Fitch Ratings has downgraded the Navient Student Loan Trust (Navient) 2015-2 class B notes.
The Rating Outlook is Negative.
Fitch has also affirmed Navient 2015-2 class A-3, Navient 2015-3 classes A-2 and B, Navient 2016-2 class A-3, Navient 2016-3 class A-3, Navient 2017-5 class A and Navient 2018-3 class A-3. The Outlook for Navient 2016-3 class A-3 and Navient 2018-3 class A-3 is Stable. The Outlooks for the rest of the affirmed classes are Negative.
RATING ACTIONS
Entity / Debt
Rating
Prior
Navient Student Loan Trust 2017-5
A 63940CAA2
LT
AA+sf
Affirmed
AA+sf
Navient Student Loan Trust 2018-3
A-3 63940TAC1
LT
AA+sf
Affirmed
AA+sf
Navient Student Loan Trust 2016-2
A-3 63940FAC1
LT
AA+sf
Affirmed
AA+sf
Navient Student Loan Trust 2015-3
A-2 63939LAB3
LT
AA+sf
Affirmed
AA+sf
B 63939LAC1
LT
Asf
Affirmed
Asf
Navient Student Loan Trust 2016-3
Page
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VIEW ADDITIONAL RATING DETAILS
Transaction Summary
Navient 2015-2
The class A-3 notes pass credit stresses up to 'AAsf' and maturity stresses up to 'AAsf'. The model-implied rating is 'AAsf'. The legal final maturity date is Nov. 26, 2040, which is over 15 years away; however, the notes are sensitive to weighted average remaining term in cashflow modeling. This metric has been increasing since 2017 and increased 20 months since the prior review, up to 182.99 months, compared to a 12 month increase the prior review. Fitch has affirmed the class A-3 notes at 'AAsf' in line with the MIR. The Outlook is Negative, which reflects this sensitivity and the recent increases in remaining term, which Fitch believes will continue.
The class B notes pass credit stresses up to 'BBBsf' and all maturity stresses. The model-implied rating is 'BBBsf', which is lower than at the last review and driven by higher interest rate scenarios that affect excess spread. The legal final maturity date is Aug. 25, 2050, which is over 25 years away. Fitch has downgraded the class B notes to 'Asf' from 'AAsf' as performance has been deteriorating. Principal shortfalls at higher rating categories with high interest rate stresses increased since the prior review in Fitch's cash modeling. Fitch's Federal Family Education Loan Program (FFELP) rating criteria allows for a rating tolerance of up to one rating category from the credit stress scenario. The Outlook is Negative.
Navient 2015-3
The class A-2 notes pass credit stresses up to 'Asf' and all maturity stresses. The model-implied rating is 'Asf'. The legal final maturity date is June 26, 2056, which is over 30 years away. The notes are sensitive to remaining term, which increased 11 months since the prior review, up to 200 months. Fitch has affirmed the class A-2 notes at 'AA+sf' and revised the Outlook to Negative from Stable. The notes remain one category above their model-implied rating from the credit stress scenario, as permitted by Fitch's FFELP criteria.
The class B notes pass credit stresses up to 'BBBsf' and all maturity stresses. The model-implied rating is 'BBBsf' for similar factors as 2015-2; however, Fitch views the magnitude of interest rate shortfalls as less material. The legal final maturity date is Oct. 25, 2058, which is over 30 years away. Fitch has affirmed the class B notes at 'Asf'. Fitch's FFELP rating criteria allows for a rating tolerance of up to one rating category from the credit stress scenario. The Outlook is Negative.
Navient 2016-2
The class A-3 notes pass credit stresses up to 'Asf' and maturity stresses up to 'AAsf'. The model-implied rating is 'Asf', driven by higher interest rate scenarios in cashflow modeling. The legal final maturity date is June 25, 2065, which is over 40 years away. The notes are sensitive to remaining term, which increased 14 months since the prior review, up to 197.48 months. Fitch has affirmed the class A-3 notes at 'AA+sf' and revised the Outlook to Negative from Stable. The notes remain one category above their model-implied rating from the credit stress scenario, as permitted by Fitch's FFELP criteria.
Navient 2016-3
The class A-3 notes pass credit stresses up to 'AAsf' and maturity stresses up to 'AA+sf'. The model-implied rating is 'AAsf'. The legal final maturity date is June 25, 2065, which is over 40 years away. Performance has deteriorated since the prior review, as the notes previously passed all credit and maturity stresses. The notes have increased sensitivity to remaining term, which increased 12 months since the prior review, up to 193.75 months. Fitch has affirmed the class A-3 notes at 'AA+sf'. The Outlook remains Stable. The notes are one notch above their model-implied rating, as permitted by Fitch's FFELP criteria.
