##### Table of Contents

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U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-QSB/A

(Amendment No. 2)



(Mark One)

|x |  | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ---------------------------------------------------------------------------------



For the Quarter Ended September 30, 2003.



OR



| ̈ |  | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ----------------------------------------------------------------------------------



For the transition period from
 to



Commission file number: 000-29995



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EDUCATION LENDING GROUP, INC.

(Exact name of small business issuer as specified in its charter)



|                                                                        |  |                                                
|----------------------------------------------------------------------- |  | -----------------------------------------------
|Delaware (State or other jurisdiction of incorporation or organization) |  | 33-0851387 (IRS employer identification number)



12760 High Bluff
Drive,

Suite 210, San Diego, California 92130

(Address of principal executive offices)



(858) 617-6080

(Registrants telephone number, including area code)



---



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES  x  NO ̈



Indicate
the number of shares outstanding of each of the issuers classes of common stock, as of the last practicable date: Shares of Common Stock, $0.001 par value, outstanding on September 30, 2003: 12,975,055, including treasury shares.



Transitional Small Business Format: YES ̈NO  x



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##### Table of Contents

EXPLANATION OF AMENDMENT



As announced in a press release dated February 26, 2004, as the result of a $468,000 computational error, Education
Lending Group, Inc, is restating its consolidated results for the first, second and third quarters of 2003. Loan servicing set-up fees should have been written off against the gain on sale instead of continuing to be amortized when the
related consolidation loans were sold. We are filing this Form10-QSB/A to report the results for the quarter and nine months ended September 30, 2003, as restated and as discussed in Note 3 to the Consolidated Financial Statements. Other than
as set forth below, the restatement does not impact any of the financial or other information set forth in the filing of our Form 10-QSB for the period ended September 30, 2003 as amended by the first amendment to such form filed on October 23,
2003. Effective as of December 31, 2003, Education Lending Group, Inc. is no longer a small business issuer. In the future, we will report our quarterly results on Form 10-Q and our annual results on Form 10-K.



TABLE OF CONTENTS



|                                                                                              |  |     
|--------------------------------------------------------------------------------------------- |  | ----
|                                                                                              |  | Page
|                                                                                              | 
|PART I. FINANCIAL INFORMATION                                                                 |  | 3   
|                                                                                              | 
|Item 1. Financial Statements                                                                  |  | 3   
|                                                                                              | 
|Consolidated Balance Sheets                                                                   |  | 3   
|                                                                                              | 
|Consolidated Statements of Operations                                                         |  | 4   
|                                                                                              | 
|Consolidated Statement of Changes in Stockholders Deficit                                    |  | 5   
|                                                                                              | 
|Consolidated Statements of Cash Flows                                                         |  | 6   
|                                                                                              | 
|Notes to Consolidated Financial Statements                                                    |  | 7   
|                                                                                              | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 9   
|                                                                                              | 
|Item 3. Controls and Procedures                                                               |  | 11  
|                                                                                              | 
|PART II. OTHER INFORMATION                                                                    |  | 11  
|                                                                                              | 
|Item 6. Exhibits and Reports on Form 8K                                                      |  | 11  



2



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##### Table of Contents

PART I. FINANCIAL INFORMATION



|Item 1. |  | Financial Statements
|------- |  | --------------------



EDUCATION LENDING GROUP, INC.

CONSOLIDATED BALANCE SHEETS



|                                                                                                                                   |  |                               |                    |   |                   |   |                    |  
|---------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------- | ------------------ | - | ----------------- | - | ------------------ | -
|                                                                                                                                   |  | September 30, 2003 (restated) |                    |   | December 31, 2002 |  
|                                                                                                                                   |  | (Unaudited)                   |                    |   |                   |  
|ASSETS                                                                                                                             |  |                               |                    |   |                   |   |                    |  
|Student loans, net of loan loss reserve                                                                                            |  | $                             | 908,994,229        |   |                   | $ | 401,839,983        |  
|Student loans, net of loan loss reserve (securitized)                                                                              |  |                               | 1,832,490,178      |   |                   |   | 947,213,769        |  
|Restricted cash and investments                                                                                                    |  |                               | 127,881,369        |   |                   |   | 113,995,355        |  
|Cash and cash equivalents                                                                                                          |  |                               | 5,459,385          |   |                   |   | 2,042,527          |  
|Interest & other receivables                                                                                                       |  |                               | 24,433,822         |   |                   |   | 9,306,708          |  
|Property and equipment, net                                                                                                        |  |                               | 1,541,947          |   |                   |   | 1,313,182          |  
|Deferred financing costs                                                                                                           |  |                               | 8,542,983          |   |                   |   | 4,306,537          |  
|Other                                                                                                                              |  |                               | 224,022            |   |                   |   | 813,209            |  
|                                                                                                                                   |  |                               |                    |   |                   |   |                    |  
|Total Assets                                                                                                                       |  | $                             | 2,909,567,935      |   |                   | $ | 1,480,831,270      |  
|                                                                                                                                   |  |                               |                    |   |                   |   |                    |  
|LIABILITIES AND STOCKHOLDERS DEFICIT                                                                                              |  |                               |                    |   |                   |   |                    |  
|Accounts payable                                                                                                                   |  | $                             | 2,742,753          |   |                   | $ | 699,893            |  
|Government payables Accrued expenses and other liabilities                                                                         |  |                               | 7,043,7517,933,430 |   |                   |   | 4,976,4257,746,605 |  
|Series 2002/2003 Notes                                                                                                             |  |                               | 1,943,391,639      |   |                   |   | 1,023,000,000      |  
|Warehouse loan facility                                                                                                            |  |                               | 977,140,863        |   |                   |   | 470,038,915        |  
|                                                                                                                                   |  |                               |                    |   |                   |   |                    |  
|Total Liabilities                                                                                                                  |  |                               | 2,938,252,436      |   |                   |   | 1,506,461,838      |  
|                                                                                                                                   |  |                               |                    |   |                   |   |                    |  
|Commitments and Contingencies                                                                                                      |  |                               |                    |   |                   |   |                    |  
|Preferred stock$0.001 par value, 10,000,000 shares authorized                                                                     |  |                               |                    |   |                   |   |                    |  
|Common stock$0.001 par value, 40,000,000 shares authorized, 12,975,055 and 11,189,084 shares issued and outstanding,
respectively |  |                               | 12,975             |   |                   |   | 11,189             |  
|Additional paid in capital                                                                                                         |  |                               | 12,555,289         |   |                   |   | 8,219,678          |  
|Accumulated deficit                                                                                                                |  |                               | (40,033,266        | ) |                   |   | (33,861,435        | )
|Accumulated other comprehensive loss                                                                                               |  |                               | (1,219,499         | ) |                   |   |                   |  
|                                                                                                                                   |  |                               |                    |   |                   |   |                    |  
|Total Stockholders Deficit                                                                                                        |  |                               | (28,684,501        | ) |                   |   | (25,630,568        | )
|                                                                                                                                   |  |                               |                    |   |                   |   |                    |  
|Total Liabilities and Stockholders Deficit                                                                                        |  | $                             | 2,909,567,935      |   |                   | $ | 1,480,831,270      |  
|                                                                                                                                   |  |                               |                    |   |                   |   |                    |  



