number of days scheduled payments are contractually past due.
(4) We calculate the percentage of loans in an extended grace period as the ratio of (a) Private Education Loans in forbearance in an extended grace period numerator to (b) Private Education Loans in repayment and forbearance denominator. An extended grace period aligns with The Office of the Comptroller of the Currency definition of an additional, consecutive, one-time period during which no payment is required for up to six months after the initial grace period. We typically grant this extended grace period to customers who may be having difficulty finding employment before the full principal and interest repayment period starts or once it has begun. Loans in forbearance in an extended grace period were approximately $272 million, $253 million, and $168 million at December 31, 2025, 2024, and 2023, respectively. See “—Financial Condition — Allowance for Credit Losses — Use of Forbearance and Modifications as a Private Education Loan Collection Tool” in this Item 7 for additional details.
(5) We calculate the percentage of loans in hardship and other forbearances as the ratio of (a) Private Education Loans in hardship and other forbearances (excluding loans in an extended grace period and delinquent loans in disaster forbearance) numerator to (b) Private Education Loans in repayment and forbearance denominator. If the customer is in financial hardship, we work with the customer and/or cosigner and identify any available alternative arrangements designed to reduce monthly payment obligations, which may include a short-term hardship forbearance. Loans in hardship and other forbearances (excluding loans in an extended grace period and delinquent loans in disaster forbearance) were approximately $161 million, $152 million, and $156 million at December 31, 2025, 2024, and 2023, respectively. See “—Financial Condition — Allowance for Credit Losses — Use of Forbearance and Modifications as a Private Education Loan Collection Tool” in this Item 7 for additional details.
Delinquencies as a percentage of loans in repayment increased to 4.0 percent at December 31, 2025 from 3.7 percent at December 31, 2024. The increase in the delinquency metric in 2025 compared with 2024 is primarily attributable to changes and refinements to our loss mitigation programs in late 2024 which generally restricted loan modification eligibility to borrowers in later-stage delinquency, as well as a shift in the composition of the loans in repayment portfolio (which does not include loans held for sale) due to $933 million of newly originated loans transferred
2025 Form 10-K — SLM CORPORATION 63
to held for sale status during the fourth quarter of 2025, as we intended to sell the loans to the Strategic Partner in January 2026. See “—Financial Condition — Allowance for Credit Losses — Use of Forbearance and Modifications as a Private Education Loan Collection Tool” in this Item 7 for additional details. The percentage of loans in an extended grace forbearance remained relatively consistent at 1.7 percent and 1.6 percent at December 31, 2025 and December 31, 2024, respectively. The percentage of loans in hardship and other forbearances remained relatively consistent at 1.0 percent and 0.9 percent, respectively, at December 31, 2025 and December 31, 2024.
The decrease in delinquencies at December 31, 2024, compared with 2023, was primarily attributable to the then-new loan modification programs. The increase in the percentage of loans in an extended grace period at December 31, 2024 compared with 2023 was primarily due to borrowers being eligible to receive up to six months of extended grace forbearance in one increment instead of multiple instances of two-month increments, coupled with our continued efforts to better match our available program offerings to the financial needs of our borrowers. The percentage of loans in hardship and other forbearances remained relatively consistent at 0.9 percent and 1.0 percent, respectively at December 31, 2024 and December 31, 2023.
64 SLM CORPORATION — 2025 Form 10-K
The following table summarizes changes in the allowance for Private Education Loan (held for investment) losses and the allowance for unfunded loan commitments.
Years Ended December 31,
(dollars in thousands)
Allowance for loan losses, beginning balance
Transfer from allowance for unfunded loan commitments (1)
Provisions:
Provision for current period
Loan sale reduction to provision
Loans transferred (to) from held for sale
Total provisions (2)
Net charge-offs:
Charge-offs
Recoveries
Net charge-offs
Allowance for loan losses, ending balance
Allowance for unfunded loan commitments, beginning balance (1)
Provision (2)(3)
Transfer to allowance for loan losses
Allowance for unfunded loan commitments, ending balance (1)
Total allowance for credit losses, ending balance
Total Allowance Percentage of Private Education Loan Exposure (5)(6)
Allowance for loan losses coverage of net charge-offs
Net charge-offs as a percentage of average loans in repayment (4)
Delinquencies as a percentage of ending loans in repayment (4)
Loans in forbearance as a percentage of ending loans in repayment and forbearance (4)
Ending total loans, gross
Average loans in repayment (4)
Ending loans in repayment (4)
Unfunded loan commitments for loans held for investment (6)
Total accrued interest receivable
(1) When a new loan commitment is made, we record an allowance to cover lifetime expected credit losses on the unfunded commitments, which is recorded in “Other Liabilities” on the consolidated balance sheet. See Notes to Consolidated Financial Statements, Note 7, “Allowance for Credit Losses and Unfunded Loan Commitments” in this Form 10-K for a summary of the activity in the allowance for and balance of unfunded loan commitments.
(2) See “ — Financial Condition — Allowance for Credit Losses — Provision for Credit Losses” in this Item 7 for a reconciliation of the provisions for credit losses reported in the consolidated statements of income.
(3) Includes incremental provision for new commitments and changes to provision for existing commitments.
(4) Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period (but, for purposes of the table, do not include those loans while they are in forbearance).
(5) The Total Allowance Percentage of Private Education Loan Exposure is the total allowance for credit losses as a percentage of ending total loans plus unfunded loan commitments and total accrued interest receivable on Private Education Loans.
(6) Unfunded loan commitments for loans held for investment and the calculation of the Total Allowance Percentage of Private Education Loan Exposure do not include $523 million of unfunded loan commitments associated with loans classified as held for sale at December 31, 2025. Due to the near-term timing of the loan sale and credit quality of the loans, we believe there is no risk of credit loss and are not recording an allowance for the unfunded loan commitments related to the loans classified as held for sale.
As part of concluding on the adequacy of the allowance for credit losses, we review key allowance and loan metrics. The most significant of these metrics considered are the allowance coverage of net charge-offs ratio; the Total Allowance as Percentage of Private Education Loan Exposure; and delinquency and forbearance percentages.
2025 Form 10-K — SLM CORPORATION 65
Net charge-offs as a percentage of average loans in repayment decreased in the year ended December 31, 2025 compared with the year-ago period primarily due to changes in the loan modification programs implemented in late 2024. Net charge-offs as a percentage of average loans in repayment decreased in the year ended December 31, 2024 compared with the year ended December 31, 2023 primarily due to the expanded loan modifications program implemented in late 2023 and throughout the full year 2024.
During 2026, the first wave of loans that were modified under the expanded loss mitigation programs in late 2023 will be exiting existing modifications. Borrowers currently enrolled in these programs have largely exhibited positive payment performance, and longer-term performance is unknown but will become clearer throughout 2026.
Use of Forbearance and Modifications as a Private Education Loan Collection Tool
In recent years, we have made significant changes to our credit administration practices, enhancing our loss mitigation programs through both our forbearance and loan modification offerings. We adjust the terms of loans for certain borrowers when we believe such changes will help our borrowers manage their student loan obligations, achieve better student outcomes and increase the collectability of the loans. These changes generally take the form of a temporary forbearance of payments, a temporary or permanent interest rate reduction, a temporary or permanent interest rate reduction with a permanent extension of the loan term, and/or a short-term extended repayment or interest-only alternative.
We continually monitor our credit administration practices and modify them from time to time based upon performance, industry conventions, and/or regulatory feedback.
Forbearance
Forbearance allows a borrower to not make scheduled payments for a specified period of time. Our forbearance policies and practices vary depending upon whether a borrower is current or delinquent at the time forbearance is requested, generally with stricter requirements for delinquent borrowers. Using forbearance extends the original term of the loan by the term of forbearance taken. Forbearance does not grant any reduction in the total principal or interest repayment obligation. While a loan is in forbearance status, interest continues to accrue and is capitalized (added to principal) at the end of the forbearance. Interest will not capitalize at the end of certain types of forbearance, such as disaster forbearance, however.
During the first six months following a borrower’s grace period, the borrower may be eligible for extended grace forbearance, which provides temporary payment relief to give the borrower additional time to be in a position to make regular principal and interest payments. We do not consider borrowers who are eligible for extended grace to be experiencing financial difficulty.
