Fitch Affirms SLM 2012-8

NEW YORK--()--Fitch Ratings has affirmed the following ratings on SLM Student Loan Trust 2012-8 (SLM 2012-8):

--Class A at 'AAAsf'; removed from Rating Watch Negative and assigned Outlook Stable;

--Class B at 'AAsf'; removed from Rating Watch Negative and assigned Outlook Stable.

The affirmations above are due to the notes passing both Fitch's credit and maturity stresses at the commensurate rating level. The notes had their maturity dates substantially extended earlier this year, which proved to be an effective mitigant to maturity risk in Fitch's cash flow modelling.

KEY RATING DRIVERS

U.S. Sovereign Risk: The trust collateral comprises 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 15.25% and a 46.0% default rate under the 'AAA' credit stress scenario. 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 twelve month (TTM) average constant default rate, utilized in the maturity stresses, is 3.6%. TTM levels of deferment, forbearance, Income-based repayment (prior to adjustment) and constant prepayment rate (voluntary and involuntary) are 7.3%, 13.9%, 12.6% and 9.5%, respectively, which 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 0.21%, 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 is provided by excess spread and, for the class A notes, subordination. As of July 2016, total and senior effective parity ratios, respectively, are 104.71% (4.50% CE) and 109.13% (8.37% CE). Liquidity support is provided by a reserve account sized at the greater of 0.25% of the pool balance and $2,235,626, currently equal to $2,689,540. The trust will continue to release cash as long as the target overcollateralization amount of 4.50% 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.

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 VARIATIONS

For transactions in surveillance, Fitch will treat certain assets such as claims filed as short-term assets in its cash flow analysis. Given that Fitch's current criteria is silent on the treatment of such assets, this treatment is considered a criteria variation. Fitch does not believe such variation has a measurable impact upon the ratings assigned.

Under the 'Counterparty Criteria for Structured Finance and Covered Bonds', dated July 18, 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 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 does not 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 buildup of CE driven by positive excess spread given favorable basis factor conditions could lead to future upgrades.

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.

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. 17 May 2016)

https://www.fitchratings.com/site/re/879815

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. 26 Jul 2016)

https://www.fitchratings.com/site/re/881705

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1011141

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1011141

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

Contacts

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