OREANDA-NEWS. Fitch Ratings has taken various rating actions on the following classes of Nelnet Student Loan Trust 2004-3:

--Class A-5 affirmed at 'AAAsf'; Outlook Stable

--Class B upgraded to 'AAsf' from 'AA-sf'; removed from Rating Watch Negative and assigned Stable Outlook.

Although cash flow indicated a higher rating, the recommendation is to upgrade the class B notes to 'AAsf' due to low hard credit enhancement leading to strong dependency on excess spread.

KEY RATING DRIVERS

U. S. Sovereign Risk: The trust collateral comprises Federal Family Education Loan Program (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 rating is currently 'AAA'/Stable Outlook.

Collateral Performance: Fitch assumes a base case default rate of 14.50% and a 43.75% default rate under the 'AAA' credit stress scenario. The claim reject rate is assumed to be 0.25% in the base case and 2% in the 'AAA' case. Fitch applies the standard default timing curve, in its credit cash flow analysis. Trailing twelve month average constant default rate, utilized in the maturity stresses, is 2.7%. The trailing 12 month average of deferment, forbearance Income based repayment (before adjustment) and constant prepayment rate (voluntary and involuntary) are 6.1%, 7.7%, 11.5% and 9.2%, 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 0.16%, 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 (CE) is provided by overcollateralization and excess spread and the class A notes benefit from subordination provided by the class B note. As of the July 2016 distribution report, senior and total parity is 108.60% and 101.00% (including reserve account). Liquidity support for the 2004-3 notes is provided by a Reserve Account which is at its floor of $2,011,386.13. The trust is releasing cash.

Maturity Risk: Fitch's SLABS cash flow model indicates that all notes are paid in full on or prior to their legal final maturity of October 27, 2036 for the class A-5 notes and October 25, 2040 for the class B note.

Acceptable Servicing Capabilities: Day to day servicing is provided by Nelnet. Fitch believes Nelnet is acceptable at this time due to its long servicing history.

CRITERIA APPLICATION

For transactions in surveillance, Fitch will treat certain assets such as claims filed as short-term assets in its cash flow analysis. Given that Fitch's current criteria is silent on the treatment of such assets, this treatment is considered a criteria variation. Fitch does not believe such variation has a measurable impact upon the ratings assigned.

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 build-up of CE driven by positive excess spread given favorable basis factor conditions could lead to future upgrades.

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.