Moody's Investors Service has just released a Request for Comment (RFC) that describes its proposed approach to rating ABS backed by U.S. FFELP student loans.

The rating agency has asked structured finance players to review and comment on its proposed assumptions. The comments should be sent to by Feb. 20. The final report  will be released publicly in March.

The newly proposed analytical framework does not significantly change the agency's current approach. However, it is meant to provide a single comprehensive overview of the firm's approach.

The proposed cash flow assumptions by Moody's have been updated and enhanced versus previously published cash flow assumptions.

If the agency implements the proposed changes, it expects to downgrade the ratings of roughly $20 billion of outstanding FFELP SLABS, which make up 10% of the Moody's-rated universe of FFELP SLABS.

Some 'Aaa' ratings on senior notes might fall as far as 'Baa3' and some ratings on subordinate notes will fall as far as 'B'. The higher default rate assumptions can cause the ratings downgrade on roughly $10 billion of outstanding FFELP SLABS.

Having a high interest rate scenario lowers the ratings of an added $10 billion.



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