Fitch Takes Various Actions on SLM Student Loan Trust 2014-2

NEW YORK--()--Fitch Ratings has taken the following rating actions on SLM Student Loan Trust 2014-2:

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

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

--Class A-3 'AAAsf'; Rating Watch Negative maintained;

--Class B 'A+sf'; Rating Watch Negative maintained.

KEY RATING DRIVERS

Maturity Risk: The Rating Watch Negative action is based on the heightened risk of the SLM 2014-2 class A-3 & B notes missing their legal final maturity dates of March 26, 2029 and Jan. 25, 2045, respectively, which would result in an event of default. In an event of such technical default, Fitch would expect ultimate repayment of full principal and interest after the legal final. Fitch expects to resolve the Rating Watch Negative status once its revised FFELP criteria report is published. The magnitude of any potential rating action could vary depending on remaining time to maturity, recent payment trends, issuer actions such as loan purchases, or other external factors.

High Collateral Quality: The trust is collateral consists of 100% a Federal Family Education Loan Program (FFELP) loans. The credit quality of the trust 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. The Stable Outlook on the notes is consistent with Fitch's current rating on the U.S. sovereign of 'AAA', Outlook Stable.

Sufficient Credit Enhancement (CE): Transaction CE is provided by overcollateralization (OC) and excess spread. In addition, the class A notes benefits from subordination provided the class B notes. As of the January 2016 distribution period, senior and total parity are at 104.77% and 101.01%, respectively. The trust has been releasing cash as the specified OC amount that requires the greater of 1% of the adjusted pool balance and $1.25 million has been met.

Adequate Liquidity Support: Liquidity support is provided by reserve account sized at 0.25% of the ending pool balance with a $995,345 floor. As of the January 2016 distribution period, the reserve account was approximately $1.91 million.

Acceptable Servicing Capabilities: Navient Solutions Inc. services 100% of the 2014-2 portfolio. In Fitch's opinion, Navient Solutions is an acceptable servicer of FFELP student loans.

On Nov. 18, 2015, Fitch released its exposure draft which delineates revisions it plans to make to the 'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria', dated June 23, 2014. Fitch has reviewed this transaction under both the existing and proposed criteria.

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, basis risk, and loan extension risk account for the majority of the risk embedded in FFELP student loan transactions. Additional defaults, basis shock beyond Fitch's published stresses, lower than expected payment speed, and other factors could result in future downgrades. Likewise, a buildup of CE driven by positive excess spread given favorable basis factor conditions could lead to future upgrades.

DUE DILIGENCE USAGE

No third-party due diligence was provided or reviewed in relation to this rating action.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 19 Dec 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=838868

Exposure Draft: Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria (pub. 04 Dec 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=874971

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria (pub. 23 Jun 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750530

Related Research

SLM Student Loan Trust 2014-2 -- Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=741220

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1000010

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1000010

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Primary Analyst
Charlene M. Davis
Director
+1-212-908-0213
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Michael Dean
Managing Director
+1-212-908-0556
or
Media Relations:
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Charlene M. Davis
Director
+1-212-908-0213
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Michael Dean
Managing Director
+1-212-908-0556
or
Media Relations:
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com