Navient 2017-5
The class A notes pass credit stresses up to 'Asf' and maturity stresses up to 'AA+sf'. The model-implied rating is 'Asf'. The legal final maturity date is July 26, 2066, which is over 40 years away. The notes are sensitive to remaining term, which has increased 11 months since the prior review, up to 206.62 months. Fitch has affirmed the class A notes at 'AA+sf' and revised the Outlook to Negative from Stable. The notes remain one category above their model-implied rating from the credit stress scenario, as permitted by Fitch's FFELP criteria
Navient 2018-3
The class A-3 notes pass credit stresses up to 'AAsf' and maturity stresses up to 'AA+sf'. The model-implied rating is 'AAsf'. The legal final maturity date is March 26, 2067, which is over 40 years away. The notes are sensitive to remaining term, which has increased nine months since the prior review, up to 189.08 months. Fitch has affirmed the class A-3 notes at 'AA+sf' and revised the Outlook to Negative from Stable. The notes remain one category above their model-implied rating, as permitted by Fitch's FFELP criteria.
KEY RATING DRIVERS
U.S. Sovereign Risk: The trust collateral comprises 100% FFELP loans with guaranties provided by eligible guarantors and reinsurance provided by the U.S. Department of Education (ED) for at least 97% of principal and accrued interest. The U.S. sovereign rating is currently 'AA+'/Stable.
Collateral Performance: For all transactions, Fitch applied the standard default timing curve in its credit stress cash flow analysis. Additionally, consolidation from the Public Service Loan Forgiveness Program, which ended in October 2022, drove the short-term inflation of the conditional prepayment rate (CPR). Further increases are likely in the short term as borrowers are afforded special provisions if they consolidate into the Federal Direct loan program before the end of June. However, we expect voluntary prepayments to return to historical levels and so sustainable CPR (sCPR; voluntary and involuntary prepayments) have not been adjusted for this, but where adjusted reflect increased to sustainable CDR (sCDR). The claim reject rate is assumed to be 0.25% in the base case and 1.65% in the 'AA' case for all transactions.
Navient 2015-2: Based on transaction-specific performance to date, Fitch assumes a cumulative default rate of 44.00% under the base case scenario and a default rate of 100% under the 'AA+' credit stress scenario, with an effective default rate of 99.83% after applying the default curve, as per criteria. Fitch is revising the sCDR upwards to 6.00% from 4.75%, as the trend in defaults has increased, and revising the sCPR to 12.0% from 10.50% in cash flow modelling. Fitch applies the standard default timing curve in its credit stress cash flow analysis.
The TTM levels of deferment, forbearance and IBR are 5.63% (5.66% at Apr 31, 2023), 18.33% (18.98%) and 27.21% (23.47%). These assumptions are used as the starting point in cash flow modelling, and subsequent declines or increases are modelled as per criteria. The 31-60 DPD have decreased and the 91-120 DPD have decreased from April, 2023 and are currently 5.17% for 31 DPD and 1.97% for 91 DPD compared to 6.67% and 2.89% for 31 DPD and 91 DPD, respectively. The borrower benefit is approximately 0.05%, based on information provided by the sponsor.
Navient 2015-3: Based on transaction-specific performance to date, Fitch assumes a cumulative default rate of 45.25% under the base case scenario and a default rate of 100% under the 'AA+' credit stress scenario, with an effective default rate of 99.80% after applying the default curve, as per criteria. Fitch is revising the sCDR upwards to 6.00% from 4.80%, as the trend in defaults has increased, and revising the sCPR to 11.0% from 9.50% in cash flow modelling.
The TTM levels of deferment, forbearance and IBR are 4.47% (4.48% at Apr 31, 2023), 19.66% (19.43%) and 24.89% (21.83%). These assumptions are used as the starting point in cash flow modelling, and subsequent declines or increases are modelled as per criteria. The 31-60 DPD have decreased and the 91-120 DPD have increases from April, 2023 and are currently 4.67% for 31 DPD and 2.41% for 91 DPD compared to 5.77% and 2.32% for 31 DPD and 91 DPD, respectively. The borrower benefit is approximately 0.04%, based on information provided by the sponsor.
Navient 2016-2: Based on transaction-specific performance to date, Fitch assumes a cumulative default rate of 45.25% under the base case scenario and a default rate of 100% under the 'AA+' credit stress scenario, with an effective default rate of 99.18% after applying the default curve, as per criteria. Fitch is maintaining the sCDR at 5.00%, and the sCPR at 9.00% in cash flow modelling.
