UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549






FORM
10-Q





(Mark
One)


x
            
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d)
              OF THE SECURITIES EXCHANGE ACT
      OF 1934





For
the quarterly period ended September 30, 2009





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 001-31924





NELNET,
INC.


(Exact
name of registrant as specified in its charter)






NEBRASKA
                (State
      or other jurisdiction of incorporation or organization)
              84-0748903
                (I.R.S.
      Employer Identification No.)121
      SOUTH 13TH STREET, SUITE 201
                LINCOLN,
      NEBRASKA
                (Address
      of principal executive offices)
              68508
                (Zip
      Code)





(402) 458-2370


(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
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes [ ] No [
]





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.


Large
accelerated filer [ ]         
Accelerated filer [X]


Non-accelerated
filer [ ]           
Smaller reporting company [ ]





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


Yes [ ]
No [X]





As of
October 31, 2009, there were 38,348,015 and 11,495,377 shares of Class A Common
Stock and Class B Common Stock, par value $0.01 per share, outstanding,
respectively (excluding 11,317,364 shares of Class A Common Stock held by a
wholly owned subsidiary).









NELNET,
INC.
 FORM
10-Q
 INDEX
 September
30, 2009
 
 PART
      I. FINANCIAL INFORMATIONItem
      1.
                                  Financial
      Statements
                                  
                                  
                                  2Item
      2.
                                  Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                                  32Item
      3.
                                  Quantitative
      and Qualitative Disclosures about Market Risk
                                  
                                  
                                  76Item
      4.
                                  Controls
      and Procedures
                                  
                                  
                                  81PART
      II. OTHER INFORMATIONItem
      1.
                                  Legal
      Proceedings
                                  
                                  
                                  81Item
      1A.
                                  Risk
      Factors
                                  
                                  
                                  83Item
      2.
                                  Unregistered
      Sales of Equity Securities and Use of Proceeds
                                  
                                  
                                  83Item
      6.
                                  Exhibits
                                  
                                  
                                  85Signatures
                                  
                                  
                                  
                                  86
   
 
 PART
I. FINANCIAL INFORMATION
 
 ITEM
1. FINANCIAL STATEMENTS
 
 NELNET,
      INC. AND SUBSIDIARIESCONSOLIDATED
      BALANCE SHEETS(Dollars
      in thousands, except share data)As
      of
                            
                            
                            As
      ofSeptember
      30, 2009
                            
                            
                            December
      31, 2008(unaudited)Assets:Student
      loans receivable (net of allowance for loan losses of$50,120
      and $50,922, respectively)
                            
                            $
                            23,764,263
                            
                            
                            
                            25,413,008Student
      loans receivable - held for sale
                            
                            
                            1,627,794
                            
                            
                            
                            —Cash
      and cash equivalents:Cash
      and cash equivalents - not held at a related party
                            
                            
                            15,077
                            
                            
                            
                            13,129Cash
      and cash equivalents - held at a related party
                            
                            
                            319,216
                            
                            
                            
                            176,718Total
      cash and cash equivalents
                            
                            
                            334,293
                            
                            
                            
                            189,847Restricted
      cash and investments
                            
                            
                            798,636
                            
                            
                            
                            997,272Restricted
      cash - due to customers
                            
                            
                            50,783
                            
                            
                            
                            160,985Accrued
      interest receivable
                            
                            
                            389,238
                            
                            
                            
                            471,878Accounts
      receivable (net of allowance for doubtful accounts of$1,506
      and $1,005, respectively)
                            
                            
                            49,268
                            
                            
                            
                            42,088Goodwill
                            
                            
                            175,178
                            
                            
                            
                            175,178Intangible
      assets, net
                            
                            
                            59,803
                            
                            
                            
                            77,054Property
      and equipment, net
                            
                            
                            28,116
                            
                            
                            
                            38,747Other
      assets
                            
                            
                            104,333
                            
                            
                            
                            113,666Fair
      value of derivative instruments
                            
                            
                            210,157
                            
                            
                            
                            175,174Total
      assets
                            
                            $
                            27,591,862
                            
                            
                            
                            27,854,897Liabilities:Bonds
      and notes payable
                            
                            $
                            26,586,093
                            
                            
                            
                            26,787,959Accrued
      interest payable
                            
                            
                            24,859
                            
                            
                            
                            81,576Other
      liabilities
                            
                            
                            193,055
                            
                            
                            
                            179,336Due
      to customers
                            
                            
                            50,783
                            
                            
                            
                            160,985Fair
      value of derivative instruments
                            
                            
                            8,998
                            
                            
                            
                            1,815Total
      liabilities
                            
                            
                            26,863,788
                            
                            
                            
                            27,211,671Shareholders'
      equity:Preferred
      stock, $0.01 par value. Authorized 50,000,000 shares;no
      shares issued or outstanding
                            
                            
                            —
                            
                            
                            
                            —Common
      stock:Class
      A, $0.01 par value. Authorized 600,000,000 shares;issued
      and outstanding 38,349,461 shares as of September 30,2009
      and 37,794,067 shares as of December 31, 2008
                            
                            
                            383
                            
                            
                            
                            378Class
      B, convertible, $0.01 par value. Authorized 60,000,000
    shares;issued
      and outstanding 11,495,377 shares as of September 30,2009
      and December 31, 2008
                            
                            
                            115
                            
                            
                            
                            115Additional
      paid-in capital
                            
                            
                            108,442
                            
                            
                            
                            103,762Retained
      earnings
                            
                            
                            620,583
                            
                            
                            
                            540,521Employee
      notes receivable
                            
                            
                            (1,449
                            )
                            
                            
                            (1,550
                            )Total
      shareholders' equity
                            
                            
                            728,074
                            
                            
                            
                            643,226Commitments
      and contingenciesTotal
      liabilities and shareholders' equity
                            
                            $
                            27,591,862
                            
                            
                            
                            27,854,897See
      accompanying notes to consolidated financial statements.
 
 2
  NELNET,
      INC. AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF OPERATIONS(Dollars
      in thousands, except share data)(unaudited)  Three
      months
                                  
                                  
                                  Nine
      monthsended
      September 30,
                                  
                                  
                                  ended
      September 30,2009
                                  
                                  
                                  2008
                                  
                                  
                                  2009
                                  
                                  
                                  2008Interest
      income:Loan
      interest
                                  
                                  $
                                  143,255
                                  
                                  
                                  
                                  284,468
                                  
                                  
                                  
                                  474,587
                                  
                                  
                                  
                                  911,140Investment
      interest
                                  
                                  
                                  1,943
                                  
                                  
                                  
                                  9,118
                                  
                                  
                                  
                                  8,810
                                  
                                  
                                  
                                  29,914Total
      interest income
                                  
                                  
                                  145,198
                                  
                                  
                                  
                                  293,586
                                  
                                  
                                  
                                  483,397
                                  
                                  
                                  
                                  941,054Interest
      expense:Interest
      on bonds and notes payable
                                  
                                  
                                  76,016
                                  
                                  
                                  
                                  234,016
                                  
                                  
                                  
                                  328,600
                                  
                                  
                                  
                                  791,621Net
      interest income
                                  
                                  
                                  69,182
                                  
                                  
                                  
                                  59,570
                                  
                                  
                                  
                                  154,797
                                  
                                  
                                  
                                  149,433Less
      provision for loan losses
                                  
                                  
                                  7,500
                                  
                                  
                                  
                                  7,000
                                  
                                  
                                  
                                  23,000
                                  
                                  
                                  
                                  18,000Net
      interest income after provision for loan losses
                                  
                                  
                                  61,682
                                  
                                  
                                  
                                  52,570
                                  
                                  
                                  
                                  131,797
                                  
                                  
                                  
                                  131,433Other
      income (expense):Loan
      and guaranty servicing revenue
                                  
                                  
                                  26,006
                                  
                                  
                                  
                                  29,691
                                  
                                  
                                  
                                  81,280
                                  
                                  
                                  
                                  78,173Tuition
      payment processing and campus commerce revenue
                                  
                                  
                                  12,987
                                  
                                  
                                  
                                  11,863
                                  
                                  
                                  
                                  40,373
                                  
                                  
                                  
                                  35,980Enrollment
      services revenue
                                  
                                  
                                  30,670
                                  
                                  
                                  
                                  29,858
                                  
                                  
                                  
                                  88,188
                                  
                                  
                                  
                                  83,148Software
      services revenue
                                  
                                  
                                  4,600
                                  
                                  
                                  
                                  5,159
                                  
                                  
                                  
                                  16,424
                                  
                                  
                                  
                                  19,342Other
      income
                                  
                                  
                                  11,094
                                  
                                  
                                  
                                  5,408
                                  
                                  
                                  
                                  39,483
                                  
                                  
                                  
                                  17,787Gain
      (loss) on sale of loans, net
                                  
                                  
                                  8,788
                                  
                                  
                                  
                                  —
                                  
                                  
                                  
                                  8,386
                                  
                                  
                                  
                                  (47,426
                                  )Derivative
      market value, foreign currency,and
      put option adjustments and derivativesettlements,
      net
                                  
                                  
                                  7,740
                                  
                                  
                                  
                                  6,874
                                  
                                  
                                  
                                  2,740
                                  
                                  
                                  
                                  10,468Total
      other income
                                  
                                  
                                  101,885
                                  
                                  
                                  
                                  88,853
                                  
                                  
                                  
                                  276,874
                                  
                                  
                                  
                                  197,472Operating
      expenses:Salaries
      and benefits
                                  
                                  
                                  37,810
                                  
                                  
                                  
                                  44,739
                                  
                                  
                                  
                                  116,216
                                  
                                  
                                  
                                  142,131Other
      operating expenses:Cost
      to provide enrollment services
                                  
                                  
                                  20,323
                                  
                                  
                                  
                                  17,904
                                  
                                  
                                  
                                  56,208
                                  
                                  
                                  
                                  48,062Depreciation
      and amortization
                                  
                                  
                                  8,769
                                  
                                  
                                  
                                  10,781
                                  
                                  
                                  
                                  28,379
                                  
                                  
                                  
                                  32,218Professional
      and other services
                                  
                                  
                                  6,584
                                  
                                  
                                  
                                  10,185
                                  
                                  
                                  
                                  20,382
                                  
                                  
                                  
                                  25,409Occupancy
      and communications
                                  
                                  
                                  5,122
                                  
                                  
                                  
                                  4,194
                                  
                                  
                                  
                                  16,064
                                  
                                  
                                  
                                  14,949Trustee
      and other debt related fees
                                  
                                  
                                  2,387
                                  
                                  
                                  
                                  2,423
                                  
                                  
                                  
                                  7,487
                                  
                                  
                                  
                                  7,277Postage
      and distribution
                                  
                                  
                                  1,958
                                  
                                  
                                  
                                  2,576
                                  
                                  
                                  
                                  7,100
                                  
                                  
                                  
                                  8,691Advertising
      and marketing
                                  
                                  
                                  1,936
                                  
                                  
                                  
                                  1,712
                                  
                                  
                                  
                                  5,632
                                  
                                  
                                  
                                  5,706Impairment
      expense
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —
                                  
                                  
                                  
                                  18,834Other
                                  
                                  
                                  7,773
                                  
                                  
                                  
                                  9,155
                                  
                                  
                                  
                                  25,121
                                  
                                  
                                  
                                  27,151Total
      other operating expenses
                                  
                                  
                                  54,852
                                  
                                  
                                  
                                  58,930
                                  
                                  
                                  
                                  166,373
                                  
                                  
                                  
                                  188,297Total
      operating expenses
                                  
                                  
                                  92,662
                                  
                                  
                                  
                                  103,669
                                  
                                  
                                  
                                  282,589
                                  
                                  
                                  
                                  330,428Income
      (loss) before income taxes
                                  
                                  
                                  70,905
                                  
                                  
                                  
                                  37,754
                                  
                                  
                                  
                                  126,082
                                  
                                  
                                  
                                  (1,523
                                  )Income
      tax expense
                                  
                                  
                                  (24,501
                                  )
                                  
                                  
                                  (13,969
                                  )
                                  
                                  
                                  (46,020
                                  )
                                  
                                  
                                  (1,793
                                  )Income
      (loss) from continuing operations
                                  
                                  
                                  46,404
                                  
                                  
                                  
                                  23,785
                                  
                                  
                                  
                                  80,062
                                  
                                  
                                  
                                  (3,316
                                  )Income
      from discontinued operations, net of tax
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —
                                  
                                  
                                  
                                  981Net
      income (loss)
                                  
                                  $
                                  46,404
                                  
                                  
                                  
                                  23,785
                                  
                                  
                                  
                                  80,062
                                  
                                  
                                  
                                  (2,335
                                  )Earnings
      (loss) per share, basic and diluted:Income
      (loss) from continuing operations
                                  
                                  $
                                  0.93
                                  
                                  
                                  
                                  0.48
                                  
                                  
                                  
                                  1.60
                                  
                                  
                                  
                                  (0.07
                                  )Income
      from discontinued operations
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —
                                  
                                  
                                  
                                  0.02Net
      income (loss)
                                  
                                  $
                                  0.93
                                  
                                  
                                  
                                  0.48
                                  
                                  
                                  
                                  1.60
                                  
                                  
                                  
                                  (0.05
                                  )See
      accompanying notes to consolidated financial statements.
 
 3
  NELNET,
      INC. AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME
      (LOSS)(Dollars
      in thousands, except share data)(unaudited)Preferred
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          Class
      A
                                                          
                                                          Class
      B
                                                          
                                                          Additional
                                                          
                                                          
                                                          
                                                          Employee
                                                          
                                                          Totalstock
                                                          
                                                          Common
      stock shares
                                                          
                                                          Preferred
                                                          
                                                          common
                                                          
                                                          common
                                                          
                                                          paid-in
                                                          
                                                          Retained
                                                          
                                                          notes
                                                          
                                                          shareholders’shares
                                                          
                                                          Class
      A
                                                          
                                                          Class
      B
                                                          
                                                          stock
                                                          
                                                          stock
                                                          
                                                          stock
                                                          
                                                          capital
                                                          
                                                          earnings
                                                          
                                                          receivable
                                                          
                                                          equityBalance
      as of June 30, 2008
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          37,952,246
                                                          
                                                          
                                                          11,495,377
                                                          
                                                          $
                                                          —
                                                          
                                                          
                                                          380
                                                          
                                                          
                                                          115
                                                          
                                                          
                                                          99,854
                                                          
                                                          
                                                          485,739
                                                          
                                                          
                                                          (2,046
                                                          )
                                                          
                                                          584,042Comprehensive
      income:Net
      income
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          23,785
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          23,785Total
      comprehensive income
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          23,785Issuance
      of common stock, net of forfeitures
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          49,650
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          1
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          960
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          961Compensation
      expense for stock based awards
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          1,045
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          1,045Repurchase
      of common stock
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          (7,564
                                                          )
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          (1
                                                          )
                                                          
                                                          —
                                                          
                                                          
                                                          (102
                                                          )
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          (103
                                                          )Balance
      as of September 30, 2008
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          37,994,332
                                                          
                                                          
                                                          11,495,377
                                                          
                                                          $
                                                          —
                                                          
                                                          
                                                          380
                                                          
                                                          
                                                          115
                                                          
                                                          
                                                          101,757
                                                          
                                                          
                                                          509,524
                                                          
                                                          
                                                          (2,046
                                                          )
                                                          
                                                          609,730Balance
      as of June 30, 2009
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          38,325,492
                                                          
                                                          
                                                          11,495,377
                                                          
                                                          $
                                                          —
                                                          
                                                          
                                                          383
                                                          
                                                          
                                                          115
                                                          
                                                          
                                                          107,959
                                                          
                                                          
                                                          574,179
                                                          
                                                          
                                                          (1,449
                                                          )
                                                          
                                                          681,187Comprehensive
      income:Net
      income
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          46,404
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          46,404Total
      comprehensive income
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          46,404Issuance
      of common stock, net of forfeitures
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          31,403
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          1
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          241
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          242Compensation
      expense for stock based awards
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          349
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          349Repurchase
      of common stock
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          (7,434
                                                          )
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          (1
                                                          )
                                                          
                                                          —
                                                          
                                                          
                                                          (107
                                                          )
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          (108
                                                          )Balance
      as of September 30, 2009
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          38,349,461
                                                          
                                                          
                                                          11,495,377
                                                          
                                                          $
                                                          —
                                                          
                                                          
                                                          383
                                                          
                                                          
                                                          115
                                                          
                                                          
                                                          108,442
                                                          
                                                          
                                                          620,583
                                                          
                                                          
                                                          (1,449
                                                          )
                                                          
                                                          728,074Balance
      as of December 31, 2007
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          37,980,617
                                                          
                                                          
                                                          11,495,377
                                                          
                                                          $
                                                          —
                                                          
                                                          
                                                          380
                                                          
                                                          
                                                          115
                                                          
                                                          
                                                          96,185
                                                          
                                                          
                                                          515,317
                                                          
                                                          
                                                          (3,118
                                                          )
                                                          
                                                          608,879Comprehensive
      income (loss):Net
      loss
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          (2,335
                                                          )
                                                          
                                                          —
                                                          
                                                          
                                                          (2,335
                                                          )Total
      comprehensive income (loss)
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          (2,335
                                                          )Cash
      dividend on Class A and Class Bcommon
      stock - $0.07 per share
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          (3,458
                                                          )
                                                          
                                                          —
                                                          
                                                          
                                                          (3,458
                                                          )Issuance
      of common stock, net of forfeitures
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          83,337
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          1
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          2,033
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          2,034Compensation
      expense for stock based awards
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          4,308
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          4,308Repurchase
      of common stock
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          (69,622
                                                          )
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          (1
                                                          )
                                                          
                                                          —
                                                          
                                                          
                                                          (769
                                                          )
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          (770
                                                          )Reduction
      of employee stock notes receivable
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          1,072
                                                          
                                                          
                                                          1,072Balance
      as of September 30, 2008
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          37,994,332
                                                          
                                                          
                                                          11,495,377
                                                          
                                                          $
                                                          —
                                                          
                                                          
                                                          380
                                                          
                                                          
                                                          115
                                                          
                                                          
                                                          101,757
                                                          
                                                          
                                                          509,524
                                                          
                                                          
                                                          (2,046
                                                          )
                                                          
                                                          609,730Balance
      as of December 31, 2008
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          37,794,067
                                                          
                                                          
                                                          11,495,377
                                                          
                                                          $
                                                          —
                                                          
                                                          
                                                          378
                                                          
                                                          
                                                          115
                                                          
                                                          
                                                          103,762
                                                          
                                                          
                                                          540,521
                                                          
                                                          
                                                          (1,550
                                                          )
                                                          
                                                          643,226Comprehensive
      income:Net
      income
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          80,062
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          80,062Total
      comprehensive income
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          80,062Issuance
      of common stock, net of forfeitures
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          569,937
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          6
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          3,539
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          3,545Compensation
      expense for stock based awards
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          1,310
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          1,310Repurchase
      of common stock
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          (14,543
                                                          )
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          (1
                                                          )
                                                          
                                                          —
                                                          
                                                          
                                                          (169
                                                          )
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          (170
                                                          )Reduction
      of employee stock notes receivable
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          101
                                                          
                                                          
                                                          101Balance
      as of September 30, 2009
                                                          
                                                          
                                                          —
                                                          
                                                          
                                                          38,349,461
                                                          
                                                          
                                                          11,495,377
                                                          
                                                          $
                                                          —
                                                          
                                                          
                                                          383
                                                          
                                                          
                                                          115
                                                          
                                                          
                                                          108,442
                                                          
                                                          
                                                          620,583
                                                          
                                                          
                                                          (1,449
                                                          )
                                                          
                                                          728,074See
      accompanying notes to consolidated financial statements.
 
