Fitch Affirms SLM 2004-6 and SLM 2004-7; Revises Outlook on Class B Notes to Negative

OREANDA-NEWS. Fitch Ratings has affirmed the SLM Student Loan Trust 2004-6 and SLM Student Loan Trust 2004-7 senior and subordinate notes at 'AAAsf'. The Rating Outlook on the class B notes of both trusts has been revised to Negative from Stable.

The Outlook revision is due to Fitch's belief that the class B notes of both trusts carry a heightened level of extension risk. Based on Fitch's cash flow modelling runs, the notes were not paid in full by their legal final maturity date of April 25, 2025 in a stressed scenario. Under such scenarios, this may result in technical defaults, although Fitch would expect ultimate repayment of full principal and interest afterwards.

A full list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

High Collateral Quality: The trusts' collateral are comprised of 100% 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% of principal and accrued interest. Fitch currently rates the U.S. sovereign at 'AAA' with a Stable Outlook.

Sufficient Credit Enhancement: Credit Enhancement is provided by excess spread and for the class A notes, subordination of the class B notes. As of June 2015, total and senior parity ratios are 104.53% (4.34% CE) and 211.64% (52.75% CE) for SLM 2004-6; 104.24% (4.07% CE) and 214.45% (53.37% CE) for SLM 2004-7. Given that the reserve is excluded from parity calculations since pool factors are below 40%, total effective parity ratios for the SLM 2004-6 and SLM 2004-7 trusts are 106.20% and 105.95%, respectively.

The trusts are in turbo and no cash will be released until all notes have been paid in full.

Adequate Liquidity Support: Liquidity support is provided by reserve accounts sized at $3,000,577 and $1,500,060 for the SLM 2004-6 and SLM 2004-7 trusts, respectively.

Acceptable Servicing Capabilities: Day to day servicing is provided by Navient Solutions, Inc. (formerly known as Sallie Mae, Inc.), In Fitch's opinion, Navient 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.

DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action

Fitch has taken the following rating actions:

SLM Student Loan Trust 2004-6:
--Class A-5 notes affirmed at 'AAAsf; Outlook Stable;
--Class B notes affirmed at 'AAAsf'; Outlook to Negative from Stable.

SLM Student Loan Trust 2004-7:
--Class A-5 notes affirmed at 'AAAsf; Outlook Stable;
--Class B notes at affirmed 'AAAsf'; Outlook to Negative from Outlook Stable.