Sallie Mae SLM stock touched a 52-week high of $32.65 during yesterday’s trading session before closing at $32.53.
The stock price of private student lender Sallie Mae has surged driven by anticipation that the Trump administration could push for privatization, shifting the federal education loan program from direct government lending to bank-based loans. Per the Wall Street Journal, the Trump administration is weighing executive actions to dismantle the US Education Department to seize control of federal spending and slash the size of the government workforce.
SLM shares have risen 68% over the past year, surpassing both its industry and close peers — Ally Financial Inc. ALLY and Navient Corporation NAVI.
Price Performance
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Other Factors Driving SLM Stock
Fed’s Rate Cut to Aid NII: The Federal Reserve lowered interest rates by 100 basis points in 2024 and indicated two rate cuts this year.
These cuts are expected to stabilize funding costs, setting the stage for future net interest income (NII) growth. As funding starts to improve, companies like SLM, NAVI and ALLY will be well-positioned to benefit from the favorable environment. With rising loan balances, these companies are expected to experience sustained NII growth in the upcoming period.
SLM’s NII witnessed a negative compound annual growth rate (CAGR) of 1.8% over the last six years (ended 2024). The Fed rate cuts are expected to gradually stabilize funding costs, providing a favorable outlook for loan providers. Thus, SLM is expected to benefit as improved funding conditions support NII expansion. Additionally, Sallie Mae's efforts to increase the amount of cash and cash equivalents held to gain from yields on cash and other short-term investments will bolster NII growth in the upcoming period.
Improving Student Loan Business: Sallie Mae’s growth initiatives are impressive. The company has been trying to enhance its private student loan business by maintaining a strong capital position and introducing multiple complementary products.
Private education loan originations witnessed a six-year CAGR of nearly 1% (2018-2024). In 2024, the company’s private education loan origination rose 10% from 2023. For 2025, the company expects 6-8% year-over-year growth in private education loan origination.
Business Expansion Efforts: The company is also focusing on expanding its business operations on the back of investments in varied product offerings and inorganic activities. In 2023, it acquired several vital assets, technology, intellectual property and experienced staff of Scholly — a scholarship publishing and servicing platform.
In 2022, Sallie Mae strengthened its position by acquiring Nitro College, a digital marketing and education solutions company, through a deal with Epic Research LLC. This strategic acquisition enhances SLM’s outreach and brand presence, improves its digital marketing capabilities and reduces customer acquisition costs.
Such initiatives support the company's goal of evolving into a comprehensive education solutions provider, ultimately driving increased loan originations.
Superior Return on Equity (ROE): Sallie Mae’s trailing 12-month return on equity (ROE) reflects its superiority in terms of utilizing shareholders’ funds. The company’s ROE of 31.66% compares favorably with the industry’s figure of 13.06%.
Few Concerns Prevail for SLM Stock
Rising Expenses: Elevated expenses are concerning for Sallie Mae. The company’s non-interest expenses witnessed a CAGR of 1.9% over the last six years (2018-2024).
Though the company focuses on lowering servicing and acquisition costs, and continues to gain efficiencies from operations, we believe that an increasing expense trend will hinder bottom-line growth in the upcoming quarters.
High Debt Level: As of Dec. 31, 2024, SLM had long-term borrowings worth $6.4 billion and cash and cash equivalents of $4.7 billion. The company carries a greater debt level than its liquidity position. Hence, SLM has a higher possibility of defaulting on interest and debt repayments if the economic situation worsens.
Should You Buy SLM Stock Now?
Sallie Mae’s investments in varied product offerings and inorganic activities to expand business operations and a focus on improving private student loan business are likely to support its financials in the upcoming period.
Sales Estimate
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Earnings Estimate
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Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
However, an elevated expense base and high debt levels are near-term concerns for Sallie Mae.
From a valuation standpoint, SLM appears somewhat expensive relative to the industry. The company is currently trading at a premium with a forward 12-month P/E multiple of 10.48X, above the industry average of 10.21X.
Price-to-Earnings
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Hence, we advise investors not to rush to buy SLM stock right now; instead, keep this stock on their radar and analyze how the company navigates through increasing expenses and interest rate cuts to optimize its financial performance in the upcoming period.
SLM currently carries a Zacks Rank of 3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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