Fitch Affirms SLC Student Loan Trust 2005-2; Outlook Stable

NEW YORK--()--Fitch Ratings has affirmed the senior and subordinate notes issued by SLC Student Loan Trust 2005-2 at 'AAAsf' and 'Asf', respectively. The Rating Outlook remains Stable for all notes.

KEY RATING DRIVERS

U.S. Sovereign Risk: The trust collateral is comprised of 100% 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. The U.S. sovereign rating is currently 'AAA'/Outlook Stable.

Collateral Performance: Fitch assumes a base case default rate of 13.6% and a 40.7% default rate under the 'AAA' credit stress scenario, which is based on actual trust performance. The claim reject rate is assumed to be 0.50% in the base case and 3% in the 'AAA' case. Fitch applies the standard default timing curve in its credit stress cash flow analysis. The trailing-12-month (TTM) average constant default rate, utilized in the maturity stresses, is 1.8%. TTM levels of deferment, forbearance, income-based repayment (prior to adjustment) and constant prepayment rate (voluntary and involuntary) are 5.1%, 8.2%, 7.9%, and 6.6%, respectively, and are used as the starting point in cash flow modelling. Subsequent declines or increases are modelled as per criteria. The borrower benefit is assumed to be approximately 0.24%, based on information provided by the sponsor.

Basis and Interest Rate Risk: Fitch applies its standard basis and interest rate stresses to this transaction as per criteria.

Payment Structure: Credit enhancement (CE) is provided by overcollateralization (OC), excess spread and, for the class A notes, subordination. As of August 2016, total and senior effective parity ratios are 100.00% (0.00% CE) and 104.49% (4.30% CE). Liquidity support is provided by a reserve equal to its floor of $1,515,458. The transaction will continue to release cash as long as the specified parity level (not including the reserve after 40% pool factor) of 100% is maintained.

Maturity Risk: Fitch's SLABS cash flow model indicates that the notes are paid in full on or prior to the legal final maturity dates under the commensurate rating scenario, subject to the downgrade tolerance described above.

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

Criteria Variation

Under the 'Counterparty Criteria for Structured Finance and Covered Bonds', dated Sept. 1, 2016, 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 are those held in the Collection Account, and the funds can only be invested for a short duration given the payment frequency of the notes, Fitch does not believe such variation has a measurable impact upon the ratings assigned.

RATING SENSITIVITIES

'AAAsf' rated tranches of most FFELP securitizations will likely move in tandem with the U.S. sovereign rating, given the strong linkage to the U.S. sovereign by nature of the reinsurance and SAP provided by ED. Sovereign risks are not addressed in Fitch's sensitivity analysis.

Fitch conducted a CE sensitivity analysis by stressing both the related lifetime default rate and basis spread assumptions. In addition, Fitch conducted a maturity sensitivity analysis by running different assumptions for the IBR usage and prepayment rate. The results below should only be considered as one potential model implied outcome as the transaction is exposed to multiple risk factors that are all dynamic variables.

Credit Stress Rating Sensitivity

--Default increase 25%: class A 'AAAsf'; class B 'Asf';

--Default increase 50%: class A 'AAAsf'; class B 'Asf';

--Basis Spread increase 0.25%: class A 'AAAsf'; class B 'Asf';

--Basis Spread increase 0.50%: class A 'AAAsf'; class B 'Asf'.

Maturity Stress Rating Sensitivity

--CPR decrease 50%: class A 'AAAsf'; class B 'Asf';

--CPR increase 100%: class A 'AAAsf'; class B 'Asf';

--IBR Usage increase 100%: class A 'AAsf'; class B 'Asf';

--IBR Usage decrease 50%: class A 'AAAsf'; class B 'Asf'.

It is important to note that the stresses are intended to provide an indication of the rating sensitivity of the notes to unexpected deterioration in trust performance. Rating sensitivity should not be used as an indicator of future rating performance.}

USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10

Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.

Fitch has affirmed the following ratings:

SLC Student Loan Trust 2005-2 notes:

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

--Class A-4 at 'AAAsf'; Outlook Stable;

--Class B-1 at 'Asf'; Outlook Stable.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016)

https://www.fitchratings.com/site/re/886006

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 26 Oct 2016)

https://www.fitchratings.com/site/re/888492

Global Structured Finance Rating Criteria (pub. 27 Jun 2016)

https://www.fitchratings.com/site/re/883130

Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria (pub. 10 Nov 2016)

https://www.fitchratings.com/site/re/889777

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1015455

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1015455

Endorsement Policy

https://www.fitchratings.com/regulatory

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Contacts

Fitch Ratings
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Harry Kohl
Director
+1-212-908-0837
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Tracy Wan
Senior Director
+1-212-908-9171
or
Media Relations:
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Contacts

Fitch Ratings
Primary Analyst
Harry Kohl
Director
+1-212-908-0837
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Tracy Wan
Senior Director
+1-212-908-9171
or
Media Relations:
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com