Hardship forbearance may be granted in order to provide temporary payment relief to borrowers who are either current in their payments but demonstrate a need for relief, or who are delinquent in their payments but demonstrate an ability and willingness to repay their obligation. In these circumstances, a borrower’s loan is placed into a forbearance status in limited monthly increments and is reflected in the forbearance status at month-end during this time. At the end of the forbearance period for borrowers who were current when they entered forbearance or those who were delinquent but met specific payment requirements curing their delinquency, the borrower will enter repayment status as current. In all instances, the borrowers are expected to begin making scheduled monthly payments at the end of their forbearance periods. This strategy is aimed at assisting borrowers while mitigating the risks of delinquency and default as well as encouraging resolution of delinquent loans.
Disaster forbearance is used to assist borrowers affected by material events, typically federally-declared disasters, including hurricanes, wildfires, floods, and pandemics. We typically grant disaster forbearance to affected borrowers in one-month increments, up to three months at a time, but the disaster forbearance granted generally does not apply toward the 12-month forbearance limit described below. Disaster forbearance is granted based on areas impacted by federally declared disasters, not because the borrower is experiencing financial difficulty. Loans in disaster forbearance are not assessed late or other fees. Due to the nature and limited timeframe of disaster forbearance, delinquent loans granted disaster forbearance are maintained in their pre-grant delinquency status, and as such, are not reflected in our loans in forbearance metrics.
We offer certain other administrative forbearances (e.g., death and disability, bankruptcy, military service, and in school assistance) that are required by law (such as by the Servicemembers Civil Relief Act), are considered separate from our active loss mitigation programs, or do not exceed the significance threshold. We do not consider borrowers eligible for these other administrative forbearances to be experiencing financial difficulty.
66 SLM CORPORATION — 2025 Form 10-K
Currently, we generally grant forbearance for up to 12 months over the life of the loan, in increments of one to two months at a time, although extended grace forbearance is typically granted in one six-month increment. Disaster forbearance and certain other limited instances do not apply toward the 12-month limit. We also currently require 12 months of positive payment performance by a borrower (meaning the borrower must make payment in a cumulative amount equivalent to 12 monthly required payments under the loan) between successive grants of forbearance and between forbearance grants and certain other repayment alternatives. This required period of positive payment performance is not necessary to receive additional increments of extended grace forbearance or for a borrower to receive a contractual interest rate reduction. In addition, we currently limit the participation of delinquent borrowers in certain short-term extended or interest-only repayment alternatives to once in 12 months and twice in five years. We also now count the number of months a borrower receives a short-term extended repayment alternative toward the 12-month forbearance limit described above.
Modification Programs other than Forbearances
For borrowers experiencing more severe hardship, following evaluation of their ability and willingness to repay, we currently use modification programs tailored to the financial condition of the individual borrower. Pursuant to our modification programs, we may reduce the contractual interest rate on a loan to a rate between 2 percent and 8 percent temporarily, and/or in some instances may permanently extend the final maturity of a loan. For borrowers experiencing the most severe financial conditions, we may permanently reduce the contractual interest rate on a loan to 2 percent for the remaining life of the loan and also permanently extend the final maturity of the loan. Following modification, borrowers who are delinquent but meet specific payment requirements curing their delinquency will be brought current. We currently limit the granting of a permanent extension of the final maturity date of a loan to once over the life of the loan, and the number of interest rate reductions to twice over the life of the loan.
Modifications under these programs are generally considered loan modifications to borrowers experiencing financial difficulty. See Note 7, “Allowance for Credit Losses and Unfunded Commitments — Loan Modifications to Borrowers Experiencing Financial Difficulty” in this Form 10-K for disclosures related to these modification programs. However, in some situations, we may offer on a limited basis term extensions or rate reductions or a combination of both to borrowers to reduce consolidation activities, which we do not consider to be modifications of loans to borrowers experiencing financial difficulty.
Delinquency Trends by Active Repayment Status
The tables below show the composition and status of the Private Education Loan portfolio held for investment aged by number of months in active repayment status (months for which a scheduled monthly payment was due). Active repayment status includes loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period. Our experience shows that the percentage of loans in forbearance status generally decreases the longer the loans have been in active repayment status. At December 31, 2025, Private Education Loans (held for investment) in forbearance that have been in active repayment status for fewer than 25 months as a percentage of all loans in repayment and forbearance were 2.0 percent. At December 31, 2025, approximately 76 percent of our Private Education Loans (held for investment) in forbearance status have been in active repayment status fewer than 25 months.
2025 Form 10-K — SLM CORPORATION 67
As of December 31, 2025
(dollars in millions)
Private Education Loans Held for Investment
Aged by Number of Months in Active Repayment Status
Not Yet in
Repayment
Total
More than 48
Loans in-school/grace/deferment
Loans in forbearance
Loans in repayment - current
Loans in repayment - delinquent 30-59 days
Loans in repayment - delinquent 60-89 days
Loans in repayment - 90 days or greater past due
Total
Deferred origination costs and unamortized premium/(discount)
Allowance for loan losses
Total Private Education Loans, net
Loans in forbearance as a percentage of total Private Education Loans in repayment and forbearance
As of December 31, 2024
(dollars in millions)
Private Education Loans Held for Investment
Aged by Number of Months in Active Repayment Status
Not Yet in
Repayment
Total
More than 48
Loans in-school/grace/deferment
Loans in forbearance
Loans in repayment - current
Loans in repayment - delinquent 30-59 days
Loans in repayment - delinquent 60-89 days
Loans in repayment - 90 days or greater past due
Total
Deferred origination costs and unamortized premium/(discount)
Allowance for loan losses
Total Private Education Loans, net
Loans in forbearance as a percentage of total Private Education Loans in repayment and forbearance
68 SLM CORPORATION — 2025 Form 10-K
As of December 31, 2023
(dollars in millions)
Private Education Loans Held for Investment
Aged by Number of Months in Active Repayment Status
Not Yet in
Repayment
Total
More than 48
Loans in-school/grace/deferment
Loans in forbearance
Loans in repayment - current
Loans in repayment - delinquent 30-59 days
Loans in repayment - delinquent 60-89 days
Loans in repayment - 90 days or greater past due
Total
Deferred origination costs and unamortized premium/(discount)
Allowance for loan losses
Total Private Education Loans, net
Loans in forbearance as a percentage of total Private Education Loans in repayment and forbearance
2025 Form 10-K — SLM CORPORATION 69
Private Education Loans Held for Investment Types
The following table provides information regarding the loans in repayment balance and total loan balance by Private Education Loan held for investment product type for the years ended December 31, 2025 and 2024.
As of December 31, 2025 (dollars in thousands)
Smart Option
Graduate
Loan
Other (1)
Total
$ in repayment (2)
$ in total
As of December 31, 2024 (dollars in thousands)
Smart Option
Graduate
Loan
Other (1)
Total
$ in repayment (2)
$ in total
(1) Other includes our Parent Loan and Career training loan products. In December 2021, we discontinued offering our Parent Loan product. Applications for those loans received before the offering termination date continued to be processed, and final disbursements under those loans occurred in February 2023. In May 2022, we discontinued offering our Career Training loan product. Applications for those loans received before the offering termination date continued to be processed, and final disbursements under those loans occurred in September 2023.
(2) Loans in repayment include loans on which borrowers are making interest only or fixed payments, as well as loans that have entered full principal and interest repayment status after any applicable grace period (but, for purposes of the table, do not include loans in the “loans in forbearance” metric).
Accrued Interest Receivable
The following table provides information regarding accrued interest receivable on our Private Education Loans. The table also discloses the amount of accrued interest on loans 90 days or greater past due as compared to our allowance for uncollectible interest. The majority of the total accrued interest receivable represents accrued interest on deferred loans where no payments are due while the borrower is in school and fixed-pay loans where the borrower makes a $25 monthly payment that is smaller than the interest accruing on that loan in that month. The accrued interest on these loans will be capitalized to the balance of the loans when the borrower exits the grace period after separation from school. The allowance for credit losses considers both the collectibility of principal and accrued interest. The allowance for uncollectible interest estimates the additional uncollectible interest that is not captured in the allowance for credit losses.