 4
  NELNET, INC. AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF CASH FLOWS(Dollars
      in thousands)(unaudited)Nine
      months ended September 30,2009
                              
                              
                              2008Net
      income (loss)
                              
                              $
                              80,062
                              
                              
                              
                              (2,335
                              )Income
      from discontinued operations
                              
                              
                              —
                              
                              
                              
                              981Income
      (loss) from continuing operations
                              
                              
                              80,062
                              
                              
                              
                              (3,316
                              )Adjustments
      to reconcile income (loss) from continuing operations to net cash
      providedby
      operating activities:Depreciation
      and amortization, including loan premiums and deferred origination
      costs
                              
                              
                              88,118
                              
                              
                              
                              107,944Provision
      for loan losses
                              
                              
                              23,000
                              
                              
                              
                              18,000Impairment
      expense
                              
                              
                              —
                              
                              
                              
                              18,834Derivative
      market value adjustment
                              
                              
                              (19,912
                              )
                              
                              
                              72,399Foreign
      currency transaction adjustment
                              
                              
                              55,979
                              
                              
                              
                              (40,361
                              )Change
      in value of put options issued in business acquisitions
                              
                              
                              —
                              
                              
                              
                              3,483Proceeds
      to terminate and/or amend derivative instruments
                              
                              
                              3,820
                              
                              
                              
                              15,403Payments
      to terminate and/or amend derivative instruments
                              
                              
                              (11,710
                              )
                              
                              
                              (3,679
                              )Gain
      from repurchase of bonds and notes payable
                              
                              
                              (19,185
                              )
                              
                              
                              —Originations
      and purchases of student loans-held for
      sale
                              
                              
                              (13,345
                              )
                              
                              
                              —(Gain)
      loss on sale of loans, net
                              
                              
                              (8,386
                              )
                              
                              
                              47,426Deferred
      income tax benefit
                              
                              
                              (30,654
                              )
                              
                              
                              (23,979
                              )Other
      non-cash items
                              
                              
                              3,569
                              
                              
                              
                              6,929Decrease
      in accrued interest receivable
                              
                              
                              82,640
                              
                              
                              
                              63,220(Increase)
      decrease in accounts receivable
                              
                              
                              (7,180
                              )
                              
                              
                              445Decrease
      in other assets
                              
                              
                              9,976
                              
                              
                              
                              13,928Decrease
      in accrued interest payable
                              
                              
                              (56,717
                              )
                              
                              
                              (37,334
                              )Increase
      (decrease) in other liabilities
                              
                              
                              34,575
                              
                              
                              
                              (1,765
                              )Net
      cash flows from operating activities - continuing
    operations
                              
                              
                              214,650
                              
                              
                              
                              257,577Net
      cash flows from operating activities - discontinued
    operations
                              
                              
                              —
                              
                              
                              
                              —Net
      cash provided by operating activities
                              
                              
                              214,650
                              
                              
                              
                              257,577Cash
      flows from investing activities:Originations,
      purchases, and consolidations of student loans, including loan
      premiumsand
      deferred origination costs
                              
                              
                              (2,104,234
                              )
                              
                              
                              (2,368,229
                              )Purchases
      of student loans, including loan premiums, from a related
      party
                              
                              
                              (39,649
                              )
                              
                              
                              (212,888
                              )Net
      proceeds from student loan repayments, claims, capitalized interest,
      participations, and other
                              
                              
                              1,507,981
                              
                              
                              
                              1,538,134Proceeds
      from sale of student loans
                              
                              
                              550,176
                              
                              
                              
                              1,267,826Proceeds
      from sale of student loans to a related party
                              
                              
                              61,452
                              
                              
                              
                              —Purchases
      of property and equipment, net
                              
                              
                              (466
                              )
                              
                              
                              (5,094
                              )Decrease
      (increase) in restricted cash and investments, net
                              
                              
                              198,636
                              
                              
                              
                              (154,768
                              )Purchases
      of equity method investments
                              
                              
                              —
                              
                              
                              
                              (2,988
                              )Business
      acquisition - contingent consideration
                              
                              
                              —
                              
                              
                              
                              (18,000
                              )Net
      cash flows from investing activities - continuing
    operations
                              
                              
                              173,896
                              
                              
                              
                              43,993Net
      cash flows from investing activities - discontinued
    operations
                              
                              
                              —
                              
                              
                              
                              —Net
      cash provided by investing activities
                              
                              
                              173,896
                              
                              
                              
                              43,993Cash
      flows from financing activities:Payments
      on bonds and notes payable
                              
                              
                              (3,978,507
                              )
                              
                              
                              (5,328,782
                              )Proceeds
      from issuance of bonds and notes payable
                              
                              
                              3,761,543
                              
                              
                              
                              5,225,548(Payments)
      proceeds from issuance of notes payable due to a related party,
      net
                              
                              
                              (21,520
                              )
                              
                              
                              32,790Payments
      of debt issuance costs
                              
                              
                              (5,876
                              )
                              
                              
                              (14,778
                              )Dividends
      paid
                              
                              
                              —
                              
                              
                              
                              (3,458
                              )Proceeds
      from issuance of common stock
                              
                              
                              329
                              
                              
                              
                              566Repurchases
      of common stock
                              
                              
                              (170
                              )
                              
                              
                              (770
                              )Payments
      received on employee stock notes receivable
                              
                              
                              101
                              
                              
                              
                              575Net
      cash flows used in financing activities - continuing
      operations
                              
                              
                              (244,100
                              )
                              
                              
                              (88,309
                              )Net
      cash flows used in financing activities - discontinued
      operations
                              
                              
                              —
                              
                              
                              
                              —Net
      cash used in financing activities
                              
                              
                              (244,100
                              )
                              
                              
                              (88,309
                              )Net
      increase in cash and cash equivalents
                              
                              
                              144,446
                              
                              
                              
                              213,261Cash
      and cash equivalents, beginning of period
                              
                              
                              189,847
                              
                              
                              
                              111,746Cash
      and cash equivalents, end of period
                              
                              $
                              334,293
                              
                              
                              
                              325,007Supplemental
      disclosures of cash flow information:Interest
      paid
                              
                              $
                              380,543
                              
                              
                              
                              814,469Income
      taxes paid, net of refunds
                              
                              $
                              69,924
                              
                              
                              
                              24,302See
      accompanying notes to consolidated financial statements.
 5
 NELNET,
INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Information
as of September 30, 2009 and for the three and nine months ended
 September
30, 2009 and 2008 is unaudited)
 (Dollars
in thousands, except per share amounts, unless otherwise noted)
 
 
 1.
Basis of Financial Reporting
 
 The
accompanying unaudited consolidated financial statements of Nelnet, Inc. and
subsidiaries (the “Company”) as of September 30, 2009 and for the three and nine
months ended September 30, 2009 and 2008 have been prepared on the same basis as
the audited consolidated financial statements for the year ended December 31,
2008 and, in the opinion of the Company’s management, the unaudited consolidated
financial statements reflect all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of results of operations for the
interim periods presented. The preparation of financial statements in conformity
with U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. Actual results could differ from
those estimates. Operating results for the three and nine months ended September
30, 2009 are not necessarily indicative of the results for the year ending
December 31, 2009. The unaudited consolidated financial statements should be
read in conjunction with the Company’s Annual Report on Form 10-K for the year
ended December 31, 2008. Certain amounts from 2008 have been reclassified to
conform to the current period presentation. Management has evaluated subsequent
events, and the impact on the reported results and disclosures, through November
9, 2009, which is the date these financial statements were filed with the
Securities and Exchange Commission (“SEC”).
 
 2.
Restructuring Charge
 
 During
the second quarter of 2009, the Company adopted a plan to further streamline its
operations by continuing to reduce its geographic footprint and consolidate
servicing operations and related support services.
 
 Management
has developed a restructuring plan that will result in lower costs and provide
enhanced synergies through cross training, career development, and simplified
communications. The Company will simplify its operating structure to leverage
its larger facilities and technology by closing certain offices and downsizing
its presence in certain geographic locations. Approximately 300 associates will
be impacted by this restructuring plan. However, the majority of these functions
will be relocated to the Company’s Lincoln headquarters and Denver offices.
Implementation of the plan began immediately and is expected to be substantially
complete during the second quarter of 2010.
 
 The
Company estimates that the charge to earnings associated with this restructuring
plan will be fully recognized by December 31, 2010 and will total approximately
$13.0 million, consisting of approximately $6.3 million in severance costs and
approximately $6.7 million in contract terminations, of which $2.8 million and
$3.2 million has been recognized in the second and third quarters of 2009,
respectively, and $1.4 million is expected to be recognized in the fourth
quarter of 2009. Selected information relating to the restructuring charge
follows:
 
 Employeetermination
                                                    
                                                    Leasebenefits
                                                    
                                                    terminations
                                                    
                                                    TotalRestructuring
      costs recognized during thethree
      month period ended June 30, 2009
                                                    $
                                                    1,482
                                                    (a)
                                                    
                                                    1,291
                                                    (b)
                                                    
                                                    2,773Cash
      payments
                                                    
                                                    (672
                                                    )
                                                    
                                                    —
                                                    
                                                    
                                                    (672
                                                    )Restructuring
      accrual as of June 30, 2009
                                                    
                                                    810
                                                    
                                                    
                                                    1,291
                                                    
                                                    
                                                    2,101Restructuring
      costs recognized during thethree
      month period ended September 30, 2009
                                                    
                                                    1,412
                                                    (a)
                                                    
                                                    —
                                                    
                                                    
                                                    1,412Adjustment
      from initial estimate of charges
                                                    
                                                    —
                                                    
                                                    
                                                    1,786
                                                    (b)
                                                    
                                                    1,786Cash
      payments
                                                    
                                                    (29
                                                    )
                                                    
                                                    (381
                                                    )
                                                    
                                                    (410
                                                    )Restructuring
      accrual as of September 30, 2009
                                                    $
                                                    2,193
                                                    
                                                    
                                                    2,696
                                                    
                                                    
                                                    4,889(a)
      Employee
      termination benefits are included in "salaries and benefits" in the
      consolidated statements of operations.(b)
      Lease
      termination costs are included in "occupancy and communications" in the
      consolidated statements of
operations.
 
 6
 
 Selected
information relating to the restructuring charge by operating segment and
Corporate Activity and Overhead follows:
 
 Restructuring
      costsrecognized
      during
                            
                            
                            AdjustmentRestructuring
                            
                            
                            the
      three month
                            
                            
                            from
      initial
                            
                            
                            
                            
                            
                            Restructuringaccrual
      as of
                            
                            
                            period
      ended
                            
                            
                            estimate
                            
                            
                            Cash
                            
                            
                            accrual
      as ofOperating
      segment
                            
                            June
      30, 2009
                            
                            
                            September
      30, 2009
                            
                            
                            of
      charges
                            
                            
                            payments
                            
                            
                            September
      30, 2009Student
      Loan and Guaranty Servicing
                            
                            $
                            1,812
                            
                            
                            
                            860
                            
                            
                            
                            1,786
                            
                            
                            
                            (410
                            )
                            
                            
                            4,048Tuition
      Payment Processing andCampus
      Commerce
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            —Enrollment
      Services
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            —Software
      and Technical Services
                            
                            
                            149
                            
                            
                            
                            292
                            
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            441Asset
      Generation and Management
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            —Corporate
      Activity and Overhead
                            
                            
                            140
                            
                            
                            
                            260
                            
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            400$
                            2,101
                            
                            
                            
                            1,412
                            
                            
                            
                            1,786
                            
                            
                            
                            (410
                            )
                            
                            
                            4,889
 
 Restructuring
                      
                      
                      RemainingEstimated
                      
                      
                      costs
      recognized
                      
                      
                      restructuring
      coststotal
      restructuring
                      
                      
                      through
                      
                      
                      expected
      to beOperating
      segment
                      
                      costs
                      
                      
                      September
      30, 2009
                      
                      
                      recognizedStudent
      Loan and Guaranty Servicing
                      
                      $
                      10,131
                      
                      
                      
                      4,644
                      
                      
                      
                      5,487Tuition
      Payment Processing andCampus
      Commerce
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —Enrollment
      Services
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —Software
      and Technical Services
                      
                      
                      1,078
                      
                      
                      
                      714
                      
                      
                      
                      364Asset
      Generation and Management
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —Corporate
      Activity and Overhead
                      
                      
                      1,763
                      
                      
                      
                      613
                      
                      
                      
                      1,150$
                      12,972
                      
                      
                      
                      5,971
                      
                      
                      
                      7,001
  7
 In 2007
and 2008, the Company recorded restructuring charges related to certain
legislative events and disruptions in the capital markets. As a result of the
restructurings, the Company incurred expenses related to severance, contract
terminations, and impairment of long-lived assets. These restructuring plans
were completed by management in December 2007 and January 2008. However, an
accrual related to certain lease terminations remains. Information relating to
such accrual follows:
 
 Restructuring
      accrual as of December 31, 2008
                                      
                                      $
                                      3,480Cash
      payments
                                      
                                      
                                      (228
                                      )Restructuring
      accrual as of March 31, 2009
                                      
                                      
                                      3,252Cash
      payments
                                      
                                      
                                      (228
                                      )Adjustment
      from initial estimate of charges
                                      
                                      
                                      515Restructuring
      accrual as of June 30, 2009
                                      
                                      
                                      3,539Cash
      payments
                                      
                                      
                                      (229
                                      )Adjustment
      from initial estimate of charges
                                      
                                      
                                      142Restructuring
      accrual as of September 30, 2009
                                      
                                      $
                                      3,452
 
 3.
Student Loans Receivable and Allowance for Loan Losses
 
 Student
loans consist of federally insured student loans, non-federally insured student
loans, and student loan participations. If the Company has the ability and
intent to hold loans for the foreseeable future, such loans are held for
investment and carried at amortized cost. Amortized cost includes the
unamortized premiums and capitalized origination costs and fees, all of which
are amortized to interest income. Loans which are held-for-investment also have
an allowance for loan loss as needed. Any loans the Company has the ability and
intent to sell are classified as held for sale and are carried at the lower of
cost or fair value. Loans which are held-for-sale do not have the associated
premium and origination costs and fees amortized into interest income and there
is also no related allowance for loan losses.
 
 As of
September 30, 2009, the Company had $1.6 billion of 2008-2009 academic year
Federal Family Education Loan Program (“FFELP”) loans classified as held for
sale. These loans were funded using the Department of Education’s Loan
Participation Program (the “Participation Program”) and were sold to the
Department of Education (the “Department”) under the Department’s Loan Purchase
Commitment Program (the “Purchase Program”). Under the Purchase Program, the
Department purchases loans at a price equal to the sum of (i) par value, (ii)
accrued interest, (iii) the one percent origination fee paid to the Department,
and (iv) a fixed amount of $75 per loan. Upon selling the $1.6 billion of loans
held for sale, the Company recognized a gain in October 2009 of $26.9 million.
During the third quarter of 2009, the Company sold $427.7 million (par value) of
student loans under the Purchase Program and recognized a gain of $9.7 million.
 
 The
Company plans to continue to use the Participation Program to fund certain loans
originated through the 2009-2010 academic year. Loans originated by the Company
for the 2009-2010 academic year are classified as held for investment on the
accompanying consolidated balance sheet.
 
 8
  Student
loans receivable consisted of the following:
 
 As
      of
                                
                                
                                As
      ofSeptember
      30, 2009
                                
                                
                                December
      31, 2008Held-for-investment
                                
                                
                                Held-for-sale
                                
                                
                                Held-for-investmentFederally
      insured loans
                                
                                $
                                23,295,203
                                
                                
                                
                                1,607,169
                                
                                
                                
                                24,787,941Non-federally
      insured loans
                                
                                
                                167,114
                                
                                
                                
                                —
                                
                                
                                
                                273,10823,462,317
                                
                                
                                
                                1,607,169
                                
                                
                                
                                25,061,049Unamortized
      loan premiums and deferred origination costs
                                
                                
                                352,066
                                
                                
                                
                                20,625
                                
                                
                                
                                402,881Allowance
      for loan losses – federally insured loans
                                
                                
                                (29,015
                                )
                                
                                
                                —
                                
                                
                                
                                (25,577
                                )Allowance
      for loan losses – non-federally insured loans
                                
                                
                                (21,105
                                )
                                
                                
                                —
                                
                                
                                
                                (25,345
                                )$
                                23,764,263
                                
                                
                                
                                1,627,794
                                
                                
                                
                                25,413,008Allowance
      for federally insured loans - held-for-investment as a percentage of such
      loans
                                
                                
                                0.12
                                %
                                
                                
                                
                                
                                
                                
                                0.10
                                %Allowance
      for non-federally insured loans as a percentage of such
    loans
                                
                                
                                12.63
                                %
                                
                                
                                
                                
                                
                                
                                9.28
                                %Total
      allowance as a percentage of the ending balance of total loans (excluding
      loans held-for-sale)
                                
                                
                                0.21
                                %
                                
                                
                                
                                
                                
                                
                                0.20
                                %
   The
Company has provided for an allowance for loan losses related to its student
loan portfolio. Activity in the allowance for loan losses is shown
below:
 
 Three
      months ended September 30,
                    
                    
                    Nine
      months ended September 30,2009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008Beginning
      balance
                    
                    $
                    50,000
                    
                    
                    
                    47,909
                    
                    
                    
                    50,922
                    
                    
                    
                    45,592Provision
      for loan losses
                    
                    
                    7,500
                    
                    
                    
                    7,000
                    
                    
                    
                    23,000
                    
                    
                    
                    18,000Loans
      charged off, net of recoveries
                    
                    
                    (4,380
                    )
                    
                    
                    (5,839
                    )
                    
                    
                    (13,482
                    )
                    
                    
                    (13,772
                    )Sale
      of loans
                    
                    
                    (3,000
                    )
                    
                    
                    —
                    
                    
                    
                    (10,320
                    )
                    
                    
                    (750
                    )Ending
      balance
                    
                    $
                    50,120
                    
                    
                    
                    49,070
                    
                    
                    
                    50,120
                    
                    
                    
                    49,070
 
 Loan
Sales
 
 The
activity included in “gain (loss) on sale of loans, net” in the accompanying
consolidated statements of operations is detailed below.
  Three
      months ended September 30,
                        
                        
                        Nine
      months ended September 30,2009
                        
                        
                        2008
                        
                        
                        2009
                        
                        
                        2008Department's
      Purchase Program (a)
                        
                        $
                        9,689
                        
                        
                        
                        —
                        
                        
                        
                        9,689
                        
                        
                        
                        —Private
      loan participations (b)
                        
                        
                        (695
                        )
                        
                        
                        —
                        
                        
                        
                        (695
                        )
                        
                        
                        —FFELP
      loan sales to related parties (c)
                        
                        
                        (206
                        )
                        
                        
                        —
                        
                        
                        
                        (608
                        )
                        
                        
                        —FFELP
      loan sales to third parties (d)
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        (47,426
                        )Gain
      (loss) on sale of loans, net
                        
                        $
                        8,788
                        
                        
                        
                        —
                        
                        
                        
                        8,386
                        
                        
                        
                        (47,426
                        )
 
 (a)
              During
      the three months ended September 30, 2009, the Company sold $427.7 million
      (par value) of student loans to the Department under the Purchase
      Program.
 
 (b)
              During
      the three and nine months ended September 30, 2009, the Company
      participated $­­­­30.5 million and $95.5 million,
      respectively, of non-federally insured loans to third parties. Loans
      participated under these agreements have been accounted for by the Company
      as loan sales. Accordingly, the participation interests sold are not
      included on the Company’s consolidated balance sheet. Per the terms of the
      servicing agreements, the Company’s servicing operations are obligated to
      repurchase loans subject to the participation interests when such loans
      become 60 or 90 days delinquent. The activity in the accrual account
      related to this repurchase obligation, which is included in “other
      liabilities” in the accompanying consolidated balance sheet, is detailed
      below.
 
 
 9
 Three
      months ended September 30,
                                                                  
                                                                  
                                                                  Nine
      months ended September 30,2009
                                                                  
                                                                  
                                                                  2008
                                                                  
                                                                  
                                                                  2009
                                                                  
                                                                  
                                                                  2008Beginning
      balance
                                                                  
                                                                  $
                                                                  7,600
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  —Transfer
      from allowance for loan losses
                                                                  
                                                                  
                                                                  3,000
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  9,800
                                                                  
                                                                  
                                                                  
                                                                  —Reserve
      for repurchase of delinquent loans (a)
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  800
                                                                  
                                                                  
                                                                  
                                                                  —Ending
      balance
                                                                  
                                                                  $
                                                                  10,600
                                                                  
                                                                  
                                                                  
                                                                  —
                                                                  
                                                                  
                                                                  
                                                                  10,600
                                                                  
                                                                  
                                                                  
                                                                  —(a)
      The reserve for repurchase of loans is included in "other" under other
      operating expenses in the accompanying consolidated statements of
      operations.
  (c)
                During
      the three and nine months ended September 30, 2009, the Company sold $21.4
      million (par value) and $61.5 million (par value), respectively, of
      federally insured student loans to Union Bank & Trust Company (“Union
      Bank”), an entity under common control with the
  Company.
 
 (d)
              During
      March and April 2008, the Company sold $1.3 billion (par value) of
      federally insured student loans in order to reduce the amount of student
      loans remaining under the Company’s multi-year committed financing
      facility for FFELP loans, which contained certain equity support
      provisions (see note 4 for additional information related to the FFELP
      warehouse facilities).
 
 4.
Bonds and Notes Payable
 
 The
following tables summarize outstanding bonds and notes payable by type of
instrument:
   As
      of September 30, 2009Carrying
                      
                      Interest
      rateamount
                      
                      range
                      
                      Final
      maturityVariable-rate
      bonds and notes (a):Bonds
      and notes based on indices
                      
                      $
                      19,749,843
                      
                      
                      0.30%
      - 6.90%
                      
                      11/25/13
      - 06/25/41Bonds
      and notes based on auction or remarketing
                      
                      
                      2,247,420
                      
                      
                      0.33%
      - 3.75%
                      
                      11/01/09
      - 07/01/43Total
      variable-rate bonds and notes
                      
                      
                      21,997,263Commercial
      paper - FFELP facility (b)
                      
                      
                      361,279
                      
                      
                      0.22%
      - 0.38%
                      
                      08/03/12Fixed-rate
      bonds and notes (a)
                      
                      
                      186,274
                      
                      
                      5.40%
      - 6.50%
                      
                      11/01/09
      - 05/01/29Unsecured
      fixed rate debt
                      
                      
                      264,966
                      
                      5.125%
      and 7.40%
                      
                      06/01/10
      and 09/15/61Unsecured
      line of credit
                      
                      
                      691,500
                      
                      
                      0.73%
      - 0.79%
                      
                      05/08/12Department
      of Education Participation
                      
                      
                      1,902,909
                      
                      
                      0.91%
                      
                      10/15/09
      and 09/30/10Department
      of Education Conduit
                      
                      
                      1,155,351
                      
                      
                      0.37%
                      
                      05/08/14Other
      borrowings
                      
                      
                      26,551
                      
                      
                      0.26%
      - 5.10%
                      
                      01/01/10
      - 11/01/15$
                      26,586,093
  10
  As
      of December 31, 2008Carrying
                      
                      Interest
      rateamount
                      
                      range
                      
                      Final
      maturityVariable-rate
      bonds and notes (a):Bonds
      and notes based on indices
                      
                      $
                      20,509,073
                      
                      
                      0.75%
      - 5.02%
                      
                      09/25/13
      - 06/25/41Bonds
      and notes based on auction or remarketing
                      
                      
                      2,713,285
                      
                      
                      0.00%
      - 6.00%
                      
                      11/01/09
      - 07/01/43Total
      variable-rate bonds and notes
                      
                      
                      23,222,358Commercial
      paper - FFELP facility (b)
                      
                      
                      1,445,327
                      
                      
                      1.32%
      - 2.94%
                      
                      05/09/10Commercial
      paper - private loan facility (b)
                      
                      
                      95,020
                      
                      
                      2.49%
                      
                      03/14/09Fixed-rate
      bonds and notes (a)
                      
                      
                      202,096
                      
                      
                      5.30%
      - 6.68%
                      
                      11/01/09
      - 05/01/29Unsecured
      fixed rate debt
                      
                      
                      475,000
                      
                      5.125%
      and 7.40%
                      
                      06/01/10
      and 09/15/61Unsecured
      line of credit
                      
                      
                      691,500
                      
                      
                      0.98%
      - 2.41%
                      
                      05/08/12Department
      of Education Participation
                      
                      
                      622,170
                      
                      
                      3.37%
                      
                      09/30/09Other
      borrowings
                      
                      
                      34,488
                      
                      
                      1.25%
      - 5.47%
                      
                      05/22/09
      - 11/01/15$
                      26,787,959
  (a)
              Issued
      in asset-backed securitizations
  (b)
              Loan
      warehouse facilities
   Secured
Financing Transactions
 
 The
Company has historically relied upon secured financing vehicles as its most
significant source of funding for student loans. The net cash flow the Company
receives from the securitized student loans generally represents the excess
amounts, if any, generated by the underlying student loans over the amounts
required to be paid to the bondholders, after deducting servicing fees and any
other expenses relating to the securitizations. The Company’s rights to cash
flow from securitized student loans are subordinate to bondholder interests and
may fail to generate any cash flow beyond what is due to bondholders. The
Company’s secured financing vehicles are loan warehouse facilities, asset-backed
securitizations, and the government’s Participation and Conduit Programs (as
described below).
 
