Fitch Releases Updated U.S. FFELP Student Loan ABS Criteria.

NEW YORK -- Recent regulatory changes to the Federal Family Education Loan Program (FFELP) through the Higher Education Reconciliation Act and the Emergency Appropriations Act, coupled with industry changes that have fundamentally affected the economics and financing of Federal Family Education Loan Program (FFELP) loans, have prompted Fitch Ratings to enhance its rating methodology for U.S. FFELP student loan asset-backed securities (ABS).

Fitch's report says that key rating considerations remain place, with changes focused on the cash flow scenario analysis. 'The scenarios include new increasing and decreasing USD LIBOR interest rate scenarios coupled with new basis risk stresses to compensate for transactions that fund FFELP CP and T-Bill based assets with USD LIBOR, taxable and tax-exempt auction rate securities in addition to the use of remarketing rate notes,' said Managing Director Claire Mezzanotte.

Additionally, the criteria incorporate refinements to assumptions regarding borrower benefit programs used by issuers as part of their product offerings. 'The continued prevalence of borrower benefit programs warranted a new scenario, which Fitch calls the Borrower Benefit Scenario. This scenario stresses borrower benefits at or above historical utilization rates. Borrower benefits are incorporated in the cash flows as either a prepayment or a reduction in borrower yield, which serves to limit the amount of excess spread, a primary form of credit enhancement,' said Director Andrea Murad. 'Fitch's Base Case Scenario is similar to the borrower benefit scenario, except that no borrowers qualify for any borrower benefits, providing a relative measure of the costs of borrower benefits to a transaction.'

'Rating U.S. Federal Family Education Loan Program Student Loan ABS' is available on the Fitch Ratings web site at www.fitchratings.com.

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