Fitch Takes Various Actions on SLM Student Loan Trust 2004-1

NEW YORK--()--Fitch Ratings has taken the following rating actions on SLM Student Loan Trust 2004-1 (SLM 2004-1):

--Class A-3 affirmed at 'AAAsf'; Outlook Stable;

--Class A-4 'AAAsf' maintained on Rating Watch Negative;

--Class A-5 AAAsf' maintained on Rating Watch Negative;

--Class A-6 'AAAsf' maintained on Rating Watch Negative;

--Class B 'Asf' maintained on Rating Watch Negative.

Maintenance of the Rating Watch Negative on the class A-4, A-5, A-6 and B notes is due to their inability to pass cash flow stresses necessary to maintain their current ratings of 'AAAsf' and 'Asf', respectively. On Dec. 4, 2015, Fitch released an exposure draft that delineates revisions it plans to make to the 'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria', dated June 23, 2014.

This transaction was reviewed under both the existing criteria and exposure draft. Fitch expects to resolve the Rating Watch Negative status once its revised FFELP criteria report is published.

KEY RATING DRIVERS

High Collateral Quality: The trust collateral comprises Federal Family Education Loan Program (FFELP) loans with guaranties provided by eligible guarantors and reinsurance provided by the U.S. Department of Education (ED) for at least 97% of principal and accrued interest. Fitch's current U.S. sovereign rating is 'AAA' with a Stable Outlook.

Sufficient Credit Enhancement: Credit enhancement (CE) is provided by excess spread and for the class A notes, subordination provided by the class B notes. As of March 2016, Fitch calculated effective total parity (which includes the reserve fund) is 100.38% and senior parity is 104.92% (4.69% CE). Cash is being released from the trust given that the 100% total parity ratio (excluding the reserve) is maintained.

Adequate Liquidity Support: Liquidity support is provided by a reserve account, sized at its floor of $3,007,834.

Acceptable Servicing Capabilities: Day-to-day servicing is provided by Navient Solutions, Inc. (formerly known as Sallie Mae, Inc.). Fitch believes Navient is an acceptable servicer of FFELP student loans.

CRITERIA VARIATIONS

In certain LIBOR-down interest rate stress scenarios the basis spread may be compressed, as Fitch would apply a floor to one-month LIBOR at a negative rate level in accordance with Fitch's 'Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds' (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.

Under the 'Counterparty Criteria for Structured Finance and Covered Bonds', dated May 14, 2014, Fitch looks to its own ratings in analyzing counterparty risk and assessing a counterparty's creditworthiness. The definition of permitted investments for this deal allows for the possibility of using investments not rated by Fitch, which represents a criteria variation. Since the only available funds to invest in are those held in the Collection Account, and the funds can only be invested for a short duration of three months given the payment frequency of the notes, Fitch doesn't believe such variation has a measurable impact upon the ratings assigned.

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 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.

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=1006019

Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1006019

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

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Contacts

Fitch Ratings
Primary Analyst:
Eric Orenstein, +1-646-582-4816
Analyst
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Committee Chairperson:
Tracy Wan, +1-212-908-9171
Senior Director
or
Media Relations:
Sandro Scenga, +1-212-908-0278
New York
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst:
Eric Orenstein, +1-646-582-4816
Analyst
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Committee Chairperson:
Tracy Wan, +1-212-908-9171
Senior Director
or
Media Relations:
Sandro Scenga, +1-212-908-0278
New York
sandro.scenga@fitchratings.com