Shares fell 68 cents, or 4 percent, to close at $16.27 Monday. Earlier, the stock traded as low as $15.50, well below a 52-week low of $16.22 set in August.

As a result of recently enacted legislation that cuts federal subsidies to student lenders, analysts expect a challenging operating environment ahead.

Credit Suisse analyst Moshe Orenbuch downgraded Nelnet to "Neutral" from "Outperform" and lowered his 12-month target price to $20 from $26.

"The new legislation and proposed regulatory changes is estimated to reduce Nelnet's guarantee servicing revenue by $8 million to $12 million," Orenbuch wrote. "While the remaining businesses are expected to gain operating leverage in 2008, we believe that the challenging environment will make this difficult to do so."

Orenbuch also cut his earnings-per-share estimates for 2007 and 2008 to $1.80 and $1.95, respectively. He previously predicted earnings per share of $1.90 for 2007 and $2.10 for 2008.

Analysts polled by Thomson Financial, on average, anticipate earnings of $1.89 per share in 2007 and $2.10 per share in 2008.

Mark Sproule, an analyst at Thomas Weisel Partners LLC, downgraded Nelnet to "Market Weight" from "Overweight" and lowered his price target to $17 from $24.

"We note that fee growth opportunities remain, but near-term pressure on Federal Family Education Loan Program-only lenders appears greater than our previous expectations," Sproule wrote in a note to investors.

Matt Snowling, an analyst at Friedman, Billings, Ramsey & Co., agreed, saying that until Nelnet can grow its fee businesses enough to offset the slowdown in its loan business, he remains cautious on the stock.

Nelnet is one of the leading servicers of FFELP loans, and without a private loan product to offset the pressure on FFELP margins, Snowling contends Nelnet is vulnerable to losing market share as larger-scale lenders use FFELP to drive private volume growth.

Snowling reiterated his "Underperform" rating, and lowered his target price $2 to $16.

On Friday, Nelnet reported a third-quarter loss of $15.7 million, or 32 cents per share, compared with a loss of $22.4 million, or 42 cents per share, in the prior-year period.