 Most of
the bonds and notes payable are primarily secured by the student loans
receivable, related accrued interest, and by the amounts on deposit in the
accounts established under the respective bond resolutions or financing
agreements. The student loan interest margin notes, included in fixed rate bonds
and notes in the above tables, are secured by the rights to residual cash flows
from certain variable rate bonds and notes and fixed rate notes. Certain
variable rate bonds and notes and fixed rate bonds are secured by financial
guaranty insurance policies or a letter of credit and reimbursement agreement
issued by Municipal Bond Investors Assurance Corporation, Ambac Assurance
Corporation, and State Street.
 
 Historically,
the Company funded new loan originations using loan warehouse facilities and
asset-backed securitizations. Student loan warehousing has historically allowed
the Company to buy and manage student loans prior to transferring them into more
permanent financing arrangements. In July 2008, the Company did not renew its
liquidity provisions on its FFELP warehouse facility. Accordingly, the facility
became a term facility and no new loan originations could be funded with this
facility. In August 2008, the Company began funding FFELP Stafford and PLUS
student loan originations for the 2008-2009 and 2009-2010 academic years
pursuant to the Department’s Participation Program and a participation agreement
with Union Bank.
 
 Loan
warehouse facilities
 
 Student
loan warehousing has historically allowed the Company to buy and manage student
loans prior to transferring them into more permanent financing arrangements. To
support its funding needs on a short-term basis, the Company historically relied
upon a multi-year committed facility for FFELP loans.
 
 FFELP Warehouse
Facility
 
 On August
3, 2009, the Company entered into a FFELP warehouse facility (the “2009 FFELP
Warehouse Facility”). The 2009 FFELP Warehouse Facility has a maximum financing
amount of $500.0 million, with a revolving financing structure supported by
364-day liquidity provisions, which expire on August 2, 2010. The final maturity
date of the facility is August 3, 2012. In the event the Company is unable to
renew the liquidity provisions by August 2, 2010, the facility would become a
term facility at a stepped-up cost, with no additional student loans being
eligible for financing, and the Company would be required to refinance the
existing loans in the facility by August 3, 2012.
 
 11
 The 2009
FFELP Warehouse Facility provides for formula based advance rates depending on
FFELP loan type, up to a maximum of 92 percent to 98 percent of the principle
and interest of loans financed. The advance rates for collateral may increase or
decrease based on market conditions. The facility contains financial covenants
relating to levels of the Company’s consolidated net worth, ratio of adjusted
EBITDA to corporate debt interest, and unencumbered cash. Any violation of these
covenants could result in a requirement for the immediate repayment of any
outstanding borrowings under the facility. Unlike the Company’s prior FFELP
warehouse facility, the new facility does not require the Company to refinance
or remove a percentage of the pledged student loan collateral on an annual
basis. As of September 30, 2009, $361.3 million was outstanding under this
facility and $138.7 million was available for future use.
 
 The
Company’s prior FFELP warehouse facility was supported by 364-day liquidity
which was up for renewal on May 9, 2008. The Company obtained an extension on
this renewal until July 31, 2008. On July 31, 2008, the Company did not renew
the liquidity provisions of this facility. Accordingly, as of July 31, 2008, the
facility became a term facility with a final maturity date of May 9, 2010. The
terms and conditions of the prior FFELP warehouse facility provided for
formula-based advance rates based on market conditions. As of December 31, 2008,
the Company had $1.6 billion of student loans in the facility, $1.4 billion
borrowed under the facility, and $280.6 million in cash posted as equity funding
support for this facility. During 2009, the Company refinanced the student loans
in this facility which allowed the Company to withdraw all remaining equity
funding support from the facility. The Company refinanced these loans using the
following facilities:
 
 ·
              In
      March 2009, the Company completed a privately placed asset-backed
      securitization of $294.6 million.
 
 ·
              In
      June 2009, the Company accessed the Department’s Conduit Program (as
      further discussed below).
 
 ·
              In
      August 2009, the Company refinanced all remaining loans using the 2009
      FFELP Warehouse Facility and terminated the prior FFELP
      facility.
 
 Private Loan Warehouse
Facility
 
 On
February 25, 2009, the Company paid $91.5 million on the outstanding debt of its
private loan warehouse facility with operating cash and terminated the facility.
Beginning in January 2008, the Company suspended private student loan
originations.
 
 Asset-backed
securitizations
 
 As part
of the Company’s issuance of asset-backed securities in March 2008 and May 2008,
due to credit market conditions when these notes were issued, the Company
purchased the Class B subordinated notes of $36 million (par value) and $41
million (par value), respectively. These notes are not included on the Company’s
consolidated balance sheet. If the credit market conditions improve, the Company
anticipates selling these notes to third parties. Upon a sale to third parties,
the Company would obtain cash proceeds equal to the market value of the notes on
the date of such sale. Upon sale, these notes would be shown as “bonds and notes
payable” on the Company’s consolidated balance sheet. Unless there is a
significant market improvement, the Company believes the market value of such
notes will be less than par value. The difference between the par value and
market value would be recognized by the Company as interest expense over the
life of the bonds.
 
 On
October 22, 2009, the Company completed an asset-backed securities transaction
of $434.0 million. The Company used the proceeds from the sale of these notes
and additional funds of $17.3 million to purchase principal and interest on
student loans, which were previously financed in other asset-backed
securitizations and the 2009 FFELP Warehouse Facility. As of November 6, 2009
$179.1 million was outstanding under the 2009 FFELP Warehouse Facility and
$320.9 million was available for future use.
 
 Department
of Education’s Loan Participation and Purchase Commitment Programs
 
 In August
2008, the Department implemented the Purchase Program and the Participation
Program pursuant to the Ensuring Continued Access to Student Loans Act of 2008
(“ECASLA”). Under the Department’s Purchase Program, the Department will
purchase loans at a price equal to the sum of (i) par value, (ii) accrued
interest, (iii) the one percent origination fee paid to the Department, and (iv)
a fixed amount of $75 per loan. Under the Participation Program, the Department
provides interim short term liquidity to FFELP lenders by purchasing
participation interests in pools of FFELP loans. FFELP lenders are charged a
rate of commercial paper plus 50 basis points on the principal amount of
participation interests outstanding. Loans funded under the Participation
Program for the 2008-2009 academic year had to be either refinanced by the
lender or sold to the Department pursuant to the Purchase Program prior to
October 15, 2009. To be eligible for purchase or participation under the
Department’s programs, loans were originally limited to FFELP Stafford or PLUS
loans made for the academic year 2008-2009, first disbursed between May 1, 2008
and July 1, 2009, with eligible borrower benefits.
 
 On
October 7, 2008, legislation was enacted to extend the Department’s authority to
address FFELP student loans made for the 2009-2010 academic year and allowing
for the extension of the Participation Program and Purchase Program from October
15, 2009 to September 30, 2010. The Department indicated that loans for the
2008-2009 academic year which are funded under the Department's Participation
Program will need to be refinanced or sold to the Department prior to October
15, 2009. On November 8, 2008, the Department announced the replication of the
terms of the Participation and Purchase Programs, in accordance with the October
7, 2008 legislation, which includes FFELP student loans made for the 2009-2010
academic year.
 
 12
 As of
September 30, 2009, the Company had $­­­1.9 billion of FFELP loans
funded using the Participation Program, of which $1.6 billion are 2008-2009
academic year loans and are classified as held for sale on the Company’s
consolidated balance sheet. These loans were sold to the Department under its
Purchase Program in October 2009. The Company plans to continue to use the
Participation Program to fund certain loans through the 2009-2010 academic
year.
 
 Department
of Education’s Conduit Program
 
 In
January 2009, the Department published summary terms for its program under which
it will finance eligible FFELP Stafford and PLUS loans in a conduit vehicle
established to provide funding for student lenders (the “Conduit Program”).
Loans eligible for the Conduit Program had to be first disbursed on or after
October 1, 2003, but not later than June 30, 2009, and fully disbursed before
September 30, 2009, and meet certain other requirements. The Conduit Program was
launched on May 11, 2009. Funding for the Conduit Program is provided by the
capital markets at a cost based on market rates, with the Company being advanced
97 percent of the student loan face amount. Excess amounts needed to fund the
remaining 3 percent of the student loan balances are contributed by the Company.
The Conduit Program has a term of five years and expires on May 8, 2014. The
Student Loan Short-Term Notes (“Student Loan Notes”) issued by the Conduit
Program are supported by a combination of (i) notes backed by FFELP loans, (ii)
the Liquidity Agreement with the Federal Financing Bank, and (iii) the Put
Agreement provided by the Department. If the conduit does not have sufficient
funds to pay all Student Loan Notes, then those Student Loan Notes will be
repaid with funds from the Federal Financing Bank. The Federal Financing Bank
will hold the notes for a short period of time and, if at the end of that time,
the Student Loan Notes still cannot be paid off, the underlying FFELP loans that
serve as collateral to the Conduit Program will be sold to the Department
through the Put Agreement at a price of 97 percent of the face amount of the
loans. As of September 30, 2009, the Company had $1.2 billion borrowed under the
facility.
 
 Union
Bank Participation Agreement
 
 The
Company maintains an agreement with Union Bank, as trustee for various grantor
trusts, under which Union Bank has agreed to purchase from the Company
participation interests in student loans (the “FFELP Participation Agreement”).
The Company has the option to purchase the participation interests from the
grantor trusts at the end of a 364-day term upon termination of the
participation certificate. As of September 30, 2009 and December 31, 2008,
$681.9 million and $548.4 million, respectively, of loans were subject to
outstanding participation interests held by Union Bank, as trustee, under this
agreement. The agreement automatically renews annually and is terminable by
either party upon five business days notice. This agreement provides
beneficiaries of Union Bank’s grantor trusts with access to investments in
interests in student loans, while providing liquidity to the Company on a
short-term basis. The Company can participate loans to Union Bank to the extent
of availability under the grantor trusts, up to $750 million or an amount in
excess of $750 million if mutually agreed to by both parties. Loans participated
under this agreement have been accounted for by the Company as loan sales.
Accordingly, the participation interests sold are not included on the Company’s
consolidated balance sheet.
 
 Unsecured
Line of Credit
 
 The
Company has a $750.0 million unsecured line of credit that terminates in May
2012. As of September 30, 2009, there was $691.5 million outstanding on this
line. The weighted average interest rate on this line of credit was 0.77% as of
September 30, 2009. Upon termination in 2012, there can be no assurance that the
Company will be able to maintain this line of credit, find alternative funding,
or increase the amount outstanding under the line, if necessary. The lending
commitment under the Company’s unsecured line of credit is provided by a total
of thirteen banks, with no individual bank representing more than 11% of the
total lending commitment. The bank lending group includes Lehman Brothers Bank
(“Lehman”), a subsidiary of Lehman Brothers Holdings Inc., which represents
approximately 7% of the lending commitment under the line of credit. On
September 15, 2008, Lehman Brothers Holdings Inc. filed a voluntary petition for
relief under Chapter 11 of the United States Bankruptcy Code. The Company does
not expect that Lehman will fund future borrowing requests. As of September 30,
2009, excluding Lehman’s lending commitment, the Company has $51.2 million
available for future use under its unsecured line of credit.
 
 The line
of credit agreement contains certain financial covenants that, if not met, lead
to an event of default under the agreement. The covenants include
maintaining:
 
 ·
              A
      minimum consolidated net worth
 
 ·
              A
      minimum adjusted EBITDA to corporate debt interest (over the last four
      rolling quarters)
 
 ·
              A
      limitation on subsidiary
indebtedness
 
 ·
              A
      limitation on the percentage of non-guaranteed loans in the Company’s
      portfolio
 
 13
 As of
September 30, 2009, the Company was in compliance with all of these
requirements. Many of these covenants are duplicated in the Company’s other
lending facilities, including its FFELP warehouse facilities.
 
 The
Company’s operating line of credit does not have any covenants related to
unsecured debt ratings. However, changes in the Company’s ratings (as well as
the amounts the Company borrows) have modest implications on the pricing level
at which the Company obtains funding.
 
 A default
on the 2009 FFELP Warehouse Facility would result in an event of default on the
Company’s unsecured line of credit that would result in the outstanding balance
on the line of credit becoming immediately due and payable.
 
 Debt
Repurchases
 
 During
2009, the Company repurchased outstanding debt as summarized below. There were
no debt repurchases in 2008. Any gains (losses) recorded by the Company from the
repurchase of debt are included in “other income” on the Company’s consolidated
statements of operations.
 
 5.125%
      Senior Notes due 2010
                                      
                                      Junior
      Subordinated Hybrid Securities
                                      
                                      Asset-backed
      securitiesNotional
                                      
                                      Purchase
                                      
                                      Gain
                                      
                                      Notional
                                      
                                      Purchase
                                      
                                      Gain
                                      
                                      Notional
                                      
                                      Purchase
                                      
                                      Gainamount
                                      
                                      price
                                      
                                      (loss)
                                      
                                      amount
                                      
                                      price
                                      
                                      (loss)
                                      
                                      amount
                                      
                                      price
                                      
                                      (loss)Three
      months ended:March
      31, 2009
                                      
                                      $
                                      34,866
                                      
                                      
                                      26,791
                                      
                                      
                                      8,075
                                      
                                      
                                      —
                                      
                                      
                                      —
                                      
                                      
                                      —
                                      
                                      
                                      —
                                      
                                      
                                      —
                                      
                                      
                                      —June
      30, 2009
                                      
                                      
                                      35,520
                                      
                                      
                                      31,080
                                      
                                      
                                      4,440
                                      
                                      
                                      1,750
                                      
                                      
                                      350
                                      
                                      
                                      1,400
                                      
                                      
                                      1,100
                                      
                                      
                                      1,078
                                      
                                      
                                      22September
      30, 2009
                                      
                                      
                                      137,898
                                      
                                      
                                      138,505
                                      
                                      
                                      (607
                                      )
                                      
                                      —
                                      
                                      
                                      —
                                      
                                      
                                      —
                                      
                                      
                                      44,950
                                      
                                      
                                      39,095
                                      
                                      
                                      5,855Nine
      months ended September 30, 2009
                                      
                                      
                                      208,284
                                      
                                      
                                      196,376
                                      
                                      
                                      11,908
                                      
                                      
                                      1,750
                                      
                                      
                                      350
                                      
                                      
                                      1,400
                                      
                                      
                                      46,050
                                      
                                      
                                      40,173
                                      
                                      
                                      5,877Subsequent
      to September 30, 2009through
      November 9, 2009
                                      
                                      
                                      —
                                      
                                      
                                      —
                                      
                                      
                                      —
                                      
                                      
                                      —
                                      
                                      
                                      —
                                      
                                      
                                      —
                                      
                                      
                                      140,200
                                      
                                      
                                      126,159
                                      
                                      
                                      14,041Total
      debt repurchased
                                      
                                      $
                                      208,284
                                      
                                      
                                      196,376
                                      
                                      
                                      11,908
                                      
                                      
                                      1,750
                                      
                                      
                                      350
                                      
                                      
                                      1,400
                                      
                                      
                                      186,250
                                      
                                      
                                      166,332
                                      
                                      
                                      19,918Balance
      as of September 30, 2009
                                      
                                      $
                                      66,716
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      $
                                      198,250
 
 5.
              Derivative
      Financial Instruments
 
 The
Company is exposed to certain risks relating to its ongoing business operations.
The primary risks managed by using derivative instruments are interest rate risk
and foreign currency exchange risk.
 
 Interest
Rate Risk
 
 The
Company’s primary market risk exposure arises from fluctuations in its borrowing
and lending rates, the spread between which could impact the Company due to
shifts in market interest rates. Because the Company generates a significant
portion of its earnings from its student loan spread, the interest rate
sensitivity of the balance sheet is a key profitability driver. The Company has
adopted a policy of periodically reviewing the mismatch related to the interest
rate characteristics of its assets and liabilities together with the Company's
outlook as to current and future market conditions. Based on those factors, the
Company uses derivative instruments as part of its overall risk management
strategy.
 
 The
Company issues asset-backed securities, the vast majority being variable rate,
to fund its student loan assets. The variable rate debt is generally indexed to
3-month LIBOR, set by auction, or through a remarketing process. The income
generated by the Company’s student loan assets is generally driven by short term
indices (treasury bills, commercial paper, and certain fixed rates) that are
different from those which affect the Company’s liabilities (generally LIBOR),
which creates basis risk. Moreover, the Company also faces repricing risk due to
the timing of the interest rate resets on its liabilities, which may occur as
infrequently as every quarter, and the timing of the interest rate resets on its
assets, which generally occurs daily. In a declining interest rate environment,
this may cause the Company’s student loan spread to compress, while in a rising
rate environment, it may cause the spread to increase. As of September 30, 2009,
the Company had approximately $23.8 billion of FFELP loans indexed to
three-month financial commercial paper rate and $19.7 billion of debt indexed to
LIBOR.
 
 In using
different index types and different index reset frequencies to fund assets, the
Company is exposed to interest rate risk in the form of basis risk and repricing
risk, which, as noted above, is the risk that the different indices may reset at
different frequencies, or will not move in the same direction or with the same
magnitude. While these indices are short term with rate movements that are
highly correlated over a longer period of time, they have recently become less
correlated. Due to capital market dislocations or other factors not within the
Company’s control, there can be no assurance the indices will regain their high
level of correlation in the future.
 
 14
 The
Company has used derivative instruments to hedge the repricing risk due to the
timing of the interest rate resets on its assets and liabilities. The Company
has entered into basis swaps in which the Company (i) receives three-month LIBOR
set discretely in advance and pays a daily weighted average three-month LIBOR
less a spread as defined in the agreements (the “Average/Discrete Basis Swaps”);
and (ii) receives three-month LIBOR and pays one-month LIBOR plus or minus a
spread as defined in the agreements (the “1/3 Basis Swaps”).
 
 However,
the Company does not generally hedge the basis risk due to the different
interest rate indices associated with its assets and liabilities, since the
derivatives needed to hedge this risk are generally illiquid or non-existent and
the relationship between the indices for most of the Company’s assets and
liabilities has been highly correlated over a long period of time.
 
 The
following table summarizes the Company’s basis swaps outstanding as of September
30, 2009 and December 31, 2008 used by the Company to hedge the repricing risk
due to the timing of the interest rate resets on its assets and
liabilities.
   As
      of September 30, 2009Notional
      AmountMaturity
                              
                              Average/Discrete
      Basis Swaps
                              
                              
                              1/3
      Basis Swaps2010
                              
                              $
                              —
                              
                              
                              
                              1,000,0002011
      (a)
                              
                              
                              6,000,000
                              
                              
                              
                              —2013
                              
                              
                              —
                              
                              
                              
                              500,0002014
                              
                              
                              —
                              
                              
                              
                              500,0002018
                              
                              
                              —
                              
                              
                              
                              1,300,0002019
                              
                              
                              —
                              
                              
                              
                              500,0002021
                              
                              
                              —
                              
                              
                              
                              250,0002023
                              
                              
                              —
                              
                              
                              
                              1,250,0002024
                              
                              
                              —
                              
                              
                              
                              250,0002028
                              
                              
                              —
                              
                              
                              
                              100,0002039
                              
                              
                              —
                              
                              
                              
                              150,000$
                              6,000,000
                              
                              
                              
                              5,800,000(a)
      Certain of these derivatives have forward effective start dates of
      January 2010 ($1.5 billion), February 2010 ($1.5 billion), and March
      2010 ($1.5 billion).
  As
      of December 31, 2008Notional
      amountMaturity
                      
                      Average/Discrete
      Basis Swaps
                      
                      
                      1/3
      Basis Swaps2010
                      
                      $
                      4,500,000
                      
                      
                      
                      —2011
                      
                      
                      2,700,000
                      
                      
                      
                      —2012
                      
                      
                      2,400,000
                      
                      
                      
                      —2018
                      
                      
                      —
                      
                      
                      
                      1,300,0002023
                      
                      
                      —
                      
                      
                      
                      1,250,0002028
                      
                      
                      —
                      
                      
                      
                      100,000$
                      9,600,000
                      
                      
                      
                      2,650,000
 
 15
 During
the three and nine months ended September 30, 2009, the Company terminated
and/or amended certain Average/Discrete Basis Swap agreements for net receipts
of $2.4 million and net payments of $7.9 million, respectively.
 
