Moody's Investors Service concluded its review of five federally guaranteed student loan securitizations either sponsored by or administered by Nelnet. The rating reviews take into account the slower rate of repayment of the collateral.

In a report published Wednesday, the rating agency said it confirmed the rating of one class of notes, upgraded the ratings of three classes of notes, and downgraded the ratings of five classes of notes.

In total, some $992 million of securities were affected.

Moody's has now completed its review of roughly one third of the Federal Family Education Loan Program Securitizations it had on ratings watch. These bonds were once considered nearly risk free, because the U.S. government guarantees at least 97% of the defaulted principal and accrued interest of the bonds. However, the rate of repayment has over the past few years as more borrowers take advantage of deferment, forbearance, and plans that adjust repayment in line with their income.

While investors will eventually receive their principal and accrued interest, the failure to pay off at maturity is considered an event of default.

The deals include CIT Education Loan Trust 2005-1, CIT Education Loan Trust 2007-1, Nelnet Student Loan Trust 2014-4, Wachovia Student Loan Trust 2005-1 and Wachovia Student Loan Trust 2006-1.

Moody’s confirmed its ‘Aaa’ rating on the A-3 tranche of CIT Education Loan Trust 2005-1, but downgraded the A-4 tranche from Aaa to A1 and upgraded the B tranche from Aa1 to Aaa.

In CIT Education Loan Trust 2007-1, the rating agency downgraded the B tranche to A1 from Aa1.

In Nelnet Student Loan Trust 2014-1, it downgraded the A-2 class from Aaa to Aa1 while upgrading the B tranche to A1 from Aa1.

In Wachovia Student Loan Trust 2005-1, it upgraded the B class from A2 to A1.

And in Wachovia Student Loan Trust 2006-1, it downgraded the class A-6 from Aaa to A1 and downgraded class B from Aa1 to Baa3.

The downgrades of some lowest payment priority class A notes result in these notes being rated lower than the subordinated Class B notes in the affected securitizations. Although transaction structures stipulate that class B interest is diverted to pay class A principal upon default on the class A notes, the class B notes mature later than the downgraded class A notes. This makes it more likely that the class B notes will be repaid before maturity.

Moody’s has stated that it will complete its review of all of the FFELP bonds it had under review by December.

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