When Grad PLUS closed to new borrowers on July 1, CCM wrote that the ABS supply would arrive with the loans, not the legislation. Sallie Mae’s third quarter, the first peak season under the new rules, is the first hard read. Four things stand out.

The demand showed up. Sallie Mae originated $3.4 billion of private education loans in the quarter, up 15% and the most in any quarter in its history. Graduate originations rose 119%, to about $1.4 billion, and October disbursements were running 35% above last year as of the October 22 call.

Credit held at Sallie Mae; one smaller lender is reaching further. The average winning FICO at approval, the higher of borrower’s and cosigner’s, was 757, 92% of loans were cosigned, and the graduate loans averaged nine points above the company’s other new originations. South Carolina Student Loan told the Wall Street Journal it has cut its minimum score to 600 from 670 for healthcare students and that its graduate volume is up 300 to 400 percent.

Where the loans go next is not settled. Sallie Mae cancelled a planned whole-loan sale because the premium on offer was below its threshold; management attributed its earnings cut, to $1.95 to $2.05 a share from $3.10 to $3.20, primarily to that decision, and expects “meaningful loan sales” to return in 2027. It also signed Sixth Street to buy at least $1.5 billion of loans a year for three years, the first year including a $600 million seasoned seed portfolio, on the model of its KKR agreement, and said its “next priority” is building the same flow capacity for graduate loans.

The credit noise was real but specific. Net charge-offs were $90 million against $77.5 million a year ago, full-year guidance rose to $400 to $420 million from $365 to $385 million, and 30+ delinquency was 4.2% of loans in repayment, from 4.0%. Management attributed the charge-off pressure to “misaligned third-party debt resolution practices” affecting a relatively small number of borrowers.

CCM read: The private loans filling the space federal graduate lending left are underwritten in full; Grad PLUS screened only for adverse credit history. In the first academic year under the new rules, lenders have gone in different directions. Sallie Mae’s new graduate borrowers score above its other new loans, while South Carolina Student Loan has lowered its minimum score to meet demand. Watch where the loans get funded, too. Forward-flow agreements with private credit do not by themselves keep collateral out of the term market, but they change who owns the loans and when, and Sallie Mae is now building that channel for graduate loans specifically. Navient reports on November 4; the 2027 calendar will give the first read on how much of the new graduate lending reaches ABS at all.