Good morning. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to Sallie Mae's 2013 First Quarter Earnings Call. [Operator Instructions] Thank you. I'd now like to turn the call over to our host, Mr. Steven McGarry. Please go ahead, sir.

Thank you, Brent. Good morning, everybody, and thank you for joining us for our First Quarter Earnings Call. With me today are Al Lord, our CEO; Jack Remondi, our President and COO; and Joe Depaulo, our EVP of Banking and Finance. After their prepared remarks, we will open up the call for questions. But before we begin, please keep in mind that our discussion will contain predictions, expectations and forward-looking statements. Actual results in the future may be materially different from those discussed here. This could be due to a variety of factors. Listeners should refer to the discussion of those factors on the company's Form 10-K and other filings with the SEC. During this conference call, we will refer to non-GAAP measures we call our core earnings. A description of core earnings and a full reconciliation to GAAP measures, as well as our GAAP results, can be found in the First Quarter 2013 Supplemental Earnings Disclosure. This is posted along with the earnings press release on the Investors page at salliemae.com. Thank you. And I'll turn the call over to Al.

Thanks, Steve. Good morning. So I think we are off to a good start in 2014 (sic) [2013]. No financial surprises in the quarter. I believe we've made some progress on the valuation of the company's equity. I also still believe there is significant distance to cover on that front. Our credit quality is looking better, and it gives us some reason for optimism. We had a good quarter in the capital markets, which are substantially more liquid than they were just last year. And before I make more comments, I'm actually going to ask our new EVP of Finance and Banking; and Jack Remondi, who you all know as our Chief Operating Officer, to cover the quarter as they saw it from their perspective. And then I'll make some comments when they're finished. Now I'll turn it over to Joe.

Thank you, Al. Good morning, everyone. I'll be referencing the earnings call presentation available on our website during my prepared remarks, beginning with Slide 3. At the end of my remarks, Jack Remondi will make a few comments on credit quality and business operations. In the first quarter, we delivered consistent earnings. And the fundamentals of origination, credit and funding all worked well, so we grew our loan originations by 22%, maintained high credit standards for those new loans, and we saw improvements in delinquency, forbearance and charge-offs across the portfolio. We took advantage of the favorable credit markets, in part reflected by the successful sale of our residual interest in a $3.8 billion trust. And we returned capital to shareholders by purchasing nearly $200 million of shares. Slide 4 provides a high-level summary of our results. For the quarter, core earnings were $283 million or $0.61 per share compared with $284 million or $0.55 per share for the year-ago quarter. Our operating expenses were $270 million versus $262 million in the first quarter of 2012 and $252 million in the fourth quarter. The increase versus the prior year quarter is the result of an $8 million gain we booked last year related to the termination of our pension plan. Operating expenses were up $18 million in the fourth (sic) [first] quarter versus the fourth quarter as a result of stock compensation payment to retirement-eligible employees, as well as severance costs. We expect full year expenses will be lower than $1 billion. I'm going to turn to Slide 5 to discuss our consumer lending metrics. As we grew originations in this segment, we maintained our loan spread within our 4.5% to 4.6% target range. We also reduced our expense ratio, and we saw improvements in delinquency rates and forbearance rates…

Thanks, Joe, and good morning, everyone. As I think you have seen from the summary statistics that have been reviewed so far, we're off to a very good start with our first quarter performance. We originated $1.4 billion of high-quality education loans, a 22% increase year-over-year. Importantly, our growth in loan volume this quarter and our targets for the year will be achieved without any changes to our credit criteria. Our focus is to offer the right set of products with features like fixed interest rates, incentives for good payment behavior and payment flexibility to help graduates get started on the right foot. Along with strong quality metrics for originations, our overall portfolio is stronger each quarter, with an average FICO score of 720 and 66% of our loans including a co-borrower. When we segment our portfolio by risk tiers: 70% of our loans fall into the low-risk segment where charge-offs fell to 1.6% in the quarter from 2.1% in the fourth quarter. 100% of our originations fall into this risk tier. Charge-offs for our moderate- and high- or nontraditional-risk tiers also fell to 5.0% and 8.7% from 7.1% and 13.2%, respectively. Over the past few years, we have continuously worked to refine our repayment practices to help our borrowers successfully manage their education loan payments. This has led us to reduce the use of forbearance where ineffective and to help borrowers avoid the needless compounding of interest on their loans. As we saw last quarter, this led to a temporary increase in charge-off rates in 2012, particularly in the fourth quarter, as we pulled forward loans likely to default. Although our forbearance offerings are more constrained, we continue to offer our borrowers who are experiencing financial hardship more options to help them successfully manage their loans. These options may…