Private Education Loans
Accrued Interest Receivable
(Dollars in thousands)
Total Interest Receivable
90 Days or Greater
Past Due
Allowance for
Uncollectible
Interest (1)
December 31, 2025
December 31, 2024
December 31, 2023
December 31, 2022
December 31, 2021
(1) The allowance for uncollectible interest at December 31, 2025, 2024, 2023, 2022, and 2021 represents the expected losses related to the portion of accrued interest receivable on those loans that are in repayment (at December 31, 2025, 2024, 2023, 2022, and 2021, relates to $164 million, $164 million, $151 million, $240 million, and $240 million, respectively, of accrued interest receivable) that is/was not expected to be capitalized. The accrued interest receivable that is/was expected to be capitalized ($1.4 billion, $1.4 billion, $1.2 billion, $937 million, and $947 million, respectively, at December 31, 2025, 2024, 2023. 2022, and 2021) is/was reserved for in the allowance for credit losses.
70 SLM CORPORATION — 2025 Form 10-K
Liquidity and Capital Resources
Funding and Liquidity Risk Management
Our primary funding and liquidity objective is to support our businesses throughout market cycles, including during periods of financial stress. Our business needs primarily include funding originations of Private Education Loans and meeting any deposits outflows at the Bank. To achieve these objectives, we maintain access to diverse funding sources, such as retail deposits, brokered deposits, asset-backed securitizations, unsecured debt, other financing facilities, and loan sales. We maintained liquidity reserves in the form of unrestricted cash and liquid investments of $5.4 billion and $6.1 billion as of December 31, 2025 and 2024, respectively, as noted in the table below.
At December 31, 2025 and December 31, 2024, our sources of liquidity included liquid investments with unrealized losses of $61.2 million and $105.8 million, respectively. It is our policy to manage operations so our liquidity needs are fully satisfied through normal operations to avoid unplanned loan or liquid investment sales under all but the most dire conditions. Our liquidity management is governed by policies approved by our Board of Directors. Oversight of these policies is performed in the Asset and Liability Committee, a management-level committee. These policies take into account the volatility of cash flow forecasts, expected asset and liability maturities, anticipated loan demand, and a variety of other factors to establish minimum liquidity guidelines.
Key risks associated with our liquidity relate to our ability to access the capital markets and deposit markets at reasonable rates. This ability may be affected by our performance, competitive pressures, the macroeconomic environment, and the impact they have on the availability of funding sources in the marketplace. We target maintaining sufficient on-balance sheet and contingent sources of liquidity to enable us to meet all contractual and contingent obligations under various stress scenarios, including severe macroeconomic stresses and specific stresses that test the resiliency of our balance sheet. At December 31, 2025, we held a significant liquidity buffer of cash and liquid investments, which we expect to maintain through in the future. Due to the seasonal nature of our business, our liquidity levels will likely vary from quarter to quarter.
Sources of Liquidity and Available Capacity
Ending Balances
As of December 31,
(dollars in thousands)
Sources of primary liquidity:
Unrestricted cash and liquid investments:
Holding Company and other non-bank subsidiaries
Sallie Mae Bank (1)
Available-for-sale investments
Total unrestricted cash and liquid investments
(1) This amount will be used primarily to originate Private Education Loans at the Bank.
Average Balances
Years Ended December 31,
(dollars in thousands)
Sources of primary liquidity:
Unrestricted cash and liquid investments:
Holding Company and other non-bank subsidiaries
Sallie Mae Bank (1)
Available-for-sale investments
Total unrestricted cash and liquid investments
(1) This amount will be used primarily to originate Private Education Loans at the Bank.
2025 Form 10-K — SLM CORPORATION 71
Deposits
The following table summarizes total deposits.
As of December 31,
(dollars in thousands)
Deposits - interest-bearing
Deposits - non-interest-bearing
Total deposits
Our total deposits of $21.1 billion were comprised of $8.8 billion in brokered deposits and $12.3 billion in retail and other deposits at December 31, 2025, compared with total deposits of $21.1 billion, which were comprised of $9.5 billion in brokered deposits and $11.6 billion in retail and other deposits, at December 31, 2024.
Interest-bearing deposits as of December 31, 2025 and 2024 consisted of retail and brokered non-maturity savings deposits, retail and brokered non-maturity money market deposit accounts (“MMDAs”), and retail and brokered CDs. Interest-bearing deposits also include deposits from Educational 529 and Health Savings plans that diversify our funding sources and that we consider to be core. These and other large omnibus accounts, aggregating the deposits of many individual depositors, represented $7.6 billion of our deposit total as of December 31, 2025, compared with $7.0 billion at December 31, 2024. The omnibus accounts are structured in such a way that entitles the individual depositor pass-through deposit insurance (subject to FDIC rules and limitations), and the majority of these deposits have contractual minimum balances and maturity terms.
Some of our deposit products are serviced by third-party providers. Placement fees associated with the brokered CDs are amortized into interest expense using the effective interest rate method. We recognized placement fee expense of $8 million, $11 million, and $12 million in the years ended December 31, 2025, 2024, and 2023, respectively. Fees paid to third-party brokers related to brokered CDs were $8 million, $8 million, and $8 million during the years ended December 31, 2025, 2024, and 2023, respectively.
Interest-bearing deposits at December 31, 2025 and 2024 are summarized as follows:
As of December 31,
(dollars in thousands)
Amount
Year-End Weighted Average Stated Rate (1)
Amount
Year-End Weighted Average Stated Rate (1)
Money market
Savings
Certificates of deposit
Deposits - interest-bearing
(1) Includes the effect of interest rate swaps in effective hedge relationships.
As of December 31, 2025 and 2024, there were $1.2 billion and $1.2 billion, respectively, of deposits exceeding FDIC insurance limits. Accrued interest on deposits was $71 million and $92 million at December 31, 2025 and 2024, respectively.
72 SLM CORPORATION — 2025 Form 10-K
Counterparty Exposure
Counterparty exposure related to financial instruments arises from the risk that a lending, investment, or derivative counterparty will not be able to meet its obligations to us.
Excess cash is generally invested with the Federal Reserve Bank of San Francisco (the “FRB”) on an overnight basis or in the FRB’s Term Deposit Facility, minimizing counterparty exposure on cash balances.
Our investment portfolio is primarily comprised of a small portfolio of mortgage-backed securities issued by government agencies and government-sponsored enterprises that are purchased to meet CRA targets. Additionally, our investing activity is governed by Board-approved limits on the amount that is allowed to be invested with any one issuer based on the credit rating of the issuer, further minimizing our counterparty exposure. Counterparty credit risk is considered when valuing investments and considering impairment.
Related to derivative transactions, protection against counterparty risk is generally provided by International Swaps and Derivatives Association, Inc. Credit Support Annexes (“CSAs”), or clearinghouses for over-the-counter derivatives. CSAs require a counterparty to post collateral if a potential default would expose the other party to a loss. All derivative contracts entered into by the Bank are covered under CSAs or clearinghouse agreements and require collateral to be exchanged based on the net fair value of derivatives with each counterparty. Our exposure to the counterparty is limited to the value of the derivative contracts in a gain position, less any collateral held by us and plus collateral posted with the counterparty.
Title VII of the Dodd-Frank Act requires all standardized derivatives, including most interest rate swaps, to be submitted for clearing to central counterparties to reduce counterparty risk. Two of the central counterparties we use are the CME and the LCH. All variation margin payments on derivatives cleared through the CME and LCH are accounted for as legal settlement. As of December 31, 2025, $562 million notional of our derivative contracts were cleared on the CME and $11 million were cleared on the LCH. The derivative contracts cleared through the CME and LCH represent 98.0 percent and 2.0 percent, respectively, of our total notional derivative contracts of $573 million at December 31, 2025.
For derivatives cleared through the CME and LCH, the net gain (loss) position includes the variation margin amounts as settlement of the derivative and not collateral against the fair value of the derivative. The amount of variation margin included as settlement as of December 31, 2025 was $(1) million and $(0.1) million for the CME and LCH, respectively. Changes in fair value for derivatives not designated as hedging instruments are presented as realized gains (losses).
