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Rating Action:

Moody's assigns provisional ratings of (P)Aaa (sf) to SLM Private Education Loan Trust 2011-A

04 Apr 2011

$562 million of asset-backed securities affected

New York, April 04, 2011 -- Moody's Investors Service has assigned provisional ratings of (P)Aaa (sf) to three classes of senior notes to be issued by SLM Private Education Loan Trust 2011-A.

Moody's issues provisional ratings in advance of the final sale of securities. Upon a conclusive review of the final documentation, Moody's will endeavor to assign final ratings to the securities. Final ratings may differ from provisional ratings.

The complete rating actions are as follows:

Issuer: SLM Private Education Loan Trust 2011-A

$287,000,000 Floating Rate Class A-1 Notes, rated (P)Aaa (sf)

$175,000,000 Fixed Rate Class A-2 Notes, rated (P)Aaa (sf)

$100,000,000 Floating Rate Class A-3 Notes, rated (P)Aaa (sf)

The Notes will be sold in a privately negotiated transaction without registration under the Securities Act of 1933 (the Act) under circumstances reasonably designed to preclude a distribution thereof in violation of the Act. The issuance has been designed to permit resale under Rule 144A.

Rating Rationale

The provisional ratings assigned to the Class A Notes is based upon an expected 20.68% overcollateralization at closing, a non-declining reserve account that is expected to be fully funded at closing at 0.25% of the initial loan balance, excess spread that is expected to be approximately 4% per annum, based on today's level of interest rates, structural features that trap excess spread to build the overcollateralization to a target level of 33%, and a cash capitalization account that is expected to be fully funded at closing in the amount of $5.82 million. Moody's cumulative net loss rate expectation is 12% for the private student loan pool.

Basis Risk

The Class A-2 notes are expected to be fixed rate. This is the first private student loan transaction issued by Sallie Mae to include unhedged interest rate risk to this extent. The interest rate risk comes from the fixed rate Class A-2 notes being backed by underlying loans that are primarily indexed to one month LIBOR.

The other risk in the transaction comes from 9% of the portfolio that is indexed to the Prime rate. Since the bonds are indexed to LIBOR, this creates basis risk with this portion of the portfolio. The transaction is not expected to hedge this risk.

V Score

The V Score for this transaction is Medium/High, which is consistent with the Medium/High V Score assigned for the U.S. Private Student Loan ABS sector. While the Medium/High score is also consistent with past Sallie Mae transactions, the transaction complexity sub-category within the V Score is weaker for this transaction. This is driven by the unhedged interest rate risk resulting from the Class A-2 notes being fixed rate, while the underlying loans are floating rate. As a result, the complexity and market value sensitivity category of the V Score is weaker for this transaction than for past Sallie Mae transactions.

Moody's V Scores provide a relative assessment of the quality of available credit information and the potential variability around the various inputs to a rating determination. The V Score ranks transactions by the potential for significant rating changes owing to uncertainty around the assumptions due to data quality, historical performance, the level of disclosure, transaction complexity, the modeling and the transaction governance that underlie the ratings. V Scores apply to the entire transaction (rather than individual tranches).

Moody's Parameter Sensitivities

If the expected cumulative net loss used in determining the initial rating for the Class A notes was changed to 15%, 20%, or 24%, the initial model-indicated output for the Class A notes would be Aa1, A2 and A3, respectively.

Parameter Sensitivities are not intended to measure how the rating of the security might migrate over time, rather they are designed to provide a quantitative calculation of how the initial model output might change if key input parameters used in the initial rating process differed. The analysis assumes that the deal has not aged. Parameter Sensitivities only reflect the ratings impact of each scenario from a quantitative/model-indicated standpoint. Qualitative factors are also taken into consideration in the rating process, so the actual ratings that would be assigned in each case could vary from the information presented in the Parameter Sensitivity analysis.

Methodology

The methodology that was used in rating this transaction is described in "Moody's Approach to Rating U.S. Private Student Loan-Backed Securities," published on January 6, 2010. To address the risk that the A-2 notes are fixed rate, while the underlying loans are floating rate, we assumed current LIBOR rates of 0.26% for the life of the transaction in our Aaa cashflow analysis. We also assumed in our Aaa cashflow analysis that the spread between Prime and LIBOR is 150 bp. This was to address the risk of approximately 9% of the loans being indexed to Prime, while the bonds are either fixed rate or indexed to LIBOR.

Moody's Investors Service did not receive or take into account a third Party due diligence report on the underlying assets or financial instruments in this transaction.

Additional research, including a pre-sale report for this transaction will be available at www.moodys.com. The special report "V Scores and Parameter Sensitivities in the U.S. Student Loan ABS Sector," is also available on moodys.com.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, confidential and proprietary Moody's Investors Service's information, confidential and proprietary Moody's Analytics' information.

Moody's Investors Service considers the quality of information available on the issuer satisfactory for the purposes of assigning a credit rating.

Moody's adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

New York
Corey Henry
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Barbara A. Lambotte
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's assigns provisional ratings of (P)Aaa (sf) to SLM Private Education Loan Trust 2011-A
No Related Data.
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