President Obama’s proposal for student loans may not directly affect private student loans but it's likely to see these loans shifted to the Federal Government.
While the changes are likely to lead to higher prepays for federal loans packaged in securitizations, Fitch Ratings said in a report that the changes won't have an impact on Private SLABS deals.
However the Education Finance Council said in a statement that the plan will see loans move from the private sector to the federal government and does little to address student debt.
"By focusing only on a limited group of students, the proposal does little for borrowers struggling to repay student loans in today’s distressed job market," said the EFC in a statement. "Moreover, the loan-shifting plan needlessly usurps student loans from nonprofit and state agency student lenders; which will cause many borrowers to lose valuable borrower benefits offered by these organizations. Shifting loans from the private sector to the federal government will also cause further uncertainty in the capital markets; fostering an unstable economy and job market."
First Marblehead who offers private education loans said it did not expect the changes to affect its business.
"First Marblehead has always been and continues to be solely focused on private student loans which are designed to supplement, not replace, existing federal student loan products," said Daniel Meyers, Chairman and Chief Executive Officer at First Marblehead. "As a result, we expect the President's current initiative regarding such federal programs to have absolutely no effect on our business."