Fitch Affirms EFS Volunteer No. 2 LLC, 2012-1 Senior Notes, Upgrades Sub Notes

NEW YORK--()--Fitch Ratings affirms the senior class notes at 'AAAsf' and upgrades the subordinate notes to 'AAsf' from 'A+sf', issued by EFS Volunteer No. 2 LLC, Series 2012-1. The Rating Outlook remains Stable for both series of notes.

KEY RATING DRIVERS

High Collateral Quality: The trust collateral is comprised of 100% of Federal Family Education Loan Program (FFELP) loans (including 2% of rehabilitated 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. Fitch affirmed at 'AAA' and assigned a Stable Outlook to the U.S. sovereign rating on March 24, 2014.

Sufficient Credit Enhancement (CE): CE is provided by overcollateralization (OC; the excess of trust's asset balance over bond balance) and excess spread, and for the senior notes, subordination of the class B note. As of February 2014, total parity is 102.61% (2.54% CE) and senior parity is 105.24% (4.98% CE). The trust is in turbo and cannot release excess cash until all notes are paid in full.

Adequate Liquidity Support: Liquidity support is provided by a reserve account. The reserve is sized equal to the greater of 0.25% of the pool balance, and $1,155,178.

Acceptable Servicing Capabilities: PHEAA is responsible for the day to day servicing of the trust. Fitch believes PHEAA to be 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:

EFS Volunteer No 2 LLC, 2012-1:

--Class A-1 note affirmed at 'AAAsf'; Outlook remains Stable;

--Class A-2 note affirmed at 'AAAsf'; Outlook remains Stable;

--Class B-1 note upgraded to 'AAsf' from 'A+sf'; Outlook remains Stable.

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:

--'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

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Contacts

Fitch Ratings
Primary Analyst
Lisette Figueroa, +1 212-908-0836
Analyst
Fitch Ratings, Inc.
One State Plaza
New York, NY 10004
or
Committee Chairperson
Tracy Wan, +1 212-908-9171
Senior Director
or
Media Relations:
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com

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Contacts

Fitch Ratings
Primary Analyst
Lisette Figueroa, +1 212-908-0836
Analyst
Fitch Ratings, Inc.
One State Plaza
New York, NY 10004
or
Committee Chairperson
Tracy Wan, +1 212-908-9171
Senior Director
or
Media Relations:
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com