Okay. So see, you've heard from Jack and Joe. They are the guys that make things happen around here. So let me just comment on some of the things that they talked about and maybe a couple of other things. And in fact, Joe and Jack both commented on the better credit news. I mention them again largely because the -- because some of the underlying statistics are starting to feel a lot better, and particularly delinquencies which are notably better. Our recoveries are very strong in the quarter as well. And while recoveries don't directly affect EPS, they are in cash and they ultimately do affect EPS. Nonetheless, we held our reserve at very conservative levels and flat as we move into the second quarter. Second quarter can hopefully confirm our optimism, but I would say, I guess, for at least the last 3 or 4 spring-summer, we've experienced economic swoons, and so we'll see how it turns out. You also note, I'm sure, that we had a little operating expense slippage. Joe mentioned that we're going to reduce those costs over the balance of the year and 2013 will be below 2012 numbers. Joe mentioned the capital markets being very accommodating. There's a fair amount of liquidity, and it seems that everybody is -- virtually all participants are looking for yield. While these markets are as liquid and active as they are, Sallie Mae will continue to be active. Joe mentioned the ABS pricing. That was very heartening, particularly our ability to move the subordinated piece. We also did 2 FFELP residual sales, ABS residuals, the second transaction price substantially better than the first. And we have another transaction in the market, and that's likely -- very likely to close in the quarter. As you know, and I…

Thank you, Al. Brent, we're ready to take questions.

[Operator Instructions] Your first question comes from the line of David Hochstim with Buckingham Research.

I wonder if you could talk a bit more about the prospects for selling more of the residual cash flows. And maybe give us a sense of how much the markets improved from a few years ago when you tried this and the buyers were giving you ridiculous bids. And then what would -- what do you think is realistic, if you think out over the next year or 2, in terms of additional sales?

David, this is Al. We're -- we will continue to explore this market. And you're correct: The demand has ticked up very nicely. The change from the first transaction to the second was startling. I'm really -- we put 2 transactions out that were kind of bite-sized, and the third one is relatively bite-size as well, trying to establish this market. I think we'll then step back a little bit maybe and take a look at what we want to do next. Just as a financial marker, I -- and when -- I know that -- the sell side community, and I've read the reports just on our earnings release last night of our parsing $0.01 and $0.02 a share from this or from that. The company's shares are trading at something less than 10x earnings, which implies something like a 10% -- actually, it's more like a 12% after-tax return. These transactions are considerably well inside the cost of capital. And so they -- and so while they remain well inside the cost of capital, they will obviously be transactions that we'll continue to consider seriously. But I'm not really prepared to give you a number at the moment, David.

Okay. And then can I just ask you about on the private loan originations? So the -- you had a big increase in the Deferred payment loans. And I just wondered, what -- how different is the expected loss rate on those or the expected ROA relative to the interest-only and the Fixed Pay options?

David, this is Joe. Our loss rate expectations are very similar across those 3 products. And one of the reasons why we'll see a slight uptick in the Deferred is that customers take second and third products. They often don't want to make the payments on all 2 or all 3 loans. So as we market to our base and continue to penetrate those customers who have loans, with more loans, as they go through school, we typically will see the Deferred piece increase a little bit relative to the first time they took a loan.

Okay. And so is there any difference in the credit characteristics or the rates on those loans, relatively?

Well, we do -- we encourage customers to make the payment while they're in school because we know it leaves them with less debt when they graduate and it's a better proposition for them and the schools. So the way we do it is, based on your risk segment, if you take the interest-only option, which of course is the highest payment, we price you at our base price. So let's say you're LIBOR, plus 5%. Then when -- if you choose a Fixed Pay, we add 50 basis to it -- basis points to that price. And if you choose the Deferred, we add about 100 basis points. So what we're trying to do is encourage the customer to graduate with the least amount of debt. And again, it works for the customer, it works well for the schools.

Okay. And then just finally, Discover recently eliminated some fees on their private loans. Are you guys seeing any impact from that on your -- on demand? Or are there -- I mean, do you view that as a pricing cut that you'll have to match to make any difference?

