<PAGE> 1
			SECURITIES AND EXCHANGE COMMISSION
				Washington, D.C. 20549
				 ____________________

		   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
			  THE SECURITIES EXCHANGE ACT OF 1934

		     For the fiscal year ended December 31, 1995

					  OR

		 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
			 THE SECURITIES EXCHANGE ACT OF 1934

			For the transition period from     to
			   Commission File Number 33-16789

				   _________________

	       RURAL ELECTRIC COOPERATIVE GRANTOR TRUST (KEPCO) 1988-K2
		(Exact name of registrant as specified in its charter)

				      NEW YORK
	     (State or other jurisdiction of incorporation or organization)

				     36-6878771
		    (I.R.S. Employer Identification Number)

		     2201 Cooperative Way, Herndon, VA 22071-3025
		       (Address of principal executive offices)
	 (Registrant's telephone number, including area code, is 703-709-6700)

				  ___________________

	  Securities Registered pursuant to Section 12(b) of the Act:  None.

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       

The Registrant has no common or voting stock.

			 DOCUMENTS INCORPORATED BY REFERENCE:

1.   Form of Trust Agreement
2.   Loan Agreement
3.   Loan Guarantee and Servicing Agreement

Exhibit Index located on page 13.

<PAGE> 2

Part I

Item 3.     Legal Proceedings

	    None.


Item 4.     Submission of Matters to a Vote of Security Holders

	    None.

<PAGE> 3

Part II

Item 5.   Market for the Registrant's Common Equity and Related Stockholder 
	  Matters

      a)    There is no established trading market for the certificates 
	    representing ownership of the beneficial interest in the Trust.

      b)    As of March 29, 1996 there was one holder of certificates 
	    representing ownership of the beneficial interest in the Trust.


Item 8.   Financial Statements and Supplementary Data

	  See attached audited financial statements.


Item 9.   Disagreements on Accounting and Financial Disclosure

	  None.



Part III

Item 13.  Certain Relationships and Related Transactions

	  None.


<PAGE> 4

Part IV

Item 14.  Exhibits, Financial Statement Schedules and Reports
	  on Form 8-K

      a)  The following documents are filed as part of this report:

	  1.  Financial Statements
	      Report of Independent Public Accountants
	      Statement of Assets and Liabilities as of
		 December 31, 1995 and 1994
	      Statement of Income and Expenses, for the Years Ended
		 December 31, 1995, 1994 and 1993
	      Statement of Cash Flows, for the Years Ended 
		 December 31, 1995, 1994 and 1993
	      Notes to Financial Statements

	  2.  Financial Statement Schedules are omitted because they are 
	      inapplicable.

	  3.  Exhibits

	      Exhibit
	      Number             Description of Exhibit
	       
	       4.1               Form of Trust Agreement, including the 
				 form of Rural Electric Cooperative 
				 Grantor Trust Certificate (incorporated 
				 by reference to Exhibit 4.1 to 
				 Registration Statement on Form S-1 [No. 
				 33-16789]).

	      10.1               Loan Agreement (incorporated by 
				 reference to Exhibit 10.1 to 
				 Registration Statement on Form S-1 [No. 
				 33-16789]).

	      10.2               Loan Guarantee and Servicing Agreement 
				 (incorporated by reference to Exhibit 
				 10.2 to Registration Statement on Form 
				 S-1 [No. 33-16789]).

       b)   Form 8-K dated December 20, 1995.
	    Semi-annual Report to Certificateholders dated December 15, 1995.

Supplemental information to be furnished with reports filed pursuant to 
Section 15(d) of the Act by Registrants which have not registered securities 
pursuant to Section 12 of the Act.

No annual report, proxy statement, form of proxy or other proxy soliciting 
material has been sent to Certificateholders, and the Registrant does not 
presently contemplate sending any such material subsequent to the filing of 
this report.

<PAGE> 5


Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 
1934, the Registrant has duly caused this report to be signed on its behalf 
by the undersigned, thereunto duly authorized, in the County of Fairfax, 
Commonwealth of Virginia on the 29th day of March, 1996.


