Navient Corp. is the nation’s largest student loan company, with a servicing portfolio of $300 billion, and a frequent issuer of student loan bonds. But the latest securitization of private student loans in its portfolio comes from Goal Structured Solutions, or GS2, an education finance company based in San Diego, Calif.
The $149 million transaction, Goal Structured Solutions Trust 2016-B, is backed almost exclusively by seasoned private student loans that it acquired from Navient Corp., formerly part of Sallie Mae.
The trust will issue three tranches of notes: $110.6 million of class A1 notes are provisionally rated AAA by DBRS; $16.96 million of class A2 notes are rated AA; and $20.75 billion of class B notes are rated A. All of the notes have a final maturity of August 2051.
The credit enhancement for the deal consists primarily of overcollateralization; at closing the balance of the collateral will be 14.5% higher than the balance of the notes being issued in the transaction. After closing, this will build up to 20%, subject to a floor of $22,483,788. There is also non-declining reserve account that will be fully funded at closing and will be equal to $1,290,688.
Beginning in June 2018, the majority of the holders of the residual certificates, the riskiest tranche of notes, which are unrated, will have the option to call this transaction by either purchasing all of the outstanding notes or purchasing all of the trust student loans.
By some measures, the loans backing this deal are safer than those backing recent student loan securitizations sponsored by Navient itself, according to DBRS. There is a higher proportion of loans with co-signers, nearly 81%, which generally experience lower default rates than loans without co-signers. By comparison, just 69% of loans backing a deal completed by Navient this year had co-signers. Also, the weighted average current FICO score in Goal Structured Solutions’ deal is 754, compared with 713 for Navient’s deal.
DBRS expects 7.20% of loans in Goal Structured Solutions deal to default, in its base case scenario.
Goal Structured Solutions’ principal business is performing professional services associated with serving as master servicer, sub-servicer or administrator for securitizations of consumer loans and other financing arrangements for pools of consumer loans, valuation and related advisory services. It manages over $24 billion in federal and private student loans. This the firm’s first private student loan securitization to be rated by DBRS.