See accompanying notes
to consolidated financial statements



3



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##### Table of Contents

Education Lending Group, Inc.

Consolidated Statements of Operations

For the Three and Nine Months Ended September 30, 2003 and 2002

(Unaudited)



|                                            |  |                                  |            |   |                                 |   |             |                 |  |   |            |   |  |   |             |  
|------------------------------------------- |  | -------------------------------- | ---------- | - | ------------------------------- | - | ----------- | --------------- |  | - | ---------- | - |  | - | ----------- | -
|                                            |  | Three Months Ended September 30, |            |   | Nine Months Ended September 30, |  
|                                            |  | 2003 (restated)                  |            |   | 2002                            |   |             | 2003 (restated) |  |   | 2002       |  
|Interest Income:                            |  |                                  |            |   |                                 |   |             |                 |  |   |            |   |  |   |             |  
|Student loans, net                          |  | $                                | 23,193,398 |   |                                 | $ | 6,943,889   |                 |  | $ | 57,422,202 |   |  | $ | 11,884,246  |  
|Investments                                 |  |                                  | 218,596    |   |                                 |   | 1,274,351   |                 |  |   | 795,551    |   |  |   | 1,803,817   |  
|                                            |  |                                  |            |   |                                 |   |             |                 |  |   |            |   |  |   |             |  
|                                            |  |                                  | 23,411,994 |   |                                 |   | 8,218,240   |                 |  |   | 58,217,753 |   |  |   | 13,688,063  |  
|Cost of Interest Income                     |  |                                  |            |   |                                 |   |             |                 |  |   |            |   |  |   |             |  
|Interest-related expenses                   |  |                                  | 11,172,198 |   |                                 |   | 6,159,540   |                 |  |   | 30,275,777 |   |  |   | 9,483,133   |  
|Valuation of interest rate swap             |  |                                  | (869,559   | ) |                                 |   |            |                 |  |   | (265,017   | ) |  |   |            |  
|Loan servicing and other fees               |  |                                  | 1,145,423  |   |                                 |   | 503,432     |                 |  |   | 2,908,411  |   |  |   | 1,099,532   |  
|                                            |  |                                  |            |   |                                 |   |             |                 |  |   |            |   |  |   |             |  
|Total Cost of Loan Financing                |  |                                  | 11,448,062 |   |                                 |   | 6,662,972   |                 |  |   | 32,919,171 |   |  |   | 10,582,665  |  
|Net Interest Income                         |  |                                  | 11,963,932 |   |                                 |   | 1,555,268   |                 |  |   | 25,298,582 |   |  |   | 3,105,398   |  
|                                            |  |                                  |            |   |                                 |   |             |                 |  |   |            |   |  |   |             |  
|Less: Provision for losses                  |  |                                  | 681,003    |   |                                 |   | 663,571     |                 |  |   | 1,668,187  |   |  |   | 968,324     |  
|                                            |  |                                  |            |   |                                 |   |             |                 |  |   |            |   |  |   |             |  
|Interest income after provision             |  |                                  | 11,282,929 |   |                                 |   | 891,697     |                 |  |   | 23,630,395 |   |  |   | 2,137,074   |  
|Other Income                                |  |                                  |            |   |                                 |   |             |                 |  |   |            |   |  |   |             |  
|Gain on sale of student loans               |  |                                  | 587,410    |   |                                 |   | 1,011,302   |                 |  |   | 10,689,302 |   |  |   | 1,051,995   |  
|Other                                       |  |                                  | 33,672     |   |                                 |   | 7,640       |                 |  |   | 51,042     |   |  |   | 13,032      |  
|                                            |  |                                  |            |   |                                 |   |             |                 |  |   |            |   |  |   |             |  
|Total Other Income                          |  |                                  | 621,082    |   |                                 |   | 1,018,942   |                 |  |   | 10,740,344 |   |  |   | 1,065,027   |  
|Operating Expenses:                         |  |                                  |            |   |                                 |   |             |                 |  |   |            |   |  |   |             |  
|General and administrative                  |  |                                  | 3,057,671  |   |                                 |   | 2,451,996   |                 |  |   | 7,925,804  |   |  |   | 5,662,511   |  
|Sales & marketing                           |  |                                  | 11,657,053 |   |                                 |   | 9,663,979   |                 |  |   | 32,576,310 |   |  |   | 16,649,290  |  
|                                            |  |                                  |            |   |                                 |   |             |                 |  |   |            |   |  |   |             |  
|Total Operating Expenses                    |  |                                  | 14,714,724 |   |                                 |   | 12,115,975  |                 |  |   | 40,502,114 |   |  |   | 22,311,801  |  
|                                            |  |                                  |            |   |                                 |   |             |                 |  |   |            |   |  |   |             |  
|Loss Before Income Tax Provision            |  |                                  | (2,810,713 | ) |                                 |   | (10,205,336 | )               |  |   | (6,131,375 | ) |  |   | (19,109,700 | )
|Income tax provision                        |  |                                  | 3,200      |   |                                 |   | 2,866       |                 |  |   | 40,456     |   |  |   | 5,266       |  
|                                            |  |                                  |            |   |                                 |   |             |                 |  |   |            |   |  |   |             |  
|Net Loss                                    |  | $                                | (2,813,913 | ) |                                 | $ | (10,208,202 | )               |  | $ | (6,171,831 | ) |  | $ | (19,114,966 | )
|                                            |  |                                  |            |   |                                 |   |             |                 |  |   |            |   |  |   |             |  
|Net Loss Per Share:                         |  |                                  |            |   |                                 |   |             |                 |  |   |            |   |  |   |             |  
|Basic & diluted                             |  | $                                | (0.23      | ) |                                 | $ | (0.99       | )               |  | $ | (0.53      | ) |  | $ | (1.92       | )
|Weighted average common shares outstanding: |  |                                  |            |   |                                 |   |             |                 |  |   |            |   |  |   |             |  
|Basic & diluted                             |  |                                  | 12,085,134 |   |                                 |   | 10,306,509  |                 |  |   | 11,604,215 |   |  |   | 9,962,192   |  



