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Global Credit Research - 11 Apr 2011
New York, April 11, 2011 -- To help market participants assess the performance of securitizations
of private student loans, Moody's Investors Service is launching
today a series of private student loan credit indices, to be updated
quarterly. For first-quarter 2011, Moody's Private
Student Loan Indices show continuing decline in defaults and delinquencies
on securitized private student loans.
The Private Student Loan Indices track nine years of credit performance
data on over 60 private student loan securitizations that Moody's
rates, representing $39 billion in outstanding pool balance.
Because private loan pools vary considerably in credit performance,
the indices provide a benchmark for relative comparisons among issuers
and individual transactions. The indices weight each securitization
"These Private Student Loan Indices standardize the calculations
of various performance metrics derived from the analysis of the securitized
private loan pools," said Tracy Rice, a Moody's
Assistant Vice President and Analyst.
For the first quarter, the Indices place the annualized default
rate at 4.8%, down from 5.0% a year
ago, marking the fifth consecutive quarter of year-over-year
decline. Moody's expects the annualized default rate index
to reach 4%-4.25% by year end and then to
drop slightly more in 2012 before stabilizing at roughly 3.5%-4%,
provided loan forbearance remains at roughly current rates.
Although its current 4.8% measure is the lowest since the
first quarter of 2008, the default rate index remains well above
its levels during the 2004-6 period.
"Default rates will remain well above the rates of 2004-6
until unemployment improves markedly, albeit on a lagged basis,"
said Moody's Rice. "The pace of improvement in unemployment
combined with the natural aging or 'seasoning' of the loan
pools backing the transactions will drive the magnitude of the decline."
A strong indication that the default rate will be declining is the improvement
in the rate that loans are delinquent. Moody's 90-Plus
Delinquency Rate Index dropped to 2.9%, in the first
quarter of 2011 down from 3.6% a year ago. It was
the fourth consecutive quarter of year-over-year improvement.
Meanwhile, the forbearance rate reached an all-time low of
4.1% in the first quarter, a manifestation of tighter
forbearance policies that some issuers have introduced over the past three
years. Forbearance rates will remain at current historically low
levels as long as issuers' forbearance policies remain constant,
The Moody's report "Moody's New Private Student Loan
Indices Show Improving Performance, More Improvement Ahead "
is available on Moodys.com.
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Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service
Moody's: Private student loan defaults decline in first quarter, new indices show
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