The Pennsylvania Higher Education Assistance Agency plans to issue a $611.8 million of bonds backed by Federal Family Education Loan Program (FFELP) student loans.

The securitization trust, PHEAA Student Loan Trust 2014-2', will offer $597 million of class A notes rated ‘AAA’/ ‘AA+’ by Fitch Ratings and Standard & Poor’s, respectively. Credit enhancement for the notes is at 3.39%. Fitch expects to rate the $14.8 million subordinate notes, ‘A+’.

RBC Capital Markets and BMO Capital Markets art the lead underwriters on the deal.

The pool is comprised of approximately $72 million (12%) of rehabilitated FFELP loans. Rehabilitated FFELP loans are loans that defaulted and were subsequently rehabilitated according to the Higher Education Act's guidelines. The student loan borrower must make at least nine timely payments in a 10-month period before the loan is declared rehabilitated.

“Although these loans exhibit much higher default rates than regular FFELP loans, they benefit from the same government guarantee as non-rehabilitated FFELP loans,” Fitch stated in its presale report.

Approximately 88.9% of the pool is made up of consolidation loans and 9.6% of the pool is  comprised of Stafford loans.  The remainder is made up of Parent Loan for Undergraduate Students (PLUS) and Supplemental Loans for Students (SLS) loans. Approximately 48.9% of the pool are loans 97% guaranteed by the Department of Education: 51.0% is 98% guaranteed, and 0.2% is 100% guaranteed.  

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