OREANDA-NEWS. Fitch Ratings has taken the following rating actions on Nelnet Student Loan Trust 2012-2 notes (Nelnet 2012-2):

--Class A affirmed at 'AAAsf'; Outlook Stable;
--Class B notes 'AAsf', Rating Watch Negative maintained.

KEY RATING DRIVERS
Maturity Risk: On Dec. 18, 2015, the Nelnet 2012-2 subordinate class B notes, currently rated 'AAsf', were placed on Rating Watch Negative based on the heightened risk of the class B notes missing their legal final maturity of Nov. 25, 2036, which would result in an event of default. In an event of such technical default, Fitch would expect ultimate repayment of full principal and interest after the legal final. Fitch expects to resolve the Rating Watch Negative status once its revised FFELP criteria report is published. The magnitude of any potential rating action could vary depending on remaining time to maturity, recent payment trends, issuer actions such as loan purchases, or other external factors.

Collateral Quality: Although the collateral consists of 100% rehabilitated 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. The current U.S. sovereign rating is 'AAA' with a Stable Outlook.

Credit Enhancement (CE): CE is provided by overcollateralization (OC; the excess of trust's asset balance over bond balance), and excess spread. The senior notes also benefit from the subordination of class B notes. As of Jan. 31, 2016, total parity is 101.78% (1.75% CE) and senior parity is 107.44% (6.92% CE). Cash is being released from the trust as long as the specified OC amount is equal to the greater of 1.75% of the adjusted pool balance and $2,000,000.

Liquidity Support: Liquidity is provided by a reserve fund sized at the greater of 0.25% of the outstanding aggregate note balance, and $333,000. The reserve fund balance is $479,353 as of Jan. 31, 2016.

Servicing Capabilities: Nelnet Education Loan Network, Inc. (NELN) is the master servicer, and Nelnet, Inc. is the subservicer. Fitch believes NELN and Nelnet Inc. 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.

DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.