Fitch Affirms Nelnet Student Loan Trust 2014-2 Notes; Outlook Stable

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed all outstanding notes issued from Nelnet Student Loan Trust 2014-2 (Nelnet 2014-2). The Rating Outlook on all the outstanding notes remains Stable.

KEY RATING DRIVERS

High Collateral Quality: The trust collateral consists of 100% Federal Family Education Loan Program (FFELP) loans, including approximately 21.5% 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. The stable outlook on the notes is consistent with Fitch's affirmation of the U.S. sovereign rating at 'AAA', Outlook Stable.

Sufficient Credit Enhancement (CE): Transaction credit enhancement is provided by overcollateralization and excess spread. In addition, the senior notes also benefit from subordination provided by the class B note. As of the January 2016 distribution report, total parity is at 101.27%. The trust has been releasing cash as the specified overcollateralization amount that requires the greater of 1.25% of the adjusted pool balance and $2,000,000 has been met.

Adequate Liquidity Support: Liquidity support is provided by reserve account sized at 0.25% of outstanding notes with $509,000 floor. As of the January 2016 distribution period, the reserve account was at $974,934.76.

Acceptable Servicing Capabilities: As of the January 2016 distribution report, Nelnet, Inc. services approximately 71.35% of the 2014-2 portfolio. Pennsylvania Higher Education Assistance Agency (PHEAA) (13.60%), Xerox Education Services, LLC (12.21%), and Great Lakes Education Loan Services Inc. (GLESI) (2.84%) service the remaining portion of the portfolio. In Fitch's opinion, all servicers are 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 buildup of CE driven by positive excess spread given favorable basis factor conditions could lead to future upgrades.

Fitch affirms the following:

Nelnet Student Loan Trust 2014-2:

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

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

--Class A-3 notes at 'AAAsf'; Outlook Stable;

--Class B notes at 'A+sf'; Outlook Stable.

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

Related Research

Nelnet Student Loan Trust 2014-2 -- Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=738836

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=999584

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=999584

Endorsement Policy

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

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160217006359/en/

Fitch Ratings
Primary Analyst
Charlene M. Davis
Director
+1-212-908-0213
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Kevin Corrigan
Senior Director
+1-212-908-0156
or
Media Relations:
Hannah James, +1 646-582-4947
[email protected]

Source: Fitch Ratings

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