OREANDA-NEWS. Fitch Ratings has taken the following rating actions on Brazos Higher Education Authority notes issued under the 2004 Indenture of Trust (BHEA 2004):

Brazos Higher Education Authority 2004:
--2004-1 class B-1 'AAsf'; Rating Watch Negative maintained;
--2005-1 class A-3 affirmed at 'AAAsf'; Outlook Stable;
--2005-1 class A-4 'AAAsf'; Rating Watch Negative maintained;
--2005-1 class B-1 'AAsf'; Rating Watch Negative maintained;
--2005-2 class A-10 'AAAsf'; Rating Watch Negative maintained;
--2005-2 class A-11 'AAAsf'; Rating Watch Negative maintained;
--2005-2 class A-12 'AAAsf'; Rating Watch Negative maintained;
--2005-2 class B-2 'AAsf'; Rating Watch Negative maintained;
--2005-3 class A-15 'AAAsf'; Rating Watch Negative maintained;
--2005-3 class A-16 'AAAsf'; Rating Watch Negative maintained;
--2005-3 class B-3 'AAsf'; Rating Watch Negative maintained;
--2006-1 class I-A-3 'AAAsf'; Rating Watch Negative maintained;
--2006-1 class I-B-1 'AAsf'; Rating Watch Negative maintained;
--2006-2 class I-A-9 'AAAsf'; Rating Watch Negative maintained;
--2006-2 class I-A-10 'AAAsf'; Rating Watch Negative maintained;
--2006-2 class I-A-13 affirmed at 'AAAsf'; Outlook Stable;
--2006-2 class I-A-14 affirmed at 'AAAsf'; Outlook Stable;
--2006-2 class I-A-15 affirmed at 'AAAsf'; Outlook Stable;
--2006-2 class I-B-2 'AAsf'; Rating Watch Negative maintained;
--2007-1 class I-A-1 affirmed at 'AAAsf'; Outlook Stable;
--2007-1 class I-A-2 affirmed at 'AAAsf'; Outlook Stable;
--2007-1 class I-A-3 affirmed at 'AAAsf'; Outlook Stable;
--2007-1 class I-A-4 affirmed at 'AAAsf'; Outlook Stable;
--2007-1 class I-A-5 affirmed at 'AAAsf'; Outlook Stable;
--2007-1 class I-B-1 'AAsf'; Rating Watch Negative maintained.

KEY RATING DRIVERS
Maturity Risk: On Dec. 18, 2015, certain senior class A notes, currently rated 'AAAsf' and subordinate class B notes, currently rated 'AAsf', were placed on Rating Watch Negative based on the heightened risk of these notes missing their legal final maturities, which would result in an event of default. In an event of such technical default, Fitch would expect ultimate repayment of full principal and interest after the legal final. Fitch expects to resolve the Rating Watch Negative status once its revised FFELP criteria report is published. The magnitude of any potential rating action could vary depending on remaining time to maturity, recent payment trends, issuer actions such as loan purchases, or other external factors.

Collateral Quality: The collateral consists of 100% 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. The current U.S. sovereign rating is 'AAA' with a Stable Outlook.

Credit Enhancement (CE): CE is provided by excess spread and overcollateralization. Parity levels continue to improve, and as of Nov. 30, 2015 was 106.88% (6.44% CE) and 124.15% (19.45% CE) for total and senior parity respectively. Additionally, the class A notes benefit from subordination provided by the class B notes. Excess spread can only be released upon rating confirmation even if the parity thresholds of 101% total parity and 109% senior parity have been met.

Liquidity Support: Liquidity support is provided by a reserve account sized at the greater of 0.75% of the outstanding principal amount of the bonds and $20,059,485.

Servicing Capabilities: The loans are serviced by Xerox Education Services Inc., Great Lakes Education Loan Services Inc., Navient LLC (formerly Sallie Mae Servicing), Nelnet Inc., Pennsylvania Higher Education Assistance Agency and Student Assistance Foundation which in Fitch's opinion are acceptable servicers.

On Nov. 18, 2015, Fitch released its exposure draft which delineates revisions it plans to make to the 'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria', dated June 23, 2014. Fitch has reviewed this transaction under both the existing and proposed criteria.

RATING SENSITIVITIES
Since the FFELP student loan ABS relies 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, basis risk, and loan extension risk account for the majority of the risk embedded in FFELP student loan transactions. Additional defaults, basis shock beyond Fitch's published stresses, lower than expected payment speed, and other factors could result in future downgrades. Likewise, a build-up of CE 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.