A policy change proposed in the Obama administration 2012 budget request that includes provisions for Department of Education (DOE) programs could affect prepayment speeds in student loan ABS, a Deutsche Bank Securities report said.

Under the proposal, borrowers that hold both direct loans and FFELP student loans would be incentivized to convert existing loans into debt owed to the DOE. The 2012 budget proposal said that borrowers would be allowed to convert existing FFELP into DOE loans under the same terms and conditions of the borrower’s former loans. Those that choose to convert will receive a benefit of up to 2% of their loan balance.

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