Our exposure to the counterparty is limited to the value of the derivative contracts in a gain position less any collateral held and plus any collateral posted. When there is a net negative exposure, we consider our exposure to the counterparty to be zero. At December 31, 2025 and 2024, we had a net positive exposure (derivative gain/loss positions to us, less collateral held by us and plus collateral posted with counterparties) related to derivatives of $0.1 million and $5 million, respectively.
We have liquidity exposure related to collateral movements between us and our derivative counterparties. Movements in the value of the derivatives, which are primarily affected by changes in interest rates, may require us to return cash collateral held or may require us to access primary liquidity to post collateral to counterparties.
The table below highlights exposure related to our derivative counterparties as of December 31, 2025.
As of December 31, 2025
(dollars in thousands)
SLM Corporation
and Sallie Mae Bank
Contracts
Total exposure, net of collateral
Exposure to counterparties with credit ratings, net of collateral
Percent of exposure to counterparties with credit ratings below S&P AA- or Moody’s Aa3
Percent of exposure to counterparties with credit ratings below S&P A- or Moody’s A3
2025 Form 10-K — SLM CORPORATION 73
Regulatory Capital
The Bank is subject to various regulatory capital requirements administered by federal and state banking authorities. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material adverse effect on our business, results of operations, and financial position. Under U.S. Basel III and the regulatory framework for prompt corrective action, the Bank must meet specific capital standards that involve quantitative measures of its assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and its classification under the prompt corrective action framework are also subject to qualitative judgments by the regulators about components of capital, risk weightings, and other factors.
Capital Management
The Bank intends to maintain at all times regulatory capital levels that meet both the minimum levels required under U.S. Basel III (including applicable buffers) and the levels necessary to be considered “well capitalized” under the FDIC’s prompt corrective action framework, in order to support asset growth and operating needs, address unexpected credit risks, and protect the interests of depositors and the DIF administered by the FDIC. The Bank’s Capital Policy requires management to monitor these capital standards and the Bank’s compliance with them. The Board of Directors and management periodically evaluate the quality of assets, the stability of earnings, and the adequacy of the allowance for credit losses for the Bank. The Company is a source of strength for the Bank and will provide additional capital if necessary.
We believe that current and projected capital levels are appropriate for 2026. As of December 31, 2025, the Bank’s risk-based and leverage capital ratios exceed the required minimum ratios and the applicable buffers under the fully phased-in U.S. Basel III standards as well as the “well capitalized” standards under the prompt corrective action framework.
Under U.S. Basel III, the Bank is required to maintain the following minimum regulatory capital ratios: a Common Equity Tier 1 risk-based capital ratio of 4.5 percent, a Tier 1 risk-based capital ratio of 6.0 percent, a Total risk-based capital ratio of 8.0 percent, and a Tier 1 leverage ratio of 4.0 percent. In addition, the Bank is subject to a Common Equity Tier 1 capital conservation buffer of greater than 2.5 percent. Failure to maintain the buffer will result in restrictions on the Bank’s ability to make capital distributions, including the payment of dividends, and to pay discretionary bonuses to executive officers. Including the buffer, the Bank is required to maintain the following capital ratios under U.S. Basel III in order to avoid such restrictions: a Common Equity Tier 1 risk-based capital ratio of greater than 7.0 percent, a Tier 1 risk-based capital ratio of greater than 8.5 percent, and a Total risk-based capital ratio of greater than 10.5 percent.
To qualify as “well capitalized” under the prompt corrective action framework for insured depository institutions, the Bank must maintain a Common Equity Tier 1 risk-based capital ratio of at least 6.5 percent, a Tier 1 risk-based capital ratio of at least 8.0 percent, a Total risk-based capital ratio of at least 10.0 percent, and a Tier 1 leverage ratio of at least 5.0 percent.
In July 2023, the federal banking agencies proposed a rule to implement significant changes to the U.S. Basel Ill regulatory capital requirements. The proposed changes to the regulatory capital requirements generally would amend or introduce approaches and methodologies that would apply to banking organizations with total consolidated assets of $100 billion or more or to banking organizations with significant trading activity. The proposed rule therefore would not affect the Bank's capital requirements or the calculation of its capital ratios. It is uncertain if and when a final rule will be adopted, and if so, whether and to what extent it will differ from the proposed rule.
Under regulations issued by the FDIC and other federal banking agencies, banking organizations that adopted CECL during the 2020 calendar year, including the Bank, could elect to delay for two years, and then phase in over the following three years, the effects on regulatory capital of CECL relative to the incurred loss methodology. The Bank elected to use this option. Therefore, the regulatory capital impact of the Bank’s transition adjustments recorded on January 1, 2020 from the adoption of CECL, and 25 percent of the ongoing impact of CECL on the Bank’s allowance for credit losses, retained earnings, and average total consolidated assets, each as reported for regulatory capital purposes (collectively, the “adjusted transition amounts”), were deferred for the two-year period ending January 1, 2022. On each of January 1, 2022, 2023, 2024 and 2025, 25 percent of the adjusted transition amounts were phased in for regulatory capital purposes. As of January 1, 2025, all adjusted transition amounts have been phased in for regulatory capital purposes. The Bank’s January 1, 2020 CECL transition amounts increased our allowance for credit losses by $1.1 billion, increased the liability representing our off-balance sheet exposure for unfunded commitments by $116 million, and increased our deferred tax asset by $306 million, resulting in a cumulative effect adjustment that reduced retained
74 SLM CORPORATION — 2025 Form 10-K
earnings by $953 million. This transition adjustment was inclusive of qualitative adjustments incorporated into our CECL allowance as necessary, to address any limitations in the models used.
The Bank’s required and actual regulatory capital amounts and ratios, including applicable capital conservation buffers, under U.S. Basel III are shown in the following table. The following capital amounts and ratios are based upon the Bank’s average assets and risk-weighted assets, as indicated. The Bank has elected to exclude accumulated other comprehensive income related to both available-for-sale investments and swap valuations from Common Equity Tier 1 Capital.
Actual
U.S. Basel III
Minimum Requirements Plus Buffer (1)(2)
(Dollars in thousands)
Amount
Ratio
Amount
Ratio
As of December 31, 2025 (3) :
Common Equity Tier 1 Capital (to Risk-Weighted Assets)
Tier 1 Capital (to Risk-Weighted Assets)
Total Capital (to Risk-Weighted Assets)
Tier 1 Capital (to Average Assets)
As of December 31, 2024 (3) :
Common Equity Tier 1 Capital (to Risk-Weighted Assets)
Tier 1 Capital (to Risk-Weighted Assets)
Total Capital (to Risk-Weighted Assets)
Tier 1 Capital (to Average Assets)
(1) Reflects the U.S. Basel III minimum required ratio plus the applicable capital conservation buffer.
(2) The Bank’s regulatory capital ratios also exceeded all applicable standards for the Bank to qualify as “well capitalized” under the prompt corrective action framework.
(3) For December 31, 2025 and 2024, the actual amounts and the actual ratios include the respective adjusted transition amounts discussed above.
2025 Form 10-K — SLM CORPORATION 75
Dividends
The Bank is chartered under the laws of the State of Utah and its deposits are insured by the FDIC. The Bank’s ability to pay dividends is subject to the laws of Utah and the regulations of the FDIC. Generally, under Utah’s industrial bank laws and regulations as well as FDIC regulations, the Bank may pay dividends from its net profits without regulatory approval if, following the payment of the dividend, the Bank’s capital and surplus would not be impaired. The Company relies on dividends from the Bank, as necessary, to enable the Company to pay any declared dividends and other payments and consummate share repurchases, as described herein. The Bank declared $700 million, $570 million, and $550 million in dividends to the Company for the years ended December 31, 2025, 2024, and 2023, respectively, with the proceeds primarily used to fund share repurchase programs and stock dividends. We expect that the Bank will pay dividends to the Company as may be necessary to enable the Company to pay any declared dividends on its Series B Preferred Stock and common stock and to consummate any common share repurchases by the Company under the share repurchase programs. See Item 1A. “Risk Factors — GENERAL RISKS” for possible limitations on the payments of our dividends.
Borrowings
Outstanding borrowings consist of unsecured debt and secured borrowings issued through our term ABS program and our Secured Borrowing Facility. The issuing entities for those secured borrowings are variable interest entities and are consolidated for accounting purposes. The following table summarizes our borrowings at December 31, 2025 and 2024. For additional information, see Notes to Consolidated Financial Statements, Note 11, “Borrowings” in this Form 10-K.
