Fitch Affirms SLM 2012-7 Class A-3 Notes; Outlook Revised to Negative

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings takes the following rating actions on the SLM Student Loan Trust 2012-7 notes:

SLM Student Loan Trust, Series 2012-7:

--Class A-1 has been paid in full;

--Class A-2 'AAAsf'; Rating Watch Negative maintained;

--Class A-3 affirmed at 'AAAsf'; Outlook revised to Negative from Stable;

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

The Rating Outlook revision is due to Fitch's belief that the class A-3 outstanding notes carry a heightened level of extension risk. Based on Fitch's cash flow modelling runs, the notes were not paid in full by their legal final maturity date on May 26, 2026 in a stressed scenario. Under such scenarios, this may result in technical defaults, although Fitch would expect ultimate repayment of full principal and interest afterwards.

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 (CE): CE is provided by overcollateralization (OC; the excess of trust's asset balance over bond balance), excess spread, and for the senior notes, subordination of the class B note. As of August 2015, total parity is 101.01% (1.00% CE) and senior parity is 105.42% (5.15% CE). The trust has been releasing cash given the specified OC amount of the greater of 1.0% of the adjusted pool balance and $1.3 million is maintained.

Adequate Liquidity Support: Liquidity support is provided by a debt service reserve fund currently sized at the greater of 0.25% of the pool balance and $1.25 million. As of August 2015, the reserve account balance is approximately $2.26 million.

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

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 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 buildup of credit enhancement 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

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=990961

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=990961

Endorsement Policy

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

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20150917006550/en/

Fitch Ratings
Primary Analyst
Jeffrey Prackup, +1-212-908-0839
Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Steve Stubbs, +1-212-908-0676
Senior Director
or
Media Relations
Sandro Scenga, +1 212-908-0278 (New York)
[email protected]

Source: Fitch Ratings

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