MeasureOne Private Student Loan Report Q1 2017

MeasureOne Webinar Private Student Loan Market Trends & Insights Introductions & Discussion of The MeasureOne Q1 2017 Private Student Loan Report - Dan Feshbach, MeasureOne CEO & Mike Simpson, VP Credit & Analytics Introduction & Discussion of the DBRS Student Loan ABS Quarterly Update - Brian Gunn, VP Client Relations & Mike Simpson, VP Credit & Analytics Closing Remarks - Q&A

The information provided in this document is strictly private and confidential. This document may not be made available, in whole of in part, without the prior written consent of MeasureOne, Inc.

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June 27, 2017 | Reporting as of end-March 2017

Dan Feshbach, Chief Executive Officer Brian Gunn, Vice President Sales & Client Services Mike Simpson, Vice President Credit and Analytics Rushali Parikh, Managing Director Products and Operations Deepika Luke, Data & Information Services Manager Rima Patel, Analyst Contact: www.measureone.com


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Private Student Loan Consortium MeasureOne has developed the first and only Private Student Loan Consortium in the United States, a data cooperative of the nation’s largest lenders and holders of private student loans. By providing proprietary data, individual members contribute to a collective database that provides insight and unique perspective into the student lending industry. This contributory data collective allows MeasureOne to apply data science and industry expertise in order to increase understanding of student lending, risk assessment, repayment performance, capital market investments and public policy development. MeasureOne would like to thank the members of the Consortium for their ongoing participation in this research report and the new data contributors for assisting in our continued effort to increase transparency in the private student loan market. For more information on the MeasureOne Private Student Loan Report, please contact Samantha Gomes – [email protected]

Dan Feshbach CEO The information provided in this document is strictly private and confidential. This document may not be made available, in whole of in part, without the prior written consent of MeasureOne, Inc.

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Private Student Loan Report

THE STUDENT LOAN MARKET: OUTSTANDING BALANCES*

The private student loan market is 7.7% of the $1.41 T student loan market as of end-Q4 2016.

Total Student Loan Market Outstanding Balance ($ B)

Private $108.2 B 7.7%

Private Student Loans Outstanding Balance ($ B) Market Share 64.4%

Total Private $108.2 B

$69.62* B

Federal $1.3 T 92.3%

Market Share 25.9% $27.96 B

Total $1.4 T 100% Sources: Federal Loans : https://studentaid.ed.gov/about/data-center/student/portfolio. Outstanding federal loans as of Dec 31, 2016 PSL Report Contributors includes the lenders/holders participating in this report. Other Securitized Private Loans: MeasureOne standardized student loan securities data using publicly available remittance reports, which includes data from Access Group, First Marblehead, Key Corp, and other non-profit issuers. It does not include data from the participants in the report. Other Private Lenders: MeasureOne Survey that includes data from banks, credit unions, and student loan refinance companies. Note: This report does not cover loans made by institutions of higher education.

Market Share 9.8% $10.61 B

PSL Report Contributors

Other Private Lenders

Other Securitized Private (Publicly Reported)

The student loan market is comprised of two major components: the federal student loan market and the private student loan market. The outstanding balance for the private student loan market is estimated to be $108.2 B, or 7.7% of the $1.41 T in outstanding balances for the entire student loan market. The participants in this report represent approximately 64.4% of the entire private student loan market outstandings. * Outstanding balances in this graph are as of end-Q4 2016, and include consolidation, refinance and parent loans. The information provided in this document is strictly private and confidential. This document may not be made available, in whole of in part, without the prior written consent of MeasureOne, Inc.

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ORIGINATIONS BY PROGRAM TYPE AND ACADEMIC YEAR OF ORIGINATION The volume of newly originated private student loans declined from AY 2008/09 origination vintage to the AY 2010/11 vintage, but has grown consistently since then. Originations for the first three quarters of AY 2016/17 are at $6.9 B, a 5.6% YoY increase compared to first three quarters of AY 2015/16. Origination Volume by Academic Year ($ B) Disbursed Amount ($ B)

Disbursed Amount - Academic Year ($ B) Disbursed Amount - Academic Year To Date (AYTD) ($ B) 7.00 5.14

5.66 4.64

5.87

5.47 4.31

6.71

6.50

5.71

5.29

4.62

7.66

7.16 6.06

Full AY 16/17 N/A

1

AY 2008/09

AY2009/10

AY 2011/12

AY 2012/13

AY 2013/14

AY 2014/15

AY 2015/16

AY 2016/17

Origination Volume by Program Type (% of Total Originations)

100% % of Total Originations

AY 2010/11

6.91

6.55

Graduate

88.80% AYTD 2016/17

50%

Undergraduate

2

0% AY 2008/09

11.20% AYTD 2016/17

2

AY2009/10

AY 2010/11

AY 2011/12

AY 2012/13

AY 2013/14

AY 2014/15

AY 2015/16

AY 2016/17

1 Academic 2 AYTD

Year is defined as July 1 of a year to June 30 of the following year. as of Q1 is Q1 of the year plus Q3 and Q4 of the previous year. E.g.: AYTD 16/17 includes Q3 2016, Q4 2016 and Q1 2017.