See accompanying notes
to consolidated financial statements



4



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EDUCATION LENDING GROUP, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS DEFICIT

For the Nine Months Ended September 30, 2003

(Unaudited)



|                                         |  |                 |  |        |        |                           |   |                     |  |   |                                     |   |  |       |            |   |                         |   |             |   |  |   |            |  
|---------------------------------------- |  | --------------- |  | ------ | ------ | ------------------------- | - | ------------------- |  | - | ----------------------------------- | - |  | ----- | ---------- | - | ----------------------- | - | ----------- | - |  | - | ---------- | -
|                                         |  | COMMON STOCK    | 
|                                         |  | Number ofShares |  | Amount |        | Additional Paid inCapital |   | Accumulated Deficit |  |   | AccumulatedOther Comprehensive Loss |   |  | Total |            |   | Total ComprehensiveLoss |  
|Balance, December 31, 2002               |  | 11,189,084      |  | $      | 11,189 |                           | $ | 8,219,678           |  | $ | (33,861,435                         | ) |  | $     |           |   |                         | $ | (25,630,568 | ) |  | $ |           |  
|Issuance of common stock                 |  | 1,785,971       |  |        | 1,786  |                           |   | 2,506,711           |  |   |                                    |   |  |       |           |   |                         |   | 2,508,497   |   |  |   |           |  
|Performance based options                |  |                |  |        |       |                           |   | 1,828,900           |  |   |                                    |   |  |       |           |   |                         |   | 1,828,900   |   |  |   |           |  
|Other comprehensive loss, net of taxes   |  |                |  |        |       |                           |   |                    |  |   |                                    |   |  |       | (1,219,499 | ) |                         |   | (1,219,499  | ) |  |   | (1,219,499 | )
|Net loss, September 30, 2003 (restated)  |  |                |  |        |       |                           |   |                    |  |   | (6,171,831                          | ) |  |       |           |   |                         |   | (6,171,831  | ) |  |   | (6,171,831 | )
|                                         |  |                 |  |        |        |                           |   |                     |  |   |                                     |   |  |       |            |   |                         |   |             |   |  |   |            |  
|Balance at September 30, 2003 (restated) |  | 12,975,055      |  | $      | 12,975 |                           | $ | 12,555,289          |  | $ | (40,033,266                         | ) |  | $     | (1,219,499 | ) |                         | $ | (28,684,501 | ) |  | $ | (7,391,330 | )
|                                         |  |                 |  |        |        |                           |   |                     |  |   |                                     |   |  |       |            |   |                         |   |             |   |  |   |            |  



See accompanying notes
to consolidated financial statements



5



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EDUCATION LENDING GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30, 2003 and 2002

