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Rating Action:

Moody's confirms 22 and downgrades nine private student loan tranches in nine Sallie Mae trusts

13 Aug 2009

Approximately $5 billion of asset-backed securities affected

New York, August 13, 2009 -- Moody's Investors Service confirmed 22 classes of notes and downgraded nine classes of notes from nine private credit student loan transactions sponsored, serviced and administered by Sallie Mae, Inc. The underlying collateral consists of private, i.e., not government guaranteed, student loans, most of which were originated through school financial aid offices. This action concludes the review for possible downgrade of the notes initiated on March 11, 2009.

The downgrades were driven primarily by worse than expected collateral performance as indicated by rising defaults and delinquencies. Delinquencies (30+ day past due) as a percent of loans in active repayment for the reporting quarter ending May 31, 2009 increased to a range of 9.2% to 12.9% from a range of 4.1% to 6.9% a year ago. Cumulative gross defaults as a percent of the original pool balance for the same reporting period were between 2.1% and 8.8%, compared to 0.4% and 6.3% a year ago. The rate of increase in defaults can be explained in part by tighter forbearance policy, implemented by Sallie Mae since the first quarter of 2008. Once the effects of the policy change subside, the rate of future defaults is expected to slow down.

The negative performance trends were particularly concentrated among transactions with higher proportions of non-traditional loans. Non-traditional loans are loans made to borrowers with low FICO scores (i.e., less than 640 FICO if borrowers attend not-for-profit institutions, and less than 670 FICO if borrowers attend for-profit institutions) and borrowers attending schools with exceptionally high default rates. Lifetime gross defaults on these loans are estimated to be 3 to 5 times higher than the defaults on Sallie Mae's traditional portfolio in the securitizations.

As a result of the negative performance trends, Moody's has increased its lifetime expected pool losses for all transactions under review, although the magnitude of the increases varied from deal to deal, depending on the non-traditional loan concentration and the observed delinquency and default performance trends. Moody's expects generally better performance from deals that closed before 2006 than from deals that closed in 2006 and 2007. The earlier transactions have built up a significant amount of credit enhancement over time as the reserve accounts are non-declining and overcollateralization has reached the floor level of 2% of the initial asset balance. In addition, most classes in the earlier transactions also reached their target credit enhancement levels, which provide further support. Conversely, performance of the transactions closed in 2006 and 2007 has been weaker, primarily because of their higher concentration of loans extended to borrowers attending schools with exceptionally high default rates and the current weak economic environment in which borrowers are entering repayment.

The ratings are based on the revised net losses on the pools, the amount of available credit enhancement, and the structural protections in the trusts. Credit enhancement in all transactions is provided by a non-declining reserve fund, overcollateralization with a floor of 2% of the initial asset balance, subordination and excess spread. A 15-year Prime to LIBOR swap provides a minimum amount of excess spread of approximately 2.5% per year. Significant structural protections include parity triggers, cumulative realized loss test (both of which redirect cashflow allocations to senior classes), no release of excess spread at 10% pool factor, and the change of cash flow allocations among the senior classes upon the occurrence of an event of default.

Other methodologies and factors that may have been considered in the process of rating this issue can also be found at www.moodys.com in the Credit Policy & Methodologies directory, in the Rating Methodologies subdirectory at www.moodys.com.

The complete rating actions are as follows:

Issuer: SLM Private Credit Student Loan Trust 2003-C

Pool Current Expected Cumulative Net Losses: 10.80% (as a percentage of the original loan pool balance)

Cl. A-3, Confirmed Aaa; Previously on 3/11/2009 Placed Under Review for Possible Downgrade

Cl. A-4, Confirmed Aaa; Previously on 3/11/2009 Placed Under Review for Possible Downgrade

Cl. A-5, Confirmed Aaa; Previously on 3/11/2009 Placed Under Review for Possible Downgrade

Cl. B, Confirmed Aa3; Previously on 3/11/2009 Placed Under Review for Possible Downgrade

Cl. C, Confirmed A3; Previously on 3/11/2009 Placed Under Review for Possible Downgrade

Issuer: SLM Private Credit Student Loan Trust 2004-A

Pool Current Expected Cumulative Net Losses: 12.00% (as a percentage of the original loan pool balance)

Cl. A-3, Confirmed Aaa; Previously on 3/11/2009 Placed Under Review for Possible Downgrade