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COSIGNED VS. NON-COSIGNED LOAN DISTRIBUTION BY ACADEMIC YEAR OF ORIGINATION Cosigner rate has consistently remained high across all vintages, having risen from 73% for the AY 2008/09 vintage and then staying above 85% from AY 2009/10 to date. The primary driver of the growing trend in cosigner rates is the strong increase in the percentage of cosigned loans for undergraduate programs, which has remained above 90% since AY 2011/12. Origination Volume by Cosigned vs. Non-Cosigned (% of Total Originations)

Undergrad

% of Total Originations

100%

Non-Cosigned

Cosigned

50%

Graduate


0% 100%

7.34% AYTD 2016/17

92.66% AYTD 2016/17

Non-Cosigned

40.39% AYTD 2016/17

Cosigned

59.61% AYTD 2016/17

50%

0%

AY 2008/09 1 The

AY2009/10

AY 2010/11 AY 2011/12 AY 2012/13 AY 2013/14 AY 2014/15 AY 2015/16 AY 2016/17

origination volume for AY 2016/17 is only from Q3 2016 to Q1 2017, which is not a full academic year.

Cosigners play a vital role in ensuring that students have access to financing. Cosigners enable lenders to extend credit they otherwise would not extend, based on the cosigner’s ability to repay, and support repayment of, the loan obligation. Cosigner rates, as a result, are associated with higher loan performance outcomes. The information provided in this document is strictly private and confidential. This document may not be made available, in whole of in part, without the prior written consent of MeasureOne, Inc.

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SCHOOL CERTIFICATION BY ACADEMIC YEAR OF ORIGINATION

A virtually universal adoption of school certification for private student loans.

1 Origination Volume by School Certified vs. Non School Certified (% of Total Originations)

100%


School Certified 75%

Non School Certified 0.62% AYTD 2016/17

99.38% AYTD 2016/17

50%

2

25%

0%

AY 2008/09 1

AY2009/10

AY 2010/11

AY 2011/12

AY 2012/13

AY 2013/14

AY 2014/15

AY 2015/16

AY 2016/17

The origination volume for AY 2016/17 is only from Q3 2016 to Q1 2017, which is not a full academic year..

School certification indicates that the school certifies the amount of a student’s need and receives loan proceeds directly from the lender. School certification provides important protection against overborrowing by matching funding requests against cost of attendance and gap financing needs. Active originating lenders in the Private Student Loan Consortium, which comprises majority of the market, universally require school certification as a core part of their private loan programs for both undergraduate and graduate students. As a result, school certification rates have consistently been above 99% for the last four academic years. 2

Bar exam loans and residency loans are examples of loans for which school certification is not applicable.


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EXECUTIVE SUMMARY

85%

Repayment (% of Total Outstanding Balance)

8%

75% 65%

5% 4% 2% 1%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 7%

6%

3%

55% 45% Late Stage Delinquencies (90+ days past due) (% of Outstanding Balance in Repayment)

Annualized Gross Charge Off Rates (% of Outstanding Balance in Repayment) 10%

6%

8%

5%

% of Repay

% of Repay

Early Stage Delinquencies (30-89 days past due) (% of Outstanding Balance in Repayment)

7% % of Repay

% of Outstanding Balance

By all key metrics; including percentage of loans in repayment, delinquency rates and charge-off rates, private student loans have exhibited strong and consistent improvement over the last eight years since the economic recession and appear to be settling at or near historical lows.

4% 3%

6% 4%

2%

2%

1%

0%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


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KEY PERFORMANCE METRICS (RECENT QUARTERS)

3.0%

30-89 Days Delinquent (% of Outstanding Balance in Repayment)

% of Repay

2.8%

+2.3% YoY

2.6% 2.4%

2.50%

2.45%

2.2% 2.0%

2016 Q1

2016 Q2

2016 Q3

2016 Q4

2017 Q1

% of Total Outstanding Balance

• 30-89 day delinquency rate at end-Q1 2017 was 2.5% and the 90+ day delinquency rate was 1.9%, both stable at low levels, now. • Delinquency reductions are not being driven by forbearance utilization which fell to 2.2% of total outstanding. • Stabilization of low delinquency levels are having a positive impact on ultimate charge-off levels as evidenced by the continued decline in this category. By end-Q1 2017, charge-offs declined by 4.4% YoY to 2.2% of total outstanding balance. • Variations from quarter to quarter during the year in some metrics reflects seasonality in the student loan market. Forbearance (% of Total Outstanding Balance) 2.4% 2.2%