As of December 31,
(dollars in thousands)
Short-Term
Long-Term
Total
Short-Term
Long-Term
Total
Unsecured borrowings:
Unsecured debt (fixed-rate)
Total unsecured borrowings
Secured borrowings:
Private Education Loan term securitizations:
Fixed-rate
Variable-rate
Total Private Education Loan term securitizations
Secured Borrowing Facility
Total secured borrowings
Total
Short-term Borrowings
Unsecured Borrowings Transactions
On November 1, 2021, we issued $500 million of 3.125 percent unsecured Senior Notes due November 2, 2026, at a price of 99.43 percent. At December 31, 2025, the outstanding carrying value, net of deferred financing fees, was $498 million.
Long-term Borrowings
Unsecured Borrowings Transactions
On January 31, 2025, we issued $500 million of 6.50 percent unsecured Senior Notes due January 31, 2030, at a price of 99.78 percent. At December 31, 2025, the outstanding carrying value, net of deferred financing fees, was $493 million.
76 SLM CORPORATION — 2025 Form 10-K
Secured Borrowings Transactions
The following summarizes those Private Education Loan Trust term ABS issued in 2024 and 2025 in which we retained 100 percent of the residual class certificates.
SMB Private Education Loan Trust
Date Closed
Loans Transferred to the Trust (1)
Notes
Issued
Gross
Proceeds
Weighted Average
Cost of Funds (2)
Weighted Average Life
of Class A and Class B Notes
(in years)
(Dollars in thousands)
2024-C ABS Transaction
May 15, 2024
SOFR plus 1.19%
2024-E ABS Transaction
August 14, 2024
SOFR plus 1.42%
2024-F ABS Transaction
November 06, 2024
SOFR plus 1.08%
Total 2024
Loans encumbered at December 31, 2025 related to 2024 term ABS
2025-A ABS Transaction
May 07, 2025
SOFR plus 1.49%
Total 2025
Loans encumbered at December 31, 2025 related to 2025 term ABS:
(1) Represents principal and capitalized interest.
(2) Represents SOFR equivalent cost of funds for variable and fixed-rate bonds, excluding issuance costs.
Pre-2024 Transactions
Prior to 2024, we executed a total of $11.53 billion in ABS transactions that were accounted for as secured borrowings. At December 31, 2025, $3.93 billion of our Private Education Loans, including $3.81 billion of principal and $116 million in capitalized interest, were encumbered as a result of these transactions.
Secured Borrowing Facility
On June 13, 2025, we amended our Secured Borrowing Facility to increase the amount that may be borrowed under the facility from $2 billion to $2.5 billion and extended the maturity. We hold 100 percent of the residual interest in the Secured Borrowing Facility Trust. The amendment extended the revolving period, during which we may borrow, repay, and reborrow funds, until June 12, 2026. The scheduled amortization period, during which amounts outstanding under the Secured Borrowing Facility must be repaid, ends on June 12, 2027 (or earlier, if certain material adverse events occur). The one-year revolving period plus the one-year amortization period results in a contractual maturity that is two years from the date of inception or renewal. For the years ended December 31, 2025 and 2024, there were no outstanding borrowings under the Secured Borrowing Facility. For additional information, see Notes to Consolidated Financial Statements, Note 11, “Borrowings” in this Form 10-K.
Other Borrowing Sources
We maintain discretionary uncommitted Federal Funds lines of credit with various correspondent banks, which totaled $125 million at December 31, 2025. The interest rate we are charged on these lines of credit is priced at Fed Funds plus a spread at the time of borrowing and is payable daily. We did not utilize these lines of credit in the years ended December 31, 2025 and 2024.
We established an account at the FRB to meet eligibility requirements for access to the Primary Credit borrowing facility at the FRB’s Discount Window (the “Window”). The Primary Credit borrowing facility is a lending program available to depository institutions that are in generally sound financial condition. All borrowings at the Window must be fully collateralized. We can pledge asset-backed and mortgage-backed securities, as well as Private Education Loans, to the FRB as collateral for borrowings at the Window. Generally, collateral value is assigned based on the estimated fair value
2025 Form 10-K — SLM CORPORATION 77
of the pledged assets. At December 31, 2025 and December 31, 2024, the value of our pledged collateral at the FRB was $2.5 billion and $2.2 billion, respectively. The interest rate charged to us is the discount rate set by the FRB. We did not utilize this facility in the years ended December 31, 2025 and 2024.
Contractual Loan Commitments
When we approve a Private Education Loan at the beginning of an academic year, that approval may cover the borrowing for the entire academic year. As such, we do not always disburse the full amount of the loan at the time of such approval, but instead have a commitment to fund a portion of the loan at a later date (usually at the start of the second semester or subsequent trimesters). We estimate expected credit losses over the contractual period in which we are exposed to credit risk via a contractual obligation to extend credit unless that obligation is unconditionally cancellable by us. At December 31, 2025, we had $2.4 billion of outstanding contractual loan commitments which we expect to fund during the remainder of the 2025/2026 academic year, including $523 million of contractual loan commitments associated with loans classified as held for sale. At December 31, 2025, we had a $77 million reserve recorded in “Other Liabilities” to cover lifetime expected credit losses on unfunded commitments.
Contractual Cash Obligations
In addition to our contractual loan commitments, we have certain other contractual cash obligations and commitments. These include contractual principal obligations associated with long-term Bank deposits, secured borrowings, unsecured debt, and lease obligations. Our material contractual cash obligations relate to Bank deposits. At December 31, 2025, we had $7.5 billion of principal obligations related to Bank deposits due in the next year, and $7.5 billion due thereafter. At December 31, 2025, our contractual cash obligations due in the next year for secured borrowings, unsecured debt, and lease obligations were $782 million, $500 million, and $7 million, respectively, and our contractual cash obligations due thereafter for our secured borrowings, unsecured debt, and lease obligations were $4.1 billion, $500 million, and $20 million, respectively.
Common Stock
Our governing documents permit the issuance of up to 1.125 billion shares of common stock (par value of $0.20). At December 31, 2025, 199 million shares were issued and outstanding and 31 million shares were unissued but encumbered for outstanding stock options, restricted stock, restricted stock units, performance stock units, and dividend equivalent units for employee compensation and remaining authority for stock-based compensation plans. See Notes to Consolidated Financial Statements, Note 13, “Stockholders’ Equity” in this Form 10-K for additional details.
78 SLM CORPORATION — 2025 Form 10-K
Critical Accounting Estimates
Management’s Discussion and Analysis of Financial Condition and Results of Operations addresses our consolidated financial statements, which have been prepared in accordance with GAAP. Notes to Consolidated Financial Statements, Note 2, “Significant Accounting Policies” in this Form 10-K includes a summary of the significant accounting policies and methods used in the preparation of our consolidated financial statements. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of income and expenses during the reporting periods. Actual results may differ from these estimates under varying assumptions or conditions. On a quarterly basis, management evaluates its estimates, particularly those that include the most difficult, subjective, or complex judgments and are often about matters that are inherently uncertain. The most significant judgments, estimates, and assumptions relate to the following critical accounting estimates that are discussed in more detail below.
Allowance for Credit Losses
Allowance for Credit Losses
We maintain an allowance for credit losses for the lifetime expected credit losses on loans in our portfolios, as well as for future loan commitments, at the reporting date.
In determining the lifetime expected credit losses on our Private Education Loan portfolio loan segments, we use a discounted cash flow method. This method requires us to project future principal and interest cash flows on our loans in those portfolios.
To estimate the future expected cash flows, we use statistical loan-level models that consider life of loan expectations for defaults, prepayments, recoveries, and any other qualitative adjustments deemed necessary, to determine the adequacy of the allowance at each balance sheet date. These cash flows are discounted at the loan’s effective interest rate to calculate the present value of those cash flows. Management adjusts the effective interest rate used to discount expected cash flows to incorporate expected prepayments. The difference between the present value of those cash flows and the amortized cost basis of the underlying loans is the allowance for credit losses. Entities that measure credit losses based on the present value of expected future cash flows are permitted to report the entire change in present value as credit loss expense, but may alternatively report the change in present value due to the passage of time as interest income. We have elected to report the entire change in present value as credit loss expense.
