Campus Partners, of Rockville, Md., one of the largest servicers of student loans in the U.S., is getting into the private student lending business, after it received an infusion of equity financing from AIG United Guaranty. After its initial launch this fall, Campus Partners will eventually issue ABS to help finance the lending business.

"We will rely on securitization as one of our primary financing tools," said Michael Carey, president of Campus Partners. The first securitization might take as much as 18 months to come to market. In the meantime, Campus Partners expects to keep its loans on its balance sheet.

Under the agreement, Campus Partners will provide lending services for schools and other lenders beginning this fall. AIG United Guaranty, whose affiliate companies provide mortgage industry financial services, including mortgage guaranty insurance, will provide insurance on the Campus Partners student loans.

"Our entry into this market will provide a flexible alternative for lenders and schools to what is currently offered in the marketplace," said Carey, who worked at Sallie Mae for 16 years.

There appears to be plenty of room for another lender in the growing private student loan market, which some say will increase by 25% yearly. Originations exceeded $14 billion in the 2004 to 2005 academic year, and are expected to hit $20 billion in 2005 to 2006, according to the College Board. At the same time, federal sources of financial aid have remained almost unchanged for more than a decade.

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