The recent decline in performance of Sallie Mae’s private student loan securitizations is linked to the more restrictive forbearance policy the lender introduced in early 2008,according to a Moody’s Investors Service report.

Policies on forbearance — when to allow borrowers to suspend some payments during financial troubles — vary widely from lender to lender, Moody’s analysts said. Although forbearance can prevent a distressed borrower from having to default, it can also prolong the period before a loan defaults if the borrower’s situation does not improve, resulting in a higher loss.

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