Cl. B, Confirmed Aa3; Previously on 3/11/2009 Placed Under Review for Possible Downgrade

Cl. C, Confirmed A3; Previously on 3/11/2009 Placed Under Review for Possible Downgrade

Issuer: SLM Private Credit Student Loan Trust 2004-B

Pool Current Expected Cumulative Net Losses: 10.40% (as a percentage of the original loan pool balance)

Cl. A-4, Confirmed Aaa; Previously on 3/11/2009 Placed Under Review for Possible Downgrade

Cl. B, Confirmed Aa3; Previously on 3/11/2009 Placed Under Review for Possible Downgrade

Cl. C, Confirmed A3; Previously on 3/11/2009 Placed Under Review for Possible Downgrade

Issuer: SLM Private Credit Student Loan Trust 2005-A

Pool Current Expected Cumulative Net Losses: 13.20% (as a percentage of the original loan pool balance)

Cl. A-4, Confirmed Aaa; Previously on 3/11/2009 Placed Under Review for Possible Downgrade

Cl. B, Confirmed Aa3; Previously on 3/11/2009 Placed Under Review for Possible Downgrade

Cl. C, Confirmed A3; Previously on 3/11/2009 Placed Under Review for Possible Downgrade

Issuer: SLM Private Credit Student Loan Trust 2005-B

Pool Current Expected Cumulative Net Losses: 11.20% (as a percentage of the original loan pool balance)

Cl. A-3, Confirmed Aaa; Previously on 3/11/2009 Placed Under Review for Possible Downgrade

Cl. A-4, Confirmed Aaa; Previously on 3/11/2009 Placed Under Review for Possible Downgrade

Cl. B, Confirmed Aa3; Previously on 3/11/2009 Placed Under Review for Possible Downgrade

Cl. C, Confirmed A3; Previously on 3/11/2009 Placed Under Review for Possible Downgrade

Issuer: SLM Private Credit Student Loan Trust 2006-A

Pool Current Expected Cumulative Net Losses: 12.40% (as a percentage of the original loan pool balance)

Cl. A-5, Confirmed Aaa; Previously on 3/11/2009 Placed Under Review for Possible Downgrade

Cl. B, Confirmed Aa3; Previously on 3/11/2009 Placed Under Review for Possible Downgrade

Cl. C, Confirmed A3; Previously on 3/11/2009 Placed Under Review for Possible Downgrade

Issuer: SLM Private Credit Student Loan Trust 2006-B

Pool Current Expected Cumulative Net Losses: 13.20% (as a percentage of the original loan pool balance)

Cl. A-5, Confirmed Aaa; Previously on 3/11/2009 Placed Under Review for Possible Downgrade

Cl. B, Downgraded from Aa2 to Aa3; Previously on 3/11/2009 Placed Under Review for Possible Downgrade

Cl. C, Downgraded from A2 to A3; Previously on 3/11/2009 Placed Under Review for Possible Downgrade

Issuer: SLM Private Credit Student Loan Trust 2006-C

Pool Current Expected Cumulative Net Losses: 14.80% (as a percentage of the original loan pool balance)

Cl. A-5, Downgraded from Aaa to Aa1; Previously on 3/11/2009 Placed Under Review for Possible Downgrade

Cl. B, Downgraded from Aa2 to A1; Previously on 3/11/2009 Placed Under Review for Possible Downgrade

Cl. C, Downgraded from A2 to Baa1; Previously on 3/11/2009 Placed Under Review for Possible Downgrade

Issuer: SLM Private Credit Student Loan Trust 2007-A

Pool Current Expected Cumulative Net Losses: 14.80% (as a percentage of the original loan pool balance)

Cl. A-4, Downgraded from Aaa to Aa1; Previously on 3/11/2009 Placed Under Review for Possible Downgrade

Cl. B, Downgraded from Aa2 to A1; Previously on 3/11/2009 Placed Under Review for Possible Downgrade

Cl. C-1, Downgraded from A2 to Baa1; Previously on 3/11/2009 Placed Under Review for Possible Downgrade

Cl. C-2, Downgraded from A2 to Baa1; Previously on 3/11/2009 Placed Under Review for Possible Downgrade

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

New York
HaVi Jacobs
Senior Associate
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's confirms 22 and downgrades nine private student loan tranches in nine Sallie Mae trusts
No Related Data.
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