Fitch Affirms South Texas Higher Education Authority Inc., Series 2013-1

NEW YORK--()--Fitch Ratings has affirmed the notes issued by South Texas Higher Education Authority Inc., Series 2013-1 at 'AAAsf'. The Rating Outlook remains Stable.

KEY RATING DRIVERS

High Collateral Quality: The collateral consists of 100% Federal Family Education Loan Program (FFELP) loans, including 17.95% of rehabilitated 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. Fitch affirmed at 'AAA' and assigned Outlook Stable 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. As of February 2014, reported total parity is 105.86% (5.54% CE). The trust is a turbo structure and excess cash cannot be released until all of the notes are paid in full.

Adequate Liquidity Support: Liquidity support is provided by a Debt Service Reserve Fund sized at the greater of 0.50% of the pool balance and $500,000.

Acceptable Servicing Capabilities: The Council for South Texas Economic Progress (CO-STEP) is the master servicer and administrator. The servicing of the loans will be managed by Panhandle-Plains Management & Servicing Corporation (Panhandle-Plains); however, day-to-day servicing will be provided by Xerox Education Services, LLC (Xerox; formerly ACS Education Services, Inc.). Fitch believes Xerox to be an acceptable servicer of FFELP student loans.

RATING SENSITIVITIES

Since the FFELP student loan ABS relies 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 affirmed the following:

South Texas Higher Education Authority, Inc., Series, 2013-1

--Series 2013-1 note at 'AAAsf'; Outlook 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:

--'South Texas Higher Education Authority, Inc., Series 2013-1 - Appendix' (May 22, 2013);

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

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

Applicable Criteria and Related Research:

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

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

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708795

South Texas Higher Education Authority, Inc., Series 2013-1 -- Appendix

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=709003

Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions

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=830684

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Contacts

Fitch Ratings
Jared Smith, +1 212-908-0371
Analyst
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, +1 212-908-0278
sandro.scenga@fitchratings.com

Sharing

Contacts

Fitch Ratings
Jared Smith, +1 212-908-0371
Analyst
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, +1 212-908-0278
sandro.scenga@fitchratings.com