Fitch Affirms Rhode Island Student Loan Authority Series 2012-2; Outlook Stable
KEY RATING DRIVERS
High Collateral Quality: The trust collateral consists of 100% (99.95% Non-Rehab; 0.05% Rehab) of Federal Family Education Loan Program (FFELP) loans. The credit quality of the trust collateral is high, in Fitch's opinion, based on the guarantees provided by the transaction's eligible guarantors and reinsurance provided by the U.S. Department of Education (ED) for at least 97% of principal and accrued interest. The current U.S. sovereign rating is 'AAA' with a Stable Outlook.
Sufficient Credit Enhancement (CE): The CE is provided by overcollateralization and future excess spread. As of June 2015, total reported parity is 106.16% (5.8% CE). The trust is a turbo structure therefore no cash is released until the note is paid in full.
Adequate Liquidity Support: Liquidity support for the note is provided by a debt service reserve account. The reserve is sized equal to the greater of 0.25% of the pool balance and \\$390,000.
Acceptable Servicing Capabilities: Day-to-day servicing is provided by Nelnet Servicing, LLC. Fitch considers Nelnet to be an acceptable servicer of FFELP loans.
Since FFELP student loan ABS rely 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 build-up of credit enhancement driven by positive excess spread given favorable basis factor conditions could lead to future upgrades.
DUE DILIGENCE USAGE
Fitch was not provided due diligence information from any third parties relating to the Rhode Island Student Loan Authority Series 2012-2.