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Rating Action:

Moody's downgrades eight tranches issued by seven Navient FFELP securitizations

07 Mar 2022

Approximately $2.1 billion of asset-backed securities affected

New York, March 07, 2022 -- Moody's Investors Service ("Moody's") has downgraded eight tranches issued by seven FFELP student loan securitizations sponsored and administered by Navient Solutions, LLC. The securitizations are backed by student loans originated under the Federal Family Education Loan Program (FFELP) that are guaranteed by the US government for a minimum of 97% of defaulted principal and accrued interest.

The complete rating actions are as follows:

Issuer: SLM Student Loan Trust 2007-2

Cl. A-4, Downgraded to Ba3 (sf); previously on Jul 29, 2021 Downgraded to Ba1 (sf)

Issuer: SLM Student Loan Trust 2008-2

Cl. A-3, Downgraded to Ba3 (sf); previously on Nov 1, 2016 Downgraded to Baa3 (sf)

Issuer: SLM Student Loan Trust 2008-5

Cl. A-4, Downgraded to Ba3 (sf); previously on Nov 1, 2016 Downgraded to Baa3 (sf)

Issuer: SLM Student Loan Trust 2008-6

Cl. A-4, Downgraded to Ba3 (sf); previously on Nov 1, 2016 Downgraded to Baa3 (sf)

Issuer: SLM Student Loan Trust 2008-7

Cl. A-4, Downgraded to Ba3 (sf); previously on Nov 1, 2016 Downgraded to Baa3 (sf)

Issuer: SLM Student Loan Trust 2008-8

Cl. A-4, Downgraded to Ba3 (sf); previously on Nov 1, 2016 Downgraded to Baa3 (sf)

Cl. B, Downgraded to Baa1 (sf); previously on Jun 3, 2020 Downgraded to A3 (sf)

Issuer: SLM Student Loan Trust 2008-9

Cl. A, Downgraded to Ba3 (sf); previously on Nov 1, 2016 Downgraded to Baa3 (sf)

RATINGS RATIONALE

Today's downgrade actions are primarily a result of the Class A bonds' approaching their legal final maturities and the reliance on Navient's support to pay off the bonds in full by their legal final maturity dates. The maturity dates for these bonds are between July 2022 and July 2023.

In today's action, Moody's considered Navient's willingness and ability to support the bonds by paying off the outstanding amount of the bonds at their legal final maturity dates. The transactions include a 10% clean-up call provision by Navient. In addition, Navient had previously amended the transactions to allow for 10% additional purchase of collateral or to establish a revolving credit facility that enables the trust to borrow money from Navient Corporation on a subordinated basis in order to pay off the notes. Earlier this year, for SLM 2007-3 Navient paid off the class A bond on its legal final maturity date by exercising the optional clean up call and for SLM 2008-1 Navient paid off the class A bond on its legal final maturity date by using the revolving credit facility. However, for SLM 2007-7 and SLM 2008-3, Navient's revolving credit facility was not used to pay off the class A bonds at their legal final maturity dates.

Today's actions also reflect the updated performance of the transactions and updated expected loss on the tranches across Moody's cash flow scenarios. Moody's quantitative analysis derives the expected loss for a tranche using 28 cash flow scenarios with weights accorded to each scenario.

Moody's ratings on the Class A notes of the affected transactions are lower than the ratings on the subordinated Class B notes. Although transaction structures stipulate that Class B interest is diverted to pay Class A principal upon default on the Class A notes, Moody's analysis indicates that the cash flow available to make payments on the Class B notes will be sufficient to make all required payments, including accrued interest, to Class B noteholders by the Class B final maturity dates, which occur later than the final maturity dates of the downgraded Class A notes. The Class B maturities are July 2025 for SLM 2007-2 and range between July 2073 to October 2083 for other affected transactions.

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was "Moody's Approach to Rating Securities Backed by FFELP Student Loans" published in April 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1271436. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Factors that would lead to an upgrade or downgrade of the ratings:

Up

Moody's could upgrade the ratings if the paydown speed of the loan pool increases as a result of declining borrower usage of deferment, forbearance and IBR, increasing voluntary prepayment rates, or prepayments with proceeds from sponsor repurchases of student loan collateral. Moody's could also upgrade the ratings owing to a build-up in credit enhancement.

Down

Moody's could downgrade the ratings if the paydown speed of the loan pool declines as a result of lower than expected voluntary prepayments, and higher than expected deferment, forbearance and IBR rates, which would threaten full repayment of the class by its final maturity date. In addition, because the US Department of Education guarantees at least 97% of principal and accrued interest on defaulted loans, Moody's could downgrade the rating of the notes if it were to downgrade the rating on the United States government.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

In rating this transaction, Moody's used a cash flow model to model cash flow stress scenarios to determine the extent to which investors would receive timely payments of interest and principal in the stress scenarios, given the transaction structure and collateral composition.

Moody's quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows. Moody's weights the impact on the rated instruments based on its assumptions of the likelihood of the events in such scenarios occurring.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Natallia Birukova
Associate Lead Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Jinwen Chen
VP - Sr Credit Officer/Manager
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
© 2022 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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