Dominion Bond Rating Service (DBRS) reported an increase in European participation on U.S. student loan securitizations (SLABS). DBRS said that in the first half of 2006, issuance of euro-denominated SLABS grew to approximately 2 billion ($2.5 billion), up more than 100% from 2005's total issuance of 735 million. Investors can look forward to increased participation from issuers like Sallie Mae, which has historically dominated Euro issuance, as well as newer entrants Nelnet and Goal Financial.
There are two types of SLABS - private and Sallie Mae's Federal Family Education Loan Program (FFELP). FFELP student loans have an explicit guaranty from the U.S. government and, as such, are of very high credit quality. The guaranty only covers 98% of principal and interest losses, the rest is borne by the loan holder or the transaction. As such, SLABS transactions are structured as 97% triple-A and 3% double-A. "This makes them almost risk less," said Steve Levitan, a partner at McKee Nelson LLP. "There is also a steady stream of product available (both the guaranteed and non-guaranteed variety), using some novel investor friendly structures not seen with other asset classes, and one that traditionally has provided good returns with low to no losses."