 FFELP
loans originated prior to April 1, 2006 generally earn interest at the higher of
a floating rate based on the Special Allowance Payment or SAP formula set by the
Department and the borrower rate, which is fixed over a period of time. The SAP
formula is based on an applicable index plus a fixed spread that is dependent
upon when the loan was originated, the loan’s repayment status, and funding
sources for the loan. The Company generally finances its student loan portfolio
with variable rate debt. In low and/or declining interest rate environments,
when the fixed borrower rate is higher than the rate produced by the SAP
formula, the Company’s student loans earn at a fixed rate while the interest on
the variable rate debt typically continues to decline. In these interest rate
environments, the Company may earn additional spread income that it refers to as
floor income.
 
 Depending
on the type of loan and when it was originated, the borrower rate is either
fixed to term or is reset to an annual rate each July 1. As a result, for loans
where the borrower rate is fixed to term, the Company may earn floor income for
an extended period of time, which the Company refers to as fixed rate floor
income, and for those loans where the borrower rate is reset annually on July 1,
the Company may earn floor income to the next reset date, which the Company
refers to as variable rate floor income. In accordance with legislation enacted
in 2006, lenders are required to rebate fixed rate floor income and variable
rate floor income to the Department for all FFELP loans first originated on or
after April 1, 2006.
 
 Absent
the use of derivative instruments, a rise in interest rates may reduce the
amount of floor income received and this may have an impact on earnings due to
interest margin compression caused by increasing financing costs, until such
time as the federally insured loans earn interest at a variable rate in
accordance with their special allowance payment formulas. In higher interest
rate environments, where the interest rate rises above the borrower rate and
fixed rate loans effectively become variable rate loans, the impact of the rate
fluctuations is reduced.
 
 As of
September 30, 2009, the Company held the following interest rate derivatives to
hedge fixed-rate student loan assets earning fixed rate floor
income.
 
 As
      of September 30, 2009Weightedaverage
      fixedNotional
                                            
                                            
                                            rate
      paid byMaturity
                                            
                                            Amount
                                            
                                            
                                            the
      Company (a)2010
                                            
                                            $
                                            1,000,000
                                            
                                            
                                            
                                            0.76%(a)
      For all interest rate derivatives, the Company receivesdiscrete three-month
LIBOR.
 
 Foreign
Currency Exchange Risk
 
 During
2006, the Company completed separate debt offerings of student loan asset-backed
securities that included 420.5 million and 352.7 million Euro-denominated notes
(the “Euro Notes”) with interest rates based on a spread to the EURIBOR index.
As a result of this transaction, the Company is exposed to market risk related
to fluctuations in foreign currency exchange rates between the U.S. dollar and
Euro. The principal and accrued interest on these notes is re-measured at each
reporting period and recorded on the Company’s balance sheet in U.S. dollars
based on the foreign currency exchange rate on that date. Changes in the
principal and accrued interest amounts as a result of foreign currency exchange
rate fluctuations are included in the “derivative market value, foreign
currency, and put option adjustments and derivative settlements, net” in the
Company’s consolidated statements of operations.
 
 The
Company entered into cross-currency interest rate swaps in connection with the
issuance of the Euro Notes. Under the terms of these derivative instrument
agreements, the Company receives from a counterparty a spread to the EURIBOR
index based on notional amounts of €420.5 million and €352.7 million and pays a
spread to the LIBOR index based on notional amounts of $500.0 million and $450.0
million, respectively. In addition, under the terms of these agreements, all
principal payments on the Euro Notes will effectively be paid at the exchange
rate in effect as of the issuance of the notes.
 
 For the three and nine months ended
September 30, 2009, the Company recorded an expense of $39.4million and $56.0million, respectively, as a result of
re-measurement of the Euro Notes, and income of $44.8million and $28.9million, respectively, for the change
in the fair value of the related derivative instruments. For the three and nine
months ended September 30, 2008, the Company recorded income of
$128.9million and
$40.4million,
respectively, as a result of re-measurement of the Euro Notes, and an expense of
$129.0million and
$37.3million,
respectively, for the change in the fair value of the related derivative
instruments.
 
 The
re-measurement of the Euro-denominated bonds generally correlates with the
change in fair value of the cross-currency interest rate swaps. However, the
Company will experience unrealized gains or losses related to the cross-currency
interest rate swaps if the two underlying indices (and related forward curve) do
not move in parallel. Management intends to hold the cross-currency interest
rate swaps through the maturity of the Euro-denominated bonds.
 
 16
 Accounting
for Derivative Financial Instruments
 
 The
Company records every derivative instrument on the balance sheet as either an
asset or liability measured at its fair value. Management has structured all of
the Company’s derivative transactions with the intent that each is economically
effective; however, the Company’s derivative instruments do not qualify for
hedge accounting. As a result, the change in fair value of the Company’s
derivatives at each reporting date are included in “derivative market value,
foreign currency, and put option adjustments and derivative settlements, net” in
the Company’s consolidated statements of operations. Changes or shifts in the
forward yield curve and fluctuations in currency rates can significantly impact
the valuation of the Company’s derivatives. Accordingly, changes or shifts to
the forward yield curve and fluctuations in currency rates will impact the
financial position and results of operations of the Company.
 
 Any
proceeds received or payments made by the Company to terminate a derivative in
advance of its expiration date, or to amend the terms of an existing derivative,
are included in “derivative market value, foreign currency, and put option
adjustments and derivative settlements, net” on the consolidated statements of
operations and are accounted for as a change in fair value on such
derivative.
 
 The
following table summarizes the fair value of the Company’s derivatives not
designated as hedging instruments:
   Asset
      derivatives
                    
                    
                    Liability
      derivativesFair
      value as of
                    
                    
                    Fair
      value as of
                    
                    
                    Fair
      value as of
                    
                    
                    Fair
      value as ofSeptember
      30, 2009
                    
                    
                    December
      31, 2008
                    
                    
                    September
      30, 2009
                    
                    
                    December
      31, 2008Interest
      Rate swaps
                    
                    $
                    —
                    
                    
                    
                    —
                    
                    
                    
                    (1,812
                    )
                    
                    
                    —Average/discrete
      basis swaps
                    
                    
                    —
                    
                    
                    
                    2,817
                    
                    
                    
                    (6,660
                    )
                    
                    
                    (1,800
                    )1/3
      basis swaps
                    
                    
                    13,966
                    
                    
                    
                    5,037
                    
                    
                    
                    (8
                    )
                    
                    
                    (15
                    )Cross-currency
      interest rate swaps
                    
                    
                    196,191
                    
                    
                    
                    167,320
                    
                    
                    
                    —
                    
                    
                    
                    —Other
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    (518
                    )
                    
                    
                    —Total
                    
                    $
                    210,157
                    
                    
                    
                    175,174
                    
                    
                    
                    (8,998
                    )
                    
                    
                    (1,815
                    )
 The
following table summarizes the effect of derivative instruments in the
consolidated statements of operations. All gains and losses recognized in income
related to the Company’s derivative activity are included in “Derivative market
value, foreign currency, and put option adjustments and derivative settlements,
net”, on the consolidated statements of operations.
   Derivatives
      not designated
                        
                        Amount
      of gain (or loss)
                        
                        
                        Amount
      of gain (or loss)as
      hedging instruments
                        
                        recognized
      on derivatives
                        
                        
                        recognized
      on derivativesThree
      months ended September 30,
                        
                        
                        Nine
      months ended September 30,2009
                        
                        
                        2008
                        
                        
                        2009
                        
                        
                        2008Settlements:Interest
      rate swaps
                        
                        $
                        (436
                        )
                        
                        
                        (3,175
                        )
                        
                        $
                        (447
                        )
                        
                        
                        (14,194
                        )Average/discrete
      basis swaps
                        
                        
                        646
                        
                        
                        
                        (3,999
                        )
                        
                        
                        11,707
                        
                        
                        
                        40,7111/3
      basis swaps
                        
                        
                        3,071
                        
                        
                        
                        —
                        
                        
                        
                        20,473
                        
                        
                        
                        894Cross-currency
      interest rate swaps
                        
                        
                        1,633
                        
                        
                        
                        7,963
                        
                        
                        
                        7,074
                        
                        
                        
                        18,578Other
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Total
      settlements
                        
                        
                        4,914
                        
                        
                        
                        789
                        
                        
                        
                        38,807
                        
                        
                        
                        45,989Change
      in fair value:Interest
      rate swaps
                        
                        
                        (2,822
                        )
                        
                        
                        (1,335
                        )
                        
                        
                        (1,811
                        )
                        
                        
                        2,763Average/discrete
      basis swaps
                        
                        
                        1,864
                        
                        
                        
                        10,390
                        
                        
                        
                        (16,813
                        )
                        
                        
                        (40,948
                        )1/3
      basis swaps
                        
                        
                        (1,115
                        )
                        
                        
                        —
                        
                        
                        
                        8,751
                        
                        
                        
                        2,568Cross-currency
      interest rate swaps
                        
                        
                        44,773
                        
                        
                        
                        (128,951
                        )
                        
                        
                        28,871
                        
                        
                        
                        (37,283
                        )Other
                        
                        
                        (518
                        )
                        
                        
                        35
                        
                        
                        
                        914
                        
                        
                        
                        501Total
      change in fair value
                        
                        
                        42,182
                        
                        
                        
                        (119,861
                        )
                        
                        
                        19,912
                        
                        
                        
                        (72,399
                        )Total
      impact to statements of operations
                        
                        $
                        47,096
                        
                        
                        
                        (119,072
                        )
                        
                        $
                        58,719
                        
                        
                        
                        (26,410
                        )
  17
  Derivative
Instruments - Credit and Market Risk
 
 By using
derivative instruments, the Company is exposed to credit and market
risk.
 
 When the
fair value of a derivative instrument is negative, the Company would owe the
counterparty if the derivative was settled and, therefore, has no immediate
credit risk. Additionally, if the negative fair value of derivatives with a
counterparty exceeds a specified threshold, the Company may have to make a
collateral deposit with the counterparty. The threshold at which the Company
posts collateral may depend on the Company’s unsecured credit rating. If
interest and foreign currency exchange rates move materially, the Company could
be required to deposit a significant amount of collateral with its derivative
instrument counterparties. The collateral deposits, if significant, could
negatively impact the Company’s liquidity and capital resources.
 
 When the
fair value of a derivative contract is positive, this generally indicates that
the counterparty would owe the Company if the derivative was settled. If the
counterparty fails to perform, credit risk with such counterparty is equal to
the extent of the fair value gain in the derivative less any collateral held by
the Company. As of September 30, 2009, the Company held approximately $308
million of collateral from the counterparty on the cross-currency interest rate
swaps.
 
 The
Company attempts to manage market and credit risks associated with interest and
foreign currency exchange rates by establishing and monitoring limits as to the
types and degree of risk that may be undertaken, and by entering into
transactions with high-quality counterparties that are reviewed periodically by
the Company’s risk committee. The Company also has a policy of requiring that
all derivative contracts be governed by an International Swaps and Derivatives
Association, Inc. Master Agreement.
 
 6.
Derivative Market Value, Foreign Currency, and Put Option Adjustments and
Derivative Settlements, net
 
 The
following table summarizes the components of “Derivative market value, foreign
currency, and put option adjustments and derivative settlements, net” included
in the consolidated statements of operations.
 
 Three
      months ended September 30,
                      
                      
                      Nine
      months ended September 30,2009
                      
                      
                      2008
                      
                      
                      2009
                      
                      
                      2008Change
      in fair value of derivatives
                      
                      $
                      42,182
                      
                      
                      
                      (119,861
                      )
                      
                      
                      19,912
                      
                      
                      
                      (72,399
                      )Foreign
      currency transaction adjustment
                      
                      
                      (39,356
                      )
                      
                      
                      128,891
                      
                      
                      
                      (55,979
                      )
                      
                      
                      40,361Change
      in fair value of put optionsissued
      in business acquisitions
                      
                      
                      —
                      
                      
                      
                      (2,945
                      )
                      
                      
                      —
                      
                      
                      
                      (3,483
                      )Derivative
      settlements, net
                      
                      
                      4,914
                      
                      
                      
                      789
                      
                      
                      
                      38,807
                      
                      
                      
                      45,989Derivative
      market value, foreign currency,and
      put option adjustments andderivative
      settlements, net
                      
                      $
                      7,740
                      
                      
                      
                      6,874
                      
                      
                      
                      2,740
                      
                      
                      
                      10,468
 
 7.
Segment Reporting
 
 The
Company has five operating segments as follows: Student Loan and Guaranty
Servicing, Tuition Payment Processing and Campus Commerce, Enrollment Services,
Software and Technical Services, and Asset Generation and Management. The
Company’s operating segments are defined by the products and services they offer
or the types of customers they serve, and they reflect the manner in which
financial information is currently evaluated by management. The accounting
policies of the Company’s operating segments are the same as those described in
the summary of significant accounting policies. Intersegment revenues are
charged by a segment to another segment that provides the product or service.
Intersegment revenues and expenses are included within each segment consistent
with the income statement presentation provided to management. Changes in
management structure or allocation methodologies and procedures may result in
changes in reported segment financial information.
 
 The
management reporting process measures the performance of the Company’s operating
segments based on the management structure of the Company as well as the
methodology used by management to evaluate performance and allocate resources.
Management, including the Company’s chief operating decision maker, evaluates
the performance of the Company’s operating segments based on their
profitability. As discussed further below, management measures the profitability
of the Company’s operating segments based on “base net income.” Accordingly,
information regarding the Company’s operating segments is provided based on
“base net income.” The Company’s “base net income” is not a defined term within
generally accepted accounting principles (“GAAP”) and may not be comparable to
similarly titled measures reported by other companies. Unlike financial
accounting, there is no comprehensive, authoritative guidance for management
reporting.
 
 18
 Historically,
the Company generated the majority of its revenue from net interest income
earned in its Asset Generation and Management operating segment. In recent
years, the Company has made several acquisitions that have expanded the
Company’s products and services and has diversified its revenue – primarily from
fee-based businesses. The Company currently offers a broad range of pre-college,
in-college, and post-college products and services to students, families,
schools, and financial institutions. These products and services help students
and families plan and pay for their education and students plan their careers.
The Company’s products and services are designed to simplify the education
planning and financing process and are focused on providing value to students,
families, and schools throughout the education life cycle. The Company continues
to diversify its sources of revenue, including those generated from businesses
that are not dependent upon government programs, thereby reducing legislative
and political risk.
 
 Fee
Generating Operating Segments
 
 Student Loan and Guaranty
Servicing
 
 The
Student Loan and Guaranty Servicing segment provides for the servicing of the
Company’s student loan portfolios and the portfolios of third parties and
servicing provided to guaranty agencies. The servicing and business process
outsourcing activities include loan origination activities, application
processing, borrower updates, payment processing, due diligence procedures, and
claim processing. These activities are performed internally for the Company’s
portfolio in addition to generating fee revenue when performed for third-party
clients. The guaranty servicing, servicing support, and business process
outsourcing activities include providing software and data center services,
borrower and loan updates, default aversion tracking services, claim processing
services, and post-default collection services to guaranty agencies. The
following are the primary product and service offerings the Company offers as
part of its Student Loan and Guaranty Servicing segment:
 
 ·
              Origination
      and servicing of FFELP loans
 ·
              Origination
      and servicing of non-federally insured student
  loans
 ·
              Servicing
      and support outsourcing for guaranty
agencies
 
 In June
2009, the Department of Education named the Company as one of four private
sector companies awarded a servicing contract to service all federally-owned
student loans, including FFELP loans purchased by the Department pursuant to
ECASLA. Beginning in August 2010, the contract will also cover the servicing on
new loans originated under the Direct Loan Program. Servicing volume will
initially be allocated by the Department to servicers awarded a contract,
however, performance factors such as customer satisfaction levels and default
rates will determine volume allocations over time. The contract spans five years
with one, five-year renewal option. Servicing loans under this contract will
increase revenue earned by this segment. However, operating margins under this
contract are expected to be lower than historical levels achieved.
 
 Tuition Payment Processing
and Campus Commerce
 
 The
Tuition Payment Processing and Campus Commerce segment provides products and
services to help institutions and education-seeking families manage the payment
of education costs during the pre-college and college stages of the education
life cycle. The Company provides actively managed tuition payment solutions,
online payment processing, detailed information reporting, financial needs
analysis, and data integration services to K-12 and higher educational
institutions, families, and students. In addition, the Company provides
customer-focused electronic transactions, information sharing, and account and
bill presentment to colleges and universities.
 
 Enrollment
Services
 
 The
Enrollment Services segment offers products and services that are focused on
helping students plan and prepare for life after high school (content management
and publishing and editing services) and helping colleges recruit and retain
students (lead generation and recruitment services). Content management products
and services include online courses and related services. Publishing and editing
services include test preparation study guides and essay and resume editing
services. Lead generation products and services include vendor lead management
services and admissions lead generation. Recruitment services include pay per
click marketing management, email marketing, list marketing services, and
admissions consulting.
 
 Software and Technical
Services
 
 The
Software and Technical Services segment provides information technology products
and full-service technical consulting, with core areas of business in
educational loan software solutions, business intelligence, technical consulting
services, and Enterprise Content Management solutions.
  19
 
 Asset
Generation and Management Operating Segment
 
 The Asset
Generation and Management segment includes the acquisition, management, and
ownership of the Company’s student loan assets. Revenues are primarily generated
from the Company’s earnings from the spread, referred to as the Company’s
student loan spread, between the yield received on the student loan portfolio
and the costs associated with originating, acquiring, and financing its student
loan portfolio. The Company generates student loan assets through direct
origination or through acquisitions. The student loan assets are held in a
series of education lending subsidiaries designed specifically for this purpose.
In addition to the student loan portfolio, all costs and activity associated
with the generation of assets, funding of those assets, and maintenance of the
debt transactions are included in this segment. This includes derivative
activity and the related derivative market value and foreign currency
adjustments. The Company is also able to leverage its capital market expertise
by providing investment advisory services and other related services to third
parties through a licensed broker dealer subsidiary. Revenues and expenses for
those functions are also included in the Asset Generation and Management
segment.
  Segment
Operating Results – “Base Net Income”
 
 The
tables below include the operating results of each of the Company’s operating
segments. Management, including the chief operating decision maker, evaluates
the Company on certain non-GAAP performance measures that the Company refers to
as “base net income” for each operating segment. While “base net income” is not
a substitute for reported results under GAAP, the Company relies on “base net
income” to manage each operating segment because it believes this measure
provides additional information regarding the operational and performance
indicators that are most closely assessed by management.
 
 “Base net
income” is the primary financial performance measure used by management to
develop the Company’s financial plans, track results, and establish corporate
performance targets and incentive compensation. Management believes this
information provides additional insight into the financial performance of the
core business activities of the Company’s operating segments. Accordingly, the
tables presented below reflect “base net income,” which is the operating measure
reviewed and utilized by management to manage the business. Reconciliation of
the segment totals to the Company’s operating results in accordance with GAAP
are also included in the tables below.
 
