Kentucky student loan securitizations keep ratings confirmed by Morningstar DBRS

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Kentucky student loan ratings

Highlights

Morningstar DBRS confirms ratings on all securities in two Kentucky Higher Education Student Loan Corporation transactions due to stronger credit enhancement levels.
Collateral performance, cumulative net losses, and delinquency levels remain stable and within expectations, aided by Federal Family Education Loan Program guarantees covering at least 97% of defaults.
The agency now applies baseline macroeconomic scenarios from its June 25, 2026 update, replacing prior coronavirus-stress assumptions, with no material ESG impacts on ratings.

Credit support and rating rationale

As reported by Morningstar DBRS, the rating agency confirms the credit ratings on all classes of securities in the two Kentucky Higher Education Student Loan Corporation student loan transactions, citing stronger credit enhancement levels than at closing for both deals.

Morningstar DBRS says credit support comes from overcollateralization, a reserve account, excess spread, and subordination protecting senior notes from junior notes. It says those protections are sufficient to support its expected default and loss severity assumptions across a range of stress scenarios.

The agency adds that its analysis uses the baseline macroeconomic scenarios for rated sovereign economies from its June 25, 2026 update. Those assumptions replace the moderate and adverse coronavirus pandemic scenarios first published in April 2020.

Portfolio performance and sector implications

Collateral performance remains within expectations, while cumulative net losses stay low across both transactions. Forbearance, deferment and delinquency levels also remain relatively stable, supported by Federal Family Education Loan Program loans that benefit from U.S. Department of Education guarantees covering at least 97% of principal and accrued interest on defaulted student loans.

Morningstar DBRS says its long-term ratings address the risk that an issuer fails to meet financial obligations under the transaction documents. It also says no environmental, social or governance factors have a significant or relevant effect on the credit analysis.

In our earlier article on KBRA’s affirmation of CGCMT 2014-GC23 ratings, we explained that the agency kept all outstanding ratings unchanged even as it raised expected total losses, given the deal’s reduced pool and the expectation that senior classes would remain insulated. We also outlined how the two remaining REO assets—Seattle’s Selig Portfolio and Washington, DC’s 5185 MacArthur Boulevard—continue to face weak performance metrics and appraisal declines, with future rating actions tied to loss realization and payment timing.

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