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Rating Action:

Moody's downgrades 43 tranches in 12 SLM student loan deals

09 Jun 2011

Approximately $9.2 billion of asset-backed securities affected.

New York, June 09, 2011 -- Moody's Investors Service downgraded 43 classes of notes from 12 SLM Private Credit Student Loan trusts sponsored, serviced and administered by Sallie Mae, Inc., a wholly-owned subsidiary of SLM Corporation. The affected notes include 24 tranches of senior notes and 19 tranches of subordinate notes. The underlying collateral backing these notes consists of private credit student loans that are not guaranteed or reinsured under the Federal Family Education Loan Program (FFELP) or any other federal student loan program.

RATINGS RATIONALE

The downgrades were prompted by deterioration in collateral performance and the resulting erosion of parity levels (i.e. the ratio of total assets to total liabilities) for all transactions. The performance deterioration contributed to Moody's increase of expected net losses to a range of 13%-20% from a range of 9%-15% as of the last rating action in August 2009, stated as a percentage of the original pool balance plus any prefunded amounts.

As of the latest reporting date, the trusts have incurred cumulative net losses ranging from 9% to 13% of the original pool balance. In addition, delinquent loan balances remained elevated in all transactions with 90-day delinquencies accounting for 3%-5% of loans in active repayment. The delinquency pipeline is expected to contribute to additional defaults in the future.

High defaults have been eroding the collateral base, causing steady declines in parity levels for most securitizations. Over the last nine months, parity has dropped by as much as 1.5 % for the affected transactions and for some transactions it decreased to a level that is below 100%. The reduction in the parity levels has eroded the trusts' excess spread, which is needed to absorb losses and build up parity. The loss of excess spread is expected to contribute to further declines in the parity levels.

In addition to the parity declines, the 2003 securitizations were significantly negatively affected by the higher costs of funding associated with auction rate notes. Since the collapse of the auction rate market in the beginning 2008, the coupon rates on these notes have been reset to a "failed-auction" rate, which increases (among other things) if the ratings of the notes fall below Aaa, and increases further if the ratings fall below A3. Because we are downgrading these notes below the trigger levels, their coupon rates increase to either LIBOR plus 2.5% or LIBOR plus 3.5%. These coupon rates further erode excess spread and expose the subordinated classes of notes to a significant default risk.

Available credit enhancement includes overcollateralization, reserve funds, subordination, and excess spread. Significant structural features include note parity triggers, reserve fund floors, and the change in cash flow allocations among the senior classes under the occurrence of certain events. Senior notes in the trusts benefit from note parity triggers, which can redirect interest payments on the subordinate notes to principal payments on the senior notes.

The principal methodology used in these rating actions was "Moody's Approach to Rating U.S. Private Student Loan-Backed Securities", published on January 6th, 2010 and is available at www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issue can also be found in the Rating Methodologies sub-directory on Moody's website.

To assess rating implications of the higher expected losses, each individual transaction was run through a variety of stress scenarios using the Structured Finance Workstation® (SFW), a cash flow model developed by Moody's Wall Street Analytics.

Our expected lifetime net losses as a percentage of original pool balance plus any loans added subsequently are approximately 12.6%, 13.8%, 14.5%, 15.8%, 17.1%, 15.4%, 19.1%, 16.4%, 17.2%, 18.4%, 20.0%, and 19.2% for the 2002-A, 2003-A, 2003-B, 2003-C, 2004-A, 2004-B, 2005-A, 2005-B, 2006-A, 2006-B, 2006-C and 2007-A trusts, respectively.

Primary sources of uncertainty with regard to expected losses are the weak economic environment and the high unemployment rate, which adversely impacts the income-generating ability of the borrowers.

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.

RATINGS:

Complete actions are as follows:

Issuer: SLM Private Credit Student Loan Trust 2002-A

Class C, Downgraded to Baa1 (sf); previously on May 26, 2011 A3 (sf) Placed Under Review for Possible Downgrade

Issuer: SLM Private Credit Student Loan Trust 2003-A

Class A-2, Confirmed at Aaa (sf); previously on May 26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade

Class A-3, Downgraded to A1 (sf); previously on May 26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade

Class A-4, Downgraded to A1 (sf); previously on May 26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade

Class B, Downgraded to Baa1 (sf); previously on May 26, 2011 Aa3 (sf) Placed Under Review for Possible Downgrade

Class C, Downgraded to Ba3 (sf); previously on May 26, 2011 A3 (sf) Placed Under Review for Possible Downgrade

Issuer: SLM Private Credit Student Loan Trust 2003-B

Class A-2, Downgraded to Aa2 (sf); previously on May 26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade

Class A-3, Downgraded to A3 (sf); previously on May 26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade

Class A-4, Downgraded to A3 (sf); previously on May 26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade

Class B, Downgraded to Baa3 (sf); previously on May 26, 2011 Aa3 (sf) Placed Under Review for Possible Downgrade

Class C, Downgraded to Caa1 (sf); previously on May 26, 2011 A3 (sf) Placed Under Review for Possible Downgrade

