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 Dec 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

In a recent Asset Securitization Report article, Joseph Cioffi examines how the President’s campaign rhetoric and post-election plans may support a court ruling that a class action lawsuit is a more reliable and superior way to enforce borrower rights relative to a competing action by a weakened CFPB or an inherently weak successor agency. Joseph notes that the administration seems poised to follow through on campaign promises of less regulation and reducing the CFPB’s enforcement power, including actions affecting the Public Service Loan Forgiveness program and for-profit schools’ federal aid eligibility. To read the full article, click here.