OREANDA-NEWS. Fitch Ratings has affirmed three tranches of notes for Nelnet Student Loan Trust 2006-3, and maintains the Rating Watch Negative on the A-6 note.

KEY RATING DRIVERS
High Collateral Quality: The trust collateral is composed entirely of student loans originated under the Federal Family Education Loan Program (FFELP). The credit quality of the trust 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 Stable Outlook on the notes is consistent with Fitch's affirmation of the U.S. sovereign rating at 'AAA'/Outlook Stable.

Credit Enhancement: Credit Enhancement (CE) is provided by overcollateralization (OC), excess spread, and for the class A notes, subordination provided by the class B notes. As of November 2015, the senior and total parities are 105.20% and 100.46% respectively. Excess cash is currently released from the trust as long as the OC level is maintained.

Adequate Liquidity Support: Liquidity support is provided by a reserve account which is determined as the greater of 0.25% of the pool balance and $3,294,279.

Acceptable Servicing Capabilities: Nelnet Inc. as the servicer is responsible for the day-to-day servicing of this trust. In Fitch's opinion, Nelnet is an acceptable servicer of FFELP student loans.

On Nov. 18, 2015, Fitch released 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 maintaining the Nelnet 2006-3 class A-6 note 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.

DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.

Fitch takes the following actions:

Nelnet Student Loan Trust 2006-3:
--Class A-4 affirmed at 'AAAsf'; Outlook Stable;
--Class A-5 affirmed at 'AAAsf'; Outlook Stable;
--Class A-6 'AAAsf'; Rating Watch Negative maintained;
--Class B affirmed at 'A+sf'; Outlook Stable.