Fitch Affirms Massachusetts Educational Financing Authority Series 2008; Outlook Stable

NEW YORK--()--Fitch Ratings has affirmed the ratings for the student loan revenue notes issued by Massachusetts Educational Financing Authority (MEFA) Series 2008 at 'AAAsf'. The Rating Outlook remains Stable.

KEY RATING DRIVERS

Collateral Quality: The collateral consists of 100% 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. The U.S. Sovereign Rating is currently 'AAA'/Outlook Stable.

Credit Enhancement (CE): Credit enhancement is provided by overcollateralization and excess spread. As of April 2016, the reported senior parity is 107.54% which includes the reserve account balance. Since the pool factor is below 40%, the cash release parity excludes the reserve account balance which brings the effective parity slightly above its cash release level of 106%.

Liquidity Support: Liquidity support is provided by a debt service reserve fund sized and maintained at 0.25% of the initial pool balance for the life of this transaction at $753,927.

Acceptable Servicing Capabilities: Xerox Education Services, LLC (XEROX-ES) is responsible for the day-to-day servicing of the loans in the trust. Fitch believes XEROX-ES is an acceptable servicer of FFELP student loans due to their long history of servicing FFELP loans.

In certain LIBOR-down interest rate stress scenarios the basis spread may be compressed, as Fitch would apply a floor to

1-month LIBOR at a negative rate level in accordance with Fitch's "Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds" dated May 2016. Since the updated interest rate stresses are not addressed yet in existing FFELP criteria, this represents a criteria variation. Use of the criteria variation did not have a measurable impact upon the ratings assigned.

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 build-up 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.

Fitch has affirmed the following rating:

--class A notes at 'AAAsf; Outlook Stable.

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. 17 May 2016)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=879815

Criteria for Servicing Continuity Risk in Structured Finance (pub. 17 Dec 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=875586

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

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1005591

Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1005591

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

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Contacts

Fitch Ratings
Primary Analyst
Emily Lee, +1-212-908-0667
Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Tracy Wan, +1-212-908-9171
Senior Director
or
Media Relations, New York
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Emily Lee, +1-212-908-0667
Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Tracy Wan, +1-212-908-9171
Senior Director
or
Media Relations, New York
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com