Fitch Takes Various Actions on Nelnet 2014-3

NEW YORK--()--Fitch Ratings has taken the following rating actions on Nelnet Student Loan Trust 2014-3:

--Class A 'AAAsf'; Rating Watch Negative maintained;

--Class B affirmed at 'A+sf'; Rating Outlook Positive.

KEY RATING DRIVERS

High Collateral Quality: The trust collateral is comprised of 100% of Federal Family Education Loan Program (FFELP) loans including 20.7% of rehabilitated 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 (CE): CE is provided by overcollateralization (OC; the excess of trust's asset balance over bond balance) and excess spread, and for the senior notes, subordination of the class B note. As of January 2016, total parity is 101.01% (1.00% CE) and senior parity is 104.51% (4.31% CE). The trust has been releasing cash given the Specified Overcollateralization Amount equal to the greater of 1.0% of the adjusted pool balance and $2,000,000 is maintained.

Adequate Liquidity Support: Liquidity support is provided by a reserve account sized at the greater of (i) 0.90% of the outstanding bond balance before May 2019 (steps down to 0.25% of the outstanding bond balance after May 2019) and $719,800, currently equal to $5,192,572.

Acceptable Servicing Capabilities: Day to day servicing is provided by Nelnet, Pennsylvania Higher Education Assistance Agency (PHEAA) and Great Lakes Educational Loan Services. In Fitch's opinion, all servicers are acceptable servicers 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, 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 buildup 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.

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 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

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1001547

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1001547

Endorsement Policy

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

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Contacts

Fitch Ratings
Primary Analyst
Eric Orenstein
Analyst
+1-646-582-4816
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Herman Poon
Senior Director
+1-212-908-0847
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
Email: sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Eric Orenstein
Analyst
+1-646-582-4816
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Herman Poon
Senior Director
+1-212-908-0847
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
Email: sandro.scenga@fitchratings.com