	      RURAL ELECTRIC COOPERATIVE GRANTOR TRUST (KEPCO) 1988 K-2

	      By:   NATIONAL RURAL UTILITIES COOPERATIVE
		    FINANCE CORPORATION as Servicer

		    By:  /S/ Sheldon C. Petersen                                          
			 Sheldon C. Petersen, Governor and
			    Chief Executive Officer





<PAGE> 6









		      RURAL ELECTRIC COOPERATIVE GRANTOR
			     TRUST (KEPCO) 1988-K2


       FINANCIAL STATEMENTS AS OF DECEMBER 31, 1995, 1994 AND 1993
			TOGETHER WITH AUDITORS' REPORT


























<PAGE> 7







		    Report of Independent Public Accountants



To the Trustee of
Rural Electric Cooperative Grantor Trust
     (Kepco) 1988-K2, and

To the Board of Directors of 
National Rural Utilities Cooperative
     Finance Corporation


We have audited the accompanying statements of assets and liabilities of Rural 
Electric Cooperative Grantor Trust (Kepco) 1988-K2 as of December 31, 1995 and 
1994, and the related statements of income and expenses and cash flows for 
each of the three years in the period ended December 31, 1995.  These 
financial statements are the responsbility of the Trust's management.  Our 
responsibility is to express an opinion on these financial statements based 
on our audits.

We conducted our audits in accordance with generally accepted auditing 
standards.  Those standards require that we plan and perform an audit to 
obtain reasonable assurance about whether the financial statements are free 
of material misstatement.  An audit includes examining, on a test basis, 
evidence supporting the amounts and disclosures in the financial statements.  
An audit also includes assessing the accounting principles used and signifi-
cant estimates made by management, as well as evaluating the overall 
financial statement presentation.  We believe that our audits provide a 
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, 
in all material respects, the financial position of Rural Electric Cooperative 
Grantor Trust (Kepco) 1988-K2 as of December 31, 1995 and 1994, and its 
operations and its cash flows for the years ended December 31, 1995, 1994 and 
1993, in conformity with generally accepted accounting principles.



March 11, 1996
Washington, D. C.



<PAGE> 8

	      RURAL ELECTRIC COOPERATIVE GRANTOR TRUST (KEPCO) 1988-K2

			 STATEMENTS OF ASSETS AND LIABILITIES

			   AS OF DECEMBER 31, 1995 AND 1994




					   1995            1994

A S S E T S

Interest Receivable                   $   386,132     $   386,132

Note Receivable                        51,340,000      51,340,000

     Total Assets                     $51,726,132     $51,726,132




L I A B I L I T I E S

Interest Payable - Grantor Trust      $   374,654     $   374,654
   Certificates

Servicer Fees Payable                      11,478          11,478

Rural Electric Cooperative
   Grantor Trust Certificates          51,340,000      51,340,000

     Total  Liabilities               $51,726,132     $51,726,132

<PAGE> 9

	    RURAL ELECTRIC COOPERATIVE GRANTOR TRUST (KEPCO) 1988-K2

		       STATEMENTS OF INCOME AND EXPENSES

	      FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993




					      1995        1994         1993


INCOME:
  Interest on note receivable              $5,148,427   $5,148,427   $5,148,427


EXPENSES:       
  Interest on grantor trust certificates    4,995,382    4,995,382    4,995,382
  Servicer fees                               153,045      153,045      153,045

     Total expenses                         5,148,427    5,148,427    5,148,427

     Net Income                            $        -     $      -   $        -


<PAGE> 10
<TABLE>
<CAPTION>   RURAL ELECTRIC COOPERATIVE GRANTOR TRUST (KEPCO) 1988 - K2

			   STATEMENTS OF CASH FLOWS

	      FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993




						   1995          1994          1993

<S>                                            <C>           <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Interest received on note receivable         $5,148,427    $5,148,427    $5,148,427
   Interest paid to Certificateholders          (4,995,382)   (4,995,382)   (4,995,382)
   Fees paid to Servicer                          (153,045)     (153,045)     (153,045)

    Net cash provided by operating activities          -             -             -

CASH FLOWS FROM INVESTING ACTIVITIES:
    Proceeds from principal payment on note            -             -             -

