Fitch Affirms Nelnet Student Loan Trust Series 2012-1

NEW YORK--()--Fitch Ratings affirms Nelnet Student Loan Trust 2012-1 senior and subordinate notes at 'AAAsf' and 'AAsf' respectively. The Rating Outlooks remain Stable.

KEY RATING DRIVERS

High Collateral Quality: The trust collateral comprises Federal Family Education Loan Program (FFELP) loans (including approximately 11% of rehabilitated loans as of December 2015) with guaranties provided by eligible guarantors and reinsurance provided by the U.S. Department of Education (ED) for at least 97% of principal and accrued interest. Fitch's current U.S. sovereign rating is 'AAA' with a Stable Outlook.

Sufficient Credit Enhancement (CE): 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 the January 2016 distribution, senior and total parities are at 105.30% and 101.40% respectively. The trust is currently releasing cash as the release level of the greater of 1.38% OC and $2,000,000 is maintained.

Adequate Liquidity Support: Liquidity support is provided by a reserve fund sized at the greater of 0.25% of the principal balance of the notes and 0.10% of the original principal balance of the notes ($343,900). The reserve fund is sized at $519,196 as of the January 2016 distribution.

Acceptable Servicing Capabilities: National Education Loan Network, Inc. is the Master Servicer, with Nelnet, Inc. acting as subservicer. Fitch believes National Education Loan Network, Inc. and Nelnet, Inc. to be acceptable servicers of FFELP student loans.

On Nov. 18, 2015, Fitch released its exposure draft which delineates revisions it plans to make to the 'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria', dated June 23, 2014. Fitch has reviewed this transaction under both the existing and proposed criteria.

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, basis risk, and loan extension risk account for the majority of the risk embedded in FFELP student loan transactions. Additional defaults, basis shock beyond Fitch's published stresses, lower than expected payment speed, and other factors could result in future downgrades. Likewise, a build-up of CE 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 ratings:

Nelnet Student Loan Trust 2012-1:

--Class A at 'AAAsf'; Outlook Stable.

--Class B at 'AAsf'; 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

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 Criteria for Structured Finance Servicers (pub. 23 Apr 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864375

Related Research

Nelnet Student Loan Trust 2012-1 - Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=678416

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=999817

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=999817

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Primary Analyst
Nicole Edwards
Director
+1-212-908-9114
Fitch Ratings, Inc.
33 Whitehall Street
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
Email: sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Nicole Edwards
Director
+1-212-908-9114
Fitch Ratings, Inc.
33 Whitehall Street
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
Email: sandro.scenga@fitchratings.com