(Unaudited)



|                                                                  |  |                 |                    |   |      |   |                  |  
|----------------------------------------------------------------- |  | --------------- | ------------------ | - | ---- | - | ---------------- | -
|                                                                  |  | 2003 (restated) |                    |   | 2002 |  
|Cash Flows From Operating Activities:                             |  |                 |                    |   |      |   |                  |  
|Net loss                                                          |  | $               | (6,171,831         | ) |      | $ | (19,114,966      | )
|Adjustments to reconcile net loss to net cash used in operations: |  |                 |                    |   |      |   |                  |  
|Non-cash charges (Depreciation, amortization and option expense)  |  |                 | 3,108,297          |   |      |   | 311,007          |  
|Provision for loan losses Valuation of interest rate swap         |  |                 | 1,668,187(265,017  | ) |      |   | 968,324         |  
|(Increase) decrease in assets:                                    |  |                 |                    |   |      |   |                  |  
|Interest and other receivables                                    |  |                 | (15,127,113        | ) |      |   | (6,190,664       | )
|Other assets                                                      |  |                 | 589,187            |   |      |   | (476,230         | )
|Increase (decrease) in liabilities:                               |  |                 |                    |   |      |   |                  |  
|Accounts payable Government payable                               |  |                 | 1,997,6242,067,325 |   |      |   | 866,8885,847,557 |  
|Accrued expenses                                                  |  |                 | (766,433           | ) |      |   | 7,439,921        |  
|                                                                  |  |                 |                    |   |      |   |                  |  
|Net cash used in operating activities                             |  |                 | (12,899,774        | ) |      |   | (10,348,163      | )
|                                                                  |  |                 |                    |   |      |   |                  |  
|Cash flows from investing activities:                             |  |                 |                    |   |      |   |                  |  
|Origination/Purchase of student loans, net                        |  |                 | (1,394,591,300     | ) |      |   | (812,515,336     | )
|Acquisition of property and equipment                             |  |                 | (552,652           | ) |      |   | (828,027         | )
|                                                                  |  |                 |                    |   |      |   |                  |  
|Net cash used in investing activities                             |  |                 | (1,395,143,952     | ) |      |   | (813,343,363     | )
|                                                                  |  |                 |                    |   |      |   |                  |  
|Cash flows from financing activities:                             |  |                 |                    |   |      |   |                  |  
|Net proceeds from warehouse loan facility                         |  |                 | 537,606,252        |   |      |   | 70,813,170       |  
|Net proceeds from Series 2002/2003 Notes                          |  |                 | 876,001,321        |   |      |   | 757,313,408      |  
|Payment of loan fees                                              |  |                 | (4,655,486         | ) |      |   | (3,991,042       | )
|Proceeds from issuance of stock                                   |  |                 | 2,508,497          |   |      |   | 1,132,335        |  
|                                                                  |  |                 |                    |   |      |   |                  |  
|Net cash provided by financing activities                         |  |                 | 1,411,460,584      |   |      |   | 825,267,871      |  
|                                                                  |  |                 |                    |   |      |   |                  |  
|Net increase in cash                                              |  |                 | 3,416,858          |   |      |   | 1,576,345        |  
|Cash and cash equivalents at beginning of period                  |  |                 | 2,042,527          |   |      |   | 1,705,113        |  
|                                                                  |  |                 |                    |   |      |   |                  |  
|Cash and cash equivalents at end of period                        |  | $               | 5,459,385          |   |      | $ | 3,281,458        |  
|                                                                  |  |                 |                    |   |      |   |                  |  



See accompanying notes
to consolidated financial statements



6



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##### Table of Contents

Education Lending Group, Inc.

(Formerly Direct III Marketing, Inc.)

Notes to Consolidated Financial Statements

September 30, 2003

(Unaudited)



Note 1  Statement of Accounting Principles





New Accounting Pronouncements



In April 2003, the Financial Accounting Standards Board (FASB)
issued SFAS 149. SFAS 149 amends and clarifies financial accounting and reporting for derivative instruments and for hedging activities under SFAS 133. In particular, SFAS 149 (1) clarifies under what circumstances a contract with an initial net
investment meets the characteristic of a derivative discussed in paragraph 6(b) of SFAS 133, (2) clarifies when a derivative contains a financing component, (3) amends the definition of an underlying to conform it to language used in FIN 45,
Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, and (4) amends certain other existing pronouncements. Those changes will result in more consistent
reporting of contracts as either derivatives or hybrid instruments. SFAS 149 is effective for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003. We have determined that SFAS 149 will
not have a significant impact on our consolidated financial statements.



In December 2002, the FASB issued SFAS 148, Accounting for Stock-Based Compensation  Transition and Disclosure  an amendment of SFAS 123, (SFAS 148). SFAS 148 addresses transition provisions for a
voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123. We are currently evaluating the impact adoption of SFAS 148 and, accordingly, SFAS
123, would have on our consolidated financial statements. We continue to account for our incentive based compensation using the intrinsic value method under APB 25. Had compensation cost for our stock options been recognized based upon the estimated
fair value on the grant date under the fair value methodology prescribed by SFAS 123 as amended by SFAS 148, our net earnings and earnings per share would have been changed as follows:



|                                                                                                            |  |                                  |            |   |                                 |   |             |                 |  |   |            |   |  |   |             |  
|----------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ---------- | - | ------------------------------- | - | ----------- | --------------- |  | - | ---------- | - |  | - | ----------- | -
|                                                                                                            |  | Three Months Ended September 30, |            |   | Nine Months Ended September 30, |  
|                                                                                                            |  | 2003 (restated)                  |            |   | 2002                            |   |             | 2003 (restated) |  |   | 2002       |  
|Net loss, as reported                                                                                       |  | $                                | (2,813,913 | ) |                                 | $ | (10,208,202 | )               |  | $ | (6,171,831 | ) |  | $ | (19,114,966 | )
|Deduct: total stock-based compensation expense determined under fair-value based method, net of tax effects |  |                                  | (200,174   | ) |                                 |   | (241,870    | )               |  |   | (652,077   | ) |  |   | (695,080    | )
|                                                                                                            |  |                                  |            |   |                                 |   |             |                 |  |   |            |   |  |   |             |  
|Pro forma net loss                                                                                          |  | $                                | (3,014,087 | ) |                                 | $ | (10,450,072 | )               |  | $ | (6,823,908 | ) |  | $ | (19,810,046 | )
|                                                                                                            |  |                                  |            |   |                                 |   |             |                 |  |   |            |   |  |   |             |  
|Loss per share:                                                                                             |  |                                  |            |   |                                 |   |             |                 |  |   |            |   |  |   |             |  
|Basic & diluted, as reported                                                                                |  | $                                | (0.23      | ) |                                 | $ | (0.99       | )               |  | $ | (0.53      | ) |  | $ | (1.92       | )
|Basic & diluted, pro forma                                                                                  |  | $                                | (0.25      | ) |                                 | $ | (1.01       | )               |  | $ | (0.59      | ) |  | $ | (1.99       | )



