News Column

Fitch Affirms Iowa Student Loan Liquidity Corp's Series 2005-1 Ratings

February 28, 2014

Fitch Ratings maintains the Rating Watch Negative on the senior notes currently rated 'AAAsf' and affirms the subordinate note at 'A+sf', Outlook Stable issued by Iowa Student Loan Liquidity Corp. (Iowa Student Loan) Series 2005-1.

High Collateral Quality:

The collateral consists of 100 percent of Federal Family Education Loan Program (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 reinsurance provided by the U.S. Department of Education (ED) for at least 97 percent of principal and accrued interest.

Rating Watch Maintained: 'AAAsf' rated tranches of U.S. FFELP student loan ABS are maintained on Rating Watch Negative following the revision of the U.S. sovereign rating on Oct. 15, 2013

Sufficient Credit Enhancement (CE):

While both the senior and subordinate notes will benefit from overcollateralization (OC; the excess of trust's asset balance over bond balance) and excess spread, the senior notes also benefit from subordination provided by the class B note. As of September 2013, total parity is 101.27 percent (1.24 percent CE) and senior parity is 118.57 percent (15.66 percent CE). Although total parity is 101.27 percent, Fitch only gives credit to the 100.50 percent cash release level.

Adequate Liquidity Support:

Liquidity support is provided by a debt service reserve fund sized at the greater of 0.50 percent of the pool balance and $1,014,938.

Acceptable Servicing Capabilities:

As of Jan. 1, servicing for the Iowa Student Loan (ISL) 2005-1 trust was transferred to ISL's subsidiary, Aspire Resources, Inc. Although Fitch does not rate Aspire Resources, Inc., Fitch believes this subsidiary of ISLLC 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:

ISL Student Loan Trust 2005-1

--Senior Class A-2 at 'AAAsf'; Rating Watch Negative maintained;

--Senior Class A-3 at 'AAAsf'; Rating Watch Negative maintained;

--Subordinate Class B affirmed at 'A+sf'; Outlook Stable.

Additional information is available at 'fitchratings.com'.

Applicable Criteria and Related Research:

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

Applicable Criteria and Related Research:

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=820547

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