Federal Loan Reforms Will Widen The Private Lending Market

Analysts have raised their price target for SLM to $40, up from previous estimates of $37. They cite continued strength in loan growth, improved credit performance, and new market opportunities for the company.

Analyst Commentary

Recent street research on SLM has highlighted both optimistic and cautionary perspectives among analysts, with several raising their price targets and others voicing concerns about credit trends.

• Price targets have been raised across the board, with multiple bullish analysts now expecting shares to reach $40. This reflects higher market confidence in SLM’s execution and growth outlook.
• Improvement in credit performance and healthier macroeconomic data are cited as factors likely to support stable allowance levels and limit downside risks.
• Lower interest rates and models rolled forward to 2027 suggest a supportive environment for valuation. Near-term credit risks appear better contained than previously anticipated.
• The elimination of certain federal loan programs is expected to open a substantial new market opportunity for private student lenders. Some estimates suggest SLM could capture a $3-$4 billion segment.

• Recent monthly data indicate that delinquencies, particularly in July, were worse than seasonal norms. There were notable increases in early stage missed payments.
• Margin compression may occur, partially offsetting the positive impact of loan growth. This will require careful management to sustain earnings momentum.
• Despite improving year-over-year trends, elevated delinquencies in the short term remain a focus. Analysts urge caution as slower hiring could introduce renewed credit risk.

What's in the News

• Sallie Mae and Adtalem Global Education have signed a Letter of Intent to create alternative financing solutions for healthcare students as the federal Grad PLUS program winds down starting July 1, 2026. The initiative will target funding across Adtalem's five institutions and may offer deferred repayment along with degree-specific loan terms. (Client Announcements)
• The planned financing partnership aims to address projected shortages in the U.S. healthcare workforce. More than 7,000 areas are already designated as Health Professional Shortage Areas, and there is an anticipated shortfall of up to 124,000 physicians by 2034. (Client Announcements)
• Between April and June 2025, Sallie Mae repurchased 2,366,356 shares for $69.75 million, completing a larger buyback totaling 14,990,178 shares or 6.94% of company shares for $351.4 million under the January 2024 program. (Buyback Tranche Update)

Valuation Changes

• The Fair Value estimate has risen slightly from $38.18 to $39, reflecting increased analyst optimism about future prospects.
• The Discount Rate has decreased marginally to 9.13% from 9.15%, indicating a modestly lower risk perception in current models.
• The Revenue Growth projection edged higher to 17.50% from 17.42%, suggesting a small improvement in top-line expectations.
• The Net Profit Margin forecast has declined narrowly to 46.95% from 47.04%.
• The Future P/E ratio estimate has decreased to 10.64x from 10.87x, pointing to a modest improvement in relative valuation.