As required by SFAS
123, we provide the following disclosure of hypothetical values for the net options issued during 2003. The net stock options granted during the quarter and nine months ended September 30, 2003 are valued at $8.95 and $5.36, respectively. These
values were estimated using the Black-Scholes option-pricing model with the following assumptions: risk free interest rates of 3.93% and 3.88% were used for the quarter and nine months ended September 30, 2003, respectively; expected volatility of
92% and expected life of 9.33 years were used for both the quarter and nine months ended September 30, 2003.



Note 2  Student Loans



We originate student loans on our own behalf and we purchase student loans from originating lenders. Our portfolio consists principally of loans originated under two
federally sponsored programs: FFELP and the Health Education Assistance Loan Program, which is also known as HEAL. We also purchase alternative supplemental education loans. There are three principal categories of FFELP loans: consolidation loans,
Stafford loans and PLUS loans. The nature of the student loans held at September 30, 2003 is as follows:



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##### Table of Contents

|                                       |  |               |             |   |                           |   |               |       |  |   |               |  
|-------------------------------------- |  | ------------- | ----------- | - | ------------------------- | - | ------------- | ----- |  | - | ------------- | -
|                                       |  | Student Loans |             |   | Student Loans Securitized |   |               | Total | 
|FFELP Loans:                           |  |               |             |   |                           |   |               |       |  |   |               |  
|Consolidation                          |  | $             | 796,032,456 |   |                           | $ | 1,820,776,973 |       |  | $ | 2,616,809,429 |  
|Stafford                               |  |               | 97,118,821  |   |                           |   |              |       |  |   | 97,118,821    |  
|PLUS                                   |  |               | 713,166     |   |                           |   |              |       |  |   | 713,166       |  
|                                       |  |               |             |   |                           |   |               |       |  |   |               |  
|FFELP Subtotal                         |  |               | 893,864,443 |   |                           |   | 1,820,776,973 |       |  |   | 2,714,641,416 |  
|Alternative Supplemental Loans         |  |               | 9,943,741   |   |                           |   |              |       |  |   | 9,943,741     |  
|                                       |  |               |             |   |                           |   |               |       |  |   |               |  
|Total Student Loans, gross             |  |               | 903,808,184 |   |                           |   | 1,820,776,973 |       |  |   | 2,724,585,157 |  
|Capitalized costs, net of amortization |  |               | 6,217,673   |   |                           |   | 13,898,420    |       |  |   | 20,116,093    |  
|Loan loss reserve                      |  |               | (1,031,628  | ) |                           |   | (2,185,215    | )     |  |   | (3,216,843    | )
|                                       |  |               |             |   |                           |   |               |       |  |   |               |  
|Total student loans, net               |  | $             | 908,994,229 |   |                           | $ | 1,832,490,178 |       |  | $ | 2,741,484,407 |  
|                                       |  |               |             |   |                           |   |               |       |  |   |               |  



The activity relating
to the student loan balances held during the period from December 31, 2002 through September 30, 2003 is as follows:



|                                |  |               |               |   |                           |   |               |       |  |   |               |  
|------------------------------- |  | ------------- | ------------- | - | ------------------------- | - | ------------- | ----- |  | - | ------------- | -
|                                |  | Student Loans |               |   | Student Loans Securitized |   |               | Total | 
|Balance at December 31, 2002    |  | $             | 401,839,983   |   |                           | $ | 947,213,769   |       |  | $ | 1,349,053,752 |  
|Additions                       |  |               |               |   |                           |   |               |       |  |   |               |  
|Originations and Purchases      |  |               | 1,900,480,632 |   |                           |   | 4,375,512     |       |  |   | 1,904,856,144 |  
|Capitalized Interest            |  |               | 950,763       |   |                           |   | 6,467,985     |       |  |   | 7,418,748     |  
|Additions to Capitalized Costs  |  |               | 10,016,543    |   |                           |   | 8,386,067     |       |  |   | 18,402,610    |  
|Reductions in Loan Loss Reserve |  |               | 1,609,012     |   |                           |   | 124,436       |       |  |   | 1,733,448     |  
|Deductions                      |  |               |               |   |                           |   |               |       |  |   |               |  
|Borrower Payments               |  |               | (46,383,596   | ) |                           |   | (98,674,666   | )     |  |   | (145,058,262  | )
|Sales to Third Parties          |  |               | (384,034,087  | ) |                           |   |              |       |  |   | (384,034,087  | )
|Additions to Loan Loss Reserve  |  |               | (2,178,414    | ) |                           |   | (1,215,753    | )     |  |   | (3,394,167    | )
|Reductions in Capitalized Costs |  |               | (6,460,086    | ) |                           |   | (1,002,059    | )     |  |   | (7,462,145    | )
|Other                           |  |               |               |   |                           |   |               |       |  |   |               |  
|Transfer to Securitizations     |  |               | (967,005,485  | ) |                           |   | 967,005,485   |       |  |   |              |  
|Other                           |  |               | 158,964       |   |                           |   | (190,598      | )     |  |   | (31,634       | )
|                                |  |               |               |   |                           |   |               |       |  |   |               |  
|Balance at September 30, 2003   |  | $             | 908,994,229   |   |                           | $ | 1,832,490,178 |       |  | $ | 2,741,484,407 |  
|                                |  |               |               |   |                           |   |               |       |  |   |               |  



