Fitch Affirms Nelnet Student Loan Trust 2014-2 Notes; Outlook Stable
KEY RATING DRIVERS
High Collateral Quality: The trust collateral consists of 100% of Federal Family Education Loan Program (FFELP) loans, including approximately 24.77% of rehabilitated 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 currently rates the U.S. sovereign rating at 'AAA', Outlook Stable.
Sufficient Credit Enhancement: CE is provided by overcollateralization (OC; the excess of trust's asset balance over bond balance) and excess spread. As of the December 2014 collection period, total parity is 101.27% and senior parity is 105.07%. Currently, cash is being released as the trust has reached the target OC release level of the greater of 1.25% of the adjusted pool balance and \$2,000,000.
Adequate Liquidity Support: is provided by a \$2.362 million reserve account as of the December 2014 collection period. On or after the August 2015 distribution date, the specified reserve requirement account will be sized at 0.25% of outstanding notes with \$509,000 floor.
Acceptable Servicing Capabilities: As of December 2014, Nelnet, Inc. services approximately 65.01% of the 2014-2 portfolio. Pennsylvania Higher Education Assistance Agency (PHEAA) (14.65%), Xerox Education Services, LLC (12.67%), and Great Lakes Education Loan Services Inc. (GLESI) (7.67%) service the remaining portion of the portfolio. In Fitch's opinion, all servicers are acceptable servicers of FFELP student loans.
Since 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 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 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.
A comparison of the transaction's representations, warranties, and enforcement mechanisms (RW&Es) to those of typical RW&Es for FFELP asset-backed securities is available in the presale appendix. This presale appendix and Fitch's special report on 'Representations, Warranties, and Enforcement Mechanisms on Global Structured Finance Transactions,' may be accessed via the links provided below.