Pete Graham: We base our assumptions on kind of forward curves. So, I think the market assumption there is probably five rate cuts.
Sanjay Sakhrani: Okay. So, there’s a punitive impact of five rate cuts in the NIM right now to the extent that doesn’t happen, that should help all else equal?
Pete Graham: Yeah. Perhaps. I mean, again, it’s — anytime you’re forecasting future interest rate, there’s always going to be some level of variability that’s unknowable until it actually happens. We tend to run a fairly balanced book. So, any moves should be kind of gradual and likely within the guidance range that we’ve articulated.
Sanjay Sakhrani: Okay. Great. Thank you so much.
Operator: Thank you. Please standby for our next question. Our next question comes from the line of Michael Kaye with Wells Fargo. Your line is open.
Michael Kaye: I was hoping you could dig a little bit more into those new borrower assistance programs that you rolled out and you alluded to. I know it’s early days, but could you just give us some of the early signs of how that’s performing? And secondly, could you talk about how that enhanced recovery strategy, which you recently implemented, how’s that going? Is it going according to plan?
Jon Witter: Yeah, Michael, it’s Jon. Happy to. In terms of the specifics, there’s a few different flavors of programs we’ve developed. And as quick context, you will remember, with the credit administration changes we made several years ago, we moved from having a very effective sort of, but very general forbearance program to a strategy where we had more programs, but much more tailored, much more focused on specific customer needs, that had the advantage of being aligned, and we’ve — I think, that’s at the time with OCC guidance. It also allows us again, to be really efficient and effective in the design of those programs and really test for their effectiveness over time, recognizing that they’re all still pretty new. So, to give you a sense of that, we’ve developed a newer, early to repayment assistance program.
This is specifically designed to help folks who are literally just coming out of school and starting to take on their financial obligations. We’ve developed a term extension and loan modification program that allows us to tailor and offer slightly more combinations of rate and tenure modification, again, really to the idea of specifically tailoring the sort of mod to the unique needs or circumstances of that borrower. And we haven’t done it yet, but we are looking at establishing a more permanent loan modification program for borrowers who are really experiencing longer-term hardship and/or sort of a permanent reduction in their income. And so, hopefully that gives you a little bit of a sense of the kinds of programs. But again, I would put it in the context of very tailored and specific and focused programs as a replacement or a substitute for the more general and flexible program that we had before.
I think we like the results we’re seeing so far, Michael, to answer that part of the question, I think we are seeing, first and foremost, our agents being able to communicate the benefit of these programs to our customers. I think the programs that we’ve developed are largely matching what customers need. We see that because we can see sort of the improved uptake of those programs when we offer it, and we can literally go back and listen to those calls and monitor all of that very closely. It is too early to be able to start to do what we will eventually do, which is the sort of longer-term loss curves of those programs, and whether or not they are generating meaningfully better outcomes or not. That will certainly be a part of the fine tuning that we will do over the quarters ahead.
But obviously the programs have to run their term and then we have to observe behavior and success of customers going forward. I think it is really important to note, our goal here is to work as productively as we can with all of our borrowers, who have fallen on hard times. We recognize that there is a human behind every one of those customers who is struggling with their loans and we want to be as helpful as we can. And we think that this targeted approach is really a great step in that direction.
Michael Kaye: And help with the part about that enhanced recovery strategy. I know you’ve made some changes. How’s that going?
Jon Witter: Yeah. It has continued to perform along our expectations. There’s no update there and we continue to believe that that is the right program and have confidence in that decision.
Michael Kaye: Great. And my second follow-up question is, is there any early signs of increased competition from new and existing players with one of your competitors looking to exit? For example, I saw word that the Carlyle Group purchased $415 million of private student loans and made a strategic investment in a company called Monogram.
Jon Witter: Yeah, Michael, I think it’s sort of too early and not the season to really see the change in competitive intensity. You have to remember, number one, lots of the spring disbursements happen in the very end of ’23 or the beginning of ’24. But they were really set up by the great work that we and our competitors do during the fall peak season. By the way, if you look at the announcement of the competitor in question, they were very clear to articulate that they were going to stop originations on February 1, which we imagine is a nod to that dynamic. They obviously want to see the business that they’ve already committed through to a natural conclusion. I think we’ll really start to sort of understand the change in competitive dynamics as we move into peak season this summer.
