Navient Solutions, a mainstay in the student loan asset-backed securities sector, is planning a $991.3 million deal through the Private Education Refi Loan Trust, 2021-F. The deal is expected to close in about a week.
The Navient ABS trust will offer investors notes that are collateralized by refinanced fixed-and variable-rate student loans sourced from Earnest Operations, LLC, a Navient affiliate, according to DBRS Morningstar, which plans to rate the notes.
Earnest has funded more than $15 billion of refinanced student loans to more than 170,000 borrowers. Earnest operations will also serve as the subservicer on the transaction.
The entire pool consists of loans taken out by borrowers who have either already graduated and are employed, which lessens the likelihood of default compared with borrowers who haven’t completed their studies. DBRS notes that as of August 11, the cutoff date, the weighted average (WA) period since borrowers had graduated was 76 months.
About 55.6% of the Navient 2021-F’s underlying borrowers has a graduate degree. Of the amount of graduate degree holders, 33.2% of them have a medical degree and a WA income of approximately $238,687. DBRS notes that less than one percent of physicians and dentists are unemployed, citing data from U.S. Bureau of Labor Statistics and the U.S. News & World Report. Unemployment rates are expected to remain low as long as the healthcare sector expands, the rating agency said.
As for the rest of the professional degree holders, about 14.0% hold a J.D. and a WA income of about $180, 430; and about 13.7% holds an MBA, with a WA income of $150,344, according to DBRS.
Aside from the borrowers’ promising prospects, the borrowers in Navient 2021-F exhibit high credit quality. Original borrowers had a WA FICO score of 767 at origination, and a WA income of $131,458.
Navient 2021-F will operate with a sequential-pay structure, and a turbo feature to provide additional credit support early in the transaction. After paying senior transaction fees, note interest and certain shortfalls, DBRS explains, the trust will devote the remaining available funds to pay principal on the class A notes until the payments reach a specified overcollateralization amount. That amount will be equal to the greater of either 3.5% of the then-current pool balance or $15.1 million.
With expected ratings of ‘AAA’ on the $945.7 million class A tranche, and ‘AA’ on the $45.6 million class B, the notes have a legal final maturity date of February 2070.