We estimate future default rates used in our current expected credit losses at a loan level using historical loss experience, current borrower characteristics, current conditions, and economic factors forecasted over a reasonable and supportable period. At the end of the reasonable and supportable forecast period, we immediately revert our forecasted economic factors to long-term historical averages. We estimate future prepayment speeds used in our current expected credit losses at a loan level using historical prepayment experience, current borrower characteristics, current conditions, and economic factors forecasted over a reasonable and supportable period.
The reasonable and supportable forecast period is meant to represent the period in which we believe we can estimate the impact of forecasted economic factors in our expected losses. We use a two-year reasonable and supportable forecast period, although this period is subject to change as our view evolves on our ability to reasonably forecast economic conditions to estimate future losses.
In estimating future default rates and prepayment speeds in our current expected credit losses, we use a combination of expected economic scenarios coupled with our historical experience and adjust for any qualitative factors (as described below). We also develop an adverse and favorable economic scenario. At each reporting date, we determine the appropriate weighting of these alternate scenarios based upon the current economic conditions and our view of the risks of alternate outcomes. This weighting of expectations is used in calculating our current expected credit losses recorded each period.
We obtain forecasts for our expected loss model from an external economic data provider who provides a range of economic forecasts with various likelihoods of occurrence. Management reviews and weighs the economic forecasts for each of these inputs to calculate our allowance for credit losses. Our forecasting process reflects management’s continuous review of forecasting assumptions and model inputs and is consistent with our internal governance, risk management framework and CECL methodologies. Management continues to review both the scenarios and their respective weightings each quarter in determining the allowance for credit losses. The most recent adjustment to scenario weightings occurred in the first quarter of 2025.
2025 Form 10-K — SLM CORPORATION 79
In estimating recoveries, we use both estimates of what we expect to receive from the sale of defaulted loans as well as historical borrower payment behavior to estimate the timing and amount of future recoveries on charged-off loans.
In addition to the above modeling approach, we also take certain other qualitative factors into consideration when calculating the allowance for credit losses, which could result in management overlays (increases or decreases to the allowance for credit losses). These management overlays can encompass a broad array of factors not captured by model inputs, including, but not limited to, changes in lending policies and procedures, including changes in underwriting standards, changes in servicing policies and collection administration practices, including changes we have implemented to our loan modification programs, state law changes that could impact servicing and collection practices, charge-offs, recoveries not already included in the analysis, the effect of other external factors such as shifts in the macroeconomic environment or legal and regulatory requirements that impact the level of estimated current expected credit losses or prepayments, the performance of the model over time versus actual losses, and any other operational or regulatory changes that could materially affect our estimate of future losses.
The evaluation of the allowance for credit losses is inherently subjective, as it requires material estimates that may be susceptible to significant changes. If actual future performance in delinquency, charge-offs, and recoveries is significantly different than estimated, or management assumptions or practices were to change, this could materially affect the estimate of the allowance for credit losses, the timing of when losses are recognized, and the related provision for credit losses in our consolidated statements of income.
When calculating our allowance for credit losses and liability for unfunded commitments, we incorporate several inputs that are subject to change period to period. These include, but are not limited to, CECL model inputs and any overlays deemed necessary by management. The most impactful CECL model inputs include:
• Economic forecasts;
• Weighting of economic forecasts; and
• Recovery rates.
Of the model inputs outlined above, economic forecasts, weighting of economic forecasts, and recovery rates are subject to estimation uncertainty, and changes in these inputs could have a material impact to our allowance for credit losses and the related provision for credit losses.
In 2023, we experienced slower prepayment rates due to the rising interest rate environment. Historically, when rates rise, loan prepayments generally decline due to a reduction in consolidation activity of our borrowers to third party lenders, and when rates decline, loan prepayments generally rise due to an increase in consolidation activity of our borrowers to third party lenders. During 2023, our estimates of future prepayment speeds reflected the then current interest rate environment and future expectations of increased prepayment speeds in line with market expectations of a decline in interest rates based on the scenarios produced by an external data provider described above. Slower prepayment speeds increase the allowance for credit losses because the loss rates applied in the future periods are applied to higher loan balances.
In the second quarter of 2024, we implemented a loan-level future default rate model that includes current portfolio characteristics and forecasts of real gross domestic product and college graduate unemployment. In the second quarter of 2024, we also implemented a future prepayment speeds model to include forecasts of real gross domestic product, retail sales, SOFR, and the U.S. 10-year treasury rate. These models reduced the reliance on certain qualitative overlays compared to the previous default rate and prepayment speeds models. Prior to these changes, our default rate and prepayment speeds models used forecasts of college graduate unemployment, retail sales, home price index, and median family income. Both the future default rate model and the future prepayment speeds model are used in determining the adequacy of the allowance for credit losses.
80 SLM CORPORATION — 2025 Form 10-K
To demonstrate the sensitivity of the allowance for credit losses for our Private Education Loan portfolio to a more pessimistic forecast of expected economic outcomes, we considered what our allowance for credit losses would be if we applied a 100 percent probability weighting to the S3 unfavorable (or downside/90th percentile) scenario (with a concurrent 0 percent weighting for both the Baseline and S1 stronger near-term growth scenarios) under the range of scenarios noted above. Excluding consideration of qualitative adjustments, this sensitivity analysis would result in a hypothetical increase in our allowance for credit losses as of December 31, 2025 of $196 million or 12.9 percent. In addition, we also considered a 100 percent probability weighting to the S4 unfavorable (or downside/96th percentile) scenario (with a concurrent 0 percent weighting for both the Baseline and S1 stronger near-term growth scenarios) under the range of scenarios noted above. Excluding consideration of any qualitative adjustments, this sensitivity analysis would result in a hypothetical increase in our allowance for credit losses as of December 31, 2025 of $298 million or 19.6 percent. These scenarios do not reflect our current expectations as of December 31, 2025, nor do they capture other qualitative adjustments or all the potential unknown variables that could arise in the forecast periods, but they provide an approximation of possible outcomes under hypothetical pessimistic conditions. The estimated impacts were calculated for the two-year reasonable and supportable periods, but were not calculated for the remaining periods since long-term assumptions used to calculate the allowance for the remaining periods are based on longer term averages and only change when we determine there is a fundamental change that will affect the long-term rate.
Estimates are also made on our Private Education Loans regarding when each borrower will separate from school. The cash flow timing of when a borrower will begin making full principal and interest payments is dependent upon when the student either graduates or leaves school. These dates can change based upon many factors. We receive information regarding projected graduation dates from a third-party clearinghouse. The separation from school date is updated quarterly based on updated information received from the clearinghouse.
Additionally, when we have a contractual obligation to fund a loan or a portion of a loan at a later date, we make an estimate regarding the percentage of this obligation that will be funded. This estimate is based on historical experience. For unfunded commitments, we recognize the related life of loan allowance as a liability. Once the loan is funded, that liability transfers to the allowance for Private Education Loan losses. For newly originated loans that will be sold to strategic partners, due to the near-term timing of the loan sale and credit quality of the loans, we believe there is no risk of credit loss and do not record an allowance for the unfunded loan commitments related to the loans classified as held for sale.
Key Credit Quality Indicators - Private Education Loans
We determine the collectability of our Private Education Loan portfolio by evaluating certain risk characteristics. We consider credit score at original approval and periodically refreshed/updated credit scores through the loan’s term, existence of a cosigner, loan status, and loan seasoning as the key credit quality indicators because they have the most significant effect on the determination of the adequacy of our allowance for credit losses. Credit scores are an indicator of the creditworthiness of borrowers, and the higher the credit scores the more likely it is the borrowers will be able to make all of their contractual payments. Loan status affects the credit risk because a past due loan is more likely to result in a credit loss than a current loan. Additionally, loans in the deferred payment status have different credit risk profiles compared with those in current pay status. Loan seasoning affects credit risk because a loan with a history of making payments generally has a lower incidence of default than a loan with a history of making infrequent or no payments. The existence of a cosigner lowers the likelihood of default as well. We monitor and update these credit quality indicators in the analysis of the adequacy of our allowance for credit losses on a quarterly basis.