    Net cash provided by investing activities          -             -             -

CASH FLOWS FROM FINANCING ACTIVITIES:
    Principal payment to Certificateholders            -             -             -

    Net cash used in financing activities              -             -             -

NET CHANGE IN CASH                                     -             -             -

CASH, beginning of year                                -             -             -

CASH, end of year                            $         -     $       -     $       -

ACCRUAL TO CASH BASIS RECONCILIATION:
   Accrual basis income                      $         -     $       -     $       -
   Change in accrual accounts:
      Decrease in interest receivable                  -             -             -
      Decrease in interest payable                     -             -             -
      Decrease in servicer fees payable                -             -             -

	 Total change in accrual accounts              -             -             -

    Net cash provided by operating activities $        -     $       -     $       -
</TABLE>

<PAGE> 11




	  RURAL ELECTRIC COOPERATIVE GRANTOR TRUST (KEPCO) 1988-K2

		      NOTES TO FINANCIAL STATEMENTS

		     DECEMBER 31, 1995, 1994 AND 1993


1.   ORGANIZATION AND OPERATIONS

     Rural Electric Cooperative Grantor Trust (Kepco) 1988-K2 (the "Trust") was 
     formed under a Trust Agreement dated February 15, 1988 among National 
     Rural Utilities Cooperative Finance Corporation ("CFC"), Kansas Electric 
     Power Cooperative, Inc. (the "Cooperative") and The First National Bank 
     of Chicago (the "Trustee").   On that date, CFC made a loan to the 
     Cooperative which issued a note (the "Note"), evidencing the borrowing, 
     to the Trust.  The Trust issued to CFC Rural Electric Cooperative Grantor 
     Trust (Kepco) 9.73% Certificates Due 2017 (the "Certificates") in the 
     amount of $51,340,000.   The Certificates are solely the obligations of 
     the Trust and are not insured or guaranteed by CFC, the Cooperative, the 
     Trustee, the Rural Utilities Service ("RUS") of the United States Depart-
     ment of Agriculture ("USDA") nor any other governmental agency.  Each 
     Certificate represents an undivided fractional interest in the Trust.  
     CFC is the depositor of the Trust and acts as Servicer of the Note.   CFC 
     filed, on behalf of the Trust, a Registration Statement on Form S-1 
     (Registration No. 33-16789) which became effective on February 17, 1988, 
     and CFC resold the Certificates thereunder.

     The assets of the Trust consist primarily of the Note which is guaranteed 
     (the "Guarantee") as to timely payment of principal and interest by the 
     United States of America, acting through the Administrator of RUS.  The 
     amounts of principal and interest payments on the Note held by the Trust 
     are sufficient to cover the scheduled principal and interest payments on 
     the Certificates issued by the Trust and the scheduled amounts of servicer 
     fees.  The General Counsel of the USDA has issued an opinion that the 
     Guarantee is supported by the full faith and credit of the United States 
     of America.

     Debt service and servicer fee payments on the Note are made to the Trustee 
     semi-annually (June 4 and December 4) by the Cooperative.  The Trustee 
     deposits all such receipts in the Trust account.  The Trustee is 
     authorized by the Trust Agreement to invest all funds in the Trust account 
     at the direction of CFC in certain eligible investments that mature no 
     later than the business day next preceding the day (June 15 and December 
     15) such amounts are to be distributed to the Certificateholders and the 
     Servicer.  The interest earned on the investments is distributed to the 
     Cooperative.  Any funds that are not so invested must be held by the 
     Trustee in the Trust account.  The Trustee may not reinvest any returns 
     of principal or investment earnings on eligible investments and the 
     Trustee may not sell any eligible investment prior to its maturity except, 
     at the direction of CFC, to preserve the value of the corpus of the Trust.

     On or before five business days after each date on which payments are 
     made on the Certificates, the Trustee is obligated to supply the holders 
     of such Certificates a report provided by the Servicer, which includes 
     certain pertinent information as to how the payment is to be allocated to 
     principal, interest, servicer fees and premium, if any, as well as the 
     principal balance outstanding after such payment.

