Good morning. Thank you all for joining us. I'm very pleased to have Jon Witter, the CEO of SLM Corp., join us for a fireside chat. The format here, what we're gonna do, I've got some prepared questions. Then about halfway in, I'll open it up so we've got some audience response questions for those of you out there, and then I'll open it up to the audience for some questions. Leading it off, Jon, you know, the third quarter's a busy time for Sallie Mae. How has the in-school origination market been shaping up during the quarter, and how does-
Yeah, Mark. Thanks, and it's great to be here, and thanks everyone for joining us. You know, as quick context, we are really fortunate to compete in what we think is a really attractive market. In just a normal year, you can count on origination growth in our market in the sort of mid to upper single digits. In that context, we're very encouraged by what we're seeing this year. We've seen year-to-date, year-over-year application growth about 13.6%. We've seen disbursement growth of about 10.6%. All of that is very consistent with the updated and increased guidance that we gave on the last quarterly call of 9%-11% origination growth for the year.
I think in addition to the numbers, which again, we're really happy about, we also like a few things that are going on. The mix of customers is a really attractive mix of customers. It is more freshmen, it is more new to firm customers. That's important for us because they tend to have greater lifetime value to us and a greater serialization rate, so that helps our origination goals and sort of opportunities in outyears. You know, I would also say, you know, that is in part we think a reflection of just what's going on in the industry, sort of a return to normalcy in the higher education market. We also think it's a little bit indicative of the investments we've made in our marketing capabilities over the last couple of years.
We've invested significantly in our martech capabilities, but we've also invested significantly in things like our Nitro acquisition, which we think attracts, you know, a younger set of customers. We like all of that. I think maybe the most important thing if my CFO were here, we've done all of that while continuing to be very disciplined on our CTA, sort of, you know, guideposts and metrics. We like the volumes.
Is there anything you're seeing that's notably different around demand, competition or credit quality-wise from last year?
Yeah, let me hit quickly what I think is the same, and then I'll talk about a few things that are on the very margin different. I think the takeaway here is, it's pretty similar. First of all, credit quality I think is, you know, plus or minus very small margins of error, highly consistent with what we've seen in last year's. That's obviously something that in these uncertain economic times we spend a lot of time looking at. If you look at cosigner rates, FICO scores, you know, all of those traditional types of measures, very, very consistent.
As we've talked about on the last couple of earnings calls, you know, I think we've seen, as may be the case in many other industries, a slight uptick over the course of the last year or so, in competition around paid search. You know, that is getting to be a little bit more of a competitive channel for us. We're fortunate in that we have lots of channels other than paid search. It will always be a part of what we do. If you think about our preferred lender list, you know, we're on, gosh, just about every preferred lender list out there. We have a huge marketing capability tied to our brand and the content that we provide to customers and prospects.
We're not as reliant on paid search as we might otherwise be, but we've seen a little bit of an uptick there, and we'll continue to watch that closely. I think the only other thing that's worth mentioning, and I view this more environmental, you know, we absolutely saw, you know, what I would call sort of a catch-up game when it came to pricing this fall in light of the very volatile rates market that we saw. I think we saw pretty rational pricing, as the rates market moved all over the place. As you can imagine, competitors can't change their price, you know, literally hour by hour, day by day.
There were times when rates run up that, you know, we sort of had concerns about margins thinning out a little bit. I think ultimately we were very disciplined and are very happy with the pricing at which we originated, but a little bit of pricing volatility as well, given the underlying rates market.
Okay. That's helpful. In sticking with competition, there have been a couple of newer entrants into the in-school market over the last few years, but your market share has not really been impacted. Can you give an update on your market share and talk about, you know, your competitive advantages that enable you to maintain a high share?
Yeah, sure. First of all, our apologies, we're sort of a quarter or so behind on market share. That's not because we don't care about it, but literally the company that we use that provides us that data has recently changed hands, and they've been slow to get us some of the data. We hope to be caught up on our market share analysis here soon. You know, we are advantaged in that we have you know, a very high sort of mid-50s, low- to mid-50s% market share, depending on the quarter. We feel good about that. Since I joined the company as CEO a couple of years ago, we have pretty consistently grown or maintained that market share.
