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Navient plans full-Earnest loan pool in $535.2M student-loan ABS

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Navient Solution's next securitization of private student-loan refinancing will involve only loans primarily issued to advanced-degree professionals by online lender Earnest, which Navient acquired in 2017.

The $535.2 million Navient Private Education Refi Loan Trust 2019-E will include two tranches of Class A notes with preliminary triple-A ratings from DBRS and S&P Global Ratings. The Class A-1 fixed-rate notes total $263 million, while the $228 million in Class A-2 notes will be divided into fixed- and variable-rate tranches.

A $44.2 million Class B notes offering will also be made, with an early rating of AA by DBRS. S&P is not rating the subordinate tranche.

The note proceeds will be used to acquire about $560.4 million in private student-loans not guaranteed or reinsured under the Federal Family Education Loan Program (FFELP) or other federal student-loan program.

The 8,092 targeted loans have an average principal balance of $69,253 and a weighted average interest rate of 5.46%, and 147-month remaining terms.

The loans are seasoned an average of 33 months.

The borrowers have weighted average FICOs of 760, with incomes of $135,054 and monthly free cash flow of $4,216 for a debt-to-income ratio of 97.2%.

All of the loans are current and nearly all (99.6%) are in repayment status. Loans originated by Earnest since its inception have had small losses of less than 0.05%, totaling just $2.4 million from $5.2 billion in originations.

S&P’s expected default rate of the underlying loans is 3.25%.

Navient, formerly SLM Corp., plans to launch private lending products for undergrads and their families in the third quarter this year, following the expiration of its former noncompete agreement with the successor Sallie Mae Corp.

In anticipation of the planned discontinuation of published Libor rates in 2021, Navient is including contract provisions for the use of an alternative reference rate based on the Federal Reserve Bank of New York’s Secured Overnight Financing Rate. SOFR has been recommended as a “fallback” benchmark rate from guidelines published in May by a public/private working group, the Alternative Reference Rates Committee, operating within the Fed.

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Student loan ABS Navient Earnest