Sallie Mae is growing profits by increasing the percentage of borrowers repaying their debt and the number of new loans issued mostly to students and families with good credit, company officials said Thursday.

In a conference call discussing second-quarter financial results, Sallie Mae executives said they’ve instituted various measures and outreach programs to get delinquent borrowers back to paying their loans. Private student loans 90 days past due dropped to 3.6%, while the company’s “charge off” rate – the amount of debt it does not expect to collect – declined to 2.7%. Both rates haven’t been that low since 2008, the company said.

The company's adjusted second-quarter net earnings totaled $462 million, which included $257 million from the sale of a portfolio of federally guaranteed loans. Sallie Mae will continue to provide service for those loans, and the company will try to continue its practice of buying portfolios of older federal loans, CEO and president John F. “Jack” Remondi said.  

An estimated $150 billion in federally guaranteed loans are neither owned nor serviced by Sallie Mae, but with demand for lending weak, banks have hesitated to let go of loan assets delivering a stream of income, company executives said.

Gains in revenue offset an increase in operating costs and expenses associated with the company’s reorganization. Sallie Mae plans to split into two entities within the next year – a consumer lending bank and a education debt and collection servicing company.

While overall results beat Wall Street estimates, Sallie Mae fell short of analyst expectations for the amount of new private loans issued in the quarter. Private loan origination grew 15% in the quarter, less than the anticipated annual rate of 20%.

“The company maintained its target of at least $4 billion in private loan origination for the full year, and we expect the company to generate strong origination [in the third quarter] to help it meet that target,” Sameer Gokhale, an analyst with Janney Capital Markets, said in a note to investors.

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