Navient launched its sixth private student loan securitization in 2021, this time with borrowers mainly from the medical, business and legal sectors in major cities – a concentration that is both a blessing and a risk.

The transaction is divided into a tranche of $ 701 million, rated “AAA” by Moody’s Investors Service, and a tranche of $ 39.5 million, rated “AA”, both with fixed interest rates.

A similarly structured, albeit somewhat larger, deal by Navient was valued in September with spreads of 57 basis points over swaps and 95 basis points over swaps of the AAA and AA tranches. The price was on the low end or just below the instructions for each piece.

The transaction is sponsored, serviced and managed by Navient Solutions, LLC with Navient Credit Finance Corporations, Blacksburg Funding, LLC, VL Funding LLC and Shenandoah Funding LLC being the sellers. Earnest Operations LLC is the author.

Borrowers are focused on high paying areas, but may still be affected by industry-specific business cycles, according to a recent Moody’s pre-sale report. For example, one fifth of the Navient Private Education Refi Loan Trust (NAVI) 2021-G borrowers have a medical degree. However, healthcare workers on refinanced ABS businesses have recently seen a large spike in forbearance loans due to a brief suspension of elective medical procedures during the pandemic, Moody’s said.

The borrowers in the loan pool have a weighted average credit score of 766, monthly free cash flow of $ 4,698, and an annual income of $ 135,684. The average principal balance outstanding per borrower is $ 69,192.

Moody’s expects the NAVI 2021-G bonds to have a weighted average maturity of 3.7 years, which is less than typical student loans with a weighted average maturity of four to eight years. The shorter loan terms mean they are less exposed to economic downturns.

Navi 2021-G is made up almost entirely of fixed-rate loans, with just 1.2% of one-month Libor loans and 0.4% of SOFR loans, the report said.

The report said this ABS deal carries a social risk as student loan debt is a hot topic in the country and potential regulatory or legislative changes could result in student loans being canceled by borrowers in financial distress, leading to lower repayment rates and higher payment defaults.

In addition, government aid programs and payment plans to reduce the debt burden on borrowers are increasing the maturity risk on ABS on private student loans, Moody’s said.