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