Fitch Ratings has affirmed the senior notes issued by Nelnet Student Loan Trust 2005-2 and Nelnet Student Loan Trust 2005-3 at 'AAAsf'. In addition, Fitch affirms the subordinate notes for both trusts at 'AA-sf'. The Rating Outlooks for both trusts remains Stable.
KEY RATING DRIVERS
High Collateral Quality: Both trusts' collateral consists of 100% of 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.
Sufficient Credit Enhancement (CE): While both the senior and subordinate notes will benefit from overcollateralization (OC) and excess spread, the senior notes also benefit from subordination provided by the class B note. Fitch gives credit to the reserve fund, which is excluded from the adjusted pool balance (APB) once the pool factor is at 40%. The current pool factor is about 32% for both trusts. As of November 2014, Fitch's calculated total parity is 100.71% (0.71% CE) and Fitch's calculated senior parity is 107.71% (7.16% CE) for Nelnet 2005-2; 100.79% (0.79% CE) and 107.77% (7.21% CE) for Nelnet 2005-3. Cash is being released from both trusts if the target OC amount is maintained. For Nelnet 2005-2, the target is $4,409,950 and for Nelnet 2005-3, the target is $3,314,500.
Adequate Liquidity Support: Liquidity support is provided by a reserve account. The reserve for Nelnet 2005-2 is sized equal to the greater of 0.25% of the pool balance and $2,976,292; for Nelnet 2005-3, the reserve is sized equal to the greater of 0.25% of the pool balance and $1,988,700.
Acceptable Servicing Capabilities: Nelnet, Inc., as servicer, will be responsible for servicing both trusts. Fitch has reviewed the servicing operations of Nelnet and believes it to be acceptable servicer of FFELP student loans.
RATING SENSITIVITIES
Since FFELP student loan ABS rely 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 has affirmed the following rating:
Nelnet Student Loan Trust 2005-2:
--Class A-4 at 'AAAsf'; Outlook Stable;
--Class A-5 at 'AAAsf'; Outlook Stable;
--Class B at 'AA-sf'; Outlook Stable;
Nelnet Student Loan Trust 2005-3:
--Class A-4 at 'AAAsf'; Outlook Stable;
--Class A-5 at 'AAAsf'; Outlook Stable;
--Class B at 'AA-sf'; Outlook Stable.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (May 20, 2014);
--'Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria' (June 23, 2014).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389
Rating U.S. Federal Family Education Loan Program Student Loan ABS Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750530
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=963895
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