Fitch Maintains Negative Rating Watch on Scholar Funding Trust 2013-A

NEW YORK--()--Fitch Ratings maintains the Negative Rating Watch on the notes currently rated 'AAAsf' issued by Scholar Funding Trust 2013-A.

KEY RATING DRIVERS

High Collateral Quality: The collateral consists of 100% rehab Federal Family Education Loan Program (FFELP) loans. The credit quality of the trust collateral is high, in Fitch's opinion, based on the guarantees provided by the transaction's eligible guarantors and reinsurance provided by the U.S. Department of Education (ED) for at least 97% of principal and accrued interest.

Rating Watch Maintained: 'AAAsf' rated tranches of U.S. FFELP student loan ABS are maintained on Rating Watch Negative following the revision of the U.S. sovereign rating on Oct. 15, 2013.

Sufficient Credit Enhancement: CE is provided by overcollateralization (OC; the excess of trust's asset balance over bond balance) and excess spread. Since deal closing, total parity has increased to 104.18% from 102.15%. Cash can be released from the trust as long as OC exceeds the greater of 5.56% of assets or $1 million when the pool balance is above 10%.

Adequate Liquidity Support: Liquidity support is provided by a Debt Service Reserve Fund currently sized at $502,517, with a floor of $321,126.

Acceptable Servicing Capabilities: JP Morgan Chase Bank N.A. is the master servicer and Xerox-ES and Tru Student, Inc. are the sub-servicer of this trust. Fitch believes all servicers to be acceptable servicers of FFELP student loans.

RATING SENSITIVITIES

Since FFELP student loan ABS rely on the U.S. government to reimburse defaults, 'AAAsf' FFELP ABS ratings will likely move in tandem with the 'AAA' U.S. sovereign rating. Aside from the U.S. sovereign rating, defaults and basis risk account for the majority of the risk embedded in FFELP student loan transactions. Additional defaults and basis shock beyond Fitch's published stresses could result in future downgrades. Likewise, a buildup of CE driven by positive excess spread given favorable basis factor conditions could lead to future upgrades.

Fitch has taken the following rating actions:

Scholar Funding Trust 2013-A:
--Class A note at 'AAAsf', Negative Rating Watch maintained.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' dated May 24, 2013;

--'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria' dated May 17, 2013.

'Scholar Funding Trust 2013-A Class A (US ABS)', dated March 11, 2013.

A comparison of the transaction's RW&Es to those of typical RW&Es for student loans is available by accessing the reports and links below:

'Scholar Funding Trust 2013-A Class A -- Appendix', dated March 11, 2013.

'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions -- Amended', dated April 17, 2012.

Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661
Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria -- Amended
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708795
Scholar Funding Trust 2013-A Class A (US ABS)
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=703651
Scholar Funding Trust 2013-A Class A -- Appendix
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=703717
Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions -- Amended
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=676496

Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=822630
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Contacts

Fitch Ratings
Primary Analyst
Victoria Ohorodnyk, +1-212-908-0866
Associate Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Committee Chairperson
Tracy Wan, +1-212-908-9171
Senior Director
or
Media Relations
Sandro Scenga, New York, +1 212-908-0278
sandro.scenga@fitchratings.com

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Contacts

Fitch Ratings
Primary Analyst
Victoria Ohorodnyk, +1-212-908-0866
Associate Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Committee Chairperson
Tracy Wan, +1-212-908-9171
Senior Director
or
Media Relations
Sandro Scenga, New York, +1 212-908-0278
sandro.scenga@fitchratings.com