OREANDA-NEWS. Fitch Ratings expects to assign the following rating and Rating Outlook to the notes issued by Nelnet Student Loan Trust 2016-1 listed below:

--$426,000,000 class A 'AAAsf'; Outlook Stable.

The rating above reflects that the notes pass both Fitch's credit and maturity stresses under all modelling scenarios.

KEY RATING DRIVERS

U. S. Sovereign Risk: The trust collateral comprises 100% Federal Family Education Loan Program (FFELP) loans, 24.9% of which are rehabilitated FFELP loans, with guaranties provided by eligible guarantors and reinsurance provided by the U. S. Department of Education (ED) for at least 97% of principal and accrued interest. The U. S. sovereign is currently rated 'AAA', Outlook Stable by Fitch.

Collateral Performance: Fitch assumes a base case default rate of 19.75% and a 47.0% default rate under the 'AAA' credit stress scenario. The claim reject rate is assumed to be 0.25% in the base case and 2.0% in the 'AAA' case. Fitch applies the standard default timing curve in its credit stress cash flow analysis and its standard constant default rate (CDR) and constant prepayment rate (CPR) assumptions in its maturity stresses. Current levels of deferment, forbearance, and income-based repayment (prior to adjustment) are 10.1%, 12.7%, and 23.0%, respectively, which are used as the starting point in cash flow modelling. Subsequent declines or increases are modelled as per criteria. The borrower benefit is assumed to be approximately 0.13% based on information provided by the sponsor.

Basis and Interest Rate Risk: Fitch applies its standard basis and interest rate stresses to this transaction as per criteria.

Payment Structure: Credit enhancement is provided by excess spread and overcollateralization (OC). As of the cutoff date, total parity is 102.55% (2.49% CE). Liquidity support is provided by a reserve account currently sized at the 1.25% of the bond balance, stepping down to 0.25% after July 2018, with a floor of $426,000. The trust will release cash after the 3.50% specified OC target is hit until October 2021 after which it will enter turbo pay-down.

Maturity Risk: Fitch's cash flow model indicates that the notes are paid in full on or prior to the legal final maturity dates under all rating scenarios.

Operational Capabilities: Day-to-day servicing is provided by Nelnet. Fitch believes Nelnet to be an acceptable servicer of FFELP student loans.

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.

USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10

Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.