While the debt ceiling agreement ostensibly means that the U.S. has averted a rating downgrade for now, federal family education loan program (FFELP) student loan asset-backed securities (ABS) sidestepped any potential rating actions according to Fitch Ratings in its latest 'Student Loan Report Card.'
Earlier this year, the Department of Education came closer to designating 21 not-for-profit entities eligible to service loans originated under the federal direct loan program. As a result, some of these entities may begin servicing these loans as early as later this year, which is good news for the sector. 'The presence of a federal direct loan servicing contract should help to stem widespread FFELP portfolio runoffs,' said Managing Director Michael Dean.
This should help the outlook for overall future student loan ABS rating performance. Fitch affirmed 41 FFELP ABS trusts during the second quarter of 2011. The Outlook remains stable due to the performance of the underlying collateral. While more guarded, the outlook for private student loan ABS remains negative due to high unemployment. 'Losses for private student loans are still increasing, but credit enhancement has thus far been sufficient enough to maintain loss coverage multiples,' said Dean.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research: The Student Loan Report Card
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=646313
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