Issuer: SLM Private Credit Student Loan Trust 2003-C

Cl. A-2, Downgraded to Aa2 (sf); previously on May 26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. A-3, Downgraded to Baa1 (sf); previously on May 26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. A-4, Downgraded to Baa1 (sf); previously on May 26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. A-5, Downgraded to Baa1 (sf); previously on Sep 1, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. B, Downgraded to Baa3 (sf); previously on Sep 1, 2010 Aa3 (sf) Placed Under Review for Possible Downgrade

Cl. C, Downgraded to Caa3 (sf); previously on Sep 1, 2010 A3 (sf) Placed Under Review for Possible Downgrade

Issuer: SLM Private Credit Student Loan Trust 2004-A

Cl. A-3, Downgraded to Aa1 (sf); previously on May 26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. B, Downgraded to A1 (sf); previously on Sep 1, 2010 Aa3 (sf) Placed Under Review for Possible Downgrade

Cl. C, Downgraded to Baa3 (sf); previously on Sep 1, 2010 A3 (sf) Placed Under Review for Possible Downgrade

Issuer: SLM Private Credit Student Loan Trust 2004-B

Cl. A-4, Confirmed at Aaa (sf); previously on Sep 1, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. B, Confirmed at Aa3 (sf); previously on Sep 1, 2010 Aa3 (sf) Placed Under Review for Possible Downgrade

Cl. C, Downgraded to Baa1 (sf); previously on Sep 1, 2010 A3 (sf) Placed Under Review for Possible Downgrade

Issuer: SLM Private Credit Student Loan Trust 2005-A

Cl. A-3, Downgraded to Aa1 (sf); previously on May 26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. A-4, Downgraded to Aa2 (sf); previously on Sep 1, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. B, Downgraded to A1 (sf); previously on Sep 1, 2010 Aa3 (sf) Placed Under Review for Possible Downgrade

Cl. C, Downgraded to Baa1 (sf); previously on Sep 1, 2010 A3 (sf) Placed Under Review for Possible Downgrade

Issuer: SLM Private Credit Student Loan Trust 2005-B

Cl. A-2, Downgraded to Aa1 (sf); previously on May 26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. A-3, Downgraded to Aa1 (sf); previously on May 26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. A-4, Downgraded to Aa3 (sf); previously on Sep 1, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. B, Downgraded to A2 (sf); previously on Sep 1, 2010 Aa3 (sf) Placed Under Review for Possible Downgrade

Cl. C, Downgraded to Baa2 (sf); previously on Sep 1, 2010 A3 (sf) Placed Under Review for Possible Downgrade

Issuer: SLM Private Credit Student Loan Trust 2006-A

Cl. A-4, Downgraded to Aa1 (sf); previously on May 26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. A-5, Downgraded to Aa3 (sf); previously on Sep 1, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. B, Downgraded to A2 (sf); previously on Sep 1, 2010 Aa3 (sf) Placed Under Review for Possible Downgrade

Cl. C, Confirmed at A3 (sf); previously on Sep 1, 2010 A3 (sf) Placed Under Review for Possible Downgrade

Issuer: SLM Private Credit Student Loan Trust 2006-B

Cl. A-4, Downgraded to Aa2 (sf); previously on May 26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. A-5, Downgraded to Aa3 (sf); previously on Sep 1, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. B, Downgraded to A2 (sf); previously on Sep 1, 2010 Aa3 (sf) Placed Under Review for Possible Downgrade

Cl. C, Downgraded to Baa1 (sf); previously on Sep 1, 2010 A3 (sf) Placed Under Review for Possible Downgrade

Issuer: SLM Private Credit Student Loan Trust 2006-C

Cl. A-4, Downgraded to Aa2 (sf); previously on May 26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. A-5, Downgraded to A1 (sf); previously on Sep 1, 2010 Aa1 (sf) Placed Under Review for Possible Downgrade

Cl. B, Downgraded to A2 (sf); previously on Sep 1, 2010 A1 (sf) Placed Under Review for Possible Downgrade

Cl. C, Confirmed at Baa1 (sf); previously on Sep 1, 2010 Baa1 (sf) Placed Under Review for Possible Downgrade

Issuer: SLM Private Credit Student Loan Trust 2007-A

Cl. A-2, Downgraded to A1 (sf); previously on May 26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. A-3, Downgraded to A1 (sf); previously on May 26, 2011 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. A-4, Downgraded to A1 (sf); previously on Sep 1, 2010 Aa1 (sf) Placed Under Review for Possible Downgrade

Cl. B, Downgraded to A2 (sf); previously on Sep 1, 2010 A1 (sf) Placed Under Review for Possible Downgrade

Cl. C-1, Confirmed at Baa1 (sf); previously on Sep 1, 2010 Baa1 (sf) Placed Under Review for Possible Downgrade

Cl. C-2, Confirmed at Baa1 (sf); previously on Sep 1, 2010 Baa1 (sf) Placed Under Review for Possible Downgrade

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, confidential and proprietary Moody's Investors Service information and confidential and proprietary Moody's Analytics' information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of maintaining 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
Jerry Lu
Senior Associate
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Irina Faynzilberg
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 downgrades 43 tranches in 12 SLM student loan deals
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