The Federal Reserve Board has reduced the capital requirement on some securities issued by SLM Funding Corp.

Department of Education-backed student loans are subject to a 1.6% reserve requirement, the Fed said. International capital accords generally require a bank to hold 8% capital reserves on all securities, though the rules permit lower capital reserves for some types of government-supported debt. SLM Funding Corp. is a subsidiary of SLM Holding Corp., the parent of Sallie Mae.

The finding covers $17.5 billion of senior asset-backed securities issued by SLM Funding and future securities backed by the Federal Family Education Loan Program.

The Fed's ruling "will make our securities more attractive to banks and other investors and will help broaden the market and increase liquidity for our securitization," SLM Funding president Mark Overend said in a prepared statement.

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