Fitch Rates PHEAA Student Loan Trust 2014-1

NEW YORK--()--Fitch Ratings has assigned the following ratings to PHEAA Student Loan Trust 2014-1 (PHEAA SLT 2014-1) student loan asset-backed notes:

--$559,200,000 class A 'AAAsf'; Rating Watch Negative;

--$14,600,000 class B 'Asf'; Outlook Stable.

KEY RATING DRIVERS

High Collateral Quality: The trust collateral is comprised of Federal Family Education Loan Program (FFELP) loans, with guaranties provided by eligible guarantors and reinsurance provided by the U.S. Department of Education (ED) for at least 97% of principal and accrued interest.

Senior FFELP Ratings Placed on Rating Watch Negative: The Rating Watch Negative status of all existing and new issuances of 'AAA' rated tranches of FFELP securitizations is based on Fitch's Oct. 15, 2013 rating action on the U.S. sovereign rating. The rating on these ABS tranches are strongly linked to the U.S. sovereign rating, since the underlying collateral in these transactions is guaranteed against default by the U.S. Dept. of Education which carries the full faith and credit of the U.S. government. In addition, the U.S. Dept. of Education provides special allowance payments to issuers and pays for the interest while the students are attending schools for subsided loans.

Sufficient Credit Enhancement: Cash flow scenarios for class A and B notes were satisfactory under Fitch's stresses. At closing, total parity is expected to be 101.07% and senior parity is expected to be 103.71%. Total credit enhancement (CE) is provided by overcollateralization (OC; about $6.14 million at closing), excess spread, and, in the case of class A notes, 2.54% subordination provided by the class B notes.

Adequate Liquidity Support: Liquidity support for the PHEAA SLT 2014-1 notes is provided by a $1.45 million reserve account (0.25% of initial pool balance) which is funded at closing with note proceeds.

Targeted OC Level: A target OC amount (or specified overcollateralization amount) equal to the greater of 1.54% of the current adjusted pool balance and $5.8 million which must be met before excess cash can be released from the trust.

Acceptable Servicing Capabilities: Pennsylvania Higher Education Assistance Agency (PHEAA) will service the entire PHEAA SLT 2014-1 portfolio. Fitch believes that PHEAA is an acceptable servicer of FFELP student loans.

RATING SENSITIVITY

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 credit enhancement driven by positive excess spread given favorable basis factor conditions could lead to future upgrades. For further discussion of Fitch's sensitivity analysis, please see the presale titled 'PHEAA SLT 2014-1', dated Feb. 21, 2014.

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

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (May 2013);

--'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria' (May 2013).

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

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=823859

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Contacts

Fitch Ratings
Primary Analyst
Jeffrey Prackup, +1 212-908-0839
Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Victoria Ohorodnyk, +1 212-908-0866
Analyst
or
Committee Chairperson
Kevin Corrigan, +1 212-908-9156
Senior Director
or
Media Relations:
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com

Sharing

Contacts

Fitch Ratings
Primary Analyst
Jeffrey Prackup, +1 212-908-0839
Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Victoria Ohorodnyk, +1 212-908-0866
Analyst
or
Committee Chairperson
Kevin Corrigan, +1 212-908-9156
Senior Director
or
Media Relations:
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com