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Fitch Upgrades Nelnet Student Loan Trust 2012-5 Sub Note; Affirms Sr Note
[September 30, 2014]

Fitch Upgrades Nelnet Student Loan Trust 2012-5 Sub Note; Affirms Sr Note


NEW YORK --(Business Wire)--

Fitch Ratings has affirmed the senior note issued by Nelnet Student Loan Trust 2012-5 at 'AAAsf'. In addition, Fitch upgrades the subordinate note to 'AAsf' from 'A+sf'. The Rating Outlook remains Stable for both classes.

KEY RATING DRIVERS

High Collateral Quality: The trust collateral consists of 100% (83.7% Non-Rehab; 16.3% Rehab) 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 at 'AAA' with a Stable Outlook.

Sufficient Credit Enhancement (CE): While both the senior and subordinate notes will benefit from overcollateralization (OC) and future excess spread, the senior notes also benefit from subordination provided by the class B note. As of July 2014, total parity is 101.01% (1% CE) and senior parity is 104.29% (4.11% CE). Cash is being released from the trust given that the targeted trust OC level (greater of 1.00% of the adjusted pool balance and $2 million) is maintained.

Adequate Liquidity Support: Liquidity support is provided by a reserve account. The reserve is sized equal to the greater of 0.60% of the pool balance, and $1,174,000.

Acceptable Servicing Capabilities: Nelnet, Inc. (Nelnet) will service approximately 51% of the portfolio, while Pennsylvania Higher Education Assistance Agency (PHEAA) will service 41% and Edfinancial Services LLC (EFS) will service the remaining 8% of the portfolio. Fitch considers all servicers to be acceptable servicers of FFELP loans.

RATING SENSITIVITIES

Since FFELP student loan ABS (News - Alert) 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 CE driven by positive excess spread given favorable basis factor conditions could lead to future upgrades.



Fitch has taken the following rating actions:

Nelnet Student Loan Trust 2012-5:


--Class A affirmed at 'AAAsf'; Outlook Stable;

--Class B upgraded to 'AAsf' from 'A+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=708795

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=886214

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON (News - Alert) THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.


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