The Missouri Higher Education Loan Authority plans to refinance three prior securitizations of government-backed student loans in the second asset-backed notes offering it has sponsored this year.
According to ratings agency presale reports, proceeds from the $523.9 million Higher Education Loan Authority of the State of Missouri Series (MOHELA) 2021-2 transaction will refinance outstanding trust issues from 2010, 2012 and 2013 that were secured by loans issued under the former Federal Family Education Loan Program (FFELP).
The deal includes a Class A series split between fixed and floating-rate bonds, backed by 85,416 loans to 35,416 borrowers. The loans have an average balance of $14,907 on a weighted-average interest rate of 5.38%, with 172 months of remaining payments.
The deal is expected to close with a parity of 104.29%, determined by the total assets in the deal ($527.9 million in loan balances, $3.43 million reserve fund and the $15 million capitalized interest fund) divided by the balance of the Class A notes.
DBRS Morningstar has issued preliminary AAA ratings to the Class A notes, while S&P Global has applied an early AA+ rating. S&P applies the lower rating since the Dept. of Education’s guarantee is impacted by the AA+ sovereign rating S&P applies to the United States federal government.
The loans were originated under the FFELP program that was discontinued in 2010 when the federal government began offering direct student loans. The FFELP loans carry a minimum 97% guarantee of principal and interest from the U.S. Department of Education.
About 47.9% of the pool assets are consolidation loans, while another 49.2% are Stafford loans and 3% are PLUS loans. Ratings agency reports indicate 6.1% of the pool consists of rehabilitated loans, a decline from 19.3% in the prior MOHELA deal that priced in February.
About 86.3% of the loans were issued before October 2007, earning them a higher special allowance payment rate, and the 43.5% of loans disbursed before disbursed before April 1 2006 will allow MOHELA to take advantage of the “current low interest rate environment may benefit the securitization as floor income from such loans provides an additional source of available funds, thus providing more excess spread."
