Fitch Rates PHEAA Student Loan Trust 2014-2

NEW YORK--()--Fitch Ratings has assigned the following ratings to PHEAA Student Loan Trust 2014-2 (PHEAA SLT 2014-2) student loan asset-backed notes:

--$597,000,000 floating rate class A notes 'AAAsf'; Outlook Stable;

--$14,850,000 floating rate class B notes 'A+sf'; Outlook Stable.

KEY RATING DRIVERS

High Collateral Quality: The trust collateral consists entirely of Federal Family Education Loan Program (FFELP) loans. Although the trust consists of approximately 12.0% of rehabilitated FFELP loans, guarantees provided by eligible guarantors and reinsurance provided by the U.S. Department of Education (ED) will cover at least 97% of principal and accrued interest. Fitch maintains the U.S. sovereign rating at 'AAA' with a Stable Rating Outlook.

Sufficient Credit Enhancement: Cash flow scenarios for class A and B notes were satisfactory under Fitch's corresponding stresses. At closing, total parity will be 101.00% and senior parity will be 103.51%. Total credit enhancement (CE) is provided by overcollateralization (OC; about $6.11 million at closing), excess spread and, in the case of the class A notes, a 2.40% subordination provided by the class B notes.

Adequate Liquidity Support: Liquidity support for PHEAA SLT 2014-2 notes is provided by a $1.53 million reserve account (0.25% of the pool balance) funded at closing with note proceeds.

Targeted OC Level: A target OC amount (or specified OC amount) equal to the greater of 1.54% of the current adjusted pool balance and $6.1 million 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 2014-2 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.

Key Rating Drivers and Rating Sensitivities are further described in the updated presale report titled 'PHEAA Student Loan Trust 2014-2', dated May 21, 2014 available on www.fitchratings.com, or by clicking on the link.

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

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (May 2014);

--'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria' (April 2014).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748821

Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria Exposure Draft

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=741218

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=835058

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Primary Analyst
Autumn Mascio
Director
+1-212-908-0896
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Victoria Ohorodnyk
Analyst
+1-212-908-0866
or
Committee Chairperson
Tracy Wan
Senior Director
+1-212-908-9171
or
Media Relations
Sandro Scenga, New York, +1-212-908-0278
sandro.scenga@fitchratings.com

Sharing

Contacts

Fitch Ratings
Primary Analyst
Autumn Mascio
Director
+1-212-908-0896
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Victoria Ohorodnyk
Analyst
+1-212-908-0866
or
Committee Chairperson
Tracy Wan
Senior Director
+1-212-908-9171
or
Media Relations
Sandro Scenga, New York, +1-212-908-0278
sandro.scenga@fitchratings.com