Navients is marketing its third offering of the year of bonds backed by federally guaranteed student loans. As with the first deal, completed in February, 20% of the Federal Family Education Loans used as were once delinquent but are now making timely payments.

Navient’s second deal of the year, completed in March, was backed entirely by rehabbed FFELP.

Also like the February, the $1 billion Navient Student Loan Trust 2017-3 will issue three tranches of floating-rate notes, all of them rated triple-A by DBRS, Standard & Poor’s, and Moody's Investors Service. All have the same legal, final maturity of July 2066, but they amortize sequentially. Principal is repaid first to the Class A-1 notes, then to the Class A-2 notes, and finally to the Class A-3 notes.

The March deal issued a single tranche of triple-A rated notes.

“While rehab loans benefit from the same guarantee as non-rehab loans, they have historically exhibited much higher cumulative defaults and default quicker than non-rehab loans,” DBRS noted in its presale report. “This increases the liquidity risk of the transaction because a more significant concentration of loans is expected to be nonperforming.”

On the plus side, the rating agency said, rehab loans, however, have historically exhibited a lower default claim reject rate from the Depaurtment of Education.

To increase the likelihood that each class of Class A Notes will be paid off by the legal final maturity date, on or after the September 2032 distribution date, excess funds will be used to make “turbo” principal payments to the Class A notes, rather than being released from the trust.

The pool consists of 28.5% unsubsidized Stafford loans, 22.2% subsidized Stafford loans, 28.4% unsubsidized Consolidation loans, 16.7% subsidized Consolidation loans, 4.2% PLUS loans and less than 0.05% SLS loans.

 Approximately 0.5%, 40.8% and 58.7% of the pool benefits from a U.S. Department of Education guarantee of 100%, 98% and 97%, respectively.

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