I think, you know, at the core of that, is really just the strength of our franchise, and the scale of our franchise. You know, if you just sort of go through the numbers, our balance sheet every year generates about $1.5 billion of NII. As I mentioned before, you know, we are on the preferred lender list of just about every school that's out there. We have a brand that is synonymous with the category. We tightly manage expenses, and we've invested in automation and sort of technology that allows us to grow effectively with scale. You know, when you put all of that together, that's a great foundation to sort of grow and invest from. I think that's allowed us to do a couple of things.
One, we've been able to invest, as I mentioned earlier, very aggressively in our marketing capabilities. That's both the technology behind our marketing, but also what we're really seeing is the incredible power of content-based marketing and relationship-based marketing that was, you know, a big driver of our acquisition of Nitro, a couple of quarters ago. We can invest very heavily in sort of marketing. The second thing is we can continue to invest in the resiliency and the automation and the scalability of our cost structure. We have about a 60% fixed cost structure today that allows us to grow very profitably, versus folks who are much more variable in their overall cost structure. I think the third thing is it allows us to invest in the overall customer experience.
Whether that's, you know, taking noise and friction out of the application, improving our service environment, and we see that in operational metrics like, you know, how long it takes a customer to fill out an application and what the yield rate is on those applications. We also see it in things like improving Net Promoter scores. It all starts from a very strong, I think, foundation and a very sort of privileged position that we have in the marketplace. Then, you know, we try to use that advantage to invest smartly on top of that.
Okay, great. Can you comment on the consolidation players and the trends you're seeing and what's the outlook for that? You know, does the product work in today's rate environment?
Yeah. Look, I am sure there will be folks at this conference, who know a lot more about the ins and outs of the consolidation business than I do. It's not a core part of our business, but we obviously have a view on it, because when people consolidate largely their federal loans, you know, sometimes obviously they're consolidating their private loans as well. I think what we've seen is a pretty dramatic change in this market over the course of the last couple of months. Third quarter, July and August, we've seen a reduction in consolidation activity by about 23.6%. Fairly significant. That's off of a slight increase in the first half of the year, really coming out of a, you know, what we believe is a normalization post, COVID.
You know, when you get into the numbers, and again, these are our numbers, and we're not in the business, but we've done some back of the envelope, you know, sort of calculations. You know, if you look at just what's happened to credit spreads and rates, you know, the sort of implied cost of funds for a lot of these consolidators is probably rough justice in the 5% range. You know, if you look at recent transactions, you know, the weighted average coupon is probably more in the 4% range. So, you know, I wouldn't write those numbers down in ink. Again, those are outside in numbers from someone who's not core to the business.
I think it modeled for us just what we think is, you know, sort of the stress that that business is under. We expect that, you know, the rate environment will be helpful to us, and, you know, our portfolio, and probably stem the level of consolidation going forward, you know, and look forward to serving those customers longer.
Okay, great. Turning to credit, you recently increased your full year guide for net charge-offs this year. You know, after having very strong credit the last two years, it came as a bit of a surprise. The driver of that is a bit nuanced, especially for those who don't follow student lending. Can you spend some time talking about that?
Yeah, happy to. Let me maybe take a step back, just to make sure everyone kind of walks into this discussion with the right set of expectations. You know, we underwrite to what we think is going to be about a 10.5% lifetime loss rate on our loans. That lifetime loss rate has ticked up modestly over the last couple of years. I think we've talked pretty extensively about new credit administration policies, changes to our forbearance practices that we put in place. We actually increased our CECL reserve over the last two or three years by about $150 million to offset that. That lifetime loss number has ticked up modestly, but it is entirely consistent with our current reserve outlook.
I'd also say it is entirely consistent with the kind of 20%+ ROEs that we've seen pretty consistently for all of our origination vintages over time. You know, I think the first thing I wanna do is sort of, you know, kind of, you know, kind of give everyone that data. If you assume kind of a six-year average life of loan, you know, that 10.5% number, just quick math, works out to be about, a 1.75% average annual charge-off rate during that C&I period. Now that's a vintage view, and obviously, the vintage is not a straight linear view. There's fewer charge-offs when someone's in school. We know when they get out of school, charge-offs are a little bit higher for a period of time.