We -- well, we haven't seen any impact on it yet. We -- obviously, our results speak for themselves in the first quarter. We don't -- we position our product for all the customers, not for the ones we expect to go delinquent. And we think that positioning -- as I mentioned a moment ago, encouraging the customer to make the payment in school is very attractive to obviously our customers. And we -- and remember, we have the parents involved, they're the cosigners, and we have the schools involved. So all 3 of them like the way we position it. And we like looking at sort of all the customers versus those we think might go delinquent.

Your next question comes from the line of Sanjay Sakhrani with KBW. Sanjay Sakhrani - Keefe, Bruyette, & Woods, Inc., Research Division: I just had a couple of questions. One was just on the FFELP portfolio -- I'm sorry, the private student loan portfolio. Could you just talk about how you expect credit quality to progress for the remainder of this year and kind of into next? And then secondly, just within your guidance for EPS, I was wondering how much in terms of debt repurchases you guys are assuming and if that stepped up relevant to the previous time you guys provided guidance.

So let's start with the credit quality piece of your question. We -- so we see the leading indicators on our portfolio as all positive. You see the delinquency rates are lower across the portfolio year-over-year, quarter-over-quarter, and you see that both in the total delinquency and the 90-plus. You also see significantly less forbearance. We're down $270 million in loans in forbearance since the first quarter of last year, that's a 20% decrease. So those leading factors would lead us to the confidence that we will see lower losses this year than obviously last year. Longer term, what we're putting in the portfolio are loans that we're writing to a 1% to 1.25% annual charge-off rate or 7% life of loan losses. And those are the Smart Option loans. So as they enter the portfolio, they continue to bring down the expected long-term loss rates. I think your second question was about guidance relative to debt repurchase. Our -- we had an assumption of debt repurchases in our original guidance of $2.30, and it remains there today. Sanjay Sakhrani - Keefe, Bruyette, & Woods, Inc., Research Division: Okay, great. And that -- did that change in any way? I mean, I'm just trying to scope kind of the impact.

Well, we had -- I mean, you could compare -- you can compare our first quarter debt repurchase gains of $29 million to the prior quarter and the prior year's quarter. We were obviously down $14 million from first quarter '12. But we don't disclose how much we will buy the rest of the year, obviously, but when we see opportunities, we'll continue to take advantage of them.

Your next question comes from the line of Eric Beardsley with Barclays.

What would you attribute the strong improvement in delinquencies to? Or is there anything that changed in terms of your workout strategies or repayment plans that you're putting students into?

This is Jack. So a couple of things, I think, are going on here. One is, the balance of the portfolio that is in the low-risk segment has continued to expand. So when you look at that portfolio: We finished at 65% at the end of 2011. It's 70% today. That portfolio has substantially lower loss levels. Even during the crisis, it had substantially lower loss levels and delinquency levels. I do think our forbearance practice changes have been a big contributor as well. Our focus is to get borrowers on payment plans so that they are -- develop a pattern of making payments each month rather than taking a break of 3 or 6 months through the use of forbearance, and that has had a positive impact as well. And when you look at a combination of those things, that -- those are the big drivers. And to the point that Joe was making earlier, when you look at the 90-day delinquencies in percentage, they're down, but they're also down in absolute dollars $92 million compared to a year ago and $200 million compared to the fourth quarter. And that ultimately is what's going to drive the lower charge-off rates coming into the balance of this year. You also see a $270 million decrease in forbearance, the amount of loans that are in forbearance. And the loans that we have been -- we've pulled forward out of that are really the ones where our borrowers show the least likely ability to benefit from a forbearance. And that's been -- I think both of those are going to lead to lower charge-off rates going forward.

Got it. I think, last quarter, you talked about potential charge-offs and provisions somewhere between $900 million and $1 billion for the year. I guess, with the improvement in the dollar amount of delinquencies you saw in first quarter, could you be trending below that now?

We are slightly ahead of plan in the first quarter, but I think the economic environment is really going to be the key thing that we will focus on. As Al indicated, for the last, I think, 3 years now, we're seeing a summer swoon. And although that's not in most economists' forecasts, there are a couple of indicators that are starting to show the same thing.

Your next question comes from the line of Brad Ball with Evercore.

In your guidance for -- of $2.49 for this year, are you including the third FFELP residual transaction that you referenced in the call?

No.

So any gains from that may be additive to that $2.49.

Yes.

Okay. And then the FFELP residual sales are giving you a lot of added flexibility in terms of managing the cash flows of the runoff book. I wonder if you can give us a sense as to how you're thinking about those accelerated realizations and its taking gains in earnings today versus the loss of the earning stream that they would have thrown off over time. So how should we think about the earnings in the out-years 2014 and beyond? And also, are you still in the market to buy FFELP residuals?

