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Fitch Rates Edsouth Indenture No. 5, Series 2014-1 (EDUSA 2014-1)

February 15, 2014

Fitch Ratings, on February 4, assigns the following ratings for two classes of EDUSA 2014-1 notes issued by Edsouth Indenture No. 5, pursuant to a discrete indenture dated January 15,:

--$197,000,000 floating rate class A notes 'AAAsf'; Rating Watch Negative;

--$4,000,000 fixed rate class B notes 'Asf'; Outlook Stable.

Key Rating Drivers

High Collateral Quality: The trust collateral is comprised entirely of student loans originated under Federal Family Education Loan Program (FFELP). Although the trust consists of approximately 100 percent of Rehabilitated FFELP Loans, the credit quality of the trust collateral is high, in Fitch's opinion, based on the guarantees provided by the transaction's eligible guarantors and at least 97 percent reinsurance of principal and accrued interest provided by the U.S. Department of Education (ED).

Rating Watch Negative Assigned: 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 (CE): Credit enhancement is provided by approximately $3,546,573 of overcollateralization (OC) and excess spread. At closing, a senior parity of 103.83 percent and total parity of 101.76 percent is expected. Cash may be released to the issuer when the Target OC, equal to the greater of 2.25 percent of the adjusted pool balance or $3,500,000, has been reached. Fitch reviewed transaction cash flows that were stressed at a level commensurate with Fitch's 'AAAsf' rating categories for the senior notes and 'Asf' for the subordinate notes. The cash flow results were satisfactory under corresponding stress scenarios for the senior and subordinate classes of notes.

Adequate Liquidity Support: Liquidity support for the EDUSA 2014- 1 notes is provided by a $4.5 million capitalized interest fund and a $502,500 reserve fund, with a debt service reserve fund requirement equal to the greater of 0.25 percent of the aggregate outstanding note balance and 0.10 percent of the initial aggregate note balance, each funded at closing with note proceeds. The capitalized interest fund balance will step down to $3 million on the January 2015 distribution date and any remaining funds will be disbursed as available funds on the January 2016 distribution date.

Acceptable Servicing Capabilities: Educational Services of America, Inc. (EdsouthServices) will be the master servicer. Pennsylvania Higher Education Assistance Agency (PHEAA; 46.4 percent), Great Lakes Education Loan Services, Inc. (GLELSI; 41 percent) and Georgia Student Finance Authority (Georgia; 12.6 percent) are the servicers. PHEAA will also be back-up servicer for Georgia. Fitch has reviewed the servicing operations of each servicer and believes them to be acceptable servicers 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.

Key Rating Drivers and Rating Sensitivities are further described in the pre-sale report titled 'Edsouth Indenture No. 5, Series 2014- 1', dated January 29, available on fitchratings.com.

Additional information is available at 'fitchratings.com'.

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (May 24, 2013);

--'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria' (May 17, 2013);

--'Edsouth Indenture No. 5, Series 2014-1' (January 29).

Applicable Criteria and Related Research:

Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria -- Amended

http://fitchratings.com/creditdesk/reports/ report_frame.cfm?rpt_id=708795

Edsouth Indenture No. 5, Series 2014-1 (US ABS)

http://fitchratings.com/creditdesk/reports/ report_frame.cfm?rpt_id=732565

Edsouth Indenture No. 5, Series 2014-1 -- Appendix

http://fitchratings.com/creditdesk/reports/ report_frame.cfm?rpt_id=732955

Global Structured Finance Rating Criteria

http://fitchratings.com/creditdesk/reports/ report_frame.cfm?rpt_id=708661

Additional Disclosure

Solicitation Status

http://fitchratings.com/gws/en/disclosure/ solicitation?pr_id=819489

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