Overcollateralization, excess spread and the presence of cash capitalization accounts (CCAs) on certain deals provide ample protection against prepayment losses on private student loan ABS deals, Lehman Brothers found after a test analysis on a Sallie Mae transaction.

Even under fast prepayment assumptions, loss coverage multiples on bonds across the capital structure are higher than those implied by their ratings, Lehman analysts wrote in a report issued last week. Average lives on private student loan ABS are relatively stable, and they offer compelling value for investors compared to bonds backed by FFELP loans.

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