Student Loan Backed Securities (SLABS)

As the name suggests, SLABS are asset backed securities collateralized by student loans.

The majority of U.S. student loans are backed by the U.S. government, which reduces credit risk for the investor.

The most common student loans are the Federal Family Education Loan Program (FFELP) loans, which are guaranteed by the U.S. Department of Education ("DOE"). Under this program, the government provides loans to students through private lenders. These private lenders give loans to students based on their repayment capacity. They also give you the ability to consolidate student loans. In case of a default on the loans, the government will guarantee upto 95-98% of the principal plus interest payments.