Facil- ities Authority). The SLABS of the latter are typically issued as tax- exempt securities and therefore trade in the municipal market. Lets first look at the cash flow for the student loans themselves. There are different types of student loans under the FFELP, including subsidized and unsubsidized Stafford loans, Parental Loans for Under- graduate Students (PLUS), and Supplemental Loans to Students (SLS). These loans involve three periods with respect to the borrowers pay- ments-deferment period, grace period, and loan repayment period. Typically, student loans work as follows. While in school, no payments are made by the student on the loan. This is the deferment period. Upon leaving school, the student is extended a grace period of usually six months when no payments on the loan need to be made. After this period, payments are made on the loan by the borrower. Prior to July 1, 1998, the reference rate for student loans originated under the FFELP program was the 3-month Treasury bill rate plus a mar- gin of either 250 basis points (during the deferment and grace periods) or 310 basis points (during the repayment period). Since July 1, 1998, the Higher Education Act changed the reference rate to the 10-year Treasury     note. The interest rate is the 10-year Treasury note plus 100 basis points. The spread over the reference rate varies with the cycle period for the loan. As with other ABS, the reference rate need not be the same as that of the underlying loans. For investors in non-Sallie Mae issues, there is exposure to collateral performance due to basis risk discussed earlier in this chapter. Typically, non-Sallie Mae issues have been LIBOR-based floaters. For Sallie Mae issues, there is an indirect government guaran- tee. Sallie Mae has typically issued SLABS indexed to the 3-month Trea- sury bill rate. However, late in the second quarter of 1999, Sallie Mae issued bonds in which the buyer of the 2-year tranche had the choice of receiving either LIBOR plus 8 basis points or the 3-month Treasury bill rate plus 87 basis points. There are available funds caps in ABS deals because of the different reference rates. Exhibit 10.12 presents a Bloomberg screen for SLABS issued by Sallie Mae from the SLM Student Loan Trust 2001-3. As can be seen from the screen, all four tranches are floaters. However, investors have a choice of reference rates in the floaters coupon formula. Specifically, the first tranche A1 is divided into two securities A1T and A1L. Panels A and B of Exhibit 10.13 presents the Bloomberg Security Description screens for these two securities. From the "Floater Formula" box in Panel A, we see that A1Ts coupon formula is the 3-month Treasury bill rate plus 65 basis points with a floor of 65 basis points. The coupon is paid quarterly and reset weekly. Conversely from Panel B, we see that A1Ls coupon formula is 3-month LIBOR plus 4 basis points with a floor of 4 basis points. The