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Rating Action:

Moody's takes rating actions on 12 of Nelnet's FFELP securitizations

12 Sep 2016

Approximately $3.4 billion of asset-backed securities affected.

New York, September 12, 2016 -- Moody's Investors Service, ("Moody's") has confirmed the ratings of five classes of notes, upgraded the ratings of six classes of notes, and downgraded the ratings of nine classes of notes issued in 12 student loan securitizations sponsored by Nelnet, Inc. The securitizations are backed by student loans originated under the Federal Family Education Loan Program (FFELP) that are guaranteed by US government for a minimum of 97% of defaulted principal and accrued interest.

Complete rating actions are as follows:

Issuer: Nelnet Student Loan Trust 2004-3

Cl. B, Upgraded to Aaa (sf); previously on Jun 14, 2016 Aa1 (sf) Placed Under Review for Possible Upgrade

Issuer: Nelnet Student Loan Trust 2004-4

Cl. B, Upgraded to Aaa (sf); previously on Jun 14, 2016 Aa1 (sf) Placed Under Review for Possible Upgrade

Issuer: Nelnet Student Loan Trust 2005-1

Cl. A-5, Confirmed at Aaa (sf); previously on Jun 14, 2016 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. B, Upgraded to Aaa (sf); previously on Jun 14, 2016 Aa1 (sf) Placed Under Review for Possible Upgrade

Issuer: Nelnet Student Loan Trust 2005-2

Cl. B, Upgraded to Aaa (sf); previously on Jun 14, 2016 Aa1 (sf) Placed Under Review for Possible Upgrade

Issuer: Nelnet Student Loan Trust 2005-3

Cl. B, Upgraded to Aaa (sf); previously on Jun 14, 2016 Aa1 (sf) Placed Under Review for Possible Upgrade

Issuer: Nelnet Student Loan Trust 2006-1

Cl. A-6, Downgraded to A2 (sf); previously on Jun 14, 2016 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. B, Downgraded to A2 (sf); previously on Jun 14, 2016 Aa1 (sf) Placed Under Review for Possible Downgrade

Issuer: Nelnet Student Loan Trust 2006-3

Cl. A-4, Confirmed at Aaa (sf); previously on Jun 14, 2016 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. A-5, Confirmed at Aaa (sf); previously on Jun 14, 2016 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. A-6, Confirmed at Aaa (sf); previously on Jun 14, 2016 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. B, Upgraded to Aaa (sf); previously on Jun 14, 2016 Aa1 (sf) Placed Under Review Direction Uncertain

Issuer: Nelnet Student Loan Trust 2008-2

Cl. A-4, Downgraded to Aa1 (sf); previously on Jun 14, 2016 Aaa (sf) Placed Under Review for Possible Downgrade

Issuer: Nelnet Student Loan Trust 2008-3

Cl. A-4, Downgraded to Baa3 (sf); previously on Jun 22, 2015 Aaa (sf) Placed Under Review for Possible Downgrade

Issuer: Nelnet Student Loan Trust 2008-4

Cl. A-4, Downgraded to Ba1 (sf); previously on Jun 22, 2015 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. B, Confirmed at Ba2 (sf); previously on Jun 14, 2016 Ba2 (sf) Placed Under Review Direction Uncertain

Issuer: Nelnet Student Loan Trust 2012-3

Class A Notes, Downgraded to Aa1 (sf); previously on Jun 14, 2016 Aaa (sf) Placed Under Review for Possible Downgrade

Class B Notes, Downgraded to A1 (sf); previously on Jun 14, 2016 Aa1 (sf) Placed Under Review for Possible Downgrade

Issuer: Nelnet Student Loan Trust 2014-2

Class A-3 Notes, Downgraded to A1 (sf); previously on Jun 14, 2016 Aaa (sf) Placed Under Review for Possible Downgrade

Class B Notes, Downgraded to A1 (sf); previously on Jun 14, 2016 Aa1 (sf) Placed Under Review for Possible Downgrade

RATINGS RATIONALE

The downgrades are a result of Moody's analysis indicating that the tranches will not pay off by final maturity dates in either some or all of Moody's 28 cash flow scenarios, thus causing the tranches to incur expected losses that are higher than the expected loss benchmarks set in Moody's idealized loss tables for the current ratings. The low payment rates on the underlying securitized pools of FFELP student loans are driven primarily by persistently high levels of loans to borrowers in non-standard payment plans, including deferment, forbearance and Income-Based Repayment (IBR), as well as by the relatively low rates of voluntary prepayments.

The upgrades and confirmations are primarily a result of Moody's analysis indicating that the tranches are likely to either successfully pay off by maturity dates, or that their expected losses across Moody's cash flow scenarios are respectively either lower or consistent with the expected loss benchmarks in Moody's idealized loss tables for the current tranche ratings.

In these rating actions Moody's also considered transaction structure features that might protect the deals from default as a result of the tranches not fully amortizing by their maturity dates. One of such features includes Nelnet's ability to optionally call the notes on the earlier of a specified date or the 10% pool factor (i.e., when the balance of the collateral pool declines to 10% of the initial pool balance). Nelnet's consistent exercise of this option in the past demonstrates its willingness and ability to support the transactions and making sure the tranches do not default at maturity. Another feature includes the requirement that the Indenture trustee initiates a sale of the underlying student loan pools if Nelnet does not notify it of its intent to call the bonds. The sale of the student loan pools will take place only if the proceeds will be sufficient to pay off all outstanding notes.

The principal methodology used in these ratings was "Moody's Approach to Rating Securities Backed by FFELP Student Loans" published in August 2016. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology.

Factors that would lead to an upgrade or downgrade of ratings:

Up

Moody's could upgrade the ratings if the paydown speed of the loan pool increases as a result of declining borrower usage of deferment, forbearance and IBR, increasing voluntary prepayment rates, or prepayments with proceeds from sponsor repurchases of student loan collateral. Moody's could also upgrade the rating owing to a build-up in credit enhancement.

Down

Moody's could downgrade the ratings if the paydown speed of the loan pool declines as a result of low voluntary prepayments, and high deferment, forbearance and IBR rates, which would threaten full repayment of the classes by their final maturity dates. In addition, because the US Department of Education guarantees at least 97% of principal and accrued interest on defaulted loans, Moody's could downgrade the ratings of the notes if it were to downgrade the rating on the United States government.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

In rating this transaction, Moody's used a cash flow model to model cash flow stress scenarios to determine the extent to which investors would receive timely payments of interest and principal in the stress scenarios, given the transaction structure and collateral composition.

Moody's quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows. Moody's weights the impact on the rated instruments based on its assumptions of the likelihood of the events in such scenarios occurring.

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Vincent Raia
Associate Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Irina Faynzilberg
VP - Sr Credit Officer/Manager
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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