Sallie Mae to Benefit From Proposed Federal Student Loan Caps

On July 1, 2025, the Trump administration proposed a new tax bill, “One Big, Beautiful Bill,” which is poised to benefit companies offering private student loans, including Sallie Mae SLM, a prominent player in the private student lending sector.

The bill introduces major changes to student loan policy, including tighter federal borrowing limits for graduate and professional students as well as parents. Although the U.S. Senate has passed the bill, it has not yet been made official and is subject to approval by the House of Representatives.

Details of the Trump Bill in the Student Loan Context

The proposed tax bill introduces new limits on the amount of money students and parents can borrow from the government for college. The bill proposes a plan to reduce graduate student borrowing to $20,500 per year, with a total limit of $100,000. For students in professional programs such as law or medicine, the cap would be $50,000 per year, up to a maximum of $200,000.

Parents who take loans on behalf of their children will also face a new limit of $20,000 per student per year, with a total limit of $65,000 per student. Earlier, parents could borrow up to the full cost of attending college, offsetting any financial aid.

The new proposal would sharply reduce those amounts and could leave many students without enough funding. The bill also includes updates to repayment plans that could reduce flexibility, encouraging borrowers to finance their loans through private lenders.

How Does the New Bill Impact SLM?

Federal student loans have long been the first choice for college funding due to predictable terms and conditions. However, with new borrowing limits proposed under the tax bill, students, especially those in graduate and professional programs, may struggle to cover the full cost of education using federal loans alone.

This gap may prompt more students to turn to private lenders, such as Sallie Mae, if the proposed legislation becomes law.  With this, SLM could see a jump in its private loan demand.

In addition to boosting demand for newly originated private student loans, the proposed tax legislation could also catalyze increased refinancing activity for SLM. Changes to federal repayment programs, such as reduced benefits or stricter eligibility, make them less appealing to borrowers. As a result, many borrowers may opt to refinance their federal loans through private lenders, such as SLM, in pursuit of more favorable terms, driving further growth in the company’s private student loan business.

Final Words on SLM

Sallie Mae continues to deepen its focus on private student lending by strengthening its capital foundation and introducing multiple complementary products. The company has been witnessing growth in its private loan originations in recent years. 

The proposed federal loan caps present a compelling opportunity for Sallie Mae. With a focused business model and strong financial foundation, SLM is well-positioned to capitalize on the growing demand for private student loans and refinancing solutions. The new proposed bill, if it becomes law, could be a key driver of future growth for the company.

SLM’s Zack Rank and Price Performance

Over the past three months, shares of SLM have gained 33.3%, underperforming the industry’s growth of 36.1%

Currently, the company carries a Zacks Rank #3 (Hold).

Other Finance Stocks to Consider

Some better-ranked finance stocks are Nelnet Inc. NNI and Encore Capital Group ECPG. NNI currently sports a Zacks Rank #1 (Strong Buy), while ECPG carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimates for NNI’s earnings have remained unchanged for the past seven days. In the past three months, its shares have risen 18.5%.

The earnings estimates for ECPG have also remained unchanged over the past seven days. EPCG shares have rallied 31.2% over the past three months. 

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research