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Basis Risk Post-LIBOR Transition Will Not Affect FFELP ABS Ratings
Significant change to basis risk is not anticipated for Federal Family Education Loan Program (FFELP) ABS following rate transition away from LIBOR under the Adjustable Interest Rate Act (LIBOR Act), according to Fitch Ratings. All FFELP ABS and Special Allowance Payments (SAP) will transition to SOFR-based rates on the first business day after June 30, 2023. Basis risk arises when the SAP rate index differs from the rate index for the FFELP ABS bonds, including differences in reset dates and reset frequency. We will apply similar basis risk stresses as those currently applied to LIBOR rates under our U.S. Federal ... (full story)