The TTM levels of deferment, forbearance and IBR are 4.41% (4.58% at Apr 31, 2023), 18.01% (8.12%) and 23.93% (21.44%). These assumptions are used as the starting point in cash flow modelling, and subsequent declines or increases are modelled as per criteria. The 31-60 DPD have decreased and the 91-120 DPD have decreased from Aprrl, 2023 and are currently 4.96% for 31 DPD and 2.10% for 91 DPD compared to 5.27% and 2.41% for 31 DPD and 91 DPD, respectively. The borrower benefit is approximately 0.07%, based on information provided by the sponsor.
Navient 2016-3: Based on transaction-specific performance to date, Fitch assumes a cumulative default rate of 14.25% under the base case scenario and a default rate of 100% under the 'AA+' credit stress scenario, with an effective default rate of 99.26% after applying the default curve, as per criteria. Fitch is maintaining the sCDR of 6.5% and the sCPR of 12.00% in cash flow modeling. Fitch applies the standard default timing curve in its credit stress cash flow analysis.
The TTM levels of deferment, forbearance and IBR are 4.79% (4.87% at Apr 31, 2023), 14.07% (14.08%) and 33.24% (31.36%). These assumptions are used as the starting point in cash flow modelling, and subsequent declines or increases are modelled as per criteria. The 31-60 DPD have Increased and the 91-120 DPD have decreased from April, 2023 and are currently 4.24% for 31 DPD and 1.49% for 91 DPD compared to 3.87% and 1.56% for 31 DPD and 91 DPD, respectively. The borrower benefit is approximately 0.08%, based on information provided by the sponsor.
Navient 2017-5: Based on transaction-specific performance to date, Fitch assumes a cumulative default rate of 36.25% under the base case scenario and a default rate of 99.47% under the 'AA+' credit stress scenario, with an effective default rate of 99.37% after applying the default curve, as per criteria. Fitch is maintaining the sCDR of 5.0% and the sCPR of 119.00% in cash flow modeling. Fitch applies the standard default timing curve in its credit stress cash flow analysis.
The TTM levels of deferment, forbearance and IBR are 4.78% (4.80% at April 31, 2023), 17.15% (17.05%) and 27.09% (24.59%). These assumptions are used as the starting point in cash flow modelling, and subsequent declines or increases are modelled as per criteria. The 31-60 DPD have decreased and the 91-120 DPD have decreased from April, 2023 and are currently 4.31% for 31 DPD and 1.47% for 91 DPD compared to 4.60% and 1.60% for 31 DPD and 91 DPD, respectively. The borrower benefit is approximately 0.06%, based on information provided by the sponsor.
Navient 2018-3: Based on transaction-specific performance to date, Fitch assumes a cumulative default rate of 37.75% under the base case scenario and a default rate of 100% under the 'AA+' credit stress scenario, with an effective default rate of 98.86% after applying the default curve, as per criteria Fitch is maintaining the sCDR of 5.00% and the sCPR of 9.50% in cash flow modeling. Fitch applies the standard default timing curve in its credit stress cash flow analysis.
The TTM levels of deferment, forbearance and IBR are 4.68% (4.59% at Apr 31, 2023), 15.57% (15.48%) and 25.16% (22.09%). These assumptions are used as the starting point in cash flow modelling, and subsequent declines or increases are modelled as per criteria. The 31-60 DPD have decreased and the 91-120 DPD have increased from April, 2023 and are currently 4.31 % for 31 DPD and 1.96% for 91 DPD compared to 4.80% and 1.82% for 31 DPD and 91 DPD, respectively. The borrower benefit is approximately 0.11%, based on information provided by the sponsor.
Basis and Interest Rate Risk: Basis risk for these transactions arises from any rate and reset frequency mismatch between interest rate indices for Special Allowance Payments (SAP) and the securities. As of the most recent distribution date, approximately 97.7%, 87.8%, 94.6%, 92.0%, 89.9% and 91.5% of the student loans from Navient 2015-2, 2015-3, 2016-2, 2016-3, 2017-5 and 2018-3, respectively are indexed to SOFR, and the rest are indexed to the 91-day T-bill rate. All notes are indexed to one-month SOFR. Fitch applies its standard basis and interest rate stresses to these transactions as per criteria.
