SLM Corp (NASDAQ: SLM)

SLM Corporation, better known as Sallie Mae, is a prominent financial brand in the higher education sector. With a mission to empower students as they embark on their unique academic journeys, Sallie Mae is dedicated to providing resources, scholarships, and responsible financing options.

Sallie Mae's primary business revolves around the origination and servicing of high-quality Private Education Loans. These loans are not made, insured, or guaranteed by any state or federal government and are designed to bridge the financial gap between the cost of higher education and the funds available through family income, savings, scholarships, and federal financial aid. In 2023, Sallie Mae originated approximately $6.4 billion in Private Education Loans, a 7% increase from the previous year, and held $19.8 billion in such loans as of December 31, 2023.

The company's loan products cater to various customer needs. For instance, the Smart Option Student Loan emphasizes in-school payment features that can lead to shorter terms and lower finance charges. Additionally, loan products for graduate students offer extended grace periods, such as those for medical students.

Sallie Mae's lending philosophy centers around responsible lending and encourages borrowers to adopt a three-step approach to paying for higher education: utilize funds that don't require repayment, maximize scholarships, grants, and work-study, and explore federal student loans. The company also rewards financial responsibility, emphasizes building good credit, and provides flexible repayment terms to help customers manage and eliminate debt.

As a leading provider of Private Education Loans, Sallie Mae competes with large banks like Citizens Financial Group, Inc. and PNC Bank, as well as smaller specialty finance companies like Sofi Technologies, Inc. and College Ave. Competition is based on products, origination capabilities, price, and customer service.

Sallie Mae's regulatory landscape includes oversight by the Utah Department of Financial Institutions, the Federal Deposit Insurance Corporation, and the Consumer Financial Protection Bureau. Regular financial condition, operations, and compliance reviews are part of the examination and supervision process.

Apart from Private Education Loans, Sallie Mae offers deposit products such as high-yield savings accounts, money market accounts, and certificates of deposit. The company also provides a free, FDIC-insured, online, goal-based savings account called SmartyPig for long- and short-term savings goals.

In terms of enrollment, Sallie Mae anticipates a relatively flat trend over the next several years. Enrollment at four-year degree-granting institutions is projected to remain stable from 2022 to 2031, according to the U.S. Department of Education. Tuition rates have been increasing at a compound annual growth rate of 1.9% and 3.0%, respectively, for public and private not-for-profit institutions from academic years 2019-2020 through 2023-2024. Sallie Mae estimates that total spending on higher education was $485 billion in academic year 2022-2023, up from $457 billion in academic year 2018-2019. Private Education Loan originations increased $2 million from the year-ago period to an estimated $15 billion in academic year 2022-2023, representing just 3.1% of total spending on higher education.