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Citigroup Sees Student-Loan Bonds on Course for Disruptions

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Top-rated securities backed by U.S. government-guaranteed student loans face cuts to as low as junk that may further roil the market for the debt, according to Citigroup Inc.

A review by rating companies that may lead to downgrades is unlikely to take into consideration that in some instances the securities have sponsors such as Navient Corp. that can accelerate repayments by buying out the underlying loans. The rating drops, which could also be avoided by amending the deals’ maturities, could rock the market, Citigroup’s Mary Kane and Eugene Belostotsky wrote Thursday.