     The fiscal year of the Trust is the calendar year.  Within the prescribed 
     period of time for tax reporting purposes, after the end of each calendar 
     year during the term of the Trust Agreement, the Trustee is obligated to 
     prepare and mail to each Certificateholder of record for the Trust, at 
     any time during such year, a report setting forth the information as is 
     reasonably necessary for the preparation of such Certificateholder's 
     Federal income tax return.

<PAGE> 12


     Payments of principal on the Certificates are scheduled to be repaid over 
     a period of fifteen years beginning in 2003.  The principal payment in 
     2003 is scheduled to be $1,700,000.  The Certificates are not subject to 
     redemption prior to December 15, 1997.  Thereafter, such Certificates are 
     subject to optional redemption, in whole and with premium until 2006, upon 
     redemption or purchase of the related Note.  The Trust Agreement will 
     terminate after payment in full has been made on the Certificates issued 
     thereunder.  


2.   TAX STATUS OF THE TRUST

     Milbank, Tweed, Hadley & McCloy, counsel to CFC, has advised CFC with 
     respect to the Trust that, in its opinion, (i) the Trust will not be 
     classified as an association taxable as a corporation, but will be 
     classified as a grantor trust and (ii) each Certificateholder will be 
     treated for Federal income tax purposes as the owner of an undivided 
     fractional interest in each of the assets held by the Trust.

     It is expected that the Trust will not have any liability for Federal or 
     State income taxes for the current or future years.


3.   INTEREST AND SERVICER FEE ACCOUNTING

     The Trust records interest income as it is earned and accrues interest 
     expense and servicer fees as they are incurred.   Servicer fees represent 
     ten basis points of the outstanding principal balance of the Certificates 
     and the Note.


4.   FAIR VALUE OF FINANCIAL INSTRUMENTS

     The following disclosure of the estimated fair value of financial instru-
     ments is made in accordance with FASB Statement No. 107, "Disclosure about 
     Fair Value of Financial Instruments."  Whenever possible, the estimated 
     fair value amounts have been determined using quoted market information as 
     of December 31, 1995, along with other valuation methodologies which are 
     summarized below.  Below is a summary of significant methodologies used 
     in estimating fair value amounts and a schedule of fair values at December 
     31, 1995.

     The carrying amounts reported for Interest Receivable, Interest Payable 
     - Grantor Trust Certificates, and Servicer Fees Payable approximate fair 
     values due to the short term maturity of these instruments.            

Note Receivable

Fair value is estimated by discounting the future cash flows using the current 
rates at which similar loans would be made to borrowers with similar credit 
ratings and for the same remaining maturities.

<PAGE> 13

Rural Electric Cooperative Grantor Trust Certificates

The fair value of the Certificate is estimated using quoted market prices for 
similar notes over the same remaining maturities.

The carrying and estimated fair values of the Trust's financial instruments 
as of December 31, 1995, are as follows:

						    1995
				       Carrying             Fair
					Value              Value

Assets:
Interest Receivable                    386,132              386,132
Note Receivable                     51,340,000          100,385,460

Liabilities:
Interest Payable - Grantor Trust
   Certificates                        374,654              374,654
Servicer Fees Payable                   11,478               11,478
Rural Electric Cooperative
  Grantor Trust Certificates        51,340,000          100,571,322


<PAGE> 14

	     RURAL ELECTRIC COOPERATIVE GRANTOR TRUST (KEPCO) 1988 K-2



				    Exhibit Index


Exhibit
Number       Description of Exhibit

 4.1         Form of Trust Agreement, including the form of Rural Electric 
	     Cooperative Grantor Trust Certificate (incorporated by reference 
	     to Exhibit 4.1 to Registration Statement on Form S-1 
	     [No. 33-16789]).

10.1         Loan Agreement (incorporated by reference to Exhibit 10.1 to 
	     Registration Statement on Form S-1 [No. 33-16789]).

10.2         Loan Guarantee and Servicing Agreement (incorporated by reference 
	     to Exhibit 10.2 to Registration Statement on Form S-1 
	     [No. 33-16789]).