Fitch Ratings has received requests by U.S. FFELP Student Loan ABS issuers for rating agency confirmation on the SAP index change. Consistent with its statements on policies regarding rating confirmations in structured finance transactions (Jan. 13, 2009) and student loan confirmations (May 8, 2009), Fitch is treating these requests as notifications.

The recently passed bill H.R. 2055, the consolidated omnibus spending bill, includes a provision that changes the index upon which special allowance payments (SAP) are based from 90-day 'AA' financial commercial paper rate (CP) to one-month LIBOR (1ML). The change will take effect on April 1, 2012.

In light of this change, Fitch has conducted a study of historical 1ML and CP and concluded that the change, in and of itself, will not have an impact on the ratings of existing FFELP ABS transactions.

In the study, Fitch observed that, from 1985 to 2011, the median bond equivalent rates for CP and 1ML were 5.35% and 5.32%, respectively, while the 99.9 percentiles were 10.27% and 10.13%. In terms of the spreads of 3ML - the most commonly used bond index - over CP and 1ML, the medians were 0.07% and 0.01%, and the 99.9 percentiles were 1.87% and 2.17%, respectively.

Fitch is currently in the process of updating its FFELP Student Loan ABS criteria, which will incorporate new basis risk assumptions. Consistent with the SAP change itself, the revised assumptions, which are expected to be made public at the end of this month, will not have a material impact on the existing ratings.

Additional information is available at 'www.fitchratings.com'.

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