OREANDA-NEWS. Fitch Ratings has affirmed the following rating on Nelnet Student Loan Trust 2004-3 (Nelnet 2004-3):

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

KEY RATING DRIVERS

Maturity Risk: On Dec. 18, 2015, the Nelnet 2014-3 Class B notes, currently rated 'AA-sf', were placed on Rating Watch Negative based on the heightened risk of the subordinate class B notes missing their legal final maturity of October 25, 2040, 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. The magnitude of the 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: Nelnet 2004-3 is collateralized by approximately $324.71 million of 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 for the FFELP loans. The U.S. is currently rated 'AAA'; Outlook Stable.

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 September 30, 2015, total parity is 100.91% (0.90% CE) and senior parity is 108.49% (7.83% CE). Cash is being released from the trust as long as parity is maintained at 100% (excluding the reserve fund).

Liquidity Support: Liquidity support is provided by a reserve fund sized at the greater of 0.25% of the pool balance, and $2,011,386. The reserve fund is sized at $2,011,386 as of September 30, 2015.

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 Dec. 4, 2015, Fitch published 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, which has resulted in placing the Nelnet 2004-3 notes on Rating Watch Negative.

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.