To buy -- did you say to buy FFELP residuals?

Yes.

FFELP portfolios [indiscernible].

FFELP portfolios.

Well, yes, look, if we can buy low, sell high, that's not a terribly bad strategy. Yours -- I think your question is, do we -- what's our view of the fact that we are accelerating earnings by bringing these transactions forward? I would -- I'd just point out that these earnings are going to decline, anyway, and that what we're doing is making a judgment about the use of capital from those earnings. And as I said earlier, to the extent that we're able to return capital on equity that's got pretty close to a pretax cost of 20%, I think that's a rational financial transaction. That it may subtract $0.01 or $0.02 from out-years is that -- is not really the issue. The out-year earnings are going to decline from FFELP, anyway. So when you ask about what you should look at in terms of the out-years, I would be paying a far greater attention to the growth part of the business, not the shrinking part of the business.

Great. And then one last question, on the expense targets. So getting your costs back to below -- or to below $1 billion for this year implies significant reduction in the next couple of quarters. Are there specific areas where you've marked for cost savings? And sort of how are you getting that run rate down to below the $250 million per-quarter rate?

Let me try that. I think a fair amount of it will happen naturally, Brad. There are a lot of things in Q1. The so-called onetime items that seem to repeat themselves are maybe are not onetime, but there are quite a number of them in the first quarter. And I think we may have taken our foot off the brake a little bit, but I don't think we're going to need to do anything particularly dramatic. We still have to crack the overhead nut in this company as the -- related to the FFELP portfolio, and we are working diligently at that. But I don't think there's anything noteworthy in our plans over the next 3 quarters or so that you would find, you or the outside world would find, particularly noteworthy.

You're retaining servicing in these transactions, right, so there's no real cost savings from these sales?

But there's no -- there is none, but there is a revenue decline, and so we've got to find cost cuts, but yes, you're right. And in fact, what we're selling in -- with these residuals, at least on average, is about 65% of the cash flow of the pools of assets that we're selling.

Your next question comes from the line of Moshe Orenbuch with Crédit Suisse. Moshe Orenbuch - Crédit Suisse AG, Research Division: I mean, you talked a little bit about the impact on the charge-offs. Could you talk a little bit about the reserving for the private student loans? Because you've got, I don't know, roughly 10%, even a little less than 10%, of your loans kind of in the nontraditional, but it's probably somewhere between 25% and 30% of your credit metrics in reserves, and that should be coming down. And how that -- how we should think about that versus the reserve you've put on for new loan growth?

What is the -- are you asking indirectly the direction of the reserve? Moshe Orenbuch - Crédit Suisse AG, Research Division: Well, I mean, by how -- well, more specifically than that, by how much could we expect the reserve to be less than -- the provision to be less than charge-offs as you have those phenomena going on?

I think, Moshe, as I said in my prepared comments, I like what's going on underneath the big numbers. But the Q1 was not a particularly great quarter for charge-offs. They were -- I thought they were pretty high. They were down from the fourth quarter, but we've flushed a lot of forbearance through in last year. And so the encouraging part to me is the improvement on the delinquency front and the forbearance front. Those -- and they're in all the buckets, and our entry rates seem to be slowing. So I'm happy with those numbers. I just -- I -- but I recall being almost this happy last year about the same time. And so -- but if those underlying numbers stay as they are or further strengthen, we will be harder pressed to keep our $2 billion reserve. Although, I -- it gives me a great deal of comfort to have this kind of coverage. Moshe Orenbuch - Crédit Suisse AG, Research Division: Great. Then separately, you mentioned that there was about a 5-basis-point drop on the margin on FFELP for the unhedged floor income. Was that something specific to the transactions? Did that have more to do with the way interest rates moved? What was that about? And does that bounce back or not?

It -- this is Joe. That's really -- that's driven by seasonal factors that reverse themselves in the second half of the year. You saw some of it probably last year, but we still think the FFELP spreads are going to be in the high -- in the mid to high 90s. Moshe Orenbuch - Crédit Suisse AG, Research Division: Great. And then just a comment, kind of putting together a whole -- a number of the previous questions. Al, you made a bunch of comments about these transactions being well inside your perceived cost of capital. I think -- and this is really not a question, more of a statement. I think that it's -- you -- I mean, you've done a great job returning capital thus far, but what -- until that cash that's generated is actually deployed, it actually kind of is slightly dilutive to earnings estimates. And it's true, over time, the earnings from the FFELP portfolio are going to go down, anyway. So I get it. But the sooner we can get more clarity as to your plans for that would be just helpful to us, I think.

