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 Sept 2018

HIGH MED LOW 2012201320142015201620172018
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

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…

This Structured Credit Investor article highlights Joseph Cioffi’s impressions of the recent CFPB v. Navient case and how the spotlight on Navient may reveal systemic issues in student loan servicing, which could result in further litigation. As Joseph points out, “there is the issue down the line that we could see more lawsuits like the Navient one come to light and particularly servicers could see more lawsuits against them.” Click here to view the full article.

Joseph Cioffi offers ValueWalk an in-depth look into the lawsuit against Navient, the largest student loan servicer. Joseph shares his thoughts on the similarities with the subprime mortgage crisis, growing sentiment in favor of student loan borrowers and the effect of the new presidential administration on the industry. Joseph states, “Prior to 2007, few, if any, knew how overburdened, outmanned and poorly equipped subprime mortgage servicers were to deal with widespread defaults…” Click here to view the full article.