Fitch Upgrades Sub Notes for SLM Student Loan Trust 2012-3; Outlook Stable

NEW YORK--()--Fitch Ratings affirms the senior class notes at 'AAAsf' and upgrades the subordinate notes to 'AAsf' from 'A+sf' issued by SLM Student Loan Trust 2012-3. The Rating Outlook on both the senior and subordinate notes remains Stable.

On March 20, 2014, Fitch took rating action to remove from Rating Watch Negative and assign Stable Outlooks to all senior class notes, currently rated 'AAAsf', backed by collateral consisting of Federal Family Education Loan Program (FFELP) student loans.

KEY RATING DRIVERS

High Collateral Quality:

The collateral consists of 100% of 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.

Assigned Stable Outlook:

'AAAsf' rated tranches of U.S. FFELP student loan ABS were assigned Stable Outlooks and removed from Rating Watch Negative to reflect the revision of the U.S. sovereign rating on March 20, 2014.

Sufficient Credit Enhancement:

While both the senior and subordinate notes will benefit from overcollateralization (OC; the excess of trust's asset balance over bond balance) and excess spread, the senior notes also benefit from subordination provided by the class B note. As of January 2014, total parity is 101.01% (1.00% CE) and senior parity is 104.97% (4.73% CE). The upgrade of the subordinate notes is due to the sufficient credit enhancement necessary to support the 'AAsf' rating. Cash is being released from the trust, given the specified OC amount, which is equal to the greater of 1% of the current adjustable pool balance and $1,300,000, has been achieved.

Adequate Liquidity Support:

Liquidity support is provided by a Debt Service Reserve Fund sized at the greater of 0.25% of the pool balance and $1,249,353.

Acceptable Servicing Capabilities:

SLM Servicing Inc. (SLM) is responsible for day-to-day servicing of the trust. Fitch believes SLM is an acceptable servicer 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 credit enhancement driven by positive excess spread given favorable basis factor conditions could lead to future upgrades.

Fitch has taken the following rating actions:

SLM Student Loan Trust 2012-3:

--Class A notes affirmed at 'AAAsf'; Outlook Stable;

--Class B notes upgraded to 'AAsf' from 'A+sf'; Outlook Stable.

A comparison of the transaction's Representations, Warranties, and Enforcement Mechanisms (RW&Es) to those of typical RW&Es for student loans is available by accessing the reports and links below:

--'SLM Student Loan Trust 2012-3 - Appendix', dated April 24, 2012;

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

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.

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=825105

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Contacts

Fitch Ratings
Primary Analyst
Jeffrey Prackup
Director
+1-212-908-0839
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Paul Jiang
Analyst
+1-212-908-9120
or
Committee Chairperson
Kevin Corrigan
Senior Director
+1-212-908-9156
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
Email: sandro.scenga@fitchratings.com

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Contacts

Fitch Ratings
Primary Analyst
Jeffrey Prackup
Director
+1-212-908-0839
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Paul Jiang
Analyst
+1-212-908-9120
or
Committee Chairperson
Kevin Corrigan
Senior Director
+1-212-908-9156
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
Email: sandro.scenga@fitchratings.com