The plan for that and other is about the rapidity with which we might sell residuals. Moshe Orenbuch - Crédit Suisse AG, Research Division: And -- right. And priorities, I mean if there are acquisition -- portfolio acquisition opportunities or debt buyback or stock buyback, yes.

Yes, okay.

Your next question comes from the line of Michael Tarkan with Compass Point. Michael Tarkan - Compass Point Research & Trading, LLC, Research Division: Just back to the private originations, for a second. I was wondering if you could just provide some color as to where the growth is coming from. Is it primarily just overall industry growth? Are you taking more market share these days? Just any kind of color on that.

This is Jack. I think it's a little bit of both. We are seeing more families take advantage of the interest rates that we can offer in our private education loans compared to what's available in the federal space. And I think a big feature of our products is that this is a family loan. It is the parents and the child, whereas the federal loans are one or the other and not a shared obligation. And I also think we are taking market share, so although the market is growing, we are clearly growing faster than the overall market pace. Michael Tarkan - Compass Point Research & Trading, LLC, Research Division: And then I guess, on the servicing side on the ED servicing contract. So you have 4.8 million borrowers now. Can you kind of ballpark for us how many of those 4.8 million are currently in repayment versus in school? And I guess what I'm getting at is, as those students go into repayment, are you expecting a decent increase in revenues associated with them?

So it's -- this is a -- we have a little bit of an interesting mix issue here. Today, our most profitable segment for servicing in the ED loan is actually in school borrowers, and that has to do with the fact that our repayment portfolio is heavily weighted towards for-profit schools which are more highly delinquent and at more highly delinquent portfolio. That mix is going to change over time. And we've been working hard to reduce our costs in that side of the equation while, at the same time, dramatically reducing the default levels that occur there. And we have -- in the 3 years that we've been servicing loans for the Department of Ed, our default loans that we service default at a substantially lower rate than loans that are serviced by the other key reservicers. Michael Tarkan - Compass Point Research & Trading, LLC, Research Division: Are you doing anything internally to maybe improve some of the survey results? It look -- the default statistics look good, but it looks like, the survey, you consistently rank towards the bottom of the pack.

It is, and that's an unfortunate item. When you look at those survey results, though, the 14 is on the subjective measures where they're measuring satisfaction. The 3 of us are really lumped very closely together and, in some instances, well within the margin of errors, but we -- where there's a significant difference in performance, it's on the default side. And just as through the first 3 years, our default rates are 10% better than the next best player in the contract. Michael Tarkan - Compass Point Research & Trading, LLC, Research Division: Okay. And then one more, I guess, on the contingency side. And I know there were recent changes that allowed you guys to use IBR to rehabilitate loans. I'm wondering if you see maybe a meaningful increase in recovery rates as a result that would potentially offset some of the fee cuts.

Well, we've always been the leader in rehabilitation in the previously defaulted federal student loan collection business. And well, certainly, getting -- allowing borrowers an easier path to making their 9 on-time payments can help on that area. The fee cuts are proposed, and there's been a significant opposition to them in Congress, so we're hopeful that they don't kind of take a penny-wise, pound-foolish approach here. Michael Tarkan - Compass Point Research & Trading, LLC, Research Division: I think -- and I guess, along those lines, even if fees were cut a little bit, the ability to rehabilitate through IBR, do you expect that would overshadow any kind of cut at this point?

Well, as I said, it is a proposal. And so we're -- we don't think that cut is a responsible way to address this portfolio, but the objective here is to get borrowers who have defaulted back into repayment and to eliminate the financial incentives to do so. And I mean, these are not easy things to do, it takes a lot of work. And if you reduce the revenue associated with that so that it -- you're going to reduce the number of borrowers who benefit from rehabilitation. There's no question.

That's right.

And there's an -- where we've argued this and presented the facts, people in Congress understand that.

[Operator Instructions] Your next question comes from the line of Sameer Gokhale with Janney Capital Markets.

So just one question, was in terms of the sale of the FFELP residuals versus purchasing opportunities. And I think, Al, you spoke about this, but I just wanted to flex that out a little further. Does this change your outlook as far as purchasing opportunities? Because it strikes me that, if the pricing is really good for these types of FFELP residuals, then why shouldn't anybody else that owns a FFELP portfolio and has outsourced the servicing also considering the same? And along those lines, have you been marketing the opportunities to buy these portfolios differently now in terms of saying, "We'll buy them in bulk amounts," if you will, and then package them so that the residuals retain the servicing. So just some thoughts there as far as maybe changes to how you're approaching potential sellers of the FFELP portfolios and also what you think in terms of the outlook for being able to buy these portfolios given the attractive opportunities to sell your residuals. So could you talk about that a little bit?