 20
 Segment
Results and Reconciliations to GAAP
   Three
      months ended September 30, 2009Fee-BasedStudent
                                                        
                                                        Tuition
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        "Base
      netLoan
                                                        
                                                        Payment
                                                        
                                                        
                                                        
                                                        Software
                                                        
                                                        
                                                        
                                                        Asset
                                                        
                                                        Corporate
                                                        
                                                        
                                                        
                                                        income"and
                                                        
                                                        Processing
                                                        
                                                        
                                                        
                                                        and
                                                        
                                                        Total
                                                        
                                                        Generation
                                                        
                                                        Activity
                                                        
                                                        Eliminations
                                                        
                                                        Adjustments
                                                        
                                                        GAAPGuaranty
                                                        
                                                        and
      Campus
                                                        
                                                        Enrollment
                                                        
                                                        Technical
                                                        
                                                        Fee-
                                                        
                                                        and
                                                        
                                                        and
                                                        
                                                        and
                                                        
                                                        to
      GAAP
                                                        
                                                        Results
      ofServicing
                                                        
                                                        Commerce
                                                        
                                                        Services
                                                        
                                                        Services
                                                        
                                                        Based
                                                        
                                                        Management
                                                        
                                                        Overhead
                                                        
                                                        Reclassifications
                                                        
                                                        Results
                                                        
                                                        OperationsTotal
      interest income
                                                        $
                                                        23
                                                        
                                                        
                                                        16
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        39
                                                        
                                                        
                                                        144,310
                                                        
                                                        
                                                        1,191
                                                        
                                                        
                                                        (342
                                                        )
                                                        
                                                        —
                                                        
                                                        
                                                        145,198Interest
      expense
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        69,914
                                                        
                                                        
                                                        6,444
                                                        
                                                        
                                                        (342
                                                        )
                                                        
                                                        —
                                                        
                                                        
                                                        76,016Net
      interest income (loss)
                                                        
                                                        23
                                                        
                                                        
                                                        16
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        39
                                                        
                                                        
                                                        74,396
                                                        
                                                        
                                                        (5,253
                                                        )
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        69,182Less
      provision for loan losses
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        7,500
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        7,500Net
      interest income (loss) after provision for loan losses
                                                        
                                                        23
                                                        
                                                        
                                                        16
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        39
                                                        
                                                        
                                                        66,896
                                                        
                                                        
                                                        (5,253
                                                        )
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        61,682Other
      income (expense):Loan
      and guaranty servicing revenue
                                                        
                                                        26,387
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        26,387
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        (381
                                                        )
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        26,006Tuition
      payment processing and campus commerce revenue
                                                        
                                                        —
                                                        
                                                        
                                                        12,987
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        12,987
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        12,987Enrollment
      services revenue
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        30,670
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        30,670
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        30,670Software
      services revenue
                                                        
                                                        966
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        3,634
                                                        
                                                        
                                                        4,600
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        4,600Other
      income
                                                        
                                                        137
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        137
                                                        
                                                        
                                                        9,959
                                                        
                                                        
                                                        998
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        11,094Gain
      (loss) on sale of loans, net
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        8,788
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        8,788Intersegment
      revenue
                                                        
                                                        21,525
                                                        
                                                        
                                                        62
                                                        
                                                        
                                                        139
                                                        
                                                        
                                                        3,793
                                                        
                                                        
                                                        25,519
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        8,355
                                                        
                                                        
                                                        (33,874
                                                        )
                                                        
                                                        —
                                                        
                                                        
                                                        —Derivative
      market value, foreign currency, and put option adjustments
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        2,826
                                                        
                                                        
                                                        2,826Derivative
      settlements, net
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        4,914
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        4,914Total
      other income (expense)
                                                        
                                                        49,015
                                                        
                                                        
                                                        13,049
                                                        
                                                        
                                                        30,809
                                                        
                                                        
                                                        7,427
                                                        
                                                        
                                                        100,300
                                                        
                                                        
                                                        23,661
                                                        
                                                        
                                                        8,972
                                                        
                                                        
                                                        (33,874
                                                        )
                                                        
                                                        2,826
                                                        
                                                        
                                                        101,885Operating
      expenses:Salaries
      and benefits
                                                        
                                                        12,468
                                                        
                                                        
                                                        6,399
                                                        
                                                        
                                                        5,337
                                                        
                                                        
                                                        5,756
                                                        
                                                        
                                                        29,960
                                                        
                                                        
                                                        1,693
                                                        
                                                        
                                                        5,919
                                                        
                                                        
                                                        238
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        37,810Restructure
      expense- severance and contract terminination costs
                                                        
                                                        2,646
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        292
                                                        
                                                        
                                                        2,938
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        402
                                                        
                                                        
                                                        (3,340
                                                        )
                                                        
                                                        —
                                                        
                                                        
                                                        —Impairment
      expense
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —Cost
      to provide enrollment services
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        20,323
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        20,323
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        20,323Other
      expenses
                                                        
                                                        7,613
                                                        
                                                        
                                                        2,265
                                                        
                                                        
                                                        3,266
                                                        
                                                        
                                                        776
                                                        
                                                        
                                                        13,920
                                                        
                                                        
                                                        4,801
                                                        
                                                        
                                                        8,567
                                                        
                                                        
                                                        1,929
                                                        
                                                        
                                                        5,312
                                                        
                                                        
                                                        34,529Intersegment
      expenses
                                                        
                                                        9,398
                                                        
                                                        
                                                        670
                                                        
                                                        
                                                        550
                                                        
                                                        
                                                        786
                                                        
                                                        
                                                        11,404
                                                        
                                                        
                                                        20,764
                                                        
                                                        
                                                        533
                                                        
                                                        
                                                        (32,701
                                                        )
                                                        
                                                        —
                                                        
                                                        
                                                        —Total
      operating expenses
                                                        
                                                        32,125
                                                        
                                                        
                                                        9,334
                                                        
                                                        
                                                        29,476
                                                        
                                                        
                                                        7,610
                                                        
                                                        
                                                        78,545
                                                        
                                                        
                                                        27,258
                                                        
                                                        
                                                        15,421
                                                        
                                                        
                                                        (33,874
                                                        )
                                                        
                                                        5,312
                                                        
                                                        
                                                        92,662Income
      (loss) before income taxes
                                                        
                                                        16,913
                                                        
                                                        
                                                        3,731
                                                        
                                                        
                                                        1,333
                                                        
                                                        
                                                        (183
                                                        )
                                                        
                                                        21,794
                                                        
                                                        
                                                        63,299
                                                        
                                                        
                                                        (11,702
                                                        )
                                                        
                                                        —
                                                        
                                                        
                                                        (2,486
                                                        )
                                                        
                                                        70,905Income
      tax (expense) benefit (a)
                                                        
                                                        (6,427
                                                        )
                                                        
                                                        (1,418
                                                        )
                                                        
                                                        (507
                                                        )
                                                        
                                                        70
                                                        
                                                        
                                                        (8,282
                                                        )
                                                        
                                                        (24,054
                                                        )
                                                        
                                                        6,976
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        859
                                                        
                                                        
                                                        (24,501
                                                        )Net
      income (loss) from continuing operations
                                                        
                                                        10,486
                                                        
                                                        
                                                        2,313
                                                        
                                                        
                                                        826
                                                        
                                                        
                                                        (113
                                                        )
                                                        
                                                        13,512
                                                        
                                                        
                                                        39,245
                                                        
                                                        
                                                        (4,726
                                                        )
                                                        
                                                        —
                                                        
                                                        
                                                        (1,627
                                                        )
                                                        
                                                        46,404Income
      from discontinued operations, net of tax
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —
                                                        
                                                        
                                                        —Net
      income (loss)
                                                        $
                                                        10,486
                                                        
                                                        
                                                        2,313
                                                        
                                                        
                                                        826
                                                        
                                                        
                                                        (113
                                                        )
                                                        
                                                        13,512
                                                        
                                                        
                                                        39,245
                                                        
                                                        
                                                        (4,726
                                                        )
                                                        
                                                        —
                                                        
                                                        
                                                        (1,627
                                                        )
                                                        
                                                        46,404(a)
      Income taxes are applied based on 38% of income (loss) before income taxes
      for the individual operating segments.
  21
  Three
      months ended September 30, 2008Fee-BasedTuitionStudent
                                                                                
                                                                                
                                                                                Payment
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                "Base
      netLoan
                                                                                
                                                                                
                                                                                Processing
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                Software
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                Asset
                                                                                
                                                                                
                                                                                Corporate
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                income"and
                                                                                
                                                                                
                                                                                and
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                and
                                                                                
                                                                                
                                                                                Total
                                                                                
                                                                                
                                                                                Generation
                                                                                
                                                                                
                                                                                Activity
                                                                                
                                                                                
                                                                                Eliminations
                                                                                
                                                                                
                                                                                Adjustments
                                                                                
                                                                                
                                                                                GAAPGuaranty
                                                                                
                                                                                
                                                                                Campus
                                                                                
                                                                                
                                                                                Enrollment
                                                                                
                                                                                
                                                                                Technical
                                                                                
                                                                                
                                                                                Fee-
                                                                                
                                                                                
                                                                                and
                                                                                
                                                                                
                                                                                and
                                                                                
                                                                                
                                                                                and
                                                                                
                                                                                
                                                                                to
      GAAP
                                                                                
                                                                                
                                                                                Results
      ofServicing
                                                                                
                                                                                
                                                                                Commerce
                                                                                
                                                                                
                                                                                Services
                                                                                
                                                                                
                                                                                Services
                                                                                
                                                                                
                                                                                Based
                                                                                
                                                                                
                                                                                Management
                                                                                
                                                                                
                                                                                Overhead
                                                                                
                                                                                
                                                                                Reclassifications
                                                                                
                                                                                
                                                                                Results
                                                                                
                                                                                
                                                                                OperationsTotal
      interest income
                                                                                
                                                                                $
                                                                                304
                                                                                
                                                                                
                                                                                
                                                                                396
                                                                                
                                                                                
                                                                                
                                                                                6
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                706
                                                                                
                                                                                
                                                                                
                                                                                290,039
                                                                                
                                                                                
                                                                                
                                                                                2,010
                                                                                
                                                                                
                                                                                
                                                                                (749
                                                                                )
                                                                                
                                                                                
                                                                                1,580
                                                                                
                                                                                
                                                                                
                                                                                293,586Interest
      expense
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                1
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                1
                                                                                
                                                                                
                                                                                
                                                                                224,272
                                                                                
                                                                                
                                                                                
                                                                                10,492
                                                                                
                                                                                
                                                                                
                                                                                (749
                                                                                )
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                234,016Net
      interest income (loss)
                                                                                
                                                                                
                                                                                304
                                                                                
                                                                                
                                                                                
                                                                                396
                                                                                
                                                                                
                                                                                
                                                                                5
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                705
                                                                                
                                                                                
                                                                                
                                                                                65,767
                                                                                
                                                                                
                                                                                
                                                                                (8,482
                                                                                )
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                1,580
                                                                                
                                                                                
                                                                                
                                                                                59,570Less
      provision for loan losses
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                7,000
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                7,000Net
      interest income (loss) afterprovision
      for loan losses
                                                                                
                                                                                
                                                                                304
                                                                                
                                                                                
                                                                                
                                                                                396
                                                                                
                                                                                
                                                                                
                                                                                5
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                705
                                                                                
                                                                                
                                                                                
                                                                                58,767
                                                                                
                                                                                
                                                                                
                                                                                (8,482
                                                                                )
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                1,580
                                                                                
                                                                                
                                                                                
                                                                                52,570Other
      income (expense):Loan
      and guaranty servicing revenue
                                                                                
                                                                                
                                                                                29,827
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                29,827
                                                                                
                                                                                
                                                                                
                                                                                (136
                                                                                )
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                29,691Tuition
      payment processing and campus commerce revenue
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                11,863
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                11,863
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                11,863Enrollment
      services revenue
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                29,858
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                29,858
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                29,858Software
      services revenue
                                                                                
                                                                                
                                                                                942
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                4,217
                                                                                
                                                                                
                                                                                
                                                                                5,159
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                5,159Other
      income
                                                                                
                                                                                
                                                                                6
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                6
                                                                                
                                                                                
                                                                                
                                                                                4,079
                                                                                
                                                                                
                                                                                
                                                                                1,323
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                5,408Intercompany
      revenue
                                                                                
                                                                                
                                                                                18,402
                                                                                
                                                                                
                                                                                
                                                                                58
                                                                                
                                                                                
                                                                                
                                                                                2
                                                                                
                                                                                
                                                                                
                                                                                1,660
                                                                                
                                                                                
                                                                                
                                                                                20,122
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                15,671
                                                                                
                                                                                
                                                                                
                                                                                (35,793
                                                                                )
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —Derivative
      market value, foreigncurrency,
      and put option adjustments
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                6,085
                                                                                
                                                                                
                                                                                
                                                                                6,085Derivative
      settlements, net
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                789
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                789Total
      other income (expense)
                                                                                
                                                                                
                                                                                49,177
                                                                                
                                                                                
                                                                                
                                                                                11,921
                                                                                
                                                                                
                                                                                
                                                                                29,860
                                                                                
                                                                                
                                                                                
                                                                                5,877
                                                                                
                                                                                
                                                                                
                                                                                96,835
                                                                                
                                                                                
                                                                                
                                                                                4,732
                                                                                
                                                                                
                                                                                
                                                                                16,994
                                                                                
                                                                                
                                                                                
                                                                                (35,793
                                                                                )
                                                                                
                                                                                
                                                                                6,085
                                                                                
                                                                                
                                                                                
                                                                                88,853Operating
      expenses:Salaries
      and benefits
                                                                                
                                                                                
                                                                                13,876
                                                                                
                                                                                
                                                                                
                                                                                6,236
                                                                                
                                                                                
                                                                                
                                                                                5,805
                                                                                
                                                                                
                                                                                
                                                                                4,138
                                                                                
                                                                                
                                                                                
                                                                                30,055
                                                                                
                                                                                
                                                                                
                                                                                1,980
                                                                                
                                                                                
                                                                                
                                                                                14,179
                                                                                
                                                                                
                                                                                
                                                                                (1,952
                                                                                )
                                                                                
                                                                                
                                                                                477
                                                                                
                                                                                
                                                                                
                                                                                44,739Restructure
      expense- severance andcontract
      terminination costs
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —Impairment
      expense
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —Cost
      to provide enrollment services
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                17,904
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                17,904
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                17,904Other
      expenses
                                                                                
                                                                                
                                                                                10,632
                                                                                
                                                                                
                                                                                
                                                                                2,132
                                                                                
                                                                                
                                                                                
                                                                                2,512
                                                                                
                                                                                
                                                                                
                                                                                568
                                                                                
                                                                                
                                                                                
                                                                                15,844
                                                                                
                                                                                
                                                                                
                                                                                5,354
                                                                                
                                                                                
                                                                                
                                                                                13,477
                                                                                
                                                                                
                                                                                
                                                                                (247
                                                                                )
                                                                                
                                                                                
                                                                                6,598
                                                                                
                                                                                
                                                                                
                                                                                41,026Intersegment
      expenses
                                                                                
                                                                                
                                                                                11,940
                                                                                
                                                                                
                                                                                
                                                                                288
                                                                                
                                                                                
                                                                                
                                                                                1,509
                                                                                
                                                                                
                                                                                
                                                                                826
                                                                                
                                                                                
                                                                                
                                                                                14,563
                                                                                
                                                                                
                                                                                
                                                                                18,200
                                                                                
                                                                                
                                                                                
                                                                                831
                                                                                
                                                                                
                                                                                
                                                                                (33,594
                                                                                )
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —Total
      operating expenses
                                                                                
                                                                                
                                                                                36,448
                                                                                
                                                                                
                                                                                
                                                                                8,656
                                                                                
                                                                                
                                                                                
                                                                                27,730
                                                                                
                                                                                
                                                                                
                                                                                5,532
                                                                                
                                                                                
                                                                                
                                                                                78,366
                                                                                
                                                                                
                                                                                
                                                                                25,534
                                                                                
                                                                                
                                                                                
                                                                                28,487
                                                                                
                                                                                
                                                                                
                                                                                (35,793
                                                                                )
                                                                                
                                                                                
                                                                                7,075
                                                                                
                                                                                
                                                                                
                                                                                103,669Income
      (loss) before income taxes
                                                                                
                                                                                
                                                                                13,033
                                                                                
                                                                                
                                                                                
                                                                                3,661
                                                                                
                                                                                
                                                                                
                                                                                2,135
                                                                                
                                                                                
                                                                                
                                                                                345
                                                                                
                                                                                
                                                                                
                                                                                19,174
                                                                                
                                                                                
                                                                                
                                                                                37,965
                                                                                
                                                                                
                                                                                
                                                                                (19,975
                                                                                )
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                590
                                                                                
                                                                                
                                                                                
                                                                                37,754Income
      tax (expense) benefit (a)
                                                                                
                                                                                
                                                                                (4,823
                                                                                )
                                                                                
                                                                                
                                                                                (1,354
                                                                                )
                                                                                
                                                                                
                                                                                (790
                                                                                )
                                                                                
                                                                                
                                                                                (128
                                                                                )
                                                                                
                                                                                
                                                                                (7,095
                                                                                )
                                                                                
                                                                                
                                                                                (14,047
                                                                                )
                                                                                
                                                                                
                                                                                7,391
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                (218
                                                                                )
                                                                                
                                                                                
                                                                                (13,969
                                                                                )Net
      income (loss) from continuing operations
                                                                                
                                                                                
                                                                                8,210
                                                                                
                                                                                
                                                                                
                                                                                2,307
                                                                                
                                                                                
                                                                                
                                                                                1,345
                                                                                
                                                                                
                                                                                
                                                                                217
                                                                                
                                                                                
                                                                                
                                                                                12,079
                                                                                
                                                                                
                                                                                
                                                                                23,918
                                                                                
                                                                                
                                                                                
                                                                                (12,584
                                                                                )
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                372
                                                                                
                                                                                
                                                                                
                                                                                23,785Income
      from discontinued operations, net of tax
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                —Net
      income (loss)
                                                                                
                                                                                $
                                                                                8,210
                                                                                
                                                                                
                                                                                
                                                                                2,307
                                                                                
                                                                                
                                                                                
                                                                                1,345
                                                                                
                                                                                
                                                                                
                                                                                217
                                                                                
                                                                                
                                                                                
                                                                                12,079
                                                                                
                                                                                
                                                                                
                                                                                23,918
                                                                                
                                                                                
                                                                                
                                                                                (12,584
                                                                                )
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                372
                                                                                
                                                                                
                                                                                
                                                                                23,785
  (a)
      Income taxes are applied based on the consolidated effective tax rate to
      income (loss) before income taxes.
 
 22
  Nine
      months ended September 30, 2009Fee-BasedTuitionStudent
                                              
                                              Payment
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              "Base
      netLoan
                                              
                                              Processing
                                              
                                              
                                              
                                              Software
                                              
                                              
                                              
                                              Asset
                                              
                                              Corporate
                                              
                                              
                                              
                                              income"and
                                              
                                              and
                                              
                                              
                                              
                                              and
                                              
                                              Total
                                              
                                              Generation
                                              
                                              Activity
                                              
                                              Eliminations
                                              
                                              Adjustments
                                              
                                              GAAPGuaranty
                                              
                                              Campus
                                              
                                              Enrollment
                                              
                                              Technical
                                              
                                              Fee-
                                              
                                              and
                                              
                                              and
                                              
                                              and
                                              
                                              to
      GAAP
                                              
                                              Results
      ofServicing
                                              
                                              Commerce
                                              
                                              Services
                                              
                                              Services
                                              
                                              Based
                                              
                                              Management
                                              
                                              Overhead
                                              
                                              Reclassifications
                                              
                                              Results
                                              
                                              OperationsTotal
      interest income
                                              
                                              $
                                              102
                                              
                                              
                                              57
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              159
                                              
                                              
                                              473,130
                                              
                                              
                                              3,930
                                              
                                              
                                              (1,324
                                              )
                                              
                                              7,502
                                              
                                              
                                              483,397Interest
      expense
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              306,846
                                              
                                              
                                              23,078
                                              
                                              
                                              (1,324
                                              )
                                              
                                              —
                                              
                                              
                                              328,600Net
      interest income (loss)
                                              
                                              
                                              102
                                              
                                              
                                              57
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              159
                                              
                                              
                                              166,284
                                              
                                              
                                              (19,148
                                              )
                                              
                                              —
                                              
                                              
                                              7,502
                                              
                                              
                                              154,797Less
      provision for loan losses
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              23,000
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              23,000Net
      interest income (loss) after provision for loan
    losses
                                              
                                              
                                              102
                                              
                                              
                                              57
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              159
                                              
                                              
                                              143,284
                                              
                                              
                                              (19,148
                                              )
                                              
                                              —
                                              
                                              
                                              7,502
                                              
                                              
                                              131,797Other
      income (expense):Loan
      and guaranty servicing revenue
                                              
                                              
                                              82,424
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              82,424
                                              
                                              
                                              —
                                              
                                              
                                              (1,144
                                              )
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              81,280Tuition
      payment processing and campus commerce revenue
                                              
                                              
                                              —
                                              
                                              
                                              40,373
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              40,373
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              40,373Enrollment
      services revenue
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              88,188
                                              
                                              
                                              —
                                              
                                              
                                              88,188
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              88,188Software
      services revenue
                                              
                                              
                                              2,766
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              13,658
                                              
                                              
                                              16,424
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              16,424Other
      income
                                              
                                              
                                              498
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              498
                                              
                                              
                                              18,851
                                              
                                              
                                              20,134
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              39,483Gain
      (loss) on sale of loans, net
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              8,386
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              8,386Intersegment
      revenue
                                              
                                              
                                              62,291
                                              
                                              
                                              172
                                              
                                              
                                              416
                                              
                                              
                                              10,813
                                              
                                              
                                              73,692
                                              
                                              
                                              —
                                              
                                              
                                              25,739
                                              
                                              
                                              (99,431
                                              )
                                              
                                              —
                                              
                                              
                                              —Derivative
      market value, foreign currency,and
      put option adjustments
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              (36,067
                                              )
                                              
                                              (36,067
                                              )Derivative
      settlements, net
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              38,807
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              38,807Total
      other income (expense)
                                              
                                              
                                              147,979
                                              
                                              
                                              40,545
                                              
                                              
                                              88,604
                                              
                                              
                                              24,471
                                              
                                              
                                              301,599
                                              
                                              
                                              66,044
                                              
                                              
                                              44,729
                                              
                                              
                                              (99,431
                                              )
                                              
                                              (36,067
                                              )
                                              
                                              276,874Operating
      expenses:Salaries
      and benefits
                                              
                                              
                                              40,527
                                              
                                              
                                              19,346
                                              
                                              
                                              17,295
                                              
                                              
                                              16,656
                                              
                                              
                                              93,824
                                              
                                              
                                              5,203
                                              
                                              
                                              18,420
                                              
                                              
                                              (1,390
                                              )
                                              
                                              159
                                              
                                              
                                              116,216Restructure
      expense- severance and contracttermination
      costs
                                              
                                              
                                              5,159
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              714
                                              
                                              
                                              5,873
                                              
                                              
                                              —
                                              
                                              
                                              755
                                              
                                              
                                              (6,628
                                              )
                                              
                                              —
                                              
                                              
                                              —Impairment
      expense
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —Cost
      to provide enrollment services
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              56,208
                                              
                                              
                                              —
                                              
                                              
                                              56,208
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              56,208Other
      expenses
                                              
