Document Type

Dissertation

Abstract

Business and mainstream media devote significant attention to the student lending industry and its possible threat to the economy. While the private loan component of student lending may not be largest part of this one trillion dollar industry, it is likely to be the space where evidence supporting the media’s concerns are found. This paper examines the variation in cumulative default rates for private student loan asset backed securities issued between 2001 and 2007, revealing the dynamics of these opaque financial instruments. The study analyzes internal pool data and external economic data, uncovering the primary factors that shape the respective cumulative default curves for each trust. The data reveals that the cumulative default curves are influenced by both underwriting procedures of the originator and the timeframe that the trust enters its repayment period. This paper provides detailed industry research and pool-level trust analysis which enhances the understanding of a little-understood area of the capital markets.

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