Sandler O'Neill analyst downgrades NelNet to "Hold"

NEW YORK—A Sandler O'Neill & Partners analyst downgraded NelNet Inc. on Tuesday, saying the conditions are too tough in the student-lending market to warrant a "Buy" rating.

Sandler O'Neill analyst Michael Taiano slashed his rating on NelNet to "Hold" from "Buy."

Taiano said the federal government is likely to intervene in the student-loan market to make things easier. However, this will probably take the form of legislation instead of, for example, direct intercession by the Federal Reserve.

Legislation would be less favorable for student lenders, he said.

Conditions in the industry remain highly uncertain, he said. While the market could improve if lenders find easier ways to raise money, the chances of that are slim enough that the stock is valued appropriately, he said.

His price target is $13. The shares closed Monday at $13.07.

Shares of NelNet lost 87 cents, or 6.7 percent, to $12.20 in afternoon trading Tuesday.