In the second quarter of 2023, we changed how we collect on defaulted loans. Previously, we used a mix of in-house collectors and sales to third parties. We continue to sell a segment of defaulted loans immediately after charge-off but no longer sell retained defaulted loans (that have been subject to internal collection attempts for six months) to third parties and instead continue our collection efforts using in-house collectors and third-party collectors. When we estimate the timing and amount of future recoveries on charged-off loans, we no longer include expectations of future sales on retained defaulted loans. We continue to monitor how we collect on defaulted loans and may modify the approach from time to time based on performance, industry conventions, and/or regulatory feedback.
Private Education Loans generally do not require borrowers to begin principal and interest repayment until at least six months after the borrowers have graduated or otherwise separated from school. Consequently, the loss estimates for these loans are generally low while the borrower is in school and then increase upon the end of the grace period after separation from school. At December 31, 2025 and 2024, 25 percent and 26 percent, respectively, of the principal balance of the Private Education Loan portfolio was related to borrowers who were then in an in-school (fully deferred), grace, or other deferment status and not required to make payments.
2025 Form 10-K — SLM CORPORATION 81
Our collection policies for Private Education Loans allow for periods of nonpayment (forbearance) for certain borrowers requesting an extended grace period upon leaving school or experiencing temporary difficulty meeting payment obligations.
As part of concluding on the adequacy of the allowance for credit losses for Private Education Loans, we review key allowance and loan metrics. The most relevant of the metrics considered are the allowance coverage of net charge-offs ratio; the allowance as a percentage of ending total loans plus unfunded loan commitments and total accrued interest receivable; and delinquency and forbearance percentages.
We consider a Private Education Loan to be delinquent if the borrower has not made a required payment prior to the 31st day after such payment was contractually due.
Off-Balance Sheet Exposure for Contractual Loan Commitments
When we approve a Private Education Loan at the beginning of an academic year, that approval may cover the borrowing for the entire academic year. As such, we do not always disburse the full amount of the loan at the time of such approval, but instead have a commitment to fund a portion of the loan at a later date (usually the start of the second semester or subsequent trimesters). We estimate expected credit losses over the contractual period that we are exposed to credit risk via a contractual obligation to extend credit unless that obligation is unconditionally cancellable by us. The discounted cash flow approach described above includes expected future contractual disbursements. The portion of the allowance for credit losses related to future disbursements is shown as a liability on the face of the balance sheet, and related provision for credit losses is reflected on the income statement.
Uncollectible Interest
The majority of the total accrued interest receivable on our Private Education Loan portfolio represents accrued interest on deferred loans where no payments are due while the borrower is in school and on fixed-pay loans where the borrower makes a $25 monthly payment that is smaller than the interest accrued on the loan in that month. The accrued interest on these loans will be capitalized and increase the unpaid principal balance of the loans when the borrower exits the grace period after separation from school. The discounted cash flow approach and the allowance for credit losses described above consider both the collectability of principal and accrued interest. The allowance for uncollectible interest estimates the additional uncollectible interest that is not captured in the allowance for credit losses. The allowance for uncollectible interest uses historical experience to estimate the uncollectible interest on loans for which payment in full of principal or interest is not expected. This amount is recorded as a reduction of interest income. Accrued interest receivable is separately disclosed on the face of the balance sheet.
Allowance for FFELP Loan Losses
During the third quarter of 2024, we transferred our FFELP Loan portfolio to loans held for sale as we planned to sell our FFELP Loan portfolio. At that time, we wrote down this loan portfolio to its estimated fair value through an adjustment to the allowance for credit losses of $8 million. We subsequently sold the FFELP Loan portfolio to a third party in the fourth quarter of 2024.
FFELP Loans are insured as to their principal and accrued interest in the event of default, subject to a risk-sharing level based on the date of loan disbursement. These insurance obligations are supported by contractual rights against the United States. For loans disbursed on or after July 1, 2006, owners receive 97 percent reimbursement on all qualifying claims. For loans disbursed after October 1, 1993, and before July 1, 2006, owners receive 98 percent reimbursement on all qualifying claims. For loans disbursed prior to October 1, 1993, owners receive 100 percent reimbursement. Because owners bear a maximum of three percent loss exposure due to this federal guarantee, our allowance for credit losses for FFELP Loans and related periodic provision expense were relatively small.
For the year ended December 31, 2023, we used the gross loss approach when estimating the allowance for credit losses for the unguaranteed portion of our FFELP Loans. We maintained an allowance for credit losses for our FFELP Loans at a level sufficient to cover lifetime expected credit losses. The allowance for FFELP Loan losses used historical experience of customer default behavior. We applied the default rate projections, net of applicable risk sharing, to our FFELP Loans for the relevant period to perform our quantitative calculation. Once the quantitative calculation was performed, we reviewed the adequacy of the allowance for credit losses and determined if qualitative adjustments needed to be considered.
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Risk Management
Our Approach
Risk is inherent in our business activities and the specialized lending industry we serve. The ability of management to identify, manage, and remediate risk in a timely manner is critical to our continued success. Our risk management framework is designed to assess, manage, and report these risks and escalate as appropriate to the Board of Directors or its designee.
Risk Oversight
Our Board of Directors oversees our overall strategic direction, including our risk management capability and effectiveness. The Board of Directors has oversight of key policies as well as the risk management framework developed and administered by the management team. We also have a process that is designed to escalate meaningful departures from our risk appetite statements to the Board. The Board of Directors oversees the continued development of the risk management framework.
The Governance Framework
Our overall objective is to ensure all significant risks inherent in our business can be identified and appropriately mitigated. To this end, we have adopted the “three lines of defense” approach to governance. Specifically, the business units form the “first line of defense” and are the “owners” of risks in their business activities. As the risk owner, the first line of defense is accountable for the day-to-day execution of risk and control policies and procedures (including activities performed by third-party contractors). The “second line of defense” is our Risk Management function, which is independent from the first line of defense. The second line of defense conducts oversight and effective challenge of the risk-taking activities within the first line of defense. Finally, the Internal Audit function comprises the “third line of defense.” The Internal Audit function provides opinions to the Board of Directors on the effectiveness of the first and second lines of defense, as reflected in audit reports.
Risk Management Policy and Risk Appetite Standard
The Risk Management Policy and Risk Appetite Standard are designed to establish a stable risk and control environment across the enterprise. The policy, which is approved by the Board of Directors, outlines the framework used to ensure that risk and control issues across the enterprise are identified, assessed, measured, monitored, and reported. The Risk Management Policy, the Risk Appetite Standard, and the related policies and procedures constitute the core of the risk management program.
Sallie Mae leverages risk appetite to outline the level of risk we are willing to accept within each risk category, as described below, in pursuit of our business objectives. Compliance with our risk appetite is monitored using a set of risk metrics, with defined thresholds and limits, for each risk category. The management-level Enterprise Risk Committee provides oversight of the risk appetite standard with escalation to the Board of Directors, as appropriate.
Board of Directors Committee Structure
We have a Board of Directors committee structure as outlined below that facilitates oversight, effective challenge, and escalation of risk and control issues .
• Financial Risk Committee. The Financial Risk Committee assists the Board of Directors in fulfilling its risk management oversight responsibilities with regard to the Company’s major financial risks, including credit risk, market risk, and liquidity risk. The Financial Risk Committee, along with the Operational and Compliance Risk Committee, provides oversight of the development, maintenance, and monitoring of the Company’s risk management framework, risk governance structure, and risk appetite statements, metrics, and associated limits and thresholds, and the promotion of our risk management culture. The Financial Risk Committee receives periodic updates on compliance with the framework from the Chief Risk Officer.
• Operational and Compliance Risk Committee. The Operational and Compliance Risk Committee assists the Board of Directors in fulfilling its oversight responsibilities relating to the major non-financial risks, including compliance risks, operational risks, information and cyber security risk, and model risk. The Operational and Compliance Risk Committee, along with the Financial Risk Committee, provides oversight of the development, maintenance, and monitoring of our risk management framework, risk governance structure, and risk appetite statements, metrics, and associated limits and thresholds, and the promotion of our risk management culture. The
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Operational and Compliance Risk Committee receives periodic updates on compliance with the framework from the Chief Risk Officer.
• Audit Committee . The Audit Committee is responsible for oversight of the quality and integrity of our financial statements, accounting and reporting processes, the performance of the Internal Audit function, and the qualifications, hiring, performance, and independence of our independent registered public accounting firm.