Note
3-Restatement of Quarterly Results



During our review of our 2003 year-end
financial statements we discovered a computational error related to the sale of consolidation loans during the first and second quarters of 2003. Loan servicing set-up fees should have been written off against the gain on sale instead of
continuing to be amortized when the related consolidation loans were sold. We have restated our consolidated financial statements to reflect the changes related to this adjustment. Following is a summary of the changes to our consolidated balance
sheet at September 30, 2003, our consolidated statement of income for the three and nine months ended September 30, 2003, and our consolidated statement of cash flows for the nine months ended September 30, 2003.



|                                                      |  |                       |               |   |             |   |               |  
|----------------------------------------------------- |  | --------------------- | ------------- | - | ----------- | - | ------------- | -
|Consolidated Balance Sheet as of September
30, 2003   |  | As previouslyreported |               |   | As restated |  
|Student loans, net of loan loss reserve (securitized) |  | $                     | 1,832,958,659 |   |             | $ | 1,832,490,178 |  
|Total assets                                          |  |                       | 2,910,036,416 |   |             |   | 2,909,567,935 |  
|Accumulated deficit                                   |  |                       | (39,564,785   | ) |             |   | (40,033,266   | )
|Total stockholders deficit                           |  |                       | (28,216,020   | ) |             |   | (28,684,501   | )



|                                            |  |                                                          |            |   |                                                |   |            |                                                         |  |   |                                               |   |  |   |            |  
|------------------------------------------- |  | -------------------------------------------------------- | ---------- | - | ---------------------------------------------- | - | ---------- | ------------------------------------------------------- |  | - | --------------------------------------------- | - |  | - | ---------- | -
|Consolidated Statement of
Operations        |  | As previouslyreported Three monthsendedSeptember 30,2003 |            |   | As restated Three monthsendedSeptember 30,2003 |   |            | As previouslyreported Nine monthsendedSeptember 30,2003 |  |   | As restated Nine monthsendedSeptember 30,2003 |  
|Loan servicing and other fees               |  | $                                                        | 1,152,099  |   |                                                | $ | 1,145,423  |                                                         |  | $ | 2,926,772                                     |   |  | $ | 2,908,411  |  
|Gain on sale of student loans               |  |                                                          | 587,410    |   |                                                |   | 587,410    |                                                         |  |   | 11,176,144                                    |   |  |   | 10,689,302 |  
|Net loss                                    |  |                                                          | (2,820,589 | ) |                                                |   | (2,813,913 | )                                                       |  |   | (5,703,350                                    | ) |  |   | (6,171,831 | )
|Net loss per share                          |  |                                                          | (0.23      | ) |                                                |   | (0.23      | )                                                       |  |   | (0.49                                         | ) |  |   | (0.53      | )
|                                            |  |                                                          |            |   |                                                |   |            |                                                         |  |   |                                               |   |  |   |            |  
|                                            |  |                                                          |            |   |                                                |   |            |                                                         |  |   |                                               |   |  |   |            |  
|                                            |  |                                                          |            |   |                                                |   |            |                                                         |  |   |                                               |   |  |   |            |  
|                                            |  |                                                          |            |   |                                                |   |            |                                                         |  |   |                                               |   |  |   |            |  
|                                            |  |                                                          |            |   |                                                |   |            |                                                         |  |   |                                               |   |  |   |            |  
|Weighted average common shares outstanding: |  |                                                          |            |   |                                                |   |            |                                                         |  |   |                                               |   |  |   |            |  
|Basic and diluted                           |  |                                                          | 12,085,134 |   |                                                |   | 12,085,134 |                                                         |  |   | 11,604,215                                    |   |  |   | 11,604,215 |  







|                                                                                  |  |                       |                |   |             |   |                |  
|--------------------------------------------------------------------------------- |  | --------------------- | -------------- | - | ----------- | - | -------------- | -
|Consolidated Statement of Cash Flows for
the nine months ended September 30, 2003 |  | As previouslyreported |                |   | As restated |  
|Net loss                                                                          |  | $                     | (5,703,350     | ) |             | $ | (6,171,831     | )
|Net cash used in operating activities                                             |  |                       | (12,431,293    | ) |             |   | (12,899,774    | )
|Origination/purchase of student loans                                             |  |                       | (1,395,059,781 | ) |             |   | (1,394,591,300 | )
|Net cash used in investing activities                                             |  |                       | (1,395,612,433 | ) |             |   | (1,395,143,952 | )





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##### Table of Contents

|Item  2. |  | Managements Discussion and Analysis of Finan
cial Condition and Results of Operations
|-------- |  | --------------------------------------------------------------------------------------



As announced in a press release dated February 26, 2004, as the result of a $468,000 computational error, Education Lending Group, Inc, is restating its consolidated results for the first, second and third
quarters of 2003. Loan servicing set-up fees should have been written off against the gain on sale instead of continuing to be amortized when the related consolidation loans were sold. We are filing this Form10-QSB/A to report the
results for the quarter and nine months ended September 30, 2003, as restated and as discussed in Note 3 to the Consolidated Financial Statements. Other than as set forth below, the restatement does not impact any of the financial or other
information set forth in the filing of our Form 10-QSB for the period ended September 30, 2003 as amended by the first amendment to such form filed on October 23, 2003. Effective as of December 31, 2003, Education Lending Group, Inc. is no longer a
small business issuer. In the future, we will report our quarterly results on Form 10-Q and our annual results on Form 10-K. Amounts referred to in Managements Discussion and Analysis of Financial Condition and Results of Operations that were
impacted by the restatement are restated below.





