KEY RATING DRIVERS
Collateral Performance: Fitch assumes a 23% base case default rate and 56.5% under the 'AAAsf 'scenario. The claim reject rate is assumed to be 0.25% for the base case and 2% for the 'AAAsf' case. Fitch applies the standard default timing curve, CDR and prepayment assumptions for FFELP loans in its cash flow analysis. Current levels of deferment, forbearance and IBR are 7.61%, 12.24%, 13.39% respectively, which are used as the starting point in cash flow modeling. Subsequent declines or increases are modeled as per criteria. Fitch assumes 0.40% borrower benefits in the cash flows analysis based on information provided by PHEAA.
Basis and Interest Rate Risk: Fitch applies its standard basis and interest rate stresses to this transaction as per criteria.
Payment Structure: Cash flows for the 2016-1 notes were satisfactory under 'AAAsf' and 'Asf' stress for class A notes and class B notes, respectively. Total credit enhancement (CE) is provided by overcollateralization (OC), excess spread and subordination provided by the class B notes for the class A notes. At closing, senior and total parity are expected to be 103.7% and 101.50%. The trust has a specified OC amount equal to the greater of 1.8% of the current adjusted pool balance and
Maturity Risk: Fitch's student loan ABS cash flow model indicates that both the senior and subordinate notes are paid in full on or prior to their legal final maturity of
Operational Capabilities: PHEAA will service the portfolio and Fitch considers PHEAA to be an acceptable servicer since they have a long history servicing FFELP student loans.
Since FFELP student loan ABS rely on the
Key Rating Drivers and Rating Sensitivities are further described in the updated presale report titled 'PHEAA Student Loan Trust 2016-1', dated
DUE DILIGENCE USAGE
Fitch was provided with Form ABS Due Diligence - 15G as prepared by
REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS
A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool is available by accessing the appendix referenced under 'Related Research' on the presale report. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled 'Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions,' dated
Additional information is available at www.fitchratings.com.
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 18
Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub.
Criteria for Servicing Continuity Risk in Structured Finance (pub. 17
Global Structured Finance Rating Criteria (pub.
Dodd-Frank Rating Information Disclosure Form
Source: Fitch Ratings