• Nominations and Governance Committee. The Nominations and Governance Committee recommends to the Board of Directors appropriate standards of corporate governance, and assists the Board of Directors in fulfilling its obligations with regard to oversight of the operations of the Board of Directors, the qualifications and independence of directors, nominations to the Board of Directors, and compliance with the corporate governance standards.
• Compensation Committee . The Compensation Committee assists the Board of Directors in fulfilling its oversight responsibilities related to the compensation and benefits of our Chief Executive Officer (“CEO”) and the non-employee members of the Board of Directors, our incentive compensation and benefits practices for employees of all levels, and management’s succession planning. Additionally, the Compensation Committee provides oversight of human capital management.
Management-Level Committee Structure
Executive Committee . The EC is authorized by the Board of Directors to assist the CEO in the general supervision of the business of the Company. Specifically, the EC will (i) provide to the CEO advice and counsel, subject matter expertise, and recommendations as requested, and (ii) through its subcommittees, facilitate the evaluation and decision-making on routine cross-functional matters, and assist management in the fulfillment of management’s duties related to specific risks. The EC has established the following sub-committees to assist in fulfilling its duties.
• Enterprise Risk Committee (“ERC”). The ERC provides independent oversight and monitoring of the risk and control environment. The ERC is jointly accountable to the Financial Risk Committee and the Operational and Compliance Risk Committee of the Board of Directors and provides for escalation accordingly.
• Credit Committee . The Credit Committee is responsible for credit and counterparty risk, product pricing, and credit and collections operations.
• Operational and Compliance Risk Committee . The OCRC is the oversight body for the identification, assessment, remediation, measurement, and reporting of operational and compliance risks.
• Asset and Liability Committee (“ALCO”). ALCO is responsible for the strategy, processes, and authorities with which the Bank’s interest rate risk, liquidity, and capital adequacy are managed.
Each of these sub-committees is comprised of subject matter experts from the senior management team and is accountable to the EC. Moreover, these sub-committees may be supported by steering or working groups, as appropriate.
Disclosure Committee. Our Disclosure Committee assists our CEO and Chief Financial Officer in their review of periodic SEC reporting documents, earnings releases, investor materials, and related disclosure policies and procedures.
Internal Audit
Internal Audit provides independent assurance to the Audit Committee of the Board of Directors as to the adequacy and effectiveness of our risk management, control, and governance processes. Internal Audit also assists management by providing objective assurance, credible challenge, and consulting services around matters involving risk management. Internal Audit regularly performs selected reviews of our risk management and compliance functions to assess the effectiveness of the overall risk management framework, identifies areas that may require increased focus and resources, and reports significant control issues and recommendations to executive management and the Audit Committee of the Board of Directors. Annually, Internal Audit performs an independent risk assessment to evaluate the risk of all significant components of the Company and uses the results to develop an annual, risk-based Internal Audit plan to provide the assurance services noted above.
Risk Categories
Risk categories are a foundational element of the risk management framework; they are widely used in risk
identification and provide the basis for risk aggregation and reporting. The Company has identified six major risk categories:
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Strategic Risk . Strategic risk is the risk of: adverse impacts to enterprise value, current or anticipated earnings, capital, or franchise value arising from the Company’s competitive and market position and evolving forces in the industry that can affect that position; lack of responsiveness to these conditions; strategic decisions to change the Company’s scale, market position, or operating model; or failure to appropriately consider implementation risks inherent in the Company’s strategy.
The overall development of the Company’s strategic plan includes extensive engagement with the Board of Directors. Similarly, the Board of Directors provides oversight and effective challenge on performance relative to the strategic plan.
Credit Risk . Credit risk is the risk of adverse impacts to earnings, capital, or reputation resulting from obligors’ failure, or the increased probability thereof, to meet the terms of a lending, issuer, or counterparty agreement. Credit risk is found in all activities where success depends on counterparty, issuer, or borrower performance.
The credit risk related to Private Education Loans is managed within a credit risk infrastructure that includes: (i) a well-defined underwriting, asset quality, and collection policy framework; (ii) an ongoing monitoring and review process of portfolio composition and trends; (iii) assignment and management of credit authorities and responsibilities; and (iv) establishment of an allowance for credit losses that covers estimated future losses based upon an analysis of portfolio metrics and economic factors.
Credit risk related to derivative contracts is managed by reviewing counterparties for credit strength on an ongoing basis and through our credit policies, which place limits on the amount of exposure we may take with any one counterparty and require collateral to secure the position. The credit and counterparty risk associated with derivatives is measured based on the replacement cost should the counterparty with contracts in a gain position to us fail to perform under the terms of the contract.
Credit risk exposure is managed primarily through the Credit Committee, and regular reporting on credit programs and credit metrics is provided to the Financial Risk Committee of the Board of Directors.
Market Risk. Market risk is the risk of adverse impacts to earnings, capital, or reputation resulting from fluctuations in market conditions such as changes in interest rates, foreign exchange rates, commodity prices, equity prices, and other financial market factors. We are exposed to various types of market risk, in particular the risk of loss resulting from interest rate risk, basis risk, and other risks that arise through the management of our investment, debt, and loan portfolios. Market risk exposures are managed primarily through ALCO. These activities are closely tied to those related to the management of our funding and liquidity risks. The Financial Risk Committee of our Board of Directors periodically reviews and approves the investment and asset and liability management policies and contingency funding plan developed and administered by ALCO. The Chief Financial Officer provides reports to the Financial Risk Committee of the Board of Directors on market risk management.
Liquidity Risk . Liquidity risk is the risk of adverse impacts to earnings, capital, reputation, or survival resulting from not being able to meet the Company’s financial obligations when they become due, whether due to a lack of available funding or the inability to liquidate assets in a timely and cost-effective manner.
Our primary liquidity needs include our ongoing ability to: meet our funding needs through market cycles, including periods of financial stress; manage the relative maturities of assets and liabilities on our balance sheet; fund disbursements of Private Education Loans and other loans; and service our indebtedness and bank deposits. Ultimately, our liquidity risk relates to our ability to access the capital markets at reasonable rates and to maintain deposits and other funding sources through the Bank, as well as our maintenance of a reserve of cash and unencumbered highly liquid investment securities that may be readily converted to cash if needed.
Our liquidity risk activities are centralized within our Corporate Finance department, which is responsible for developing and executing our funding strategy. We analyze and monitor our liquidity risk, maintain excess liquidity, and access diverse funding sources depending on current market conditions. Liquidity risks are overseen and recommendations approved primarily through ALCO. The Financial Risk Committee of our Board of Directors is responsible for periodically reviewing the liquidity positions and contingency funding plan developed and administered by ALCO.
Operational Risk . Operational risk is the risk of adverse impacts to earnings, capital, or reputation resulting from inadequate or failed internal processes, people, and systems, or from external events. Operational risk is pervasive in that it exists in all business lines, functional units, legal entities, and geographic locations.
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Operational risk exposures are managed through a combination of first line of defense and control activities and second line of defense oversight. The OCRC is the management committee responsible for operational risk, and it supports the EC in its oversight duties. The OCRC is responsible for escalation to the EC, as appropriate. Additionally, our key risk indicators include operational risk metrics, thresholds, and limits and are included in the periodic reporting to the Operational and Compliance Risk Committee of the Board of Directors.
Cybersecurity risk is one of our significant operational risks. We provide more detailed information on our cybersecurity risk management, strategy, and governance in Part I, Item 1C. of this Form 10-K.
Compliance Risk. Compliance risk is the risk of legal or regulatory sanctions, fines, penalties, financial losses, or loss to brand resulting from violations of, or non-conformance with, applicable laws, rules, regulations, and self-regulatory organizations’ standards, as well as the Code of Business Conduct.
Primary ownership and responsibility for compliance risk is placed with the first line of defense to identify and manage. Our Compliance function supports these activities by providing extensive training, monitoring, and testing of the processes, policies, and procedures utilized by the first line of defense, maintaining relevant legal and regulatory requirements, and working in close coordination with our Legal department. Compliance risk metrics and regular reporting on compliance programs are provided to the Operational and Compliance Risk Committee of the Board of Directors.
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