Fitch Ratings has affirmed the Kentucky Higher Education Student Loan Corporation Student Loan Asset-Backed Notes Series 2013-1 (KHESLC 2013-1) at 'AAAsf'. The Rating Outlook remains Stable.

KEY RATING DRIVERS

High 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.

Sufficient Credit Enhancement: Cash flow scenarios for the 2013-1 notes were satisfactory under Fitch's stresses. Parity for the 2013-1 notes is at 107.0% as of August 2015. CE is provided by overcollateralization (OC; the excess of trust's asset balance over bond balance) and excess spread. This trust is in turbo; therefore, no cash can be released until the 2013-1 notes are paid in full.

Adequate Liquidity Support: Liquidity support for the 2013-1 notes is provided by a reserve fund equal to the greater of 0.25% of outstanding notes and 0.15% of the initial balance of the notes. As of August 2015, the reserve fund balance was $920,462.

Acceptable Servicing Capabilities: KHESLC is responsible for day-to-day servicing of the trust as Nelnet Servicing LLC provides backup servicing. Fitch believes both are acceptable servicers of FFELP student loans.

RATING SENSITIVITIES

Since FFELP student loan ABS rely 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 credit enhancement driven by positive excess spread given favorable basis factor conditions could lead to future upgrades.

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

Fitch has affirmed the following rating:

Kentucky Higher Education Student Loan Corp. Student Loan Asset-Backed Notes, Series 2013-1:

--2013-1 notes at 'AAAsf; Outlook Stable.

Additional information is available at www.fitchratings.com.
Applicable Criteria
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158
Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum (pub. 14 May 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744175
Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds (pub. 19 Dec 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=838868
Exposure Draft: Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria (pub. 04 Dec 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=874971
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952
Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria (pub. 23 Jun 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750530
Related Research
Kentucky Higher Education Student Loan Corporation, Series 2013-1 - Appendix
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=699995

Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=997652
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=997652
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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