Vermont Business Magazine Fitch Ratings has assigned ratings to the Vermont Student Assistance Corporation (VSAC) education loan revenue bonds senior series 2025A issued from the 2012 master trust. Fitch has also affirmed the existing bond ratings of the master trust.
The $32.0 million proceeds of the 2025A issuance and approximately $0.14 million in premium will be used to fund the prefunding account. This will be used for the purchase of new loans originated by VSAC within the terms of the prefunding period, ending on June 15, 2026, for an amount equal to $28.9 million. The remaining amounts will fund the increase in the cash reserve, the capitalized interest fund and the costs of issuance.
After the 2025A issuance, the master trust will be collateralized by approximately $197.2 million of existing private student loans and a total of $28.9 million of funds that can be used to purchase additional student loans in accordance with its permitted prefunding schedule.
KEY RATING DRIVERS
Collateral Performance: The master trust will be collateralized by approximately $197.2 million of existing private student loans (PSLs), along with $28.9 million of new fixed-rate PSLs to be originated through June 15, 2026. The PSLs have been or will be originated under VSAC's Student Advantage Loan (SAL) and Parent Advantage Loan (PAL) programs.
All loans under both programs require a minimum FICO score of 680, and SAL programs require a cosigner. As of the Jan. 31, 2025 statistical cutoff date, the pool contains 0.66% of rehabilitated (rehab) loans, which are reperforming, according to VSAC's defaulted-loan rehab program launched in 2019 as an additional collection strategy.
Fitch assigned a base case default rate of 3.0% for immediate repayment (IR) loans, including the parent loans, 5.5% for interest-only (IO) loans, 10.0% for SAL deferred loans, 9.5% for PAL deferred loans and 30.0% for rehab loans, resulting in a weighted average (WA) portfolio default rate of 6.7%. Fitch applied rating stress multiples of 2.50x for 'Asf' and 1.85x for 'BBBsf', which are the median stress multiples from Fitch's rating criteria. The WA 'Asf' stressed default rate is approximately 16.7% and the WA 'BBB' stressed default rate is 12.3%. A recovery rate of 20.0% is assumed, based on VSAC's recovery history.
Payment Structure: Transaction cash flows were tested and found satisfactory under Fitch's 'Asf' rating stress scenario for the senior bonds and the 'BBBsf' rating for the subordinate bonds. Credit enhancement (CE) is provided by overcollateralization (OC), the excess of the trust's total assets over total liabilities, excess spread and, for the senior bonds, the subordination of the subordinate bonds. Interest payment to the subordinate bonds will be suspended if the total parity ratio drops below 90%.
At closing, senior and total parity ratios for this master trust are about 129.5% and 118.5%, respectively. Excess cash will be released to the issuer once senior and total parity exceed 125% and 120%, respectively. When 10% of the bonds remain outstanding, the transaction will convert to turbo payment and no longer release cash. Liquidity support will be provided by a $2.0 million capitalized interest fund and a $4.16 million reserve fund. The capitalized interest fund will be released on Dec. 15, 2027. The reserve fund will be maintained at the greater of 2% of the outstanding note balance and $1 million.
Operational Capabilities: VSAC will service the entire trust portfolio and has been originating and servicing the loans since 1998. As a quasi-state agency, VSAC has more collection tools at its disposal than for-profit issuers. Fitch views VSAC as an acceptable servicer, given its experience and track record in servicing PSLs.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
As Fitch's base case default proxy is derived primarily from historical collateral performance, actual performance may differ from the expected performance, resulting in higher loss levels than the base case. This would result in a decline in available CE and the remaining loss coverage levels available to the notes. Note ratings may be susceptible to potential negative rating actions, depending on the extent of this decline in the coverage.
Fitch conducted a sensitivity analysis by stressing the transaction's prepayment (CPR) assumption. Fitch utilized lower CPR vectors of 3.6%/4.2%/4.8%/5.4%/6.0% at 'Asf' and 4.2%/4.9%/5.6%/6.3%/7.0% at 'BBBsf', which resulted in no adverse impact to the rating at these CPR levels.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
Stable to improved asset performance driven by stable delinquencies and defaults would lead to increasing CE levels. However, improved performance on the underlying collateral would not necessarily result in positive rating actions as master trusts are generally not considered for upgrades, in line with rating criteria, due to the potential of future issuances.
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
PARTICIPATION STATUS
The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer’s available public disclosure.
APPLICABLE CRITERIA
- Structured Finance and Covered Bonds Counterparty Rating Criteria (pub. 28 Nov 2023)
- U.S. Private Student Loan ABS Rating Criteria (pub. 13 May 2024) (including rating assumption sensitivity)
- Structured Finance and Covered Bonds Country Risk Rating Criteria (pub. 20 Jun 2024)
- Structured Finance and Covered Bonds Interest Rate Stresses Rating Criteria (pub. 24 Oct 2024)
- Global Structured Finance Rating Criteria (pub. 18 Nov 2024) (including rating assumption sensitivity)
APPLICABLE MODELS
Numbers in parentheses accompanying applicable model(s) contain hyperlinks to criteria providing description of model(s).
ADDITIONAL DISCLOSURES
ENDORSEMENT STATUS
Vermont Student 2019-A
EU Endorsed, UK Endorsed
Vermont Student Assistance Corp 2016-A
EU Endorsed, UK Endorsed
Vermont Student Assistance Corporation Senior Series 2021A
EU Endorsed, UK Endorsed
Vermont Student Assistance Corporation Senior Series 2020A
EU Endorsed, UK Endorsed
Vermont Student Assistance Corporation Senior Series 2022A
EU Endorsed, UK Endorsed
Vermont Student Assistance Corporation Senior Series 2023A
EU Endorsed, UK Endorsed
Vermont Student Assistance Corporation Senior Series 2024A
EU Endorsed, UK Endorsed
Vermont Student Assistance Corporation Senior Series 2025A
EU Endorsed, UK Endorsed
Vermont Student Assistance Corporation, Series 2017
EU Endorsed, UK Endorsed
Vermont Student Assistance Corporation, Series 2018-A
EU Endorsed, UK Endorsed
DISCLAIMER & DISCLOSURES
All Fitch Ratings (Fitch) credit ratings are subject to certain limitations and disclaimers. Please read these limitations and disclaimers by following this link: https://www.fitchratings.com/understandingcreditratings. In addition, the following https://www.fitchratings.com/rating-definitions-document details Fitch's rating definitions for each rating.
Solicitation Status
The ratings above were solicited and assigned or maintained by Fitch at the request of the rated entity/issuer or a related third party. Any exceptions follow below.
Endorsement Policy
Fitch’s international credit ratings produced outside the EU or the UK, as the case may be, are endorsed for use by regulated entities within the EU or the UK, respectively, for regulatory purposes, pursuant to the terms of the EU CRA Regulation or the UK Credit Rating Agencies (Amendment etc.) (EU Exit) Regulations 2019, as the case may be. Fitch’s approach to endorsement in the EU and the UK can be found on Fitch’s Regulatory Affairs page on Fitch’s website. The endorsement status of international credit ratings is provided within the entity summary page for each rated entity and in the transaction detail pages for structured finance transactions on the Fitch website. These disclosures are updated on a daily basis.
Source: 6.5.2025. Fitch Ratings - New York - 05 Jun 2025: Fitch
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