Introduction

This report provides an update on Alt Lending, a specialist originator and acquirer of distressed private US student loans. Kingsbury & Partners is sponsoring a $15 million Credit Linked Note (CLN) backed by Alt Lending’s strategy, offering professional investors defined exposure to this growing and resilient asset class.

The CLN structure provides institutional access to an otherwise fragmented and opaque market. By combining disciplined acquisition pricing with specialist servicing, the strategy aims to deliver strong, risk-adjusted returns while maintaining transparency over the underlying assets.

This September report highlights both Alt Lending’s latest performance and the broader trends shaping the US private student loan market.

Chief Investment Officer Commentary

Alt Lending is steadily accelerating its originations and acquisitions of distressed, defaulted, and delinquent private US student loans through focused outreach efforts. The team has maintained an exceptionally compelling acquisition cost, securing these loans at an average of 8.50 cents on the dollar.

Collections have shown consistent growth, and it is encouraging to witness the strategy gaining strong momentum. Performance is being evaluated through recovery metrics tied to both the outstanding principal and the acquisition cost.

To calculate this, the current Outstanding Principal Balance is subtracted from the original Loan Origination/Purchase Amount (face value), yielding Gross Collections over an average holding period of approximately five months.

  • Relative to the Total Principal Balance, these Gross Collections represent 2.36%.
  • When measured against the purchase price, the collections equate to 27.78% — effectively the gross yield. This is a superb performance and much higher than forecast.

August saw robust acquisition activity, with $472,000 in receivables acquired, marking the strongest month yet, at an even more favourable average purchase price of 6.3 cents on the dollar.

Initial projections assumed modestly higher collection rates but a notably higher acquisition cost. Although actual collections are tracking slightly below those estimates, the substantial reduction in purchase price enhances the overall model significantly.

The core approach remains unchanged: leveraging specialised servicers such as Zuntafi to optimise collections, rehabilitate loans to reperforming status, and maximise recoveries.

Overall, the performance is much stronger than originally modelled in underwriting, and we look forward to continuing to support the Alt Lending team with their acquisitions.

Broader Market Insights

The private US student loan market, a vital complement to federal options, has grown to encompass a diverse range of products, including traditional private loans and refinanced loans (Refi SLABS).

According to the Morningstar DBRS Student Loan ABS Update (Q2 2025):

  • Since 1988, there have been 748 securitisations, totalling over $635 billion in issuance.
  • The private segment shows an outstanding balance of $34.6 billion as of Q2 2025, up 5.8% year-over-year from $32.0 billion.
  • The market is supported by a 77% active repayment rate.

However, economic pressures such as inflation and rising interest rates are impacting borrower performance — a trend mirrored in Alt Lending’s portfolio.

Key metrics from the DBRS report:

  • Rising Refi SLABS charge-offs: Averaging 0.09% monthly in Q2 2025, up from 0.06% in Q2 2024; 2022 and 2023 vintages: 1.25% and 1.32%, driven by inflation and “FICO drift.”; Longer-dated vintages (2013, 2014): 0.26% and 0.33% charge-offs after 57 and 61 months — demonstrating resilience.
  • Delinquencies: 30+ day delinquencies rose to 1.45% in Q2 2025, from 0.78% in Q2 2024; Still lower than traditional private (2.2%) and FFELP (7.5%) loans.
  • Forbearance utilisation: Slightly improved, dipping to 0.76% from 0.80%.

Competitive Landscape

Competition is intensifying, with new entrants such as Yrefy challenging established players like SoFi and Earnest. Yrefy’s AI-driven underwriting and competitive refinancing rates appeal to a broader borrower base, pressuring incumbents to innovate.

This dynamic could influence Alt Lending’s acquisition strategy. Economic headwinds and competitive pressures may amplify delinquency and charge-off trends observed in the DBRS data.

The traditional private SLABS market, with a $34.6 billion outstanding balance, reflects steady growth supported by high repayment rates — but remains exposed to inflationary challenges.