OREANDA-NEWS. Fitch Ratings has affirmed the outstanding senior note of EdSouth Indenture No. 1, LLC Series 2010-1 at 'AAAsf'/Outlook Stable. The affirmation is due to the note passing both Fitch's credit and maturity stresses at the commensurate rating level. A full list of rating actions follows at the end of this rating action commentary.

KEY RATING DRIVERS

U. S. Sovereign Risk: The trust collateral consists of Federal Family Education Loan Program (FFELP) loans, 5.4% of which is rehabilitated loans. Guarantees are provided by the transaction's eligible guarantors and reinsurance is provided by the U. S. Department of Education (ED) for at least 97% of principal and accrued interest. Fitch's U. S. sovereign rating is currently 'AAA'/Outlook Stable.

Collateral Performance: Fitch assumes a base case default rate of 8.25% and a 22% default rate under the 'AAAsf' credit stress scenario. Fitch also tested a 17.7% default base case, based on observations of high recent defaults. The claim reject rate is assumed to be 0.25% in the base case and 2% in the 'AAAsf' 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 5.9%. TTM average levels of deferment, forbearance, Income-based repayment (before adjustment) and constant prepayment rate (voluntary and involuntary) are 14.5%, 17.2%, 18.9% and 24.5%, 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 0.3%, based on information provided by the sponsor.

Basis and Interest Rate Risk: Fitch applies its standard basis and interest rate stresses to this trust as per the agency's criteria.

Payment Structure: Credit Enhancement (CE) is provided by excess spread and overcollateralization. As of the July 2016 distribution date, total parity is 140.86% (29.01% CE). Liquidity support is provided by a reserve account currently sized at the required floor of $411,650.85. The trust is currently in turbo, and excess cash will not be released from the trust until the class A-1 note is paid in full.

Maturity Risk: Fitch's student loan ABS 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 Great Lakes Educational Loan Services, Inc. (Great Lakes) and Pennsylvania Higher Education Assistance Agency (PHEAA), managing approximately 32% and 68% of the outstanding loan portfolio, respectively. Fitch believes both Great Lakes and PHEAA are acceptable servicers of FFELP student loans.

CRITERIA VARIATIONS

Under Fitch's criteria 'Rating U. S. Federal Family Education Loan Program Student Loan ABS Criteria', dated July 26, 2016, Fitch does not address the process by which it gives certain credit to short-term assets in its cash flow analysis, and it is therefore considered a criteria variation.

Under the Counterparty Criteria for Structured Finance and Covered Bonds, dated September 1, 2016, Fitch looks to its own ratings in analyzing counterparty risk and assessing a counterparty's creditworthiness. The definition of the permitted investments for this deal allows the possibility of using investments that do not meet Fitch's criteria, this represents a criteria variation. Fitch does not believe such variation will have 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.

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:

EdSouth Indenture No. 1, LLC Series 2010-1:

--Class A-1 note at 'AAAsf'; Outlook Stable.