Payment Structure: Credit enhancement (CE) is provided by overcollateralization (OC), excess spread and for the class A notes on Navient 2015-2 and 2015-3, subordination provided by class B notes. As of the most recent distribution date, Fitch's senior parity ratios are 101.00%, 101.44%, 105.82%, 107.15%, 104.92% and 104.51% for Navient 2015-2, 2015-3, 2016-2, 2016-3, 2017-5 and 2018-3, respectively. Liquidity support is provided by reserve funds currently sized at $1,000,039, $752,636, $510,251, $7670082, $1,477,719.77 and $1,591,659.43 for Navient 2015-2, 2015-3, 2016-2, 2016-3, 2017-5 and 2018-3 respectively.
Operational Capabilities: Day-to-day servicing is provided by Navient Solutions, LLC. Fitch believes Navient to be an adequate servicer, due to its extensive track record as the largest servicer of FFELP loans. Fitch was notified that Navient entered into a binding letter of intent on Jan. 29, 2024 that will transition the student loan servicing to MOHELA, a student loan servicer for government and commercial enterprises. The transition to MOHELA is not expected to interrupt servicing activities.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
'AA+sf' rated tranches of most FFELP securitizations will likely move in tandem with the U.S. sovereign rating given the strong linkage to the U.S. sovereign, by nature of the reinsurance provided by the Department of Education. 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.
This section provides insight into the model-implied sensitivities the transaction faces when one assumption is modified, while holding others equal. Fitch conducts credit and maturity stress sensitivity analysis by increasing or decreasing key assumptions by 25% and 50% over the base case. The credit stress sensitivity is viewed by stressing both the base case default rate and the basis spread. The maturity stress sensitivity is viewed by stressing remaining term, IBR usage and prepayments. The results below should only be considered as one potential outcome, as the transactions are exposed to multiple dynamic risk factors and should not be used as an indicator of possible future performance.
Navient Student Loan Trust 2015-2
Current Ratings: class A-3 'AAsf'; class B 'Asf'
Current Model-Implied Ratings: class A-3 'AAsf' (Credit Stress) / 'AAsf' (Maturity Stress); class B 'BBBsf' (Credit Stress) / 'AA+sf' (Maturity Stress)
Credit Stress Rating Sensitivity
Default increase 25%: class A 'AAsf'; class B 'BBBsf';
Default increase 50%: class A 'AAsf'; class B 'BBsf';
Basis spread increase 0.25%: class A 'AAsf'; class B 'BBBsf';
Basis spread increase 0.50%: class A 'Asf'; class B 'BBBsf'.
Maturity Stress Rating Sensitivity
CPR decrease 25%: class A 'BBsf'; class B 'Asf';
CPR decrease 50%: class A 'CCCsf'; class B 'Asf';
IBR usage increase 25%: class A 'AAsf'; class B 'Asf';
IBR usage increase 50%: class A 'Asf'; class B 'Asf';
Remaining term increase 25%: class A 'Asf'; class B 'Asf';
Remaining term increase 50%: class A 'BBsf'; class B 'Asf'
Navient Student Loan Trust 2015-3
Current Ratings: class A-3 'AA+sf'; class B 'Asf'
Current Model-Implied Ratings: class A-3 'Asf' (Credit Stress) / 'AA+sf' (Maturity Stress); class B 'BBBsf' (Credit Stress) / 'AA+sf' (Maturity Stress)
Credit Stress Rating Sensitivity
Default increase 25%: class A 'AA+sf'; class B 'BBBsf';
Default increase 50%: class A ' AA+sf'; class B 'BBsf';
Basis spread increase 0.25%: class A 'AA+sf'; class B 'BBBsf';
Basis spread increase 0.50%: class A 'AA+sf'; class B 'BBsf'.
Maturity Stress Rating Sensitivity
CPR decrease 25%: class A 'AA+sf'; class B 'Asf';
CPR decrease 50%: class A 'AA+sf'; class B 'Asf';
IBR usage increase 25%: class A 'AA+sf'; class B 'Asf';
IBR usage increase 50%: class A 'AA+sf'; class B 'Asf';
Remaining term increase 25%: class A 'AA+sf'; class B 'Asf';
Remaining term increase 50%: class A 'AA+sf'; class B 'Asf'
Navient Student Loan Trust 2016-2
Current Ratings: class A 'AA+sf'
Current Model-Implied Ratings: class A 'Asf' (Credit Stress) / 'AA+sf' (Maturity Stress);
Credit Stress Rating Sensitivity
Default increase 25%: class A 'Asf';
Default increase 50%: class A 'Asf';
Basis spread increase 0.25%: class A 'Asf';
Basis spread increase 0.50%: class A 'Asf'.
