Fiscal challenges for the US government and its credit standing will continue to be the key risk for securitizations backed by loans originated with under the Federal Family Education Loan Program (FFELP). Ten to thirty percent of all cash in FFELP securitizations comes from the US government in the form of a default and minimum yield guarantee.
The overall performance of FFELP student loans will remain week in 2013.
"Defaults on the loan pools backing most FFELP securitizations will continue being high because the new college graduates will be looking for a job during a weak economy characterized by high unemployment rates," said Irina Faynzilberg, Moody's Vice President- Senior Credit Officer. "Net losses on the pools, however, will continue being low because of the US government guarantee of defaulted loans."
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