                                              
                                              27,350
                                              
                                              
                                              7,012
                                              
                                              
                                              9,602
                                              
                                              
                                              2,292
                                              
                                              
                                              46,256
                                              
                                              
                                              15,635
                                              
                                              
                                              27,287
                                              
                                              
                                              3,736
                                              
                                              
                                              17,251
                                              
                                              
                                              110,165Intersegment
      expenses
                                              
                                              
                                              28,352
                                              
                                              
                                              1,962
                                              
                                              
                                              1,604
                                              
                                              
                                              2,195
                                              
                                              
                                              34,113
                                              
                                              
                                              59,372
                                              
                                              
                                              1,664
                                              
                                              
                                              (95,149
                                              )
                                              
                                              —
                                              
                                              
                                              —Total
      operating expenses
                                              
                                              
                                              101,388
                                              
                                              
                                              28,320
                                              
                                              
                                              84,709
                                              
                                              
                                              21,857
                                              
                                              
                                              236,274
                                              
                                              
                                              80,210
                                              
                                              
                                              48,126
                                              
                                              
                                              (99,431
                                              )
                                              
                                              17,410
                                              
                                              
                                              282,589Income
      (loss) before income taxes
                                              
                                              
                                              46,693
                                              
                                              
                                              12,282
                                              
                                              
                                              3,895
                                              
                                              
                                              2,614
                                              
                                              
                                              65,484
                                              
                                              
                                              129,118
                                              
                                              
                                              (22,545
                                              )
                                              
                                              —
                                              
                                              
                                              (45,975
                                              )
                                              
                                              126,082Income
      tax (expense) benefit (a)
                                              
                                              
                                              (17,744
                                              )
                                              
                                              (4,667
                                              )
                                              
                                              (1,480
                                              )
                                              
                                              (994
                                              )
                                              
                                              (24,885
                                              )
                                              
                                              (49,066
                                              )
                                              
                                              11,150
                                              
                                              
                                              —
                                              
                                              
                                              16,781
                                              
                                              
                                              (46,020
                                              )Net
      income (loss) from continuing operations
                                              
                                              
                                              28,949
                                              
                                              
                                              7,615
                                              
                                              
                                              2,415
                                              
                                              
                                              1,620
                                              
                                              
                                              40,599
                                              
                                              
                                              80,052
                                              
                                              
                                              (11,395
                                              )
                                              
                                              —
                                              
                                              
                                              (29,194
                                              )
                                              
                                              80,062Income
      from discontinued operations, net of tax
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —
                                              
                                              
                                              —Net
      income (loss)
                                              
                                              $
                                              28,949
                                              
                                              
                                              7,615
                                              
                                              
                                              2,415
                                              
                                              
                                              1,620
                                              
                                              
                                              40,599
                                              
                                              
                                              80,052
                                              
                                              
                                              (11,395
                                              )
                                              
                                              —
                                              
                                              
                                              (29,194
                                              )
                                              
                                              80,062
  (a)
      Income taxes are applied based on 38% of income (loss) before income taxes
      for the individual operating segments.
  23
  Nine
      months ended September 30, 2008Fee-BasedTuitionStudent
                                                                        
                                                                        Payment
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        "Base
      netLoan
                                                                        
                                                                        Processing
                                                                        
                                                                        
                                                                        
                                                                        Software
                                                                        
                                                                        
                                                                        
                                                                        Asset
                                                                        
                                                                        Corporate
                                                                        
                                                                        
                                                                        
                                                                        income"and
                                                                        
                                                                        and
                                                                        
                                                                        
                                                                        
                                                                        and
                                                                        
                                                                        Total
                                                                        
                                                                        Generation
                                                                        
                                                                        Activity
                                                                        
                                                                        Eliminations
                                                                        
                                                                        Adjustments
                                                                        
                                                                        GAAPGuaranty
                                                                        
                                                                        Campus
                                                                        
                                                                        Enrollment
                                                                        
                                                                        Technical
                                                                        
                                                                        Fee-
                                                                        
                                                                        and
                                                                        
                                                                        and
                                                                        
                                                                        and
                                                                        
                                                                        to
      GAAP
                                                                        
                                                                        Results
      ofServicing
                                                                        
                                                                        Commerce
                                                                        
                                                                        Services
                                                                        
                                                                        Services
                                                                        
                                                                        Based
                                                                        
                                                                        Management
                                                                        
                                                                        Overhead
                                                                        
                                                                        Reclassifications
                                                                        
                                                                        Results
                                                                        
                                                                        OperationsTotal
      interest income
                                                                        
                                                                        $
                                                                        1,160
                                                                        
                                                                        
                                                                        1,471
                                                                        
                                                                        
                                                                        16
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        2,647
                                                                        
                                                                        
                                                                        892,690
                                                                        
                                                                        
                                                                        4,781
                                                                        
                                                                        
                                                                        (1,389
                                                                        )
                                                                        
                                                                        42,325
                                                                        
                                                                        
                                                                        941,054Interest
      expense
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        3
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        3
                                                                        
                                                                        
                                                                        762,689
                                                                        
                                                                        
                                                                        30,318
                                                                        
                                                                        
                                                                        (1,389
                                                                        )
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        791,621Net
      interest income (loss)
                                                                        
                                                                        
                                                                        1,160
                                                                        
                                                                        
                                                                        1,471
                                                                        
                                                                        
                                                                        13
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        2,644
                                                                        
                                                                        
                                                                        130,001
                                                                        
                                                                        
                                                                        (25,537
                                                                        )
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        42,325
                                                                        
                                                                        
                                                                        149,433Less
      provision for loan losses
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        18,000
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        18,000Net
      interest income (loss) after provisionfor
      loan losses
                                                                        
                                                                        
                                                                        1,160
                                                                        
                                                                        
                                                                        1,471
                                                                        
                                                                        
                                                                        13
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        2,644
                                                                        
                                                                        
                                                                        112,001
                                                                        
                                                                        
                                                                        (25,537
                                                                        )
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        42,325
                                                                        
                                                                        
                                                                        131,433Other
      income (expense):Loan
      and guaranty servicing revenue
                                                                        
                                                                        
                                                                        78,147
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        78,147
                                                                        
                                                                        
                                                                        26
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        78,173Tuition
      payment processing and campus commerce revenue
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        35,980
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        35,980
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        35,980Enrollment
      services revenue
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        83,148
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        83,148
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        83,148Software
      services revenue
                                                                        
                                                                        
                                                                        3,477
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        37
                                                                        
                                                                        
                                                                        15,828
                                                                        
                                                                        
                                                                        19,342
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        19,342Other
      income
                                                                        
                                                                        
                                                                        44
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        44
                                                                        
                                                                        
                                                                        13,787
                                                                        
                                                                        
                                                                        3,956
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        17,787Gain
      (loss) on sale of loans, net
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        (47,426
                                                                        )
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        (47,426
                                                                        )Intersegment
      revenue
                                                                        
                                                                        
                                                                        57,008
                                                                        
                                                                        
                                                                        242
                                                                        
                                                                        
                                                                        2
                                                                        
                                                                        
                                                                        4,993
                                                                        
                                                                        
                                                                        62,245
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        46,843
                                                                        
                                                                        
                                                                        (109,088
                                                                        )
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —Derivative
      market value, foreign currency,and
      put option adjustments
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        466
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        (35,987
                                                                        )
                                                                        
                                                                        (35,521
                                                                        )Derivative
      settlements, net
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        55,954
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        (9,965
                                                                        )
                                                                        
                                                                        45,989Total
      other income (expense)
                                                                        
                                                                        
                                                                        138,676
                                                                        
                                                                        
                                                                        36,222
                                                                        
                                                                        
                                                                        83,187
                                                                        
                                                                        
                                                                        20,821
                                                                        
                                                                        
                                                                        278,906
                                                                        
                                                                        
                                                                        22,807
                                                                        
                                                                        
                                                                        50,799
                                                                        
                                                                        
                                                                        (109,088
                                                                        )
                                                                        
                                                                        (45,952
                                                                        )
                                                                        
                                                                        197,472Operating
      expenses:Salaries
      and benefits
                                                                        
                                                                        
                                                                        40,365
                                                                        
                                                                        
                                                                        17,450
                                                                        
                                                                        
                                                                        18,701
                                                                        
                                                                        
                                                                        14,031
                                                                        
                                                                        
                                                                        90,547
                                                                        
                                                                        
                                                                        6,157
                                                                        
                                                                        
                                                                        41,581
                                                                        
                                                                        
                                                                        1,323
                                                                        
                                                                        
                                                                        2,523
                                                                        
                                                                        
                                                                        142,131Restructure
      expense- severence andcontract
      terminination costs
                                                                        
                                                                        
                                                                        747
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        282
                                                                        
                                                                        
                                                                        487
                                                                        
                                                                        
                                                                        1,516
                                                                        
                                                                        
                                                                        1,845
                                                                        
                                                                        
                                                                        3,746
                                                                        
                                                                        
                                                                        (7,107
                                                                        )
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —Impairment
      expense
                                                                        
                                                                        
                                                                        5,074
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        5,074
                                                                        
                                                                        
                                                                        9,351
                                                                        
                                                                        
                                                                        4,409
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        18,834Cost
      to provide enrollment services
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        48,062
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        48,062
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        48,062Other
      expenses
                                                                        
                                                                        
                                                                        27,130
                                                                        
                                                                        
                                                                        6,743
                                                                        
                                                                        
                                                                        7,801
                                                                        
                                                                        
                                                                        1,901
                                                                        
                                                                        
                                                                        43,575
                                                                        
                                                                        
                                                                        15,793
                                                                        
                                                                        
                                                                        42,263
                                                                        
                                                                        
                                                                        51
                                                                        
                                                                        
                                                                        19,719
                                                                        
                                                                        
                                                                        121,401Intersegment
      expenses
                                                                        
                                                                        
                                                                        35,040
                                                                        
                                                                        
                                                                        1,045
                                                                        
                                                                        
                                                                        4,936
                                                                        
                                                                        
                                                                        1,562
                                                                        
                                                                        
                                                                        42,583
                                                                        
                                                                        
                                                                        57,754
                                                                        
                                                                        
                                                                        3,018
                                                                        
                                                                        
                                                                        (103,355
                                                                        )
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —Total
      operating expenses
                                                                        
                                                                        
                                                                        108,356
                                                                        
                                                                        
                                                                        25,238
                                                                        
                                                                        
                                                                        79,782
                                                                        
                                                                        
                                                                        17,981
                                                                        
                                                                        
                                                                        231,357
                                                                        
                                                                        
                                                                        90,900
                                                                        
                                                                        
                                                                        95,017
                                                                        
                                                                        
                                                                        (109,088
                                                                        )
                                                                        
                                                                        22,242
                                                                        
                                                                        
                                                                        330,428Income
      (loss) before income taxes
                                                                        
                                                                        
                                                                        31,480
                                                                        
                                                                        
                                                                        12,455
                                                                        
                                                                        
                                                                        3,418
                                                                        
                                                                        
                                                                        2,840
                                                                        
                                                                        
                                                                        50,193
                                                                        
                                                                        
                                                                        43,908
                                                                        
                                                                        
                                                                        (69,755
                                                                        )
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        (25,869
                                                                        )
                                                                        
                                                                        (1,523
                                                                        )Income
      tax (expense) benefit (a)
                                                                        
                                                                        
                                                                        (10,542
                                                                        )
                                                                        
                                                                        (4,081
                                                                        )
                                                                        
                                                                        (1,187
                                                                        )
                                                                        
                                                                        (902
                                                                        )
                                                                        
                                                                        (16,712
                                                                        )
                                                                        
                                                                        (15,889
                                                                        )
                                                                        
                                                                        22,824
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        7,984
                                                                        
                                                                        
                                                                        (1,793
                                                                        )Net
      income (loss) from continuing operations
                                                                        
                                                                        
                                                                        20,938
                                                                        
                                                                        
                                                                        8,374
                                                                        
                                                                        
                                                                        2,231
                                                                        
                                                                        
                                                                        1,938
                                                                        
                                                                        
                                                                        33,481
                                                                        
                                                                        
                                                                        28,019
                                                                        
                                                                        
                                                                        (46,931
                                                                        )
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        (17,885
                                                                        )
                                                                        
                                                                        (3,316
                                                                        )Income
      from discontinued operations, net of tax
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        981
                                                                        
                                                                        
                                                                        981Net
      income (loss)
                                                                        
                                                                        $
                                                                        20,938
                                                                        
                                                                        
                                                                        8,374
                                                                        
                                                                        
                                                                        2,231
                                                                        
                                                                        
                                                                        1,938
                                                                        
                                                                        
                                                                        33,481
                                                                        
                                                                        
                                                                        28,019
                                                                        
                                                                        
                                                                        (46,931
                                                                        )
                                                                        
                                                                        —
                                                                        
                                                                        
                                                                        (16,904
                                                                        )
                                                                        
                                                                        (2,335
                                                                        )(a)
      Income taxes are applied based on the consolidated effective tax rate to
      income (loss) before income taxes.
 Corporate
Activity and Overhead in the previous tables primarily includes the following
items:
 
 ·
                Income
      earned on certain investment
activities
 ·
                Interest
      expense incurred on unsecured debt
transactions
 ·
                Other
      products and service offerings that are not considered operating
      segments
 ·
                Certain
      corporate activities and unallocated overhead functions related to
      executive management, human resources, accounting and finance, legal,
      marketing, and corporate technology
support
 24
 The
adjustments required to reconcile from the Company’s “base net income” measure
to its GAAP results of operations relate to differing treatments for
derivatives, foreign currency transaction adjustments, and certain other items
that management does not consider in evaluating the Company’s operating results.
The following tables reflect adjustments associated with these areas by
operating segment and Corporate Activity and Overhead:
 
 Student
                                
                                TuitionLoan
                                
                                Payment
                                
                                
                                
                                Software
                                
                                Asset
                                
                                Corporateand
                                
                                Processing
                                
                                
                                
                                and
                                
                                Generation
                                
                                ActivityGuaranty
                                
                                and
      Campus
                                
                                Enrollment
                                
                                Technical
                                
                                and
                                
                                andServicing
                                
                                Commerce
                                
                                Services
                                
                                Services
                                
                                Management
                                
                                Overhead
                                
                                TotalThree
      months ended September 30, 2009Derivative
      market value, foreign currency, andput
      option adjustments (1)
                                $
                                —
                                
                                —
                                
                                —
                                
                                —
                                
                                (2,826)
                                
                                —
                                
                                (2,826)Amortization
      of intangible assets (2)
                                
                                1,078
                                
                                1,842
                                
                                2,251
                                
                                141
                                
                                —
                                
                                —
                                
                                5,312Compensation
      related to business combinations (3)
                                
                                —
                                
                                —
                                
                                —
                                
                                —
                                
                                —
                                
                                —
                                
                                —Variable-rate
      floor income, net of settlements on derivatives (4)
                                —
                                
                                —
                                
                                —
                                
                                —
                                
                                —
                                
                                —
                                
                                —Income
      from discontinued operations, net of tax (5)
                                
                                —
                                
                                —
                                
                                —
                                
                                —
                                
                                —
                                
                                —
                                
                                —Net
      tax effect (6)
                                
                                (410)
                                
                                (700)
                                
                                (855)
                                
                                (54)
                                
                                1,074
                                
                                86
                                
                                (859)Total
      adjustments to GAAP
                                $
                                668
                                
                                1,142
                                
                                1,396
                                
                                87
                                
                                (1,752)
                                
                                86
                                
                                1,627Three
      months ended September 30, 2008Derivative
      market value, foreign currency, andput
      option adjustments (1)
                                $
                                —
                                
                                —
                                
                                —
                                
                                —
                                
                                (9,030)
                                
                                2,945
                                
                                (6,085)Amortization
      of intangible assets (2)
                                
                                1,165
                                
                                1,889
                                
                                3,258
                                
                                286
                                
                                —
                                
                                —
                                
                                6,598Compensation
      related to business combinations (3)
                                
                                —
                                
                                —
                                
                                —
                                
                                —
                                
                                —
                                
                                477
                                
                                477Variable-rate
      floor income, net of settlements on derivatives (4)
                                —
                                
                                —
                                
                                —
                                
                                —
                                
                                (1,580)
                                
                                —
                                
                                (1,580)Income
      from discontinued operations, net of tax (5)
                                
                                —
                                
                                —
                                
                                —
                                
                                —
                                
                                —
                                
                                —
                                
                                —Net
      tax effect (6)
                                
                                (432)
                                
                                (699)
                                
                                (1,205)
                                
                                (106)
                                
                                3,926
                                
                                (1,266)
                                
                                218Total
      adjustments to GAAP
                                $
                                733
                                
                                1,190
                                
                                2,053
                                
                                180
                                
                                (6,684)
                                
                                2,156
                                
                                (372)Nine
      months ended September 30, 2009Derivative
      market value, foreign currency, andput
      option adjustments (1)
                                $
                                —
                                
                                —
                                
                                —
                                
                                —
                                
                                37,499
                                
                                (1,432)
                                
                                36,067Amortization
      of intangible assets (2)
                                
                                3,236
                                
                                5,598
                                
                                7,994
                                
                                423
                                
                                —
                                
                                —
                                
                                17,251Compensation
      related to business combinations (3)
                                
                                —
                                
                                —
                                
                                —
                                
                                —
                                
                                —
                                
                                159
                                
                                159Variable-rate
      floor income, net of settlements on derivatives (4)
                                —
                                
                                —
                                
                                —
                                
                                —
                                
                                (7,502)
                                
                                —
                                
                                (7,502)Income
      from discontinued operations, net of tax (5)
                                
                                —
                                
                                —
                                
                                —
                                
                                —
                                
                                —
                                
                                —
                                
                                —Net
      tax effect (6)
                                
                                (1,230)
                                
                                (2,127)
                                
                                (3,037)
                                
                                (161)
                                
                                (11,399)
                                
                                1,173
                                
                                (16,781)Total
      adjustments to GAAP
                                $
                                2,006
                                
                                3,471
                                
                                4,957
                                
                                262
                                
                                18,598
                                
                                (100)
                                
                                29,194Nine
      months ended September 30, 2008Derivative
      market value, foreign currency, andput
      option adjustments (1)
                                $
                                —
                                
                                —
                                
                                —
                                
                                —
                                
                                32,504
                                
                                3,483
                                
                                35,987Amortization
      of intangible assets (2)
                                
                                3,586
                                
                                5,937
                                
                                9,193
                                
                                858
                                
                                145
                                
                                —
                                
                                19,719Compensation
      related to business combinations (3)
                                
                                —
                                
                                —
                                
                                —
                                
                                —
                                
                                —
                                
                                2,523
                                
                                2,523Variable-rate
      floor income, net of settlements on derivatives (4)
                                —
                                
                                —
                                
                                —
                                
                                —
                                
                                (32,360)
                                
                                —
                                
                                (32,360)Income
      from discontinued operations, net of tax (5)
                                
                                (981)
                                
                                —
                                
                                —
                                
                                —
                                
                                —
                                
                                —
                                
                                (981)Net
      tax effect (6)
                                
                                (1,182)
                                
                                (1,954)
                                
                                (3,045)
                                
                                (284)
                                
                                548
                                
                                (2,067)
                                
                                (7,984)Total
      adjustments to GAAP
                                $
                                1,423
                                
                                3,983
                                
                                6,148
                                
                                574
                                
                                837
                                
                                3,939
                                
                                16,904
  (1)
              Derivative
      market value, foreign currency, and put option adjustments: “Base net
      income” excludes the periodic unrealized gains and losses that are caused
      by the change in fair value on derivatives used in the Company’s risk
      management strategy in which the Company does not qualify for “hedge
      treatment” under GAAP. Included in “base net income” are the economic
      effects of the Company’s derivative instruments, which includes any cash
      paid or received being recognized as an expense or revenue upon actual
      derivative settlements. “Base net income” also excludes the foreign
      currency transaction gains or losses caused by the re-measurement of the
      Company’s Euro-denominated bonds to U.S. dollars and the change in fair
      value of put options issued by the Company for certain business
      acquisitions.
 
 (2)
              Amortization
      of intangible assets: “Base net income” excludes the amortization of
      acquired intangibles.
 25
 (3)
              Compensation
      related to business combinations: The Company has structured certain
      business combinations in which the consideration paid has been dependent
      on the sellers’ continued employment with the Company. As such, the value
      of the consideration paid is recognized as compensation expense by the
      Company over the term of the applicable employment agreement. “Base net
      income” excludes this expense.
 
 (4)
              Variable-rate
      floor income: Loans that reset annually on July 1 can generate excess
      spread income compared with the rate based on the special allowance
      payment formula in declining interest rate environments. The Company
      refers to this additional income as variable-rate floor income. The
      Company excludes variable-rate floor income, net of settlements paid on
      derivatives used to hedge student loan assets earning variable-rate floor
      income, from its “base net income” since the timing and amount of
      variable-rate floor income (if any) is uncertain, it has been eliminated
      by legislation for all loans originated on and after April 1, 2006, and it
      is in excess of expected spreads. In addition, because variable-rate floor
      income is subject to the underlying rate for the subject loans being reset
      annually on July 1, it is a factor beyond the Company’s control which can
      affect the period-to-period comparability of results of
      operations.
  Prior to
October 1, 2008, variable rate floor income was calculated by the Company on a
statutory maximum basis. However, as a result of the disruption in the capital
markets beginning in August 2007, the full benefit of variable rate floor income
calculated on a statutory maximum basis has not been realized by the Company due
to the widening of the spread between short term interest rate indices and the
Company’s actual cost of funds. As a result of the ongoing volatility of
interest rates, effective October 1, 2008, the Company changed its calculation
of variable rate floor income to better reflect the economic benefit received by
the Company. The economic benefit received by the Company related to variable
rate floor income was $0.1 million for the three months ended September 30, 2008
and $7.5 million and $25.7 million for the nine months ended September 30, 2009
and 2008, respectively. There was no economic benefit received by the Company
related to variable rate floor income for the three months ended September 30,
2009. Variable rate floor income calculated on a statutory maximum basis was
$0.1 million and $1.6 million for the three months ended September 30, 2009 and
2008, respectively, and $23.9 million and
$42.3 million for the nine months ended September 30, 2009 and 2008,
respectively. Beginning October 1, 2008, the economic benefit received by the
Company has been used to determine base net income.
  The
Company has used derivative instruments to hedge variable rate floor income
during certain periods. During the nine months ended September 30, 2008, the
Company made payments (settlements) of $10.0 million on such derivatives. These
settlements are netted with variable-rate floor income and are excluded from
“base net income.”
 