Sure. Sameer, I don't -- philosophically, I don't think it changes anything with respect to our propensity to buy. If there are assets out there that we can buy at an economic advantage, we will do that. I don't see them at all as mutually exclusive. I don't see them at odds with one another. It's what we do, it's what we've done for 40 years. We have acquired FFELP assets either by originating them or by acquiring them in the secondary markets. So -- and we're still looking. Of course, if we popularize a marketplace around the sale of residuals, then others will likely explore that marketplace. The fact is that we saw that there were a couple of these transactions done before we did any, that were notably smaller, of course, than ours. But that marketplace is there, and of course, it could compete with our own ability to buy. I -- there are a variety of other places where we hold advantages there, both in servicing -- obviously, in servicing and in -- and just in critical mass. So that's the nature of markets.

Okay, that's helpful. And then just the other question I had was, in the present, the fiscal year 2014 budget and the income-based repayment limit being proposed at 10% versus 15%, can you just talk about the implications for, say, the valuation and cash flows of your FFELP portfolio? Because one of the implications, I think, is, to the extent that the limit goes to 10% and payments are smaller, it should increase the duration of your portfolio potential, unless I'm mistaken. And then I think the proposal may somehow extend to all borrowers currently, as opposed to a subsegment, currently. Can you just talk about it a little bit and how you think about the implications for your cash flows in the FFELP portfolio, your thoughts on valuation? I mean, it seems like it's clearly designed to help borrowers as well, with the payments. So can you talk about that a little bit?

So -- it's Jack, Sameer. I -- this is primarily targeted to borrowers who are in the Direct Lending program who are entering repayment. IBR is really a benefit for kids coming out of school who have larger debt burdens relative to their income. Our portfolio of FFELP loans is highly seasoned at this point. And although it could have some impact. And it would -- and you're right, it would extend cash -- extend duration and, therefore, cash flows, we don't expect it to have a meaningful impact.

Your next question comes from the line of Scott Valentin with FBR. Scott Valentin - FBR Capital Markets & Co., Research Division: Just with regard to the consumer finance -- CFPB. They put out a request for comment on servicing. I'm just wondering how you view that. Do you see that requiring -- or resulting in wholesale changes? Or do you think it's more at the margin type changes?

They -- we did respond to their request. The CFPB has spent a fair amount of time here at Sallie Mae looking at our private education business. And I think we have done an excellent job. And they have walked away looking at our practices as being industry leading and would expect nothing different on the services side. Scott Valentin - FBR Capital Markets & Co., Research Division: And then just as a follow-up. I guess, the subsidy, the issue comes up again in July, with the government loan rates. I just wonder if you have a view, this could probably be again a last-minute decision, but your view if it stays at 6.8% or goes to 6.8% from 3.4%, assuming it has a positive impact on the origination outlook.

Oh boy. I think we'll just leave that alone, if you don't mind. You had at least Economics 1 or 2, you know what a rate increase should do in terms of the overall marketplace. But we're not part of that whole decision process.

Our final question comes from the line of Eric Beardsley with Barclays.

Just a really quick follow-up on the FFELP margin. You talked about a rebounding in the second half, but how should we think about that out 2, 3 years from now in terms of what the trajectory is of the FFELP loan spread?

Yes, I don't see it moving significantly over the next few years. The only long-term piece is obviously we got a lot of floor income. So if rates were to go up over time, the value of that piece declines. So that's the only thing I would say is significant, with most of this stuff term-funded.

Yes. I guess, in terms of some of the older loans being slightly higher yield in terms of the previous Special Allowance Payment calculations, does that have an effect as your portfolio seasons further and some of the older loans run off?

Yes, that -- certainly, depending on what your time frame is, it would be. I mean, in the next couple of years, I don't see that 2 or 3 years, but I think over, a 5- to 10-year period, that's going to happen.

Sir, we have no further questions in the queue. Are there any closing remarks?

No, Brent. That concludes our conference call this morning. Thank you, everybody, for joining us. And if you have any follow-up calls, please call me or my colleague, Joe Fisher. Thank you.

Thank you. This concludes today's conference call. You may now disconnect.