We know they really fall off as that portfolio becomes more seasoned. That's just the normal adulting process. If you think about 21-year-olds getting out of college and sort of starting their life, that's just the way it works. I think really noteworthy for us is, you know, that vintage view takes on different forms with a portfolio. We've been very much growing and maturing our portfolio over the last couple of years, so rates have been a little bit lower as more students have been in school and so forth. I think over the last year or so, we're starting to move into a much more mature stance in terms of our portfolio. We would expect, therefore, that portfolio performance would more closely approximate sort of the average lifetime performance in any given year. Again, just take that as context.
Now, this year we're guiding to about 2.3%, not 1.75% charge-offs, and so that's obviously high. There's three things. We talked about all of these on the last call, but let me go into a little bit more detail on those. The first, and I think the, you know, sort of the most significant and easiest to get your head around, is what we call this gap year population. Every year, doesn't matter, every year, we have a group of students who drop out of college and they, you know, enter P&I without the benefit of a college education. They are not surprisingly, you know, among our non-performing cohorts because they've dropped out and they still have debt, but they don't have the degree and the underlying wage that goes along with it.
In 2022, we effectively had two of those populations, our normal 2022 dropout population, but we also had, effectively, what we call this gap year population, which was the dropout population from 2021. During the pandemic, we made the decision, because we weren't sure how quickly people were gonna go back to school, and there's real benefits that a student loses if they go into P&I, you know, and then ultimately decide to go back to school later. We made the programmatic decision to give those people longer before they went back into P&I. This year we effectively ended up with two of those populations, two of the worst performing populations.
On top of that, what we saw is that this gap year population, this 2021 dropout population, is performing materially worse than a normal dropout population would. Again, you know, to put it out there, we were surprised by that. From an overall credit attribute perspective, they looked a lot like a normal dropout population. They are just performing worse than a normal population would. To a certain extent, that makes sense. You know, I think the risk splitter called, "I dropped out of school during COVID" is probably a pretty powerful risk splitter. We're seeing that in the performance. It's important to note that this is a defined finite population. We know every single customer in this cohort by name, right? We know who they are.
You know, it's not sort of an amorphous part of our portfolio that we're tracking. We can track their specific performance and sort of understand that. The second thing that you know we talked about in the last call driving it is the changes to our credit administration or our forbearance practices. Again, I think we've talked about those pretty extensively and reserved for those. What I think we're seeing here, we believe is a slightly faster sort of trip for customers to default who are sort of you know not benefiting any longer from the more sort of ready access to that forbearance program. They're working through the system a little bit faster than what we had modeled.
The third thing that we talked about on the call is, you know, we entered the year a little bit behind on staffing, given the Great Resignation. These two volume events put us from sort of it being a nuisance to it being something that, you know, required, you know, more stronger response. We have staffed up aggressively. We have sort of corrected that problem. There is no doubt that part of the results was, you know, us being, less fully staffed than we would've liked to have been in the early part of the year for that part.
Okay, that's very helpful. Any color you can give us on what you're seeing so far in preview and trends for credit? Still in line with kind of your new guidance.
Yeah, I would say, just in service to our head of investor relations, we did put out an eight-page, a couple of pages this morning. One of them is reaffirming the guidance that we laid out in the second quarter call. If you haven't seen that, I think I'm looking at Brian now. He's nodding his head. I think that has gone out and is sort of publicly available out there. We are seeing trends that we think are highly indicative of the things that we thought we would see when we put out our guidance. You know, to sort of touch on a few, and I think this may, you know, also touch on not just this year, but future years as well.
You know, number one, we are seeing a real normalization of this gap year population, especially the customers that entered P&I sooner. They are really starting to act a lot like a normal gap year population. They were higher losses in the early months, but they've really normalized, and so we feel very, very good about that trend. I think the second thing that we're seeing, which is worth noting, is that our normal 2022 dropout population is actually acting a lot like our 2019 population, especially when you adjust for the credit administration practices that I've talked about. That doesn't look like the 2021 gap year population. It looks much more like a normal population. We feel good about that.