 (5)
              Discontinued
      operations: In May 2007, the Company sold EDULINX. As a result of this
      transaction, the results of operations for EDULINX are reported as
      discontinued operations for all periods presented. The Company presents
      “base net income” excluding discontinued operations since the operations
      and cash flows of EDULINX have been eliminated from the ongoing operations
      of the Company.
 
 (6)
              For
      2009, income taxes are applied based on 38% of income (loss) before income
      taxes for the individual operating segments. For 2008, income taxes for
      each individual operating segment are applied based on the consolidated
      effective tax rate.
 
 8.
              Intangible
      Assets and Goodwill
   Intangible
assets consist of the following:
  Weightedaverageremaininguseful
      life as of
                        
                        
                        As
      of
                        
                        
                        As
      ofSeptember
      30,
                        
                        
                        September
      30,
                        
                        
                        December
      31,2009
      (months)
                        
                        
                        2009
                        
                        
                        2008Amortizable
      intangible assets:Customer
      relationships (net of accumulated amortization of $36,557and
      $29,737, respectively)
                        
                        
                        98
                        
                        
                        
                        $
                        43,803
                        
                        
                        
                        50,623Trade
      names (net of accumulated amortization of $8,265 and$5,478,
      respectively)
                        
                        
                        35
                        
                        
                        
                        
                        8,794
                        
                        
                        
                        11,581Covenants
      not to compete (net of accumulated amortization of$19,041
      and $14,887, respectively)
                        
                        
                        11
                        
                        
                        
                        
                        4,581
                        
                        
                        
                        8,735Database
      and content (net of accumulated amortization of $7,137and
      $5,447, respectively)
                        
                        
                        14
                        
                        
                        
                        
                        2,343
                        
                        
                        
                        4,033Computer
      software (net of accumulated amortization of $8,880and
      $7,441, respectively)
                        
                        
                        14
                        
                        
                        
                        
                        122
                        
                        
                        
                        1,561Student
      lists (net of accumulated amortization of $8,197 and$7,855,
      respectively)
                        
                        
                        —
                        
                        
                        
                        
                        —
                        
                        
                        
                        342Other
      (net of accumulated amortization of $114 and $95,
      respectively)
                        
                        
                        77
                        
                        
                        
                        
                        160
                        
                        
                        
                        179Total
      - amortizable intangible assets
                        
                        
                        79
                        
                        
                        
                        $
                        59,803
                        
                        
                        
                        77,054
 
 26
 The
Company recorded amortization expense on its intangible assets of $5.3 million
and $6.6 million for the three months ended September 30, 2009 and 2008,
respectively, and $17.3 million and $19.7 million for the nine months ended
September 30, 2009 and 2008, respectively. The Company will continue to amortize
intangible assets over their remaining useful lives. As of September 30, 2009,
the Company estimates it will record amortization expense as
follows:
   2009
                        
                        $
                        5,0672010
                        
                        
                        15,9852011
                        
                        
                        10,0312012
                        
                        
                        9,0292013
                        
                        
                        6,1682014
      and thereafter
                        
                        
                        13,523$
                        59,803
 
 The
following table summarizes the Company’s allocation of goodwill by operating
segment as of September 30, 2009 and December 31, 2008:
   Tuition
      Payment Processing and Campus Commerce
                            
                            $
                            58,086Enrollment Services
                            
                            
                            66,613Software
      and Technical Services
                            
                            
                            8,596Asset
      Generation and Management
                            
                            
                            41,883$
                            175,178
   On
February 26, 2009, the President introduced a fiscal year 2010 Federal budget
proposal calling for the elimination of the FFEL Program and a recommendation
that all new student loan originations be funded through the Direct Loan
Program. See note 14 for additional information on legislative developments.
Elimination of the FFEL Program would impact the Company’s operations and
profitability by, among other things, reducing the Company’s interest revenues
as a result of the inability to add new FFELP loans to the Company’s portfolio
and reducing guarantee and third-party FFELP servicing fees as a result of
reduced FFELP loan servicing and origination volume. Additionally, the
elimination of the FFEL Program could reduce education loan software sales and
related consulting fees received from lenders using the Company’s software
products and services and certain other products and services included in the
Company’s Enrollment Services operating segment. The fair value and/or ability
to recover the Company’s goodwill, intangible assets, and other long-lived
assets related to these activities could be adversely affected if the FFEL
Program is eliminated.
 
 9.
Fair Value of Financial Instruments
 
 On
January 1, 2008, the Company expanded disclosures about fair value measurements
on financial assets and liabilities based upon the framework for measuring fair
value defined in authoritative guidance. Effective January 1, 2009, the Company
expanded disclosures about fair value measurements on certain nonfinancial
assets and nonfinancial liabilities, which are recorded at fair value only upon
impairment.
 
 Fair
value is defined as the price to sell an asset or transfer a liability in an
orderly transaction between willing and able market participants. The Company
determines fair value using valuation techniques which are based upon observable
and unobservable inputs. Observable inputs reflect market data obtained from
independent sources, while unobservable inputs reflect the Company’s market
assumptions. Transaction costs are not included in the determination of fair
value. When possible, the Company seeks to validate the model’s output to market
transactions. Depending on the availability of observable inputs and prices,
different valuation models could produce materially different fair value
estimates. The values presented may not represent future fair values and may not
be realizable. Additionally, there may be inherent weaknesses in any calculation
technique, and changes in the underlying assumptions used, including discount
rates and estimates of future cash flows, could significantly affect the results
of current or future values.
 
 The
Company categorizes its fair value estimates based on a hierarchal framework
associated with three levels of price transparency utilized in measuring
financial instruments at fair value. Classification is based on the lowest level
of input that is significant to the fair value of the instrument. The three
levels include:
 
 ·
              Level
      1: Quoted prices for identicalinstruments
      in active markets. The types of financial instruments included in Level 1
      are highly liquid instruments with quoted
  prices.
 
 ·
              Level
      2: Quoted prices for similarinstruments in
      active markets, quoted prices for identical or similar instruments in
      markets that are not active; and model-derived valuations whose inputs are
      observable or whose primary value drivers are
  observable.
 
 ·
              Level
      3: Instruments whose primary value drivers are unobservable. Inputs
      are developed based on the best information available; however,
      significant judgment is required by management in developing the
      inputs.
  27
 The
following table presents the Company’s financial assets and liabilities that are
measured at fair value on a recurring basis. All financial assets and
liabilities that are measured at fair value are categorized as Level 1 or 2
based on the above hierarchy.
   As
      of September 30, 2009Level
      1
                        
                        
                        Level
      2
                        
                        
                        TotalAssets:Cash
      and cash equivalents (a)
                        
                        $
                        334,293
                        
                        
                        
                        —
                        
                        
                        
                        334,293Restricted
      cash (a)
                        
                        
                        355,388
                        
                        
                        
                        —
                        
                        
                        
                        355,388Restricted
      cash - due to customers (a)
                        
                        
                        50,783
                        
                        
                        
                        —
                        
                        
                        
                        50,783Restricted
      investments (a)
                        
                        
                        —
                        
                        
                        
                        443,248
                        
                        
                        
                        443,248Other
      assets (b)
                        
                        
                        4,218
                        
                        
                        
                        5,369
                        
                        
                        
                        9,587Fair
      value of derivative instruments (c)
                        
                        
                        —
                        
                        
                        
                        210,157
                        
                        
                        
                        210,157Total
      Assets
                        
                        $
                        744,682
                        
                        
                        
                        658,774
                        
                        
                        
                        1,403,456Liabilities:Fair
      value of derivative instruments (c)
                        
                        $
                        —
                        
                        
                        
                        8,998
                        
                        
                        
                        8,998Total
      Liabilities
                        
                        $
                        —
                        
                        
                        
                        8,998
                        
                        
                        
                        8,998
  As
      of December 31, 2008Level
      1
                        
                        
                        Level
      2
                        
                        
                        TotalAssets:Cash
      and cash equivalents (a)
                        
                        $
                        189,847
                        
                        
                        
                        —
                        
                        
                        
                        189,847Restricted
      cash (a)
                        
                        
                        387,404
                        
                        
                        
                        —
                        
                        
                        
                        387,404Restricted
      cash - due to customers (a)
                        
                        
                        160,985
                        
                        
                        
                        —
                        
                        
                        
                        160,985Restricted
      investments (a)
                        
                        
                        —
                        
                        
                        
                        609,868
                        
                        
                        
                        609,868Other
      assets (b)
                        
                        
                        4,941
                        
                        
                        
                        3,876
                        
                        
                        
                        8,817Fair
      value of derivative instruments (c)
                        
                        
                        —
                        
                        
                        
                        175,174
                        
                        
                        
                        175,174Total
      Assets
                        
                        $
                        743,177
                        
                        
                        
                        788,918
                        
                        
                        
                        1,532,095Liabilities:Fair
      value of derivative instruments (c)
                        
                        $
                        —
                        
                        
                        
                        1,815
                        
                        
                        
                        1,815Total
      Liabilities
                        
                        $
                        —
                        
                        
                        
                        1,815
                        
                        
                        
                        1,815
 
 (a)
              The
      carrying amount for cash and cash equivalents, restricted cash, restricted
      cash – due to customers, and restricted investments approximates fair
      value due to the variable rate of interest and/or the short maturities of
      these instruments.
 
 (b)
              Other
      assets includes investments recorded at fair value on a recurring basis.
      Fair value measurement is based upon quoted prices. Level 1 investments
      include investments traded on an active exchange, such as the New York
      Stock Exchange, and U.S. Treasury securities that are traded by dealers or
      brokers in active over-the-counter markets. Level 2 investments include
      corporate debt securities.
 
 (c)
              All
      derivatives are accounted for at fair value on a recurring basis. The fair
      values of derivative financial instruments are determined by derivative
      pricing models using the stated terms of the contracts and observable
      yield curves, forward foreign currency exchange rates, and volatilities
      from active markets. It is the Company’s policy to compare its derivative
      fair values to those received by its counterparties in order to validate
      the model’s outputs. Fair value of derivative instruments is comprised of
      market value less accrued interest and excludes
  collateral.
  28
 The
following table summarizes the fair values of all of the Company’s financial
instruments on the consolidated balance sheet:
   As
      of
                      
                      
                      As
      ofSeptember
      30, 2009
                      
                      
                      December
      31, 2008Fair
      value
                      
                      
                      Carrying
      value
                      
                      
                      Fair
      value
                      
                      
                      Carrying
      valueFinancial
      assets:Student
      loans receivable
                      
                      $
                      24,121,630
                      
                      
                      
                      23,764,263
                      
                      
                      
                      25,743,732
                      
                      
                      
                      25,413,008Student
      loans receivable - held for sale
                      
                      
                      1,654,701
                      
                      
                      
                      1,627,794
                      
                      
                      
                      —
                      
                      
                      
                      —Cash
      and cash equivalents
                      
                      
                      334,293
                      
                      
                      
                      334,293
                      
                      
                      
                      189,847
                      
                      
                      
                      189,847Restricted
      cash
                      
                      
                      355,388
                      
                      
                      
                      355,388
                      
                      
                      
                      387,404
                      
                      
                      
                      387,404Restricted
      cash – due to customers
                      
                      
                      50,783
                      
                      
                      
                      50,783
                      
                      
                      
                      160,985
                      
                      
                      
                      160,985Restricted
      investments
                      
                      
                      443,248
                      
                      
                      
                      443,248
                      
                      
                      
                      609,868
                      
                      
                      
                      609,868Accrued
      interest receivable
                      
                      
                      389,238
                      
                      
                      
                      389,238
                      
                      
                      
                      471,878
                      
                      
                      
                      471,878Other
      assets
                      
                      
                      9,587
                      
                      
                      
                      9,587
                      
                      
                      
                      8,817
                      
                      
                      
                      8,817Derivative
      instruments
                      
                      
                      210,157
                      
                      
                      
                      210,157
                      
                      
                      
                      175,174
                      
                      
                      
                      175,174Financial
      liabilities:Bonds
      and notes payable
                      
                      
                      26,529,388
                      
                      
                      
                      26,586,093
                      
                      
                      
                      26,512,082
                      
                      
                      
                      26,787,959Accrued
      interest payable
                      
                      
                      24,859
                      
                      
                      
                      24,859
                      
                      
                      
                      81,576
                      
                      
                      
                      81,576Due
      to customers
                      
                      
                      50,783
                      
                      
                      
                      50,783
                      
                      
                      
                      160,985
                      
                      
                      
                      160,985Derivative
      instruments
                      
                      
                      8,998
                      
                      
                      
                      8,998
                      
                      
                      
                      1,815
                      
                      
                      
                      1,815
   The
methodologies for estimating the fair value of financial assets and liabilities
that are measured at fair value on a recurring basis are discussed above. The
remaining financial assets and liabilities were estimated using the following
methods and assumptions:
 
 Student
Loans Receivable and Student Loans Receivable – Held for Sale
 
 The fair
value of student loans receivable is estimated at amounts recently paid and/or
received or amounts anticipated to be received by the Company to acquire and/or
sell similar loans in the market and/or the characteristics of the
portfolio.
 
 Accrued
Interest Receivable/Payable and Due to Customers
 
 The
carrying amount approximates fair value due to the variable rate of interest
and/or the short maturities of these instruments.
 
 Bonds
and Notes Payable
 
 The fair
value of the bonds and notes payable is based on market prices for securities
that possess similar credit risk and interest rate risk.
 
 Limitations
 
 The fair
value of a financial instrument is the current amount that would be exchanged
between willing parties, other than in a forced liquidation. Fair value is best
determined based upon quoted market prices. However, in many instances, there
are no quoted market prices for the Company’s various financial instruments. In
cases where quoted market prices are not available, fair values are based on
estimates using present value or other valuation techniques. Those techniques
are significantly affected by the assumptions used, including the discount rate
and estimates of future cash flows. Accordingly, the fair value estimates may
not be realized in an immediate settlement of the instrument.
 
 10.
Shareholders’ Equity
 
 Issuance
of Class A Common Stock
 
 In March
2009, the Company’s 2008 annual performance-based incentives awarded to
management were paid in approximately 455,000 fully vested and unrestricted
shares of Class A common stock issued pursuant to the Company’s Restricted Stock
Plan. It is the Company’s current intention to pay future annual
performance-based incentives to management, if any, in common stock issued
pursuant to the Restricted Stock Plan.
  Dividends
  In the first quarter of
2007, the Company began paying dividends of $0.07 per share on the Company's
Class A and Class B Common Stock which were paid quarterly through the first
quarter of 2008. On May 21, 2008, the Company announced that it was temporarily
suspending its quarterly dividend program. On November 5, 2009, the Company's
Board of Directors voted to reinstate the quarterly dividend program.
Accordingly, a dividend of $0.07 per share on the Company's Class A and Class B
Common Stock will be paid on December 15, 2009 to all holders of record as of
December 1, 2009.
  29
 11.
Earnings per Common Share
 
 Presented
below is a summary of the components used to calculate basic and diluted
earnings per share. On January 1, 2009, the Company began applying the two-class
method of computing earnings per share. The two-class method requires the
calculation of separate earnings per share amounts for the unvested share-based
awards and for common stock. Unvested share-based awards that contain
nonforfeitable rights to dividends are considered securities which participate
in undistributed earnings with common stock. Earnings per share attributable to
common stock is shown in the table below. Prior period earnings per share data
has been retroactively adjusted to conform to the current
presentation.
   Three
                        
                        
                        Ninemonths
      ended
                        
                        
                        months
      endedSeptember
      30,
                        
                        
                        September
      30,2009
                        
                        
                        2008
                        
                        
                        2009
                        
                        
                        2008Net
      income (loss) attributable to Nelnet, Inc.
                        
                        $
                        46,404
                        
                        
                        
                        23,785
                        
                        
                        
                        80,062
                        
                        
                        
                        (2,335
                        )Less
      earnings (loss) allocated to unvested restricted
    stockholders
                        
                        
                        291
                        
                        
                        
                        168
                        
                        
                        
                        514
                        
                        
                        
                        (17
                        )Net
      income (loss) available to common stockholders
                        
                        $
                        46,113
                        
                        
                        
                        23,617
                        
                        
                        
                        79,548
                        
                        
                        
                        (2,318
                        )Weighted
      average common shares outstanding - basic
                        
                        
                        49,611,423
                        
                        
                        
                        49,176,436
                        
                        
                        
                        49,432,165
                        
                        
                        
                        49,109,340Dilutive
      effect of the assumed vesting of restricted stock awards
                        
                        
                        197,433
                        
                        
                        
                        220,117
                        
                        
                        
                        201,125
                        
                        
                        
                        —Weighted
      average common shares outstanding - diluted
                        
                        
                        49,808,856
                        
                        
                        
                        49,396,553
                        
                        
                        
                        49,633,290
                        
                        
                        
                        49,109,340Basic
      earnings (loss) per common share
                        
                        $
                        0.93
                        
                        
                        
                        0.48
                        
                        
                        
                        1.60
                        
                        
                        
                        (0.05
                        )Diluted
      earnings (loss) per common share
                        
                        $
                        0.93
                        
                        
                        
                        0.48
                        
                        
                        
                        1.60
                        
                        
                        
                        (0.05
                        )
 
 No
dilutive effect of nonvested restricted stock is presented for the nine months
ended September 30, 2008 as the Company reported a net loss and including these
shares would have been antidilutive for the period. The dilutive effect of these
shares if the Company had net income for the period was not
significant.
 
 12.
Other Income
 
 The
following table summarizes the components of “other income” included in the
consolidated statements of operations.
  Three
      months ended September 30,
                  
                  
                  Nine
      months ended September 30,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Gains
      on debt repurchases
                  
                  $
                  5,248
                  
                  
                  
                  —
                  
                  
                  
                  19,185
                  
                  
                  
                  —Borrower
      late fee income
                  
                  
                  2,859
                  
                  
                  
                  2,748
                  
                  
                  
                  8,648
                  
                  
                  
                  8,907Gain
      on sale of equity method investment (a)
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  3,500
                  
                  
                  
                  —Other
                  
                  
                  2,987
                  
                  
                  
                  2,660
                  
                  
                  
                  8,150
                  
                  
                  
                  8,880Other
      income
                  
                  $
                  11,094
                  
                  
                  
                  5,408
                  
                  
                  
                  39,483
                  
                  
                  
                  17,787
  (a)
              On
      September 28, 2007, the Company sold its 50% membership interests in
      Premiere Credit of North America, LLC (“Premiere”) for initial proceeds of
      $10.0 million. The Company recognized an initial gain on the sale of
      Premiere of $3.9 million during the three month period ended September 30,
      2007. In January 2009, the Company earned $3.5 million in additional
      consideration as a result of the sale of Premiere. This payment
      represented contingent consideration that was owed to the Company if
      Premiere was awarded a collections contract as defined in the purchase
      agreement.
 
 13.
Legal Proceedings and Regulatory Reviews
 
 General
 
 The
Company is subject to various claims, lawsuits, and proceedings that arise in
the normal course of business. These matters principally consist of claims by
student loan borrowers disputing the manner in which their student loans have
been processed and disputes with other business entities. In addition, from time
to time the Company receives information and document requests from state or
federal regulators concerning its business practices. The Company cooperates
with these inquiries and responds to the requests. While the Company cannot
predict the ultimate outcome of any inquiry or investigation, the Company
believes its activities have materially complied with applicable law, including
the Higher Education Act, the rules and regulations adopted by the Department of
Education thereunder, and the Department of Education’s guidance regarding those
rules and regulations. On the basis of present information, anticipated
insurance coverage, and advice received from counsel, it is the opinion of the
Company’s management that the disposition or ultimate determination of these
claims, lawsuits, and proceedings will not have a material adverse effect on the
Company’s business, financial position, or results of operations.
 
 30
 United
States ex rel Oberg v. Nelnet, Inc. et al
 
 On
September 28, 2009, the Company was served with a Summons and First Amended
Complaint naming the Company as one of ten defendants in a “qui tam” action
brought by Jon H. Oberg on behalf of the United States of America. Qui tam
actions assert claims by an individual on behalf of the federal government, and
are filed under seal until the government decides, if at all, to intervene in
the case.
 
 An
original complaint in the action was filed under seal in the U.S. District Court
for the Eastern District of Virginia on September 21, 2007, and was unsealed on
August 26, 2009 upon the government’s filing of a Notice of Election to Decline
Intervention in the matter. The First Amended Complaint (the “Oberg Complaint”)
was filed on August 24, 2009 and alleges the defendant student loan lenders
submitted false claims for payment to the Department of Education in order to
obtain special allowance payments on certain student loans at a rate of 9.5%,
which the Oberg Complaint alleges is in excess of amounts permitted by law. The
Oberg Complaint seeks the imposition of civil penalties and treble the amount of
damages sustained by the government in connection with the alleged overbilling
by the defendants for special allowance payments. The Oberg Complaint alleges
that approximately $407 million in unlawful 9.5% special allowance payment
claims were submitted by the Company to the Department of Education.
 
