S&P: Nelnet Student Loan Trust 2018-1 $473.75 Million Notes Assigned Ratings

S&P Global Ratings today assigned its ratings to Nelnet Student Loan Trust 2018-1's $473.75 million student loan asset-backed notes (see list).

The note issuance is an asset-backed securities transaction backed by a pool of Federal Family Education Loan Program student loans that are at least 97% reinsured by the U. S. federal government.

The ratings reflect:The transaction's initial total parity of approximately 104.16%. Total parity is defined as the percentage of total assets divided by the notes' balance. The transaction's initial class A-1 parity of approximately 503.5%. Class A-1 parity is defined as the percentage of total assets divided by the class A-1 note amount. An initial overcollateralization amount of 4.0% of the initial adjusted pool balance that is expected to be maintained at the greater of 4.0% of the then-current adjusted pool balance and $10 million (2.03% of initial adjusted pool balance). Overcollateralization is the excess of the pool balance plus the reserve fund balance, minus the total debt. The reserve account, which equals 1.50% of the initial notes' balance at closing and is required to be maintained at 1.50% of the outstanding notes' balance until April 2020, at which time it reduces to 1.00% of the outstanding notes' balance. The reserve fund will further reduce to 0.50% of the outstanding notes' balance on and after the April 2022 distribution date. The reserve has a floor equal to 0.10% of the initial notes' balance. The transaction's payment structure, which permits excess spread to be released until the earlier of the April 2025 distribution date and when the pool balance is 10% or less of the initial pool balance, when full turbo begins and all excess spread will be used to redeem the notes. Our view that the likelihood that the payment structure changes because of a nonmonetary event of default is sufficiently remote, allowing for different ratings on each class. The U. S. federal government's reinsurance of at least 97% of the defaulted loans' principal and interest. Our expectation of timely interest and principal payments made by the legal final maturity date in the cash flow runs that simulated our 'AAA' and 'AA+' rating credit stress and liquidity scenarios. A credit stability scenario analysis, which indicates that under moderately stressful economic conditions (defined as approximately 2.25x the expected defaults), the 'AAA (sf)' and 'AA+ (sf)' ratings would not decline more than one and three rating categories in the first and third years, respectively. The transaction's legal structure.

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