Securitization has emerged as a popular mode of funding student loans. Issuance of SLABS frees up lenders’ capital and allows them to make additional student loans. SLABS are issued by both government and private agencies.
Sallie Mae or SLM Corp is the largest lender and servicer of student loans in the US, besides other active participants. The company is the largest originator and holder of Federal Family Education Loan Programs (FFELP) in the US and also issues private loans to students for funding their higher education. Several state sponsored entities also issue FFELP loans, service them, guarantee them and issue SLABS. Some private industry players also provide private student loans exclusively and act as intermediaries between student loan originators and investors in SLABS by securitizing the loans. Loans issued under the US government’s FFELP program are guaranteed and insured against default by specified agencies.