Trusts that sold auction-rate securities backed by student loans are facing downgrades as debt costs continue to rise and borrowers struggle to refinance, Fitch Ratings said Tuesday.

"While most trusts have shown resilience to the market freeze, none were structured to withstand permanent market dislocation," Kevin Duignan, head of Fitch's U.S. asset-backed securities group in New York, said in a press release. This makes "negative rating actions on certain transactions less a case of 'if' and more a case of 'when.' "

Fitch said would review 110 U.S. student-loan trusts that have issued auction-rate securities; liabilities exceed assets at about a third of them.

Declines in the ratio of assets to liabilities indicate a trust may not be getting enough income to cover expenses. Benchmarks, including the London interbank offered rate, have soared recently.

Student-loan corporations have been less successful than either municipalities or closed-end fund managers at refinancing or restructuring their auction-rate securities.

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