We mentioned this briefly on the last call, but we also did a bunch of pretty extensive, you know, sort of analyses as we would always do on the rest of our portfolio. What we've found is if you look at, you know, refreshed FICO scores, you know, payment performance for fixed versus variable rate customers, you know, all of the kind of normal credit splitting metrics, what we're seeing is very little change in the core base portfolio at this point. We're feeling really pretty good for where we are, recognizing it's an uncertain economic environment right now. You know, you've got half the world predicting, you know, sort of a great recession and half the world predicting, you know, sort of a soft landing.
you know, in light of all that, we feel good about the trends that we're seeing and, you know, certainly feel comfortable reaffirming the guidance that we've given already.
Okay, great. You effectively just answered my next question, but just to clarify, I mean, it sounds like the question's about 2023 credit. It sounds like a lot of the things are going on too, which you talked about the timing being more temporary should fade. Should we think of 2023 as reverting to kind of that long-term 175 basis points annualized?
Yeah. I think.
Normalized charge.
Yeah. I think that is why or part of the reason why I wanted to spend the time really walking through the logic behind sort of that normalized through the cycle loss rate. I think that is the right starting point. Then what I would encourage folks to do is overlay whatever economic view, you know, your house or your shop or your judgment tells you we should overlay on top of that. I think it's probably too early for us to be announcing official guidance in that regard, but that's the exact same thought process that we would get.
We would take that 1.75%, and then we would sort of our view of what we think the macroeconomic environment's gonna look like and, you know, would expect to share that guidance, you know, on or about the time that we do our fourth quarter call.
Okay. That's very helpful. Let's see. Just switching gears, I wanna talk about the loan sale environment.
Yeah.
You have plans to sell another $1 billion this year. How is demand and pricing shaping up? What kind of impact does the current rate environment have on the premium?
Yeah. Again, in the 8-K, I think we put out a few details on this. We have an asset sale agreement. We've not yet closed the sale, but have an asset sale agreement to sell the last $1 billion in loans that was in our plan for the year. As always, we don't divulge specific pricing for a little while after that, giving our partners and counterparties a chance to do what they need to do. The pricing was certainly well within and toward the upper range of sort of what we had modeled into our overall guidance for the year. Not so much above that we wanted to change our EPS guidance, but we thought it was sort of comfortably within the range that we laid out.
You know, to give you a little bit of color, we were pleased with the response that we got when we went to market. We had a number of really good blue chip qualified folks show up who have always shown up, and we had a number of really qualified blue chip names show up who hadn't previously shown up. We got that sale done during what was unquestionably, you know, a really tumultuous time in the overall capital markets. You know, if you think about, you know, our loan sales, there's really three things that drive, you know, the premium we get. You know, number one is rates. You know, that's especially true on the fixed, you know, fixed rate portion of what we sell.
That's a very mathematical effect. I think, you know, we sort of all get and understand that. You know, the second is credit spreads, you know, which had blown out during all of this turmoil and we think are, you know, showing nice signs of beginning to normalize. You know, the third is the appetite for the residual portion because, you know, given that most of our buyers securitize or otherwise productize the loans. You know, what's the demand for that residual portion? That's really a proxy for how risk-on appetite is in the marketplace. All of those definitely took somewhat of a hit during this economic kerfuffle that we've been in. I think we're encouraged that we're seeing early signs of those beginning to normalize.
You know, look, we love our strategy of selling loans and buying back undervalued shares. You know, I think that that's a strategy that we'll look to continue as, you know, as long as the economics make sense.
Okay. Great. I just want to pause here and ask a few questions of the audience, if you'd be willing to participate and grab the controls in front of you. We've got three or four prepared questions. If we can queue those up. Okay. What do you view as the biggest catalyst for SLM over the next year? One, increasing private student loan market share. Two, better than expected gain on sale margin. Three, better than expected private student loan credit. Four, upside to NIM. Or five, other. Okay. So 53% indicated better than expected private student loan credit. Next question, please. What do you view as the biggest risk to shares? One, increasing third-party consolidation. Two, worse than expected credit. Three, lower gain on sale margin on loan sales. Four, expansion to other products. Five, other.
