Private student loan lenders are getting the business they always wanted. On July 1, 2026, the federal Grad PLUS program closed to new borrowers and graduate borrowing was capped, sending students in expensive master’s, law, and medical programs to private lenders for the difference.

Three months in, the two largest publicly traded private student loan lenders have reported record loan volume, but both have missed Wall Street’s profit estimates.

Sallie Mae’s stock fell 9% the day after its October 22 report. Navient followed on November 4 with core earnings of $0.03 a share, well under the roughly $0.09 analysts expected. For borrowers, the lenders’ pain is showing up as higher private student loan rates and tighter credit standards in the first admissions cycle without Grad PLUS.

What Did Sallie Mae And Navient Report For The Third Quarter Of 2026?

Both lenders posted record or near-record originations, but both earned less than Wall Street expected. Sallie Mae originated $3.4 billion in private student loans, up 15% from a year earlier, and its graduate student loan originations rose 119% to $1.4 billion. The company still posted a $32.3 million net loss and cut its full-year earnings guidance to $1.95 to $2.05 a share from $3.10 to $3.20. That is a steep reversal for the largest lender in the private student loan market.

Navient, which lends through its Earnest brand, reported $1.4 billion in originations, up 77%, with in-school student loans up 84% to $479 million. Core earnings came in at $0.03 a share against an estimate of $0.12. Its lending margin shrank to 2.09% from 2.39% a year ago as refinance student loans, which earn less, became a bigger share of the book.

SoFi was the exception. Student loan originations rose 96% to $2.9 billion, charge-offs ran at 0.63%, and the company raised full-year guidance. The difference is the customer. SoFi’s student loan borrowers carried an average FICO score of 761 and average income of $154,000, and most of that volume is refinancing for high earners rather than new in-school lending, which matches what our SoFi review has said about who gets its best rates.

Why Are Record Student Loan Originations Producing Losses?

When borrowers a lend a new student loan, they have to spend the money immediately, while the interest income gets paid over 10 to 15 years. That timing mismatch is the core problem, and two other issues hit at the same time.

We flagged this tension when we wrote about how the new federal caps shift the most profitable student loans to private lenders: the profit is real, but it is years or even a decade away.

Loss Reserves Come Before Interest Income

Bank accounting rules require a lender to set aside its expected lifetime losses the moment it funds a student loan. Sallie Mae recorded a $214 million provision for credit losses, up from $179 million a year earlier. Management said the increase is directly due to origination growth.

Navient avoided the issue somewhat by electing fair value accounting for in-school student loans made after June 30, which turned what would have been a reserve charge into a $23 million gain (and that still wasn’t enough to make their earnings estimate). That choice says a lot about how uncertain private lenders remain about graduate credit risk.

The Market For Selling Student Loans Softened

Sallie Mae’s earnings depend on selling a slice of each year’s new student loans to investors at a premium. A year ago that produced $136 million in gains on $1.94 billion of student loans sold. This quarter the gain was under $4 million.

Management canceled a planned fourth-quarter sale of roughly $1 billion because the price fell below its minimum, blaming rate volatility and investors chasing higher yields. That one decision accounts for most of the guidance cut.

A new agreement with Sixth Street now commits at least $1.5 billion of purchases a year alongside an existing KKR deal. A lender that cannot sell student loans at a good price has less room to compete on rate.

Older Private Student Loans Are Going Bad

Sallie Mae traced its rising charge-offs to for-profit debt settlement firms that market a “private student loan refinance” and then tell borrowers with good credit to stop paying so the firm can negotiate a settlement. Those borrowers go straight from delinquency to default. There have been multiple Reddit threads documenting a “standoff” between Yrefy and Sallie Mae on similar issues.

The company raised its 2026 net charge-off forecast to $400 million to $420 million and said uptake of its own alternatives has been “slower than anticipated.”

We have warned for years that settling private student loans for less than you owe wrecks credit and triggers a tax bill, and now a lender is quantifying the damage.

Navient’s credit problem is older. It took a $178 million provision on its legacy private student loan book because delinquencies and charge-offs are “persisting at elevated levels for a longer duration than previously anticipated,” plus $33 million on refinance student loans made before it tightened credit in 2024.

CEO Edward Bramson said the company is “evaluating additional loan sales as we continue to optimize the portfolio,” after moving $2.4 billion of student loans to held-for-sale and selling $750 million at a gain. Borrowers who refinance with Earnest should expect their student loans to change hands.

Is The Graduate Student Loan Market Smaller Than Lenders Expected?

Yes, at least in the first year. The pool of new graduate borrowers is shrinking while every lender competes for it. Preliminary National Student Clearinghouse data show graduate enrollment fell 1.6% this fall and master’s enrollment fell 3.7%, with computer science programs down more than 10% at the graduate level. International graduate enrollment is falling on top of that, as we reported when universities began cutting programs over vanishing international students.

