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Eight Ratings Raised, 93 Affirmed On Seven New Jersey Higher Education Student Assistance Authority Series

  • We raised our ratings on eight bonds from New Jersey Higher Education Student Assistance Authority's 2010-1 Indenture (series 2010-1 and 2017-1) and 2012 Indenture (series 2012-1, 2013-1, 2014-1, 2015-1, and 2016-1).
  • We also affirmed our ratings on 93 bonds from New Jersey Higher Education Student Assistance Authority's 2010-1 Indenture (series 2010-1 and 2017-1) and 2012 Indenture (series 2012-1, 2013-1, 2014-1, 2015-1, and 2016-1).
  • The upgrades reflect the bonds' short-term maturities.
  • The affirmations reflect our view of the credit support, parity, and pool characteristics, among other factors.
  • The bonds are backed by a pool of private student loans made under HESAA's NJCLASS loan program.
 

NEW YORK (S&P Global Ratings) Feb. 4, 2019--S&P Global Ratings today raised 
its ratings on eight bonds from series 2010-1, 2012-1, 2013-1, 2014-1, 2015-1, 
2016-1, and 2017-1 issued by New Jersey Higher Education Student Assistance 
Authority (HESAA) out of its 2010-1 and 2012 indentures. At the same time, we 
affirmed our ratings on 93 bonds from series 2010-1, 2012-1, 2013-1, 2014-1, 
2015-1, 2016-1, and 2017-1 (see list). The bonds are backed by a pool of 
private student loans made under HESAA's NJCLASS loan program.

The upgrades reflect the expected payoff of bonds maturing within the current 
year. To ensure the full payment of the bonds' principal at their stated 
maturity dates, on each mid-year payment date, the trustee will set aside 50% 
of the principal amount due in next six months. The upgrades also reflect the 
transactions' structural features, which restrict the use of such funds for 
other purposes.

The affirmations reflect our view of each trust's collateral performance, 
which supports our initial expected cumulative default assumptions. We believe 
the credit enhancement available is sufficient to support the bonds at their 
current ratings.

The 2010-1 and 2012 trusts have both senior and subordinate bonds that pay 
interest semi-annually. The bonds are subject to various redemption 
provisions, including optional redemption, mandatory redemption resulting from 
non-origination, special optional redemption, and special mandatory redemption 
from excess revenues.

PARITY
The increase in parity for the trust is largely due to excess spread, which 
the trust cannot release without meeting minimum parity requirements. As of 
the September 2018 servicer report, the trusts' parity levels are as follows. 

PARITY LEVELS (%)

Indenture           September 2018         June 2017
2010-1                       120.4             117.5

Indenture           September 2018         June 2016
2012                         110.6             107.9

The parity level in both trusts is currently higher than the required release 
threshold. At this time, the issuer has elected not to release the excess 
funds; however, this could change in the future.

Parity is defined as a ratio of the total asset balance--including loan 
principal and accrued interest to be capitalized, and the money in trust 
accounts (other than the rebate fund)--to the total bond amount outstanding 
plus accrued interest and unpaid program expenses. 

LOAN STATUS (%)
As of Sept. 30, 2018

                                         2010-1         2012
Option 1 loans (full repayment)            72.8         72.5
Option 2 loans (interest-only repayment)   18.4         18.0
Option 3 loans (full deferral)              8.8          9.5

Current loans                              87.1         87.7
1-30 days delinquent loans                  9.1          9.1
31+ days delinquent loans                   3.9          3.2

The percentage of borrowers in active repayment typically decreases after each 
additional bond issuance out of an existing trust because the bonds' sale 
proceeds are subsequently used over the next year and a half to fund new 
loans, including loans that defer interest and principal payments while the 
borrowers attend college.

As part of our analytical review and according to our student loan criteria, 
we compare a transaction's remaining credit enhancement with our projection of 
remaining net losses by reviewing its collateral performance and the current 
pool collateral characteristics, including defaults and levels of recoveries, 
forbearance, deferments, delinquencies, and seasoning. 

Based on our analysis of the collateral's performance, and the pace of 
defaults that both pools are currently experiencing, lifetime cumulative 
defaults remain in line with our initial default rate assumptions: 11.5%-12.0% 
for the 2010-1 trust and 9.5%-10.5% for the 2012 trust.

We will continue to monitor the performance of the student loan receivables 
that are backing the trusts relative to its remaining default expectations and 
our assessment of the credit enhancement available to the bonds.
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