Social Finance’s Professional Loan Program 2018-A has reached $720.1 million, which is just a bit lower than the final deal it had in 2017. SoFi’s first program of the year features bonds secured by loans that refinance student debt of those who have large incomes and advanced degrees.
In this latest program, three portions of senior Class A notes worth $677.3 million will be issued. Of that figure, one $55 million Class A-1 portion is mostly secured by floating-rate loans, and it has a variable-rate interest rate, which will be calculated based on one-month Intercontinental Exchange London Interbank Offered Rate (LIBOR).
Fixed-rate student loans will mostly back the $358.5 million in Class A-2A notes, as well as the $236.8 million in Class A-2 notes.
How Does It Stack Up to the December 2017 Transaction?
Much like SoFi’s December 2017 transaction, those three portions gained assistance from 23.44 percent credit enhancement. With credit enhancement, extra collateral, a guarantee from another party or insurance lets a borrower give a lender additional assurance the obligation will be paid.
Credit rating agency DBRS gave a preliminary AA rating to $69.8 million in variable-rate and fixed-rate secured Class B notes.
This round of figures shows a higher percentage of loans going to borrowers with undergraduate degrees. In December, that figure was 20.9 percent, but for this transaction, it was 24.8 percent. In addition, this transaction shows a slight bump in the refinancing of Parent PLUS loans. That figure went from 5.7 percent in December to 6.4 percent this time.
The borrowers for this round are comparable to the ones from December in terms of income, credit scores, and disposable cash flow. These borrowers show 772 as an average weighted credit score. The weighted average income of the borrowers is $170,820. Every month after expenses are considered, these borrowers show a weighted average of $7,285 free cash flow.
Of the professions accounted for in this transaction, almost one-fourth of the refinances went to graduates who had medical or dental degrees. Those borrowers were earning a weighted-average yearly income of $275,009.
Another 12.3 percent had degrees from MBA programs with a weighted-average annual income of $150,136, while 12.4 percent had degrees from law school with weighted-average annual incomes of $172,408.
With such a high-income base to work with and highly-educated professionals for borrowers, SoFi has had good luck with the default rates. As shown by ratings agency reports, the default rates have been very low.
Out of $15 billion in loans spread out to 185,000 borrowers as of Nov. 30, 2017, there had been only 587 delinquencies that lasted more than 60 days. Out of the $15 billion, SoFi had charged off a mere $16.4 million from those loans.
Author: Mike Brown
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