Yes, inconsistent with the prior one. 83% worse than expected credit. Okay, next question. Where do you see gain on sale premium in the second half? 0%-2.5%, 2.6%-5%, 5.1%-7.5%, 7.5%-10%, or above 10%? So 42%, 2.6%-5%. Do we have one more? Yeah. Over the next year, will you expect your position in SLM to, one, increase, three, decrease, or, three, remain the same? I'd say pretty balanced. A 40% increase versus 13% to decrease. So thank you all for participating in that. I wanna open it up to the audience for questions if you have any. If not, I've got more prepared that I can ask. Anyone? Okay.
Well, feel free to raise your hand later if.
It's early on a Monday morning, so.
Yes. This is not atypical. Okay, let's see. Sticking with the loan sale topic, going forward, does it still make sense to continue loan sale and buyback program?
Yeah. Look, I'm not ever gonna say never, but I think this is a case where I'd be as comfortable as I ever would saying, yeah, I think it makes sense, especially given the, you know, sort of the environment that we see in front of us. Let me clarify and build that out a little bit. First of all, I've said this in a number of occasions, my management team, my board and I, you know, we worship at the altar of capital allocation and capital return. We think it is an incredibly important thing in terms of showing discipline to our investors. We think that we've got a great opportunity to, you know, have a franchise that produces capital, both now, leading up to and through our full implementation of CECL and after.
Capital return and capital allocation is gonna be something that I think we talk about in one way, shape or form. You know, could the form of that capital return change over time? Could the exact strategy change? Maybe. But I don't think the commitment to capital return is gonna change as long as I'm the CEO and as long as we have the board we have. We all fundamentally believe in that. You know, as we've talked about in a couple of settings in the past, we have what is in practice a pretty simple thought process for how we think about shares, loan sales and share buybacks. You can think of it's a little more complicated than this, but you can think of it effectively as a matrix.
You know, we look at our valuation and multiple on sort of one axis, and we look at loan premium and sort of capital generation capabilities on the other, and that obviously gives us a great sort of green, yellow, red zone for when it makes sense to sell loans and buy back shares. Makes sense from getting full NPV value for the loans, makes sense in terms of accretion, makes sense in terms of, you know, overall economic value creation. Like, all of that is a part of the formula. We are well in the green zone today. While I think we signaled on the last call that earnings premiums have come down a little bit for the reasons you talked about, guess what? Our stock price has too.
You know, in that relative relationship, we still think it is a really smart thing to be thinking about selling loans and using that freed-up capital and premium to go and buy back stock. I expect, you know, if current conditions exist, we'll continue to be in the green zone as we head into next year. You know, what I think we've said very publicly is our intent is to sort of create and maintain a flattish balance sheet, you know, as we head up through full implementation of CECL. We've used the word flattish very purposefully. We'll always be a little bit opportunistic, plus or minus, based on what's going on in the market, and we may choose to do a little more or a little less in any given year based on prevailing market conditions.
I think you all as investors would want us to do that. I think our commitment is as long as we're sort of in that green zone, we're gonna keep pushing forward with that, with that strategy.
Okay. Does the full CECL phase-in have any impact on that longer term?
Yeah, you know, post-CECL, and again, we're not trying to be mysterious about any of this. Post-CECL, you know, the credit logic, the loan sale logic changes, but so too does the organic capital generation capability of the firm. You know, so what, you know, what we've sort of seen is when we get past CECL, we will be able to both grow the balance sheet and return significant capital to investors at the same time. You know, I think we've always felt like the limiting factor on sort of, you know, our strategy, our capital return strategy, was not how much capital we can generate, but how efficiently and effectively we can return that capital to shareholders, without, you know, for example, distorting things like, you know, equity prices.
I think, you know, our view is post-CECL implementation, the exact amount of loan sales will probably shift. We'll probably ratchet it back some. My guess is we'll always do some loan sales because we'll wanna show, you know, sort of the external validation of the market value of the asset. We'll wanna keep that, you know, that funding channel open to us. My guess is post-CECL, we will move to a capital return model that looks more organic and a little bit less dependent on loan sales, although we think loan sales will still be a part of it.
