DBRS Morningstar Finalizes Provisional Ratings on Navient Student Loan Trust 2020-1

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the following classes of notes issued by Navient Student Loan Trust 2020-1 (Navient 2020-1):

-- $275,000,000 Class A-1A Notes rated AAA (sf)
-- $485,000,000 Class A-1B Notes rated AAA (sf)
-- $10,800,000 Class B Notes rated AAA (sf)

The ratings are based on a review by DBRS Morningstar of the following analytical considerations:

-- The transaction assumptions consider DBRS Morningstar’s set of macroeconomic scenarios for select economies related to the Coronavirus Disease (COVID-19), available in its commentary “Global Macroeconomic Scenarios: July Update,” published on July 22, 2020. DBRS Morningstar initially published macroeconomic scenarios on April 16, 2020, which were last updated on July 22, 2020, and are reflected in DBRS Morningstar’s rating analysis.
-- The assumptions consider the moderate macroeconomic scenario outlined in the commentary (the moderate scenario serving as the primary anchor for current ratings). The moderate scenario assumes some success in containment of the coronavirus within Q2 2020 and a gradual relaxation of restrictions, enabling most economies to begin a gradual economic recovery in Q3 2020.
-- The transaction’s form and sufficiency of available credit enhancement.
-- The ability of Navient Solutions, LLC (Navient Solutions) as servicer to perform collections on the collateral pool and other required activities.
-- The provisions in the transaction documents include the transition to a new benchmark replacement rate in the event that LIBOR is discontinued. DBRS Morningstar determined that the contemplation of SOFR as a benchmark replacement rate is not a material deviation from the DBRS Morningstar methodology “Interest Rate Stresses for U.S. Structured Finance Transactions.” For more information, please see the transaction’s rating report.
-- The legal structure and expected legal opinions that address the true sale of the student loans, the non-consolidation of the trust, that the trust has a valid first-priority security interest in the assets, and the consistency with the DBRS Morningstar “Legal Criteria for U.S. Structured Finance.”

The collateral securing Navient 2020-1 primarily consists of student loans originated pursuant to the Federal Family Education Loan Program, which are ultimately guaranteed by the U.S. Department of Education for at least 97% of principal plus accrued interest. Navient Solutions will act as servicer for 100% of the trust student loans.

The Class A-1A Notes bear interest at a fixed rate. The Class A-1B and Class B Notes bear interest based on one-month LIBOR plus a margin. Interest will be paid on a monthly basis beginning on the distribution date in October 2020. Principal will be paid sequentially, first pro rata to the Class A-1A Notes and the Class A-1B Notes, and then to the Class B Notes (in that order) until each such class of notes is paid in full.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is Rating U.S. Federal Family Education Loan Program Securitizations (February 19, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at [email protected].

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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