Nelnet is in the market with $722 million securitization of federally guaranteed student loans.

The $722 million Nelnet Student Loan Trust 2015-2 will issue three tranches of floating-rate notes with preliminary ratings from Moody’s Investors Service: $122.5 million of class A-1 notes and $584.5 million of class A-2 notes are rated ‘Aaa’ and $15.0 million of class B notes are rated A1.  

The collateral includes Federal Family Education Loan Program loans, which are insured by the U.S. Department of Education for at least 97% of defaulted principal and accrued interest. Nearly 25% are subsidized Stafford loans, 34% are unsubsidized Stafford loans, 4.31% are GradPLUS loans, 2.52% are PLUS loans and 35% are consolidation loans. Subsidized Stafford loans enhance liquidity in the transactions because these loans receive interest subsidy payments from the Department of Education while these borrowers are in school, grace, or deferment status. PLUS loans generally default at a lower rate than Stafford loans, according to Moody’s.

Approximately 33.9% of the loans have first disbursements prior to October 1, 2007 compared to 94.4% for Nelnet’s previous transaction. Loans first disbursed prior to October 1, 2007 earn a higher special allowance payment (SAP) rate than loans disbursed after October 1, 2007. In 2007, the College Cost Reduction and Access Act reduced the SAP rate on FFELP loans disbursed after October 1, 2007 by 55 basis points for Stafford and consolidation loans and 85 basis points for PLUS loans held by for-profit lenders.

As Jan. 31, 2015, the average outstanding principal balance per borrower was $11,700, the weighted average borrower interest rate was 6.46%, and the weighted average remaining term to maturity was 171 months; that compared with 16,714, 4.27% and 183 months for Nelnet’s previous FFELP securitization.

Merrill Lynch, Pierce, Fenner & Smith, Citigroup Global Markets, and BMO Capital Markets are underwriting the offering.

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