Maturity Stress Rating Sensitivity
CPR decrease 25%: class A 'AAsf';
CPR decrease 50%: class A 'AAsf';
IBR usage increase 25%: class A 'AAsf';
IBR usage increase 50%: class A 'AAsf';
Remaining term increase 25%: class A 'AAsf';
Remaining term increase 50%: class A 'AAsf'.
Navient Student Loan Trust 2016-3
Current Ratings: class A 'AA+sf'
Current Model-Implied Ratings: class A 'AAsf' (Credit Stress) / 'AA+sf' (Maturity Stress);
Credit Stress Rating Sensitivity
Default increase 25%: class A 'AAsf';
Default increase 50%: class A 'AAsf';
Basis spread increase 0.25%: class A 'Asf';
Basis spread increase 0.50%: class A 'Asf'.
Maturity Stress Rating Sensitivity
CPR decrease 25%: class A 'AA+sf';
CPR decrease 50%: class A 'AA+sf';
IBR usage increase 25%: class A 'AA+sf';
IBR usage increase 50%: class A 'AA+sf';
Remaining term increase 25%: class A 'AA+sf';
Remaining term increase 50%: class A 'AA+sf'.
Navient Student Loan Trust 2017-5
Current Ratings: class A 'AA+sf'
Current Model-Implied Ratings: class A 'Asf' (Credit Stress) / 'AA+sf' (Maturity Stress);
Credit Stress Rating Sensitivity
Default increase 25%: class A 'BBsf';
Default increase 50%: class A 'BBsf';
Basis spread increase 0.25%: class A 'BBBsf';
Basis spread increase 0.50%: class A 'BBBsf'.
Maturity Stress Rating Sensitivity
CPR decrease 25%: class A 'AAsf';
CPR decrease 50%: class A 'BBBsf';
IBR usage increase 25%: class A 'AA+sf';
IBR usage increase 50%: class A 'AA+sf';
Remaining term increase 25%: class A 'AA+sf';
Remaining term increase 50%: class A 'AA+sf'.
Navient Student Loan Trust 2018-3
Current Ratings: class A 'AA+sf'
Current Model-Implied Ratings: class A 'AAsf' (Credit Stress) / 'AA+sf' (Maturity Stress);
Credit Stress Rating Sensitivity
Default increase 25%: class A 'AAsf';
Default increase 50%: class A 'AAsf';
Basis spread increase 0.25%: class A 'AAsf';
Basis spread increase 0.50%: class A 'Asf'.
Maturity Stress Rating Sensitivity
CPR decrease 25%: class A 'AA+sf';
CPR decrease 50%: class A 'AA+sf';
IBR usage increase 25%: class A 'AA+sf';
IBR usage increase 50%: class A 'AA+sf';
Remaining term increase 25%: class A 'AA+sf';
Remaining term increase 50%: class A 'AA+sf'.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
Navient Student Loan Trust 2015-2
Credit Stress Sensitivity
Default decrease 25%: class A 'AA+sf'; class B 'AAsf'
Basis Spread decrease 0.25%: class A 'AA+sf'; class B 'Asf'
Maturity Stress Sensitivity
CPR increase 25%: class A 'AA+sf'; class B 'AA+sf'
IBR usage decrease 25%: class A 'AAsf'; class B 'AA+sf'
Remaining Term decrease 25%: class A 'AA+sf'; class B 'AA+sf'.
Navient Student Loan Trust 2015-3
No upgrade credit or maturity stress sensitivity is provided for the class A notes, as they are at their highest possible current and model-implied ratings.
Credit Stress Sensitivity
Default decrease 25%: class B 'AAsf'
Basis Spread decrease 0.25%: class B 'BBBsf'
Maturity Stress Sensitivity
CPR increase 25%: class B 'AA+sf'
IBR usage decrease 25%: class B 'AA+sf'
Remaining Term decrease 25%: class B 'AA+sf'.
Navient Student Loan Trust 2016-2
No upgrade credit or maturity stress sensitivity is provided for the class A notes, as they are at their highest possible current and model-implied ratings.
Navient Student Loan Trust 2016-3
No upgrade credit or maturity stress sensitivity is provided for the class A notes, as they are at their highest possible current and model-implied ratings.
Navient Student Loan Trust 2017-5
No upgrade credit or maturity stress sensitivity is provided for the class A notes, as they are at their highest possible current and model-implied ratings.
Navient Student Loan Trust 2018-3
No upgrade credit or maturity stress sensitivity is provided for the class A notes, as they are at their highest possible current and model-implied ratings.
CRITERIA VARIATION
No variations from criteria at this time.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
Additional information is available on www.fitchratings.com
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