Dow Jones is reporting on how credit markets have adjusted in light of the additional TALF details provided by the Federal Reserve last week. Unfortunately, it doesn't seem to be having much on an impact on student loan securities:
- "An improvement in private-sector student loan deals would be hard to
pinpoint because there has been no new issuance in over a year, and
"these long assets are difficult to place because of the lack of a long
track record and weakening economy," say Citi analysts."
- SLA note: The Citi analysts seem to referring to private (or alternative) loans here as Sallie Mae was completing FFELP securitization transactions on an almost monthly basis until August of 2008. It would have been nice if the article reported on what these securities are trading hands at to provide some sense on how the market is valuing these assets.
- "Moreover, with the administration of President Barack Obama planning on
taking over most student lending, there could be few, if any, private
lender loans to securitize."
- SLA note: If if the government were to manage the entire federal loan program (Stafford, PLUS, Grad PLUS loans), I suspect that there still will be a market for private (or alternative) loans. Unless federal loan limits grow significantly, there will continue to be a gap between the cost of attendance (tuition, room and board, fees, etc.) and other financial aid which will be filled by private (or alternative) loans.
As long as costs continue to soar at US colleges, there will be a strong and growing private student loans market - especially after credit markets stabilize. Costs are outpacing federal aid significantly.
Regarding Direct Loans - It would be in the governments interest to securitize loans they fund themselves - removing that debt from the federal debt burden.
The student loan market does not have much activity in February - things will heat up as we head into the summer...
Posted by: Online Education | March 09, 2009 at 06:23 PM