Fitch Ratings has affirmed the senior notes at 'AAAsf' and subordinate notes at 'AA-sf' issued by Nelnet Student Loan Trust 2004-3. The Rating Outlook remains Stable for the senior and subordinate notes.
KEY RATING DRIVERS
High Collateral Quality: The trust collateral consists of 100% (99.82% Non-Rehab; 0.18% Rehab) 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. Fitch's current U.S. sovereign rating is 'AAA' with a Stable Rating Outlook.
Sufficient Credit Enhancement: While both the senior and subordinate notes will benefit from overcollateralization (OC; the excess of trust's asset balance over bond balance) and future excess spread, the senior notes also benefit from subordination provided by the class B note. Fitch gives credit to the reserve fund, which is excluded from the adjusted pool balance once the pool factor is at 40%. The current pool factor is at 27%. As of September 2014, Fitch's calculated total parity is 100.80% (0.79% CE) and Fitch's calculated senior parity is 108.38% (7.73% CE). Cash is being released from the trust given that the 100% parity (excluding reserve fund) is maintained.
Adequate Liquidity Support: Liquidity support is provided by a reserve account. The reserve is sized equal to the greater of 0.25% of the pool balance, and $2,011,386.
Acceptable Servicing Capabilities: Nelnet Education Loan Network, Inc. (NELN) is the master servicer. Both Nelnet, Inc. and Navient are the subservicers. Fitch believes NELN, Nelnet, and Navient are acceptable servicers of FFELP student loans.
RATING SENSITIVITIES
Since FFELP student loan ABS rely 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 credit enhancement driven by positive excess spread given favorable basis factor conditions could lead to future upgrades.
Fitch has affirmed the following ratings:
Nelnet Student Loan Trust 2004-3:
--Class A-5 at AAAsf; Outlook Stable Maintained;
--Class B at AA-sf; Outlook Stable Maintained.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (Aug. 4, 2014);
--'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria'(June 23, 2014).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389
Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750530
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=967836
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