RESULTS OF OPERATIONS



Three Months Ended September 30, 2003 Compared to September 30, 2002



Earnings Summary



For the three months ended September 30, 2003, our net loss was $2.8 million, or $0.23 per share, compared to a net loss of $10.2 million, or $0.99 per share for the three months ended September 30, 2002. The
decreased loss for the three months ended September 30, 2003 as compared to September 30, 2002 is attributable to higher revenues generated by increased student loan assets in the September 30, 2003 quarter as compared to the September 30, 2002
quarter, partially offset by correspondingly higher interest-related expenses, loan servicing fees and operating expenses. Our student loan asset base at September 30, 2003 was $2.7 billion, compared to $2.2 billion at June 30, 2003 and $869 million
at September 30, 2002. Included in our operating expenses for the quarter are the payments made to marketing partners who advertise, identify and attract potential borrowers for us. These marketing partners generally receive a one-time fee for each
loan application they originate. Accordingly, as our new loan volume generated by marketing partners increases, our marketing partner fee expense increases. These fees are a significant portion of our expenses and during the quarter ended September
30, 2003, represented 59% of our total operating expenses. Since we only earn an interest spread on the loans we hold on our balance sheet, the marketing partner fee expense, along with other sales and marketing expenses, results in losses until
such time as a significant scale of student loan assets is reached on our balance sheet.





Net Interest Income and Income after Provision for Loan Losses



Net interest income during the three months ended September 30, 2003 was $11,964,000. This was comprised of gross interest income of
approximately $23,412,000 less costs of interest of approximately $11,448,000. This amount includes interest-related costs of $11,172,000, loan servicing and other fees of approximately $1,145,000 and a mark-to-market adjustment of $869,000 (credit)
for the interest rate swap entered into during the fourth quarter of 2002. For the quarter ended September 30, 2003, net interest income after the provision for loan losses was approximately $11,283,000. Net interest income for the three months
ended September 30, 2002 was $1,555,000. This was comprised of gross interest income of approximately $8,218,000 less costs of interest income of approximately $6,663,000. These costs for the quarter ended September 30, 2002 include interest-related
costs of $6,160,000 and loan servicing and other fees of approximately $503,000. Net interest income after the provision for loan losses was approximately $892,000 for the quarter ended September 30, 2002. The increase in the net interest income we
earned during the quarter is a direct result of the increase in the student loan assets we held over those held in the same quarter of the prior year. In addition, because the majority of the student loans we held are consolidation loans
(approximately 97% and 96% of the loans on our balance sheets at December 31, 2002 and September 30, 2003, respectively) which carry a fixed interest rate, coupled with the fact our borrowing costs have decreased (a function of the low interest rate
environment since September 30, 2002), our spread has increased. This is reflected in the increased net interest income.



9



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##### Table of Contents

Nine Months Ended September 30, 2003 Compared to September 30, 2002



Earnings Summary



For the nine months ended September 30, 2003, our net loss was $6.2 million, or $0.53 per share, compared to a net loss of $19.1 million, or
$1.92 per share for the nine months ended September 30, 2002. The decreased loss for the nine months ended September 30, 2003 as compared to September 30, 2002 is primarily attributable to the sale of approximately $247 million of consolidation
loans (we sold the consolidation loans during the period to raise cash for operations) which resulted in a gain on sale of approximately $8.5 million. Also contributing to the reduced loss in the nine months ended September 30, 2003 as compared to
the nine months ended September 30, 2002 are the higher revenues generated by our increased student loan assets in the nine months ended September 30, 2003 compared to the nine months ended September 30, 2002, partially offset by correspondingly
higher interest-related expenses, loan servicing fees and operating expenses. Our student loan asset base at September 30, 2003 was $2.7 billion, a $1.4 billion increase from the $1.3 billion student loan portfolio we held at December 31, 2002. At
September 30, 2002, we held $0.9 million of student loans on our balance sheet. Included in our operating expenses are payments made to marketing partners who advertise, identify and attract potential borrowers for us. These marketing partners
generally receive a one-time fee for each loan application they originate. Accordingly, as our new loan volume generated by marketing partners increases, our marketing partner fee expense increases. These marketing partner fees are a significant
portion of our expenses and include the non-cash charge of approximately $1,458,000 related to vesting and mark-to-market adjustments of the performance based options awarded to certain marketing partners, as discussed in Note 1 to the consolidated
financial statements. During the nine months ended September 30, 2003, marketing partner fees represented 58% of our total operating expenses. Since we only earn an interest spread on the loans we carry on our balance sheet, the marketing partner
fee expense along with other sales and marketing expenses results in losses until such time as a significant scale of student loan assets held on the balance sheet is reached.





