OREANDA-NEWS. Fitch Ratings has affirmed the senior notes issued by South Texas Higher Education Authority 2012-1 (STHEA 2012-1) at 'AAAsf'. The Rating Outlook remains Stable for all classes.

KEY RATING DRIVERS

High Collateral Quality: The trust collateral consists of 100% of Federal Family Education Loan Program (FFELP) loans which includes approx. 16% rehabilitated loans. The credit quality of the trust 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. The Stable Outlook on the notes is consistent with Fitch's affirmation of the U.S. sovereign rating at 'AAA' with a Stable Outlook.

Sufficient Credit Enhancement: CE is provided by overcollateralization (OC; the excess of trust's asset balance over bond balance) and excess spread. Parity for class A notes is at 109.79% as of August 2015 collection period. This trust is currently in turbo; no excess cash can be released until all notes are paid in full.

Adequate Liquidity Support: Liquidity support for the notes is provided by a reserve account currently at $918,465.

Acceptable Servicing Capabilities: XES is responsible for day-to-day servicing of the trust. Fitch believes XES is an acceptable servicer of FFELP student loans.

Fitch reviewed STHEA 2012-1 using its existing and proposed FFELP ABS criteria as listed below.

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 affirmed the following ratings:

South Texas Higher Education Authority 2012-1
--Class A-1 note at AAAsf; Outlook Stable;
--Class A-2 note at AAAsf; Outlook Stable;
--Class A-3 note at AAAsf; Outlook Stable.