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Fitch Maintains Negative Watch on SLM 2006-9 & SLM 2007-1 Sr. Notes; Upgrades Sub Notes

January 27, 2014

Fitch Ratings maintains the Negative Rating Watch on the senior notes currently rated 'AAAsf' and upgrades the subordinate notes to 'Asf' from 'BBBsf' issued by both SLM Student Loan Trust 2006-9 and SLM Student Loan Trust 2007-1. The Stable Outlooks are maintained on both trust's subordinate notes. KEY RATING DRIVERS High Collateral Quality: Both SLM 2006-9 and SLM 2007-1 collateral consists of 100 percent of Federal Family Education Loan Program (FFELP) loans. The credit quality of the trust collaterals are high, in Fitch's opinion, based on the guarantees provided by the transaction's eligible guarantors and reinsurance provided by the U.S. Department of Education (ED) for at least 97 percent of principal and accrued interest. Rating Watch Maintained: All existing and new issuances of 'AAA' rated tranches of FFELP securitizations are on Rating Watch Negative following the revision of the long-term foreign and local currency Issuer Default Ratings (IDRs) of the U.S. Sufficient Credit Enhancement: While both the senior and subordinate notes will benefit from excess spread, the senior notes also benefit from subordination provided by the class B note. As of September 2013 , total parity is 100 percent and senior parity is 104.70 percent for SLM 2006-9; 100 percent and 104.47 percent for SLM 2007-1. Cash is being released from the both trusts given that the 100 percent (excluding reserve fund) parities are maintained. Adequate Liquidity Support: Liquidity support is provided by a reserve account. The reserve is sized equal to the greater of 0.25 percent of the pool balance, and $3,769,588 for SLM 2006-9; for SLM 2007-1, the reserve is sized equal to the greater of 0.25 percent of the pool balance, and $6,032,945 . Acceptable Servicing Capabilities: Sallie Mae Inc. , as servicer, is responsible for servicing both trusts. Fitch believes Sallie Mae is an acceptable servicer of FFELP student loans. RATING SENSITIVITIES Since FFELP student loan ABS rely on the U.S. government to reimburse defaults, 'AAAsf' FFELP ABS ratings will likely move in tandem with the 'AAA' U.S. sovereign rating. Aside from the U.S. sovereign rating, defaults and basis risk account for the majority of the risk embedded in FFELP student loan transactions. Additional defaults and basis shock beyond Fitch's published stresses could result in future downgrades. Likewise, a buildup of credit enhancement driven by positive excess spread given favorable basis factor conditions could lead to future upgrades. Fitch has taken the following rating actions: SLM Student Loan Trust Series 2006-9: --Class A-4 note 'AAA'; Rating Watch Negative maintained; --Class A-5 note 'AAA'; Rating Watch Negative maintained; --Class A-6 note 'AAA'; Rating Watch Negative maintained; --Class B upgraded to 'Asf' from 'BBBsf'; Outlook Stable. SLM Student Loan Trust Series 2007-1: --Class A-4 note 'AAA'; Rating Watch Negative maintained; --Class A-5 note 'AAA'; Rating Watch Negative maintained; --Class A-6 note 'AAA'; Rating Watch Negative maintained; --Class B upgraded to 'Asf' from 'BBBsf'; Outlook Stable. Additional information is available at 'fitchratings.com '. Applicable Criteria and Related Research : --'Global Structured Finance Rating Criteria' dated May 24, 2013 ; --'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria' dated May 17, 2013 . Applicable Criteria and Related Research : Global Structured Finance Rating Criteria http://fitchratings.com/creditdesk/reports/ report_frame.cfm?rpt_id=708661 Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria -- Amended http://fitchratings.com/creditdesk/reports/ report_frame.cfm?rpt_id=708795 Additional Disclosure Solicitation Status http://fitchratings.com/gws/en/disclosure/ solicitation?pr_id=816353 ((Comments on this story may be sent to newsdesk@closeupmedia.com ))


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