Net Interest Income and Interest Income after Provision for
Loan Losses



Net interest income for the nine months ended September 30,
2003 was $25,299,000. This was comprised of gross interest income of approximately $58,218,000 less interest costs of approximately $32,919,000. Interest costs include interest-related expenses of $30,276,000, a mark-to-market adjustment of $265,000
(credit) related to the interest rate swap entered into during the fourth quarter of 2002 and loan servicing and other fees of $2,908,000. For the nine months ended September 30, 2003, net interest income after the provision for loan losses was
approximately $23,630,000. Net interest income for the nine months ended September 30, 2002 was $3,105,000. This was comprised of gross interest income of approximately $13,688,000 less costs of interest income of approximately $10,583,000. Costs of
interest income include interest-related expenses of $9,483,000 and loan servicing and other fees of $1,100,000 for the nine months ended September 30, 2002. Net interest income after the provision for loan losses was approximately $2,137,000 for
the nine months ended September 30, 2002. The increase in the net interest income we earned during the nine months ended September 30, 2003 compared to the nine months ended September 30, 2002 is a direct result of the increase in the student loan
assets we held at September 30, 2003. In addition, because the majority of the student loans we hold are consolidation loans (approximately 97% and 96% of the loans on our balance sheets at December 31, 2002 and September 30, 2003, respectively)
which carry a fixed interest rate, coupled with the fact our borrowing costs have decreased (a function of the low interest rate environment since September 30, 2002), our spread has increased. This is reflected in the increased net interest income.





Gain on Sale of Student Loans



For the nine months ended
September 30, 2003 approximately $10,689,000 was booked as gain on the sale of student loans from this entity compared with $1,052,000 during the nine months ended September 30, 2002. The increase from the nine months ended September 30, 2002 to the
nine months ended September 30, 2003 is attributable to having a full year of operations leading into the period, whereas we had only commenced operations through the school preferred lender-list channel in the first quarter of 2002 and therefore
had neither a full nine months of activity, nor an established pipeline from which to draw. Due to changes in our arrangement with the purchaser of a portion of these loans, beginning with the third quarter of 2003, we will hold loans on our balance
sheet for 120 days after final disbursement. The change will push a portion of these sales into 2004, resulting in reduced gain on sale when compared to prior periods. At September 30, 2003, our total student loans on the balance sheet included
approximately $39,527,000 of loans held for sale.



10



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##### Table of Contents

From time to time we may also elect to sell some portion of our consolidation loans. Accordingly, in addition to the sale
of loans generated in the school preferred lender-list channel during the nine months ended September 30, 2003, we chose to sell approximately $247,000,000 of consolidation loans. This resulted in additional gain on sale of approximately $8,532,000
for the nine months ended September 30, 2003 compared to no sales from this source in the first nine months of 2002. As a result, we had total gain on sale during the nine months ended September 30, 2003 of approximately $10,689,000 compared to
$1,052,000 during the same period in 2002.





LIQUIDITY AND CAPITAL RESOURCES



At September 30, 2003, we had operating cash and cash equivalents of approximately $5,459,000 (excluding restricted cash and investments). Since inception, we have
financed our operations from debt and equity financings. During the three and nine months ended September 30, 2003, we used cash of approximately $3,426,000 and $12,900,000, respectively, to fund our operations. During the nine months ended
September 30, 2003, we acquired property and equipment of approximately $553,000. At September 30, 2003, we had advances of approximately $977,141,000 outstanding against our warehouse loan facilities. We hold $959,500,000 and $983,892,000 from our
LIBOR/Auction Rate Education Loan Backed Notes issued in 2002 and 2003 (Series 2002 Notes and Series 2003 Notes), respectively at September 30, 2003. During the nine months ended September 30, 2003, our net recorded loans
increased $1,392,431,000 to $2,741,484,000. During the three and nine months ended September 30, 2003, we received proceeds of approximately $2,181,000 and $2,508,000, respectively, net of issuance costs, for the issuance of 1,493,471 and 1,785,971
shares of common stock in connection with the exercise of warrants and employee stock options.





|Item 3. |  | Controls and Pro
cedures
|------- |  | ------------------------



Based on their most recent
evaluation, which was completed within 90 days of the filing of this Form 10-QSB/A, our principal executive officer and principal financial officer believe our disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
require specific modifications to insure that all financial reporting and disclosures are accurate. We are in the process of developing improved internal control processes and expect to implement them during the first quarter of 2004. We believe
these changes will enhance the accuracy of all future financial reports.





PART II. OTHER
 INFORMA
TION





|Item 6. |  | Exhibits and Reports o
n Form 8-K
|------- |  | ---------------------------------



(a)
Exhibits.



The exhibits listed below are
filed as part of this document.



|               |  |  |  |                                                         
|-------------- |  |  |  | --------------------------------------------------------
|Exhibit Number |  |  |  | Description                                             
|31.1           |  |  |  | CEO Certification under Sarbanes-Oxley Act (Section 302)
|31.2           |  |  |  | CFO Certification under Sarbanes-Oxley Act (Section 302)
|32.1           |  |  |  | CEO Certification under Sarbanes-Oxley Act (Section 906)
|32.2           |  |  |  | CFO Certification under Sarbanes-Oxley Act (Section 906)





(b) Form 8-K.



During the quarter ended September 30, 2003, we filed two Reports on Form 8-K. They were dated July 24, 2003 and August 11, 2003.



11



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##### Table of Contents

SIGNATURES



In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.



|                        |  |  |  |                               |  |        |  |                                             
|----------------------- |  |  |  | ----------------------------- |  | ------ |  | --------------------------------------------
|Date: February 27, 2004 |  |  |  | EDUCATION LENDING GROUP, INC.
|                        |  |  |  |                              
|                        |  |  |  |                               |  | By:    |  | /s/ James G. Clark                          
|                        |  |  |  |                               |  |        |  |                                             
|                        |  |  |  |                               |  | Name:  |  | James G. Clark                              
|                        |  |  |  |                               |  | Title: |  | Chief Financial Officer                     
|                        |  |  |  |                               |  |        |  | (Principal Financial and Accounting Officer)



12