Sallie Mae, formally SLM Corp., lowered its earnings outlook after net charge-offs rose in the third quarter.
The private student loan company said Thursday it now expects earnings per share for the year to be $1.95 to $2.05, down from its earlier guidance of $3.10 to $3.20.
Sallie Mae's projection for annual net charge-offs increased after logging a bigger loss from unpaid debt in the latest quarter.
Net charge-offs increased 17% to $90.4 million in the third quarter. That was primarily due to an issue with a third-party debt management firm, which affected a small group of borrowers with a high ability to pay, who progressed straight through delinquency to default.
The company has pivoted to fix the problem, but affected borrowers are taking longer than expected to get back on track with debt payments. Delinquencies have ticked up by 0.2 of a percentage point.
Sallie Mae swung to a loss of $32.3 million, or 19 cents a share, from a profit of $135.9 million, or 63 cents a share, a year earlier.
The loss was primarily due to provision and expenses related to higher originations, the company said. Provisions for credit losses rose 19% to $214 million.
Net interest income fell to $339 million, from $373 million. Analysts expected $359.1 million.
Despite the higher charge-offs, originations did rise. Private education loan originations increased 15% to $3.4 billion.
Sallie Mae has increased lending to graduate students following changes to federal programs that limit how much graduate students can borrow, Chief Executive Jonathan Witter said. Graduate loan originations more than doubled.
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