Grandfathering delays the shift too, since students who received a Grad PLUS loan before July 1, 2026 can keep borrowing under the old rules for up to three years. The National Bureau of Economic Research puts the annual shortfall at about $8 billion across roughly 370,000 borrowers, and KBRA cautions that displaced federal borrowing will not convert one-for-one into private student loans.

Sallie Mae’s new graduate borrowers carried FICO scores nine points above its overall average, which means the prime borrowers are competitive to price and the thin-credit borrowers are the ones we said private lenders would never fully serve.

The pressure is also impacting smaller lenders. Ascent Funding, the San Diego lender that raised $45 million in February to expand graduate lending, confirmed to SanDiegoVille that it cut about 17% of its workforce on September 1. Chief Marketing Officer Allie Danziger said “Ascent recently made the difficult decision to reduce its workforce,” and the company gave no reason.

The funding model explains the exposure: a nonbank lender like Ascent has to sell or finance every student loan it originates, so a softer market for student loan sales hurts it before it reaches a deposit-funded bank like Sallie Mae.

What Does This Mean For Graduate Students Borrowing This Year?

Private student loan pricing has split in two directions over the past year, and approval depends more on credit score and income than ever before. In The College Investor’s daily rate tracking, the lowest advertised fixed rate on a private student loan is 1.99% APR this week, down from 2.85% in late October 2025.

The top of the range moved the other way at two lenders. Ascent’s highest fixed rate rose to 18.19% from 15.46% and Abe’s rose to 16.58% from 15.61%, while Sallie Mae and College Ave held their ceilings at 17.49% and 17.99%. Lenders are cutting teaser rates to win prime borrowers and charging more for less qualified borrowers, and the lowest rates require autopay discounts, the shortest loan repayment terms, and top-tier credit.

The federal Direct Unsubsidized rate for graduate students is 8.07% for 2026-27, and it comes with income-driven repayment plans and discharge protections that private student loans lack. For most graduate students, the federal $20,500 still comes first.

The lenders’ credit data tells you how to apply. Navient’s new in-school borrowers averaged a 770 FICO score, and 92% of Sallie Mae’s new student loans carried a cosigner. A creditworthy cosigner remains the biggest lever on the rate a student is offered, and the cosigner release terms decide how long a parent stays on the hook.

Students without a cosigner have fewer options, most of them outcomes-based or state nonprofit programs rather than the big national lenders.

The Sallie Mae results also carry a warning for anyone who already holds private student loans. A company that offers to “refinance” your student loans but requires you to stop paying first is selling debt settlement, not refinancing. Real refinancing lenders pay off your old student loan at closing and never ask you to default. Our list of current student loan scams covers the settlement-mill pitch in detail.

What Should Graduate Borrowers Do Now?

1. Borrow the federal maximum first. The $20,500 Direct Unsubsidized limit for graduate students, or $50,000 for professional programs. Check the 2026-27 student loan borrowing limits before you apply anywhere else.
2. Get three to five private quotes, including a state nonprofit lender. Rates range from about 2% to 18% depending on credit, so one quote tells you nothing. Start with our best graduate school student loans and add any state-based nonprofit lender that serves your state or school.
3. Apply with a cosigner and read the cosigner release terms. Lenders range from 12 payments to half the repayment term before a cosigner can come off. Our cosigner release comparison lists the rules by lender.
4. Never stop paying to chase debt settlement. If you are struggling with existing private student loans, call the lender about forbearance or a modified payment before you miss one. Our article on options when you cannot afford private student loans walks through what is real.
5. If you hold high interest rate private graduate student loans, price a refinance. Lenders are competing hardest for prime refinance borrowers right now. Compare the best student loan refinance lenders before rates move again.

Frequently Asked Questions

Did Sallie Mae And Navient Miss Earnings Because Fewer Students Are Borrowing?

No. Both lenders reported record or near-record originations in the third quarter of 2026, with Sallie Mae’s graduate student loan volume up 119% and Navient’s in-school volume up 84%. The misses came from loss reserves on new student loans, a canceled student loan sale at Sallie Mae, and rising defaults on student loans made in 2021 through 2024.

Are Private Student Loans Harder To Get After The Grad PLUS Cutoff?

Approval standards have not loosened, and rates have risen. New in-school borrowers at Navient averaged a 770 FICO score, and 92% of Sallie Mae’s new student loans had a cosigner. The average 10-year fixed private student loan rate for borrowers with 720-plus credit was 8.75% in late October 2026, up from 7.57% a year earlier.

Is A Company That Offers To Refinance My Private Student Loans By Settling Them Legitimate?

No. Refinancing means a new lender pays off your existing student loan in full at closing. Debt settlement means you stop paying, default, and then negotiate a reduced payoff, which damages your credit for up to seven years and can create a tax bill on the forgiven amount. Sallie Mae told investors in 2026 that these firms are driving defaults among borrowers who could afford to pay.