Okay, great.
Can I jump in?
Sure.
Sorry. What's your desire to get to investment grade? You're a crossover kind of candidate at this point, from your ratings perspective. Just wondering what your appetite is for that.
Yeah. You know, I'm not gonna be able to give you a super specific example. You know, I'm not sure we've talked about that in specific details, but I'm happy to give you the strategic answer. Look, we would love to be investment grade, and we're in active discussions with rating agencies right now, and we know very well what they are looking for from us to get to investment grade. There are some of those things that, you know, we think are easier for us to deliver with certain rating agencies. There's a few of those things that may be a little bit harder. I think we are willing to, you know, to invest to get to investment grade, but, quite frankly, we're not willing to overinvest to get to investment grade.
We've got, you know, a really good understanding of what we think that would do to things like our borrowing costs and economic value. Just trying to get that right. But, you know, it is certainly on our radar, and if we can figure out a cost-effective way to get there, I think it's something we would love to do. Yeah.
Great. Turning next to the Biden administration's recent announcement around loan forgiveness. Can you just talk about what your thoughts are on that and kind of what implications, if any, you see it having on your business?
Yeah. Look, it's obviously been a long time coming, and I think there's been a chance for lots of discussion on this. You know, ultimately, I think Biden did, you know, largely what he's been talking about doing for a while here. You know, the short answer is the direct implication on our business is negligible. This is a forgiveness policy that by definition only relates to federal loans, not to private loans. There is no authority whatsoever for Biden to, you know, forgive, cancel, or repay the kinds of private loans that we originate and sell every day. You know, at the end of the day, you know, it is really constrained to that part.
You know, I think what I would add though is, you know, I think in the short to medium term, there's probably a couple of small positive impacts on us. No doubt, this on the margin increases the creditworthiness of our borrowers. We know about 80% of our customers also have federal loans, and so if they're enjoying some degree of debt forgiveness, you know, that's a net positive for us, even if it's only of the sort of $10,000 variety.
By the way, you know, I think we know that, of about 80% who have federal loans, our back-of-the-envelope analysis, and again, rough justice, we don't have specific current tax information, but we think probably about 80% of those will get some form of, you know, a loan forgiveness as a part of this program should it go through. We think it'll have a small, you know, but meaningful impact on credit. We think it will likely also have probably a small positive effect on the future rate of loan consolidation. You know, at the end of the day, if you're reducing the balances outstanding, you know, it just, you know, decreases the financial case for consolidating loans.
I think it makes it a little bit hard, especially at the low margins we talked about earlier, for consolidators to make those customer acquisition business cases really fly. You know, what's more interesting to me though is what does this really mean for the long term? Let me be very clear, I'm not gonna stand up here and try to predict political outcomes. You know, the workings of Washington, I think are sort of beyond that. I think what we've observed being a part of a lot of these conversations is, you know, the conversation has really switched over the last couple of months. I think it has gone much more towards, you know, how do we keep this from ever happening again?
We hear that certainly from Republicans, but we also hear it from an awful lot of moderate Democrats who basically looked at this and said, "You can't forgive $500 billion of federal loans and not ask the fundamental question of what went wrong." Certainly if any bank out there forgave, you know, what, roughly a third to a quarter of its loans outstanding, you know, there would be tough questions to be answered. I think, you know, what that, you know, sort of conversation is showing is a couple of things. One, there's not a lot of appetite seemingly to forgive any more than the loans that have been forgiven, and maybe not even that.
I think, you know, the risk of, hey, are we gonna somehow turn around and forgive all, you know, college loans, which I heard a lot about two years ago when I joined the company. That doesn't seem to be in keeping with the current dialogue. It certainly doesn't feel like there is an interest in expanding the government's involvement in how to pay for higher education. In fact, it seems like there's actually an appetite to shrink or reduce that. You know, at the end of the day, I'm not gonna, again, predict the political outcome. You know, if I had done that, you know, for example, back when Trump came into the White House, I think we all would've assumed something more.
