Fitch Affirms Nelnet Education Loan Funding's 2004-1 Sr Notes, Upgrades Subs; Outlook Remains Stable

NEW YORK--()--Fitch Ratings affirms the senior notes at 'AAAsf' and upgrades the subordinate notes to 'AAsf' from 'A+sf' issued by Nelnet Education Loan Funding 2004-1. The Rating Outlook remains Stable on both classes.

KEY RATING DRIVERS

High Collateral Quality: The trust collateral consists of 100% of 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. On March 24, 2014, Fitch affirmed the U.S. sovereign rating at 'AAA' and assigned a Stable Outlook.

Sufficient Credit Enhancement: Credit enhancement (CE) is provided by overcollateralization (OC; the excess of trust's asset balance over bond balance), excess spread, and for the class A notes, subordination provided by the class B notes. As of February 2014, senior and total parity are 109.00% and 101.52% respectively. The trust can release excess cash as long as a 101.00% total parity is maintained.

Adequate Liquidity Support: Liquidity support is provided by a reserve account, currently funded to its floor of $1,515,000.

Acceptable Servicing Capabilities: Nelnet Inc. as the servicer is responsible for the day-to-day servicing of this trust. In Fitch's opinion, Nelnet is an acceptable servicer of FFELP student loans.

RATING SENSITIVITIES

Since the FFELP student loan ABS relies 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 CE driven by positive excess spread given favorable basis factor conditions could lead to future upgrades.

Fitch has taken the following rating actions:

Nelnet Education Loan Funding 2004-1:

--Class A-1A affirmed at 'AAAsf'; Outlook Stable;

--Class A-1B affirmed at 'AAAsf'; Outlook Stable;

--Class A-2 affirmed at 'AAAsf'; Outlook Stable;

--Class B-1 upgraded to 'AAsf' from 'A+sf'; Outlook Stable;

--Class B-2 upgraded to 'AAsf' from 'A+sf'; Outlook Stable.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (May 24, 2013);

--'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria' (May 17, 2013).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661

Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria -- Amended

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708795

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=826517

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Contacts

Fitch Ratings, Inc.
Primary Analyst
Harry Kohl
Associate Director
+1-212-908-0837
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Committee Chairperson
Kevin Corrigan
Senior Director
+1-212-908-9156
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
sandro.scenga@fitchratings.com

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Contacts

Fitch Ratings, Inc.
Primary Analyst
Harry Kohl
Associate Director
+1-212-908-0837
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Committee Chairperson
Kevin Corrigan
Senior Director
+1-212-908-9156
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
sandro.scenga@fitchratings.com