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Rating Action:

MOODY'S RATES NORTH CAROLINA STATE EDUCATION ASSISTANCE AUTHORITY STUDENT LOAN BONDS, SERIES 2004 O-1, O-2, AND O-3, Aaa

14 Oct 2004
MOODY'S RATES NORTH CAROLINA STATE EDUCATION ASSISTANCE AUTHORITY STUDENT LOAN BONDS, SERIES 2004 O-1, O-2, AND O-3, Aaa

Approximately $396 Million of Debt Securities Affected.

New York, October 14, 2004 -- Moody's Investors Service has assigned the rating of Aaa to the 2004 Series O-1, O-2, and O-3 (Senior Lien) Tax-Exempt Guaranteed Student Loan Revenue Bonds issued by the State of North Carolina State Education Assistance Authority (NCSEAA). Both series were issued under a General Resolution dated September 14, 1995.

The complete rating action is as follows:

$82,000,000 Tax-Exempt Guaranteed Student Loan Revenue Bonds, 2004 Series O-1, rated Aaa

$82,000,000 Tax-Exempt Guaranteed Student Loan Revenue Bonds, 2004 Series O-2, rated Aaa

$82,650,000 Tax-Exempt Guaranteed Student Loan Revenue Bonds, 2004 Series O-3, rated Aaa

RATING RATIONALE

The ratings are based on the following factors: (i) the strong quality of the Federal Family Education Loan Program (FFELP) guaranteed student loans underlying the transaction; (ii) a debt service reserve account equal to 3% of outstanding bond principal for the variable rate bonds and six months of interest on the previously issued fixed-rate bonds; (iii) overcollateralization of approximately 2.85% and the buildup of additional equity over the life of the transaction from the accumulation of excess spread that cannot be withdrawn without a ratings confirmation by Moody's; and (iv) the 2.1% subordination provided by the two series of subordinate bonds.

BOND DETAILS

The 2004 Series O-1, O-2, and O-3 Bonds are tax-exempt auction rate securities. Interest rates will be determined by auctions held every 35-days and will be paid semi-annually. The final legal maturity for the 2004 Series O-1 through O-3 Bonds is July 1, 2034.

UNDERLYING COLLATERAL

The trust estate includes only FFELP student loans that are ultimately guaranteed by the Department of Education (DOE) for 98% of the principal and interest due should the borrower default. As of August 31. 2004, approximately 73% of the loans in the trust estate were made to four-year university/college students, who tend to default with lower frequency than those students attending two-year and proprietary schools. Although only 37.58% of the loans are in repayment, the potential liquidity risk is mitigated by the reserve fund, and the subsidized Stafford loan interest subsidy payments. Approximately 38.5% of the pool consists of subsidized Stafford loans.

ISSUER AND SERVICER

North Carolina State Education Assistance Authority is a political subdivision of the State of North Carolina, created in 1965 to provide higher-education financial assistance to state residents through the origination, purchase, and insurance of student loans and issuance of bonds and notes for such purpose. College Foundation, Inc., a nonprofit corporation chartered in 1955, acts as servicer for the loans. College Foundation has a low claim rejection rate, with a net rejection rate of less than 0.1% for each calendar year beginning in 1998 through 2003.

For further details please visit http://www.moodys.com

New York
Linda Stesney
Managing Director
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Andrew Lipton
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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