Fitch: U.S. Private Student Loan ABS Exhibiting Recession Strains

NEW YORK--(Business Wire)--
Performance for U.S. private student loan ABS is under increased pressure as the
economic crisis weighs heavily on borrowers and co-borrowers, according to Fitch
Ratings.

Student loan borrowers are graduating into a dreadful job market and
co-borrowers are not immune to the wave of unemployment filings. In addition,
the ability to refinance private student loans using home equity in an effort to
avoid default has become difficult for parental co-borrowers in light of
severely declining house values and credit availability.

'The host of pressures including high unemployment, escalating tuition and rapid
declines in co-borrower net worth is resulting in a more immediate impact on
private student loan ABS performance than previously observed,' said Managing
Director Mike Dean. 'In addition, negative student loan performance
traditionally lagged economic recessions by a significant margin as students
have either not yet matriculated or opted to pursue advanced degrees instead of
joining the workforce. Fitch has noted that this lag is shrinking in the current
economic crisis.'

Fitch anticipates that rising unemployment will continue to have a worsening
affect on private student loan performance through 2009 and well into 2010. 'The
ability of the private student loan borrower and in most cases, the co-borrower
to obtain and maintain employment is a key determinant of whether the loan will
be repaid in full,' said Senior Director Andrea Murad. 'With many forecasting
unemployment levels increasing to 9 or 10%, financial burdens on borrowers will
only increase.'

Fitch has noted that certain private student loan trusts are projecting losses
that are 1.5 to two times initial expectations. Trusts from the 2006 to 2008
vintages and those with higher concentrations of 'direct to consumer' or DTC
loans are experiencing the greatest variability in performance. Virtually all
issuers have experienced substantially higher losses and lower recoveries on
loans disbursed directly to the borrower as opposed to through school channels.

Although private student loan trust collateral is generally expected to perform
worse than initially anticipated, this has not resulted in negative rating
actions for all issuers. In particular the Sallie Mae and Student Loan Corp
securitizations are tracking closest to Fitch's expectations and are still able
to generate sufficient excess spread to cover losses limiting the likelihood of
negative rating actions over the near to mid-term.

Fitch has a Negative Rating Outlook on the private student loan ABS sector. Over
the past 12 months, Fitch has downgraded 26 tranches from 7 deals, with 98
tranches remaining on Rating Watch Negative.

Fitch's rating definitions and the terms of use of such ratings are available on
the agency's public site, www.fitchratings.com. Published ratings, criteria and
methodologies are available from this site, at all times. Fitch's code of
conduct, confidentiality, conflicts of interest, affiliate firewall, compliance
and other relevant policies and procedures are also available from the 'Code of
Conduct' section of this site.

Fitch Ratings, New York
Mike Dean, +1-212-908-0556
Andrea Murad, +1-212-908-0896
Sandro Scenga, +1-212-908-0278 (Media Relations)
sandro.scenga@fitchratings.com

Copyright Business Wire 2009