- 1.7% YoY 2.21%

2.0% 1.8%

2016 Q1

2.5%

2016 Q3

2016 Q4

2.5% - 0.7% YoY

2.0%

1.87%

1.88%

% of Repay

% of Repay

2016 Q2

2017 Q1

Annualized Charge-offs (% of Total Outstanding Balance)

90+ Days Delinquent (% of Outstanding Balance in Repayment)

1.5%

2.18%

2.3%

- 4.4% YoY

2.32%

2.22%

2.1% 1.9%

1.0%

2016 Q1

2016 Q2

2016 Q3

2016 Q4

2017 Q1

1.7%

2016 Q1

2016 Q2

2016 Q3


2016 Q4

2017 Q1 99


DELINQUENCY COMPARISONS ACROSS UNDERGRADUATE AND GRADUATE LOANS

The long-term trend of decreasing early and late stage delinquencies persists even when the data is split into graduate and undergraduate loans, further underscoring delinquency rates settling at historical lows. Graduate loan delinquency rates are consistently lower than undergraduate delinquency rates and the spread between undergraduate and graduate loan delinquency rates has gradually narrowed since 2008 due to improved undergraduate loan performance.

Early-stage Delinquencies (30-89 days past due) • For undergraduate loans, the Q1 2017 rate of 2.6% is a decline of 70% from the Q4 2008 peak of 8.7%. For graduate loans the 1.8% rate in Q1 2017 is a decline of 55.3% from Q4 2009’s peak of 4.0%. Late-stage Delinquencies (90+ days past due) • At 2.0% for undergraduate loans, late-stage delinquencies are now 72% lower than the Q2 2009 peak of 7.1%. At 1.3% for graduate loans, late-stage delinquencies are 54% lower than the Q2 2010 peak of 2.8%.

% of Repay

10%

Outstanding Balance by Loan Type 30-89 Days Delinquent (% of Outstanding Balance in Repayment)

Undergraduate

8%

Graduate

6% 4% 2% 0%

2008

2009

2010

2012

2013

2014

2015

2016

2017

90+ Days Delinquent (% of Outstanding Balance in Repayment)

8% % of Repay

2011

Undergraduate

6%

Graduate

4% 2% 0%

2008

2009

2010

2011

2012

2013

2014

2015


2016

2017

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DELINQUENCY BY ACADEMIC YEAR OF ORIGINATION

These charts measure loan delinquencies by origination vintage, and performance of each vintage is evaluated relative to loans of similar age originated during different academic years. Private student loan delinquencies decreased with each successive origination cohort, driven primarily by underwriting enhancements and by general improvements in the economy over time. 90 Days Delinquent (% of Outstanding Balance in Repayment) By Quarters Since Origination

30-89 Days Delinquent (% of Outstanding Balance in Repayment) By Quarters Since Origination 4%

6% 5%

3%

3% 2% 1% 0%

0

AY 16/17

2

AY 15/16

4

6

AY 14/15

AY 13/14

AY AY AY 10/11 12/13 11/12

AY 09/10

AY 08/09

8 10 12 14 16 18 20 22 24 26 28 30 32 34 Quarters since origination

% of Repay

% of Repay

4% AY 08/09

2%

1%

0%

0

2

AY AY AY 14/15 16/17 15/16

4

6

AY 13/14

AY 12/13

AY 11/12

AY AY 09/10 10/11


The improvement by origination vintage is extremely clear; early-stage delinquencies decreased for each successive cohort since origination. For example, early-stage (30-89) delinquencies at four quarters after origination went from 5.1% to 2.4% to 1.7% to 1.3% to 1.2% to 1.2% to 1.0% for the AY 2008/09 through AY 2014/15 vintages. This analysis implies that the declining trends of delinquencies are likely to accelerate as loans originated in more recent academic years show lower delinquency rates than those from previous cohorts at the same stage of repayment, and those cohorts will be a larger proportion of the overall market in repayment moving forward. Late-stage (90+)delinquencies show an even clearer pattern, demonstrating that the decline in delinquencies is a sustained trend and not a short-term phenomenon. The information provided in this document is strictly private and confidential. This document may not be made available, in whole of in part, without the prior written consent of MeasureOne, Inc.

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GROSS CHARGE-OFF RATES BY ACADEMIC YEAR OF ORIGINATION As with delinquencies, charge-off rates have significantly decreased with each successive origination cohort, improving to below pre-economic crisis levels since the AY 2009/10 origination vintage. Again, this is driven primarily by underwriting enhancements and also by the general improvement in the economy over time.

