Student Loan Risk Assessment

How are the changing economic, political and consumer environments affecting student loan asset backed securities?

Evolving sentiment toward the rising cost of higher education and growing student loan debt balance is resulting in new market opportunities and challenges. The charts provide instruction on how industry practices and other factors are impacting risks for lenders and investors.

Risk Level

As of Apr 2019

HIGH MED LOW 20122013201420152016201720182019
The Student Loan Risk Assessment shows the risk of battles over loss allocation.

LOW RISK

HIGH RISK

Lending Practices and Factorsi

Private lending and refi’s have benefited from stringent underwriting, but competition could lead to looser underwriting; deferments and forbearances are skewing delinquency rates; latent risks exist, such as loans for unaccredited programs and for-profit schools.

LOW RISK

HIGH RISK

ABS Practices and Factorsi

Private and Refi deals continue to benefit from pools of higher quality loans; FFELP deals should continue to benefit from the government guarantee.

LOW RISK

HIGH RISK

Underlying Market Risksi

Education costs, the average student loan debt burden and the aggregate student loan balance all continue to climb, spurring debt-relief programs, proposed legislation and bankruptcy reform, and a growing body of borrower-friendly decisions.

current Status

Featured Post

Take care of your business at home, before searching for greener pastures. It’s a key takeaway from Part One of our interview regarding subprime auto: lenders and servicers with modernized collection and recovery systems have a solid foundation for profitability that should be a requisite before embarking on business development plans. In Part Two of our discussion with David Albers, CEO of Revenue Connections, we asked David to share his advice on ways to positively impact collection efforts…

Take care of your business at home, before searching for greener pastures. It’s a key takeaway from Part One of our interview regarding subprime auto: lenders and servicers with modernized collection and recovery systems have a solid foundation for profitability that should be a requisite before embarking on business development plans.

In Part Two of our discussion with David Albers, CEO of Revenue Connections, we asked David to share his advice on ways to positively impact collection efforts for student loans, where, unlike auto, there is no collateral to support recoveries….

Like Ali v. Frazier II and III, it’s not much of a rivalry if one side keeps winning the decision.

The battle began when the Department of Education fired a shot across the bow with its letter arguing that state laws attempting to regulate student loan servicers – whether through licensing requirements or consumer protection laws – were preempted by federal law, which calls for uniform administration of federal student loan programs. Now state victories are starting to pile up.

Given consumer disclosures are regulated under federal laws,…

It’s been said that a war doesn’t determine who is right, but rather, who is left.

Although there’s been much talk of an epic battle between states and the federal government that will determine the scope of federal preemption in the student loan space, it’s not going to be much of a fight if only one side shows up.  If current trends hold, it looks like states will be left to dominate the legal landscape of consumer protection.

In the wake of statements by the resigning student loan ombudsman at the Bureau of Consumer Financial Protection that current political leadership has repeatedly undermined the Bureau’s efforts to protect consumers,…

It’s back to school time, and there’s so much noise about a student loan crisis that there’s a need to corral all the noisemakers and to gain an understanding of what’s actually going on. Sister Mary Elephant had the right idea when she scolded her classroom to be quiet some 40 years ago.

It does sound pretty bad. Student debt surpassed $1.5 trillion earlier this year, and it’s estimated that nearly 40 percent of borrowers will default on their student loans by 2023. But talks of a collapse are not marrying up with performance and other data….

Originations and Issuances, by the Numbers

Student loan debt rose to $1.52 trillion in Q1 2018, up from $1.44 trillion a year earlier, and now accounts for 10.7% of the $13.21 trillion in total household debt, based on Federal Reserve Board of Governors and Federal Reserve Bank of New York data.

According to a report issued by DBRS, $16.7 billion in student loan asset-backed securities (SLABS) were issued in 2017, up 10% versus a year ago. Of the total 2017 SLABS issuance, student loan refinance (refi) ABS issuances were $5.2 billion,…

Last week, Joseph Cioffi was a featured speaker at the iiBig 10th Annual Education Finance & Loan Symposium in Alexandria, Virginia.  He participated in a panel regarding the latest trends and issues impacting collections and also moderated a panel on valuation and trends in student loan securitizations.  Below, he shares key takeaways from the conference and shares insights from his fellow panelists.

The conference was highly informative, including the insights of the experts on the valuation panel: Rosemary Kelley, Senior Managing Director at Kroll Bond Rating Agency;…