Navient Student Loan Trust 2021-2 — Moody’s assigns provisional ratings to


Rating Action: Moody’s assigns provisional ratings to Navient Student Loan Trust 2021-2Global Credit Research – 07 Apr 2021Approximately $762.3 million of asset-backed securities ratedNew York, April 07, 2021 — Moody’s Investors Service, (“Moody’s”) has assigned a provisional rating of (P)Aaa (sf) to the Class A-1A, Class A-1B, and Class B notes to be issued by Navient Student Loan Trust 2021-2. The underlying collateral consists of Federal Family Education Loan Program (FFELP) non-consolidation and consolidation student loans.Moody’s issues provisional ratings in advance of the final sale of securities. Upon a conclusive review of the final documentation, Moody’s will endeavor to assign final ratings to the securities. Final ratings may differ from provisional ratings.The complete rating actions are as follows:Issuer: Navient Student Loan Trust 2021-2Fixed Rate Class A-1A Notes, Assigned (P)Aaa (sf)Floating Rate Class A-1B Notes, Assigned (P)Aaa (sf)Floating Rate Class B Notes, Assigned (P)Aaa (sf)RATINGS RATIONALEThe ratings are based on the underlying collateral consisting of FFELP student loans, which are indirectly guaranteed by the U.S. Department of Education for a minimum of 97% of defaulted principal and accrued interest; the overcollateralization of the trust, which is expected to have an initial parity level of 103.1%; a reserve account funded at 3.35% of the initial pool balance that steps down successively to 1.00% of the pool balance on the September 2023 distribution date and to 0.65% of the pool balance on the April 2032 distribution date, and has a floor of approximately $0.76 million; excess spread that is expected to average between 1.3% and 1.5% basis points per annum that is trapped to a target overcollateralization level of the greater of 3.01% of the adjusted pool balance and $5.7 million, and is used on or after the April 2027 distribution date to exclusively pay down bonds. The ratings are also based on the expertise and experience of Navient Solutions, LLC (formerly known as Navient Solutions, Inc.), which is one of the largest FFELP and Direct Loan servicer, as the servicer for this transaction.The expected net loss on the loan pool to be securitized is approximately 0.8%, similar to the prior Navient FFELP deal.The COVID-19 pandemic has had a significant impact on economic activity. Although global economies have shown a remarkable degree of resilience to date and are returning to growth, the uneven effects on individual businesses, sectors and regions will continue throughout 2021 and will endure as a challenge to the world’s economies well beyond the end of the year. While persistent virus fears remain the main risk for a recovery in demand, the economy will recover faster if vaccines and further fiscal and monetary policy responses bring forward a normalization of activity. As a result, there is a heightened degree of uncertainty around our forecasts. Our analysis has considered the effect on the performance of consumer assets from a gradual and unbalanced recovery in US economic activity. Specifically, for FFELP student loan ABS, loan performance will continue to benefit from government support and the improving unemployment rate that will support the borrower’s income and their ability to service debt. However, any elevated use of borrower assistance programs to affected borrowers, such as forbearance, deferment and income-based repayment (IBR), may adversely impact scheduled cash flows to bondholders.We regard the COVID-19 outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety.The ratings consider high social risk attributable to the debt burden of student loans and the affordability of education in the US. Potential regulatory or legislative changes could impact funds available to the trust.Rating MethodologyThe principal methodology used in these ratings was “Moody’s Approach to Rating Securities Backed by FFELP Student Loans” published in May 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1226065. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.Factors that would lead to a downgrade of the ratings:Because the US Department of Education guarantees at least 97% of principal and accrued interest on defaulted loans, Moody’s could downgrade the ratings of the notes if it were to downgrade the rating on the United States…



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