4%

12%

3%

9%

AY 08/09

2%

1%

0%

0

2

AY 16/17

4

6

AY 15/16

AY 14/15

AY 13/14

AY AY AY 11/12 10/11 12/13

AY 09/10

Cumulative Charge-offs (% of Original Balance) By Quarters Since Origination

15%

% of Repay

% of Repay

5%

Annualized Charge-offs (% of Outstanding Balance in Repayment) By Quarters Since Origination

AY 08/09

AY 09/10 AY 10/11

6%

3%

0%


0

AY 16/17

2

4

6

AY AY 14/15 15/16

AY 13/14

AY 12/13

AY 11/12


Generally, charge-off rates peak around four years after origination, and this has remained the case across origination vintages. However, charge-offs by quarter since origination consistently decreased for each successive origination vintage across all quarters after origination, a very striking pattern. For example, cumulative charge-offs eight quarters after origination went from 1.3% to 1.0% to 0.8% to 0.6% to 0.6% to 0.6% to 0.5% from the AY 2008/09 through AY 2014/15 vintages, as a percent of total amount disbursed for the academic year. The information provided in this document is strictly private and confidential. This document may not be made available, in whole of in part, without the prior written consent of MeasureOne, Inc.

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Student Loan Refinance

Executive Summary 

DBRS publishes a quarterly Student Loan ABS Update report that includes coverage of the student loan refinance market



The report helps market participants stay well informed on the current state of the student loan asset-backed securities (SLABS) market, evaluate the performance of the underlying securitizations and better understand the changing credit quality of SLABS over time



DBRS produced the underlying data and charts in the report with the assistance of MeasureOne



The report can be downloaded at www.dbrs.com


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PRIVATE EDUCATION LOANS: STUDENT LOAN REFINANCE U.S. ABS ISSUANCE

Student Loan Refinance Securities Issuance ($ MM)

$4,500

$3,965

$4,000

$ Millions

$3,500 $3,000

$2,674

$2,500 $2,000

$2,282 18.23% Deferment

74.49% Repayment

$1,500 $1,000 $500

$554 $152

$2013

2014

2015

2016

2017 through Q2


14 14

PRIVATE EDUCATION LOANS: STUDENT LOAN REFINANCE BY ISSUER

Student Loan Refinance Securitization by Issuer ($ MM)

$ MILLIONS

$4,000

$322

$3,500

$701

$3,000 $96

$2,500 $2,000

18.23% Deferment

74.49% Repayment

$436 $232 $175 $292

$898

$1,500 $2,505

$1,000

$1,680

$500 $-

$1,583

$554

$152

2013

2014

SoFi

DRB

2015

Earnest

2016

CommonBond


2017 THROUGH Q2

15 15

PRIVATE EDUCATION LOANS: STUDENT LOAN REFI MARKET SHARE SINCE 2013

Student Loan Refinance Securitization Market Share by Issuer since 2013 ($ MM)

SoFi - 67% DRB - 17% Earnest - 9% CommonBond - 7%

18.23% Deferment


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PRIVATE EDUCATION LOANS: STUDENT LOAN REFI COLLATERAL COMPARISON CB 2017-A-GS

SoFi 2017-C

EARN 2017-A

DRB 2017-A

9-May-17

14-Apr-17

13-Apr-17

21-Mar-17

$252,071,384

$599,755,099

$181,171,062

$338,930,878

Fixed-Rate Loans

68%

81%

84%

85%

Variable-Rate Loans

32%

19%

16%

15%

$78,822

$72,155

$71,468

$122,130

3.57%

4.03%

4.04%

3.27%

$167,951

$172,521

$135,595

$195,110

770

775

765

$6,276

$7,296

$4,379

$11,854*

33

34

32

33

WA Fixed-Rate Coupon

5.53%

5.46%

5.28%

5.40%

WA Margin to 1mL

3.52%

3.50%

3.24%

NA

WA Margin to 3mL

N/A

NA

N/A

3.77%

71.8%

68.60%

77.8%

89.7%

28.2%%

23.80%

22.2%

7.2%

Statistical Cutoff Date Aggregate Principal Balance

Average Balance WA 3-Year CDR (School Specific) WA Borrower Income WA Credit Score WA Monthly Free Cash Flow WA Age of Borrower

Graduate Degree Refi Undergraduate Degree Refi

*

18.23% Deferment 766

DRB 2017-A free cash flow does not reflect borrower taxes


17 17

PRIVATE EDUCATION LOANS: STUDENT LOAN REFI COLLATERAL COMPARISON CB 2017-A-GS

SoFi 2017-C

EARN 2017-A

DRB 2017-A

97.4%

98.80%

99.90%

93.3%

Forbearance