Nelnet is offering $358.9 million in student loan asset-backed securities (ABS), to fund a pool of student loans originated by Truist Bank and Cognition Financial.
Nelnet and CSS PSL 2023-1 Acquisition are co-sponsors on the deal, according to ratings analysts from DBRS Morningstar.
The Truist-originated loans were originated under the Academic Answer loan program from 2006 to 2012, while Cognition Financial originated loans under the Monogram loan program between 2010 and 2020. Truist Bank funded both product types, according to DBRS analysts. Academic Answer and Monogram account for virtually all of the originated loans in the pool, with just 1% of the securitization pool coming from various programs, DBRS said.
All of the notes have a legal final maturity date of Feb. 20, 2041, according to the rating agency.
High-quality borrower attributes secure the collateral pool, DBRS says. Underlying loans have an original FICO score of 745, on a weighted average (WA) basis. The pool has other attributes that reduce the likelihood of default, including the fact that 90.7% of the loans are been co-signed, the loans are funding educations at four-year schools, and 99.3% of the loans were made to borrowers attending not-for-profit schools.
Just 12.1% of the trust's loans consist of direct-to-consumer (DTC) loans. With such loans, bypassing the school's financial aid office. Such loans are seen as having a higher likelihood of default. The school does not certify the borrower's financial need, raising the risk that the borrower has taken on too much debt in relation to their actual need.
On a WA basis, Nelnet 2023-A's loans have been in repayment for 61 months. This is a credit positive, because borrowers first entering the repayment phase tend to have a higher rate of default, DBRS said.
Geographically speaking, the pool is diverse, lowering the likelihood that future regional economic downturns would destabilize the performance of the underlying loans and disrupt repayment to noteholders. Pennsylvania, New York, Virginia, California and Florida account for 9.0%, 8.0%, 7.4%, 6.8%, and 6.4% of the pool, respectively, the rating agency said.
DBRS intends to assign ratings of 'AAA' to the A-FL and A-FX classes of notes. The A-FL class is benchmarked to the one-month Secured Overnight Financing Rate (SOFR), according to the Asset Securitization Report's deal database.
It expects to assign 'AA' to the class B; 'A' to the class C notes; 'BBB' to the D notes; and 'BB' to the class E notes.