Okay. Just a follow-up question on that though. Do you think this is as proposed, obviously it's just a one-time benefit. Does this open the door to more forgiveness longer term?
Yeah. Again, hard to predict. You know, I think, you know, if you look at the HEROES Act, which was the enabling legislation that the Biden administration has cited, you know, that has to be done during a time of national emergency. I think the clock is ticking on COVID as a time of national emergency. So you'd have to have another national emergency for that to happen. I think there's a lot of discussion right now among Republicans and moderate Democrats to clarify the HEROES Act and other education acts to make this kind of broad scale loan forgiveness not possible going forward. Now that's new legislation that doesn't, you know, that hasn't happened.
I think more importantly, if you look at the political backlash that is starting to take form, it feels like it is growing around topics of basic equity, basic fairness, not just for people who didn't get college degrees, but also real questions of equity and fairness for people who did get college degrees and funded them in a different way, or who have already paid back their loans. Again, I'm not gonna predict a political outcome. I don't think this opens the door in the, you know, short or medium term for broader scale loan forgiveness. I'd be surprised, and I'd be even more surprised in the long term.
Okay. That's so cool.
Jon, can I jump in for a second?
Yeah.
Back here, [audio distortion]
Yeah.
Encouraging credit update. June versus August delinquencies look flat and just kind of wondering if it's fair to think about that, you know, as you're being able to ring-fence the credit issues and, you know, so it wants to be successful.
Yeah. On the delinquency side, I think you should expect that delinquencies will stay a little bit elevated through the course of this year and then begin to normalize. By the way, they'll probably never go back to exactly where they were before for the reasons that we talked about. You know, it's a more mature portfolio, the changes to the credit administration practices and so forth. But I think we would expect, you know, probably another quarter plus of slightly elevated delinquencies before seeing sort of that sweep of play.
Yeah. I was wondering if you could comment on cross-sell, you know, between the Sallie Mae with that customer base has always been to use it to sell other products. What are your thoughts on that going forward?
Yeah. It's a really good question. It sounds like you've been eavesdropping in some of our strategic conversations lately. We very much believe that we have sort of the catbird seat for building relationships with some of the most attractive customers out there. I think as we came in and really looked at that part of the strategy over the last couple of years, I think we sort of recognized a couple of things. Number one, you know, to sort of really do that, we needed to have even more customer relationships than we have today. Cross-selling is a great business, but you need to have, you know, a fundamental heft of customers to defray the fixed cost of doing that.
You know, two, that there was more work that we could do to really deepen and improve our relationship with our customers, so that when we showed up with another product, they had an even better perception of Sallie Mae. Third, that there's a whole cross-sell machine and apparatus that, you know, we had the very kind of rudimentary start to, but had not really built out in industrial form. So we are taking steps in each one of those areas. You know, part of why we were excited about the Nitro acquisition is not only the effect that it has on our core business, and I think you're starting to see that in some of the, you know, high school or college freshmen, new to firm, lower CTA type of numbers I shared before.
What Nitro also does, you know, all of this data is out there from when we announced the deal, is that it really increases, you know, by, you know, a large order of magnitude, the number of college customers that we have a relationship with, and that will only grow the longer that we operate together. We are absolutely taking steps right now to further enhance the engagement with and the quality of our existing customer relationships. We're doing that during school, during grace, during repayment, and we're seeing those Net Promoter Scores move up, you know, nicely, as a result of all of that. We are absolutely building and leveraging tools and capabilities that Nitro brought to us, cross-sell capabilities that will make it easier for us to get new offers in front of customers.
By the way, the very first beneficiary of that improved cross-sell capability is serialization in our core business. Like, the very best thing we can do is just sell more student loans and get 100% share of wallet of those student loans. It is absolutely a part of where we're taking the company. We think that there are some things that we are sort of building in a pretty methodical way to make sure it can be a scalable, attractive and, you know, quite frankly, resilient business for us. We like our customer base a lot and look forward to finding ways to further monetize that over time.
Okay. Great. I think we're gonna have to end on that note, but please join me in thanking Jon for all his thoughts.
Thank you.