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Fitch Affirms U.S. Education Loan Trust IV, LLC - March 1, 2006 Indenture of Trust; Outlook Negative

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings affirms the senior and subordinate student loan notes issued by U.S. Education Loan Trust IV, LLC - March 1, 2006 Indenture of Trust at 'AAAsf' and 'Bsf' respectively.

Although the trust has continued to build senior and total parity since the beginning of 2011 due to redemption of notes at a discount, uncertainty remains due to ongoing litigation pertaining to net loan rate calculations from 2010 through 2012. Because of this, rating Outlooks for all notes have been revised to Negative from Stable to account for the potential negative impact to the trust from the litigation.

KEY RATING DRIVERS

Collateral Quality: The trust 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. Fitch currently rates the U.S. 'AAA' with a Stable Outlook.

Credit Enhancement: Credit enhancement (CE) is provided by overcollateralization (OC; the excess of trust's asset balance over bond balance), excess spread, and for the senior notes, subordination provided by the subordinate notes. As of March 2014, senior and total parities are 113.07% and 102.91% respectively, and the trust can release cash as long as the 106.00% and 101.00% senior and total parity levels, respectively, are maintained.

Liquidity Support: Liquidity support is provided by a debt service reserve fund sized at the 1% of the outstanding bond balance. The debt service reserve fund is sized at $ $13,583,530 as of March 2014.

Servicing Capabilities: Pennsylvania Higher Education Assistance Agency, Navient Servicing Inc, Xerox-ES, and Great Lakes Educational Loan Services, Inc. are responsible for the day-to-day servicing of the loans in the trust. In Fitch's opinion, they are an acceptable servicer of FFELP student loans.

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 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 CE driven by positive excess spread given favorable basis factor conditions could lead to future upgrades.

Fitch affirms the ratings and revises the Outlooks to Negative for the following:

U.S. Education Loan Trust IV, LLC - March 1, 2006 Indenture of Trust:

--Class 2006-1 A-2 at 'AAAsf'; Outlook to Negative from Stable;

--Class 2006-1 A-3 at 'AAAsf'; Outlook to Negative from Stable;

--Class 2006-1 A-4 at 'AAAsf'; Outlook to Negative from Stable;

--Class 2006-1 A-5 at 'AAAsf'; Outlook to Negative from Stable;

--Class 2006-1 A-6 at 'AAAsf'; Outlook to Negative from Stable;

--Class 2006-1 A-7 at 'AAAsf'; Outlook to Negative from Stable;

--Class 2006-1 A-8 at 'AAAsf'; Outlook to Negative from Stable.

--Class 2006-2 A-1 at 'AAAsf'; Outlook to Negative from Stable;

--Class 2006-2 A-2 at 'AAAsf'; Outlook to Negative from Stable;

--Class 2006-2 A-3 at 'AAAsf'; Outlook to Negative from Stable;

--Class 2006-2 A-4 at 'AAAsf'; Outlook to Negative from Stable;

--Class 2006-2 A-5 at 'AAAsf'; Outlook to Negative from Stable;

--Class 2006-2 A-6 at 'AAAsf'; Outlook to Negative from Stable;

--Class 2006-2 A-7 at 'AAAsf'; Outlook to Negative from Stable;

--Class 2007-1 A-3 at 'AAAsf'; Outlook to Negative from Stable;

--Class 2007-1 A-4 at 'AAAsf'; Outlook to Negative from Stable.

--Class 2006-1 B-1 at 'Bsf'; Outlook to Negative from Stable;

--Class 2006-1 B-2 at 'Bsf'; Outlook to Negative from Stable;

--Class 2006-2 B-1 at 'Bsf'; Outlook to Negative from Stable;

--Class 2007-1 B-1 at 'Bsf'; Outlook to Negative from Stable.

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

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (May 20, 2014);

--'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria' (June 23, 2014).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748821

Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750530

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=837865

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Fitch Ratings
Primary Analyst
Harry Kohl, +1 212-908-0837
Associate Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Tracy Wan, +1 212-908-9171
Senior Director
or
Media Relations:
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com

Source: Fitch Ratings