Oct 22, 2026 earnings call — New strategic partner and record loan originations
Announced Sixth Street partnership to buy a minimum of $1.5 billion in new private education loans annually, plus an initial $600 million seed portfolio.
Revenue $0.4B (est $0.5B) · EPS $-0.19 (est $0.17)
Key quotes
"Sixth Street has committed to purchase a minimum of $1.5 billion in newly originated private education loans annually with the first year inclusive of an initial seed portfolio of $600 million in seasoned loans."
"In Q3, graduate originations were up 119% year over year, with an average FICO score 9 points higher than the overall average of new origination in the portfolio."
"As such, we are increasing our full year net charge off guidance to $400 million to $420 million with a midpoint $45 million higher than that of our original range."
Analyst Q&A 6
loan sales and charge-offs
Q (Jeff Adelson · Morgan Stanley): How much whole loan sale was planned for this year and what might 2027 look like for loan sales and partnerships? Also, why did net charge-off guidance rise beyond the third-party issue impact?
A: They said the added loan sale size was in the "1 billion dollars" range and that loan sales depend on originations, partner commitments and the bank balance sheet. They view the current market as temporary and expect stabilization next year with flat to single digit balance sheet growth while meeting partner commitments, including Sixth Street. On net charge-offs they said the guidance reset reflects the third party collection issue and that they had previously thought they could stay within the original range.
"I think in the context of sizing kind of in that 1 billion dollars range is probably the right way to think about that." — Peter Graham (CFO)
loan sales and funding capacity
Q (Sanjay Sakhrani · KBW): Can acceptable loan sale pricing return if rates stay in flux next year? How much capacity do you have to hold loans on the balance sheet given current capital?
A: They said even in a higher-for-longer scenario, they expect a path toward relief next year and that market conditions this quarter are temporary. They said the balance sheet is in great shape, capital buffers are substantial, the second partner adds funding capacity and they are working on more flow capacity for graduate originations.
"I think the balance the balance sheet is in great shape." — Peter Graham (CFO)
gain inclusion and collection issue
Q (Terry Ma · Barclays): Is the gain on sale from the second partnership included in the revised EPS guide? How long will the third-party debt collection issue affect credit costs and can you ring-fence it? Also, do you still view the Grad PLUS TAM expansion as real?
A: They said the gain on sale from the Sixth Street partnership is included in guidance for this year. On the third-party collection issue they said it is hard to give exact timing, but they have put forceful actions in place and are seeing early positive indicators and expect next year's impact to be meaningfully less. They also said they still see the TAM expansion as a real opportunity and will continue selective investment while managing expenses.
"Yes, that is included in our guidance for this year." — Peter Graham (CFO)
NIM and seed portfolio timing
Q (Donald Fandetti · Wells Fargo): How should we think about near-term NIM given higher broker deposit rates and competition for deposits? When will the $600 million seed portfolio close and will those loans have good margins?
A: They said NIM was pushed down earlier this year because they pulled forward a big loan sale and held excess liquidity during a low-origination period, and they expect normalization as peak season originations fund. They said they extended deposit duration to manage interest rate exposure. On the seed portfolio, they said a portion closed at quarter-end and the remainder will close in the early part of the fourth quarter, and the held-for-sale also reflects KKR forward-flow commitments.
"So a portion of the seed portfolio closed just at the end of the quarter." — Peter Graham (CFO)
held-for-sale timing and seasonality
Q (Richard Shane · JPMorgan): The held-for-sale portfolio is larger. Is that timing due to seasonality, and will any migrate to held-for-investment in Q4?
A: They said the flow agreements have overall annual commitments but are not ratable and will fluctuate with the seasonality of originations. They noted third quarter had the highest originations in company history, which is why held-for-sale was larger at quarter end. They also said there was no decision to avoid a traditional non-flow sale.
"And so they will fluctuate according to the seasonality of our originations." — Peter Graham (CFO)
will held-for-sale loans sell in Q4?
Q (Giuliano Bologna · Compass Point): Will you complete sale of most of the large held-for-sale book in Q4 or will some leak into next year? Has all the seed portfolio moved to held-for-sale and will gains be realized in Q4?
A: They said they generally sell from the bank into the warehouse monthly and then takeout sales to the partner occur the subsequent month and after the quarter, so the held-for-sale at quarter end will clear out when they make those sales to KKR. They said $600 million of seasoned seed portfolio is in held-for-sale, with a portion closed in Q3 and the remainder closing in Q4, and they have not selected a separate portfolio for any planned non-flow sale so nothing was moved to held-for-investment for that reason. They confirmed the forward-flow gains on that held-for-sale chunk will be realized in the fourth quarter.
"And so the held for sale at the end of the third quarter will clear out when we make those sales to the to KKR in this case." — Peter Graham (CFO)