Another lender is joining an increasingly crowded field of originating and securitizing refinanced college student loans of high-earning professional graduates.
Education Loan Finance (ELFI), a division of Knoxville, Tenn.-based Southeast Bank, is packaging a first-time, $200 million securitization of refinanced student loans it has originated since 2015 for students from eligible undergraduate and graduate programs.
ELFI Graduate Loan Program 2018-A is a pooling of fixed- and variable-rate loans to borrowers with weighted average FICO credit scores of 774 and incomes of $133,532. The loans average 148 months (12.3 years) in length for borrowers of an average age of 32.
Graduate professional degrees represented in the pool include medical (14%), pharmacy (12.1%), legal (8.7%), and MBAs (7%). DBRS’ presale reports 36% of the degrees in the pool are undergraduate.
The loans have between five- and 20-year terms, and generally require an immediate repayment schedule after being issued. None of the loans in the pool are currently in forbearance. ELFI plans to add $14.7 million of additional loans into the pool by the deal’s closing later this month.
DBRS has assigned provisional triple-A ratings to the $24.8 million Class A-1 floating-rate notes and the fixed-rate Class A-2 bonds totaling $158.7 million. The variable-rate notes will be backed by pool’s floating-rate loans (which have a cap of 9.95%), and the A-2 notes will be secured by the fixed-rate collateral.
The also includes a $16.6 million Class B tranche that DBRS has assigned an A rating.
Although the loans are originated through ELFI, the securitization is being administered and sponsored by the bank’s affiliated nonprofit Educational Services of America Inc. (or EdSouth), which has acquired over $5 billion in postsecondary education loans since 1988.
The securitization represents the bulk of the $250 million in loans ELFI has made to about 3,455 borrowers since launching. ELFI markets is program nationally, and includes Lending Tree and NerdWallet among its affiliate partners in recruiting borrowers.
The program supplements the private student lending practice that Southeast Bank has operated through in-school medical and pharmacy student loan programs since 2010.
With its deal, ELFI joins pioneering finance company Social Finance (SoFi), Navient Corp. (through its acquisition of Earnest Corp.) and Laurel Road Bank in attracting high-earning medical, business and legal professionals with offers to refinance their student loans with below-market rates. (Laurel Road is the new name for the former Darien Rowayton Bank in Darien, Conn.)
The loans in the trust pool will be serviced by the Higher Education Loan Authority of the State of Missouri (MOHELA), one of the largest servicers in the nation.