 The 9.5%
special allowance payments received by the Company were disclosed by the Company
on multiple occasions beginning in 2003. In January, 2007, the Company entered
into a settlement agreement with the Department of Education to resolve the
Office of Inspector General of the Department of Education (the “OIG”) audit
report with respect to the Company’s student loan portfolio receiving special
allowance payments at a minimum 9.5% interest rate (the “Settlement Agreement”).
The Settlement Agreement resolved the issues now raised by the Oberg Complaint,
and contains an acknowledgment by the Department of Education that the Company
acted in good faith in connection with its billings for 9.5% special allowance
payments.
 
 United
States ex rel Vigil v. Nelnet, Inc. et al
 
 On November 4, 2009, the
Company was served with a Summons and Third Amended Complaint naming
the Company as one of three defendants in an unrelated qui tam action brought by
Rudy Vigil (the “Vigil Complaint”). This matter was filed under seal in the U.S.
District Court for the District of Nebraska on July 11, 2007 and was unsealed on
October 15, 2009 following the government’s notice that it declined to intervene
in the matter. The Vigil Complaint, filed by a former employee of the Company,
appears to allege that the Company engaged in false advertising and offered
prohibited inducements to student loan borrowers in order to increase the
Company’s loan holdings, and subsequently submitted false claims to the
Department of Education in order to obtain special allowance payments and
default claim payments on such loans.
  The
Company believes the allegations in both of the above matters to be frivolous
and without merit and intends to vigorously defend the claims.  However,
the Company cannot currently predict the ultimate outcome of this matter or any
liability which may result, which could have a material adverse effect on the
Company's results of operations and financial condition.
 
 Department
of Education Review
   The
Department of Education periodically reviews participants in the FFELP for
compliance with program provisions. On June 28, 2007, the Department notified
the Company that it would be conducting a review of the Company’s practices in
connection with the prohibited inducement provisions of the Higher Education Act
and the associated regulations that allow borrowers to have a choice of lenders.
The Company understands that the Department selected several schools and lenders
for review. The Company responded to the Department’s requests for information
and documentation and cooperated with their review. On May 1, 2009, the Company
received the Department’s preliminary program review report, which covered the
Department’s review of the period from October 1, 2002 to September 30, 2007.
The preliminary program review report contained certain initial findings of
noncompliance with the Higher Education Act’s prohibited inducement provisions
and required that the Company provide an explanation for the basis of the
arrangements noted in the preliminary program review report. The Company has
responded and provided an explanation of the arrangements noted in the
Department of Education’s initial findings, and the Department of Education is
expected to issue a final program review determination letter and advise the
Company whether it intends to take any additional action. To the extent any
findings are contained in a final letter, the additional action may include the
assessment of fines or penalties, or the limitation, suspension, and termination
of the Company’s participation in the FFELP.
 
 The
Company believes that it has materially complied with the Higher Education Act’s
prohibited inducement provisions and the rules, regulations, and guidance of the
Department of Education thereunder; however, it cannot predict the ultimate
outcome of the Department of Education’s review.
 
 14.
Recent Developments - Legislation
 
 On
February 26, 2009, the President introduced a fiscal year 2010 Federal budget
proposal calling for the elimination of the FFEL Program and a recommendation
that all new student loan originations be funded through the Federal Direct Loan
Program. On September 17, 2009, the House of Representatives passed H.R. 3221,
the Student Aid and Fiscal Responsibility Act (“SAFRA”), which would eliminate
the FFEL Program and require that, after July 1, 2010, all new federal student
loans be made through the Federal Direct Loan Program. The Senate is expected to
begin its consideration of similar student loan reform legislation sometime in
2009; however, the debate will likely continue into 2010. In addition to the
House-passed legislation, there are several other proposals for changes to the
education financing framework that may be considered that would maintain a role
for private lenders in the origination of federal student loans. These include a
possible extension of ECASLA, which expires on July 1, 2010, and the Student
Loan Community Proposal, a proposal endorsed by a cross-section of FFELP service
providers (including the Company) as an alternative to the 100% federal direct
lending proposal included in SAFRA.
 
 31
 Elimination
of the FFEL Program would impact the Company’s operations and profitability by,
among other things, reducing the Company’s interest revenues as a result of the
inability to add new FFELP loans to the Company’s portfolio and reducing
guarantee and third-party FFELP servicing fees as a result of reduced FFELP loan
servicing and origination volume. Additionally, the elimination of the FFEL
Program could reduce education loan software sales and related consulting fees
received from lenders using the Company’s software products and services and
certain other products and services included in the Company’s Enrollment
Services operating segment. The fair value and/or ability to recover the
Company’s goodwill, intangible assets, and other long-lived assets related to
these activities could be adversely affected if the FFEL Program is
eliminated.
 
 ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
 (Management’s
Discussion and Analysis of Financial Condition and Results of Operations is for
the three and nine months ended September 30, 2009 and 2008. All dollars are in
thousands, except per share amounts, unless otherwise noted).
 
 The
following discussion and analysis provides information that the Company’s
management believes is relevant to an assessment and understanding of the
consolidated results of operations and financial condition of the Company. The
discussion should be read in conjunction with the Company’s consolidated
financial statements included in the Company’s Annual Report on Form 10-K for
the year ended December 31, 2008.
 
 Forward-looking
and cautionary statements
 
 This
report contains forward-looking statements and information that are based on
management’s current expectations as of the date of this document. Statements
that are not historical facts, including statements about the Company’s
expectations and statements that assume or are dependent upon future events, are
forward-looking statements. These forward-looking statements are subject to
risks, uncertainties, assumptions, and other factors that may cause the actual
results to be materially different from those reflected in such forward-looking
statements. These factors include, among others, the risks and uncertainties set
forth in “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q and
the Company’s Annual Report on Form 10-K for the year ended December 31, 2008
and changes in the terms of student loans and the educational credit marketplace
arising from the implementation of, or changes in, applicable laws and
regulations (including changes resulting from new laws, such as any new laws
enacted to implement the Administration’s 2010 budget proposals as they relate
to FFELP), which may reduce the volume, average term, special allowance
payments, and yields on student loans under the FFEL Program of the Department
or result in loans being originated or refinanced under non-FFEL programs or may
affect the terms upon which banks and others agree to sell FFELP loans to the
Company. The Company could also be affected by changes in the demand for
educational financing or in financing preferences of lenders, educational
institutions, students, and their families; the Company’s ability to maintain
its credit facilities or obtain new facilities; the ability of lenders under the
Company’s credit facilities to fulfill their lending commitments under these
facilities; changes to the terms and conditions of the liquidity programs
offered by the Department; changes in the general interest rate environment and
in the securitization markets for education loans, which may increase the costs
or limit the availability of financings necessary to initiate, purchase, or
carry education loans; losses from loan defaults; changes in prepayment rates,
guaranty rates, loan floor rates, and credit spreads; uncertainties inherent in
forecasting future cash flows from student loan assets and related asset-backed
securitizations; the uncertain nature of estimated expenses that may be incurred
and cost savings that may result from restructuring plans; incorrect estimates
or assumptions by management in connection with the preparation of the
consolidated financial statements; and changes in general economic conditions.
Additionally, financial projections may not prove to be accurate and may vary
materially. The reader should not place undue reliance on forward-looking
statements, which speak only as of the date of this Quarterly Report on Form
10-Q. The Company is not obligated to publicly release any revisions to
forward-looking statements to reflect events after the date of this Quarterly
Report on Form 10-Q or unforeseen events. Although the Company may from time to
time voluntarily update its prior forward-looking statements, it disclaims any
commitment to do so except as required by securities laws.
 
 OVERVIEW
 
 The
Company is an education planning and financing company focused on providing
quality products and services to students, families, schools, and financial
institutions nationwide. The Company is a vertically-integrated organization
that offers a broad range of products and services to its customers throughout
the education life cycle.
 
 Focused
on long term organic growth, the Company earns its revenues from fee generating
businesses related to its diversified education finance and service operations
and from net interest income on its portfolio of student loans.
 
 32
 The
Company has certain business objectives in place for 2009 that
include:
 
 ·
              Grow
      and diversify revenue from fee generating
  businesses
 ·
              Manage
      operating costs
 ·
              Maximize
      the value of existing portfolio
 ·
              Eliminate
      exposure to liquidity risk and unfunded debt
  burden
 
 Achieving
these business objectives has impacted the financial condition and operating
results of the Company during the three and nine months ended September 30,
2009. In addition, legislation concerning the student loan industry has impacted
and will continue to impact the financial condition and operating results of the
Company. Each of these items are discussed below.
 
 Grow
and Diversify Revenue from Fee Generating Businesses
 
 In recent
years, the Company has expanded products and services generated from businesses
that are not dependent upon the FFEL Program, thereby reducing legislative and
political risk. Revenues from these businesses are primarily generated from
products and services offered in the Company’s Tuition Payment Processing and
Campus Commerce and Enrollment Services operating segments. As shown below,
revenue earned from businesses less dependent upon the FFEL Program has grown
$5.4 million (17.3%) for the three months ended September 30, 2009 compared to
the same period in 2008, and $17.0 million (19.0%) for the nine months ended
September 30, 2009 compared to the same period in 2008.
   Three
      months ended September 30,2009
                                        
                                        
                                        2008
                                        
                                        
                                        $
      Change
                                        
                                        
                                        %
      ChangeTuition
      Payment Processing and Campus Commerce
                                        
                                        $
                                        12,987
                                        
                                        
                                        
                                        11,863
                                        
                                        
                                        
                                        1,124Enrollment
      Services - Lead Generation
                                        
                                        
                                        23,595
                                        
                                        
                                        
                                        19,313
                                        
                                        
                                        
                                        4,28236,582
                                        
                                        
                                        
                                        31,176
                                        
                                        
                                        $
                                        5,406
                                        
                                        
                                        
                                        17.3
                                        %Enrollment
      Services - Other
                                        
                                        
                                        7,075
                                        
                                        
                                        
                                        10,545Student
      Loan and Guaranty Servicing
                                        
                                        
                                        27,353
                                        
                                        
                                        
                                        30,769Software
      and Technical Services
                                        
                                        
                                        3,634
                                        
                                        
                                        
                                        4,217Total
      revenue from fee generating businesses
                                        
                                        $
                                        74,644
                                        
                                        
                                        
                                        76,707Nine
      months ended September 30,2009
                                        
                                        
                                        2008
                                        
                                        
                                        $
      Change
                                        
                                        
                                        %
      ChangeTuition
      Payment Processing and Campus Commerce
                                        
                                        $
                                        40,373
                                        
                                        
                                        
                                        35,980
                                        
                                        
                                        
                                        4,393Enrollment
      Services - Lead Generation
                                        
                                        
                                        66,374
                                        
                                        
                                        
                                        53,719
                                        
                                        
                                        
                                        12,655106,747
                                        
                                        
                                        
                                        89,699
                                        
                                        
                                        $
                                        17,048
                                        
                                        
                                        
                                        19.0
                                        %Enrollment
      Services - Other
                                        
                                        
                                        21,814
                                        
                                        
                                        
                                        29,466Student
      Loan and Guaranty Servicing
                                        
                                        
                                        85,190
                                        
                                        
                                        
                                        81,624Software
      and Technical Services
                                        
                                        
                                        13,658
                                        
                                        
                                        
                                        15,828Total
      revenue from fee generating businesses
                                        
                                        $
                                        227,409
                                        
                                        
                                        
                                        216,617
 
 Department
of Education Servicing Contract
 
 In June
2009, the Department of Education named the Company as one of four private
sector servicers awarded a servicing contract to service all federally-owned
student loans, including FFELP loans purchased by the Department pursuant to
ECASLA. Beginning in August 2010, the contract will also cover the servicing on
new loans originated under the Direct Loan Program. Servicing volume will
initially be allocated by the Department to servicers awarded a contract, and
performance factors such as customer satisfaction levels and default rates will
determine volume allocations over time. The contract spans five years with one,
five-year renewal option. Servicing loans under this contract will further
diversify the Company’s revenue and customer base.
 
 33
 The
Company began servicing loans and recognized approximately $30,000 of revenue
under this contract in September 2009. As of September 30, 2009 and October 31,
2009, the Company was servicing approximately $177 million and $2.5 billion,
respectively, of loans under the Department’s servicing contract, which includes
approximately $12 million and $740 million, respectively, of loans not
previously serviced by the Company that were sold by third parties to the
Department as part of the ECASLA Purchase Program.
 
 Manage
Operating Costs
 
 The
Company has continued to focus on managing costs and gaining efficiencies and
continued benefits from prior restructuring activities. As shown below,
excluding the cost to provide enrollment services and restructuring and
impairment charges, operating expenses decreased $16.8 million (19.5%) and $36.7
million (14.3%) for the three and nine months ended September 30, 2009 compared
to the same periods in 2008 and decreased $7.0 million (9.2%) for the three
months ended September 30, 2009 compared to the three month period ended June
30, 2009.
 
 Operating
Expenses
 
 Three
      months endedSeptember
      30,
                                2009
                              
                              
                              September
      30,
                                2008
                              
                              
                              $
      Change
                              
                              
                              %
      ChangeSalaries
      and benefits
                              
                              $
                              36,398
                              
                              
                              
                              44,739
                              
                              
                              
                              (8,341
                              )
                              
                              
                              (18.6
                              )%Other
      expenses
                              
                              
                              32,601
                              
                              
                              
                              41,026
                              
                              
                              
                              (8,425
                              )
                              
                              
                              (20.5
                              )Operating
      expenses, excluding the costto
      provide enrollment services andrestructure
      and impairment expenses
                              
                              
                              68,999
                              
                              
                              
                              85,765
                              
                              
                              $
                              (16,766
                              )
                              
                              
                              (19.5
                              )%Cost
      to provide enrollment services
                              
                              
                              20,323
                              
                              
                              
                              17,904Restructure
      expense
                              
                              
                              3,340
                              
                              
                              
                              —Impairment
      expense
                              
                              
                              —
                              
                              
                              
                              —Total
      operating expenses
                              
                              $
                              92,662
                              
                              
                              
                              103,669Three
      months endedSeptember
      30,
                                2009
                              
                              
                              June
      30,
                                2009
                              
                              
                              $
      Change
                              
                              
                              %
      ChangeSalaries
      and benefits
                              
                              $
                              36,398
                              
                              
                              
                              38,699
                              
                              
                              
                              (2,301
                              )
                              
                              
                              (5.9
                              )%Other
      expenses
                              
                              
                              32,601
                              
                              
                              
                              37,277
                              
                              
                              
                              (4,676
                              )
                              
                              
                              (12.5
                              )Operating
      expenses, excluding the costto
      provide enrollment services andrestructure
      and impairment expenses
                              
                              
                              68,999
                              
                              
                              
                              75,976
                              
                              
                              $
                              (6,977
                              )
                              
                              
                              (9.2
                              )%Cost
      to provide enrollment services
                              
                              
                              20,323
                              
                              
                              
                              18,092Restructure
      expense
                              
                              
                              3,340
                              
                              
                              
                              3,288Impairment
      expense
                              
                              
                              —
                              
                              
                              
                              —Total
      operating expenses
                              
                              $
                              92,662
                              
                              
                              
                              97,356Nine
      months endedSeptember
      30,
                                2009
                              
                              
                              September
      30,
                                2008
                              
                              
                              $
      Change
                              
                              
                              %
      ChangeSalaries
      and benefits
                              
                              $
                              113,323
                              
                              
                              
                              136,422
                              
                              
                              
                              (23,099
                              )
                              
                              
                              (16.9
                              )%Other
      expenses
                              
                              
                              106,430
                              
                              
                              
                              120,003
                              
                              
                              
                              (13,573
                              )
                              
                              
                              (11.3
                              )Operating
      expenses, excluding the costto
      provide enrollment services andrestructure
      and impairment expenses
                              
                              
                              219,753
                              
                              
                              
                              256,425
                              
                              
                              $
                              (36,672
                              )
                              
                              
                              (14.3
                              )%Cost
      to provide enrollment services
                              
                              
                              56,208
                              
                              
                              
                              48,062Restructure
      expense
                              
                              
                              6,628
                              
                              
                              
                              7,107Impairment
      expense
                              
                              
                              —
                              
                              
                              
                              18,834Total
      operating expenses
                              
                              $
                              282,589
                              
                              
                              
                              330,428
 
 Maximize
the Value of Existing Portfolio
 
 Fixed
rate floor income
 
 The
Company’s core student loan spread (variable student loan spread including fixed
rate floor contribution) for the three and nine months ended September 30, 2009
was 1.27% and 1.10%, respectively, compared to 1.04% and 1.02% for the same
periods in 2008. During the three and nine months ended September 30, 2009, loan
interest income includes $39.3 million (62 basis points of spread contribution)
and $106.6 million (57 basis points), respectively, of fixed rate floor income
compared to $10.0 million (15 basis points) and $29.4 million (15 basis points)
during the same periods in 2008. The increase in fixed rate floor income is due
to lower interest rates in 2009 compared to the same periods in
2008.
 
 34
 Loans
originated prior to April 1, 2006 generally earn interest at the higher of a
floating rate based on the Special Allowance Payment or the SAP formula set by
the Department and the borrower rate, which is fixed over a period of time. The
SAP formula is based on an applicable index plus a fixed spread that is
dependent upon when the loan was originated, the loan’s repayment status, and
funding sources for the loan. The Company generally finances its student loan
portfolio with variable rate debt. In low and/or declining interest rate
environments, when the fixed borrower rate is higher than the rate produced by
the SAP formula, the Company’s student loans earn at a fixed rate while the
interest on the variable rate debt typically continues to decline. In these
interest rate environments, the Company earns additional spread income that it
refers to as floor income. For loans where the borrower rate is fixed to term,
the Company earns floor income for an extended period of time, which the Company
refers to as fixed rate floor income.
 
 If
interest rates remain low, the Company anticipates continuing to earn
significant fixed rate floor income in future periods.
 
 Future
Cash Flow from Portfolio
 
 As of
September 30, 2009, the Company had $19.7 billion of notes issued under
asset-backed securitizations that primarily reprice at a fixed spread to three
month LIBOR and are structured to substantially match the maturity of the funded
assets. These notes fund FFELP student loans that are predominantly set based on
a spread to three month commercial paper. Based on cash flow models developed to
reflect management’s current estimate of, among other factors, prepayments,
defaults, deferment, forbearance, and interest rates, the Company currently
expects future undiscounted cash flows from these transactions will be
approximately $1.35 billion as detailed below. These cash flows consist of net
spread and servicing and administrative revenue in excess of estimated cost. The Company expects
the future cash flow would correspond to earnings when excluding the
amortization of loan premiums and deferred origination costs, potential
derivative activity used by the Company to hedge the portfolio, and other
portfolio management and administrative costs. Because the Company does not use
gain-on-sale accounting when issuing asset-backed securitizations, the future
earnings of these transactions are not yet reflected in the Company’s
consolidated financial statements.
   
   Eliminate
Exposure to Liquidity Risk and Unfunded Debt Burden
 
 Reducing
Liquidity Risk
 
 The
Company had a FFELP warehouse facility that was due to expire in May 2010 that
provided for formula-based advance rates based on current market conditions,
which required equity support to be posted to the facility under certain
circumstances. As of December 31, 2008, the Company had $1.6 billion of student
loans in this facility, $1.4 billion borrowed under the facility, and $280.6
million in cash posted as equity funding support for the facility. During 2009,
the Company has reduced its liquidity exposure under this facility as a result
of the following transactions:
 
 ·
              In
      March 2009, the Company completed a $294.6 million asset-backed
      securitization and refinanced loans previously financed in the
      facility
 
 35
 ·
              In
      June 2009, the Company accessed the Department’s Conduit Program and
      refinanced loans previously financed in the
  facility
 
 ·
              In
      August 2009, the Company entered into a new $500.0 million FFELP warehouse
      facility that expires in August 2012. In August 2009, the Company utilized
      the new warehouse facility to refinance all remaining loans in the old
      warehouse facility. Refinancing these loans allowed the Company to
      terminate the prior facility and withdraw all remaining equity funding
      support.
 
 In
October 2009, the Company completed an asset-backed securities transaction of
$434.0 million. The Company used the proceeds from the sale of these notes to
purchase student loans that were previously financed in the new FFELP warehouse
facility and certain other existing asset-backed securitizations. As of November
6, 2009, $179.1 million was outstanding under the new FFELP warehouse and $320.9
million was available for future use.
 
 Debt
Repurchases
 
 During
2009, the Company repurchased outstanding debt as summarized below. Any gains
(losses) recorded by the Company from the repurchase of debt are included in
“other income” on the Company’s consolidated statements of
operations.
 
 5.125%
      Senior Notes due 2010
                                        
                                        Junior
      Subordinated Hybrid Securities
                                        
                                        Asset-backed
      securitiesNotional
                                        
                                        Purchase
                                        
                                        Gain
                                        
                                        Notional
                                        
                                        Purchase
                                        
                                        Gain
                                        
                                        Notional
                                        
                                        Purchase
                                        
                                        Gainamount
                                        
                                        price
                                        
                                        (loss)
                                        
                                        amount
                                        
                                        price
                                        
                                        (loss)
                                        
                                        amount
                                        
                                        price
                                        
                                        (loss)Three
      months ended:March
      31, 2009
                                        
                                        $
                                        34,866
                                        
                                        
                                        26,791
                                        
                                        
                                        8,075
                                        
                                        
                                        —
                                        
                                        
                                        —
                                        
                                        
                                        —
                                        
                                        
                                        —
                                        
                                        
                                        —
                                        
                                        
                                        —June
      30, 2009
                                        
                                        
                                        35,520
                                        
                                        
                                        31,080
                                        
                                        
                                        4,440
                                        
                                        
                                        1,750
                                        
                                        
                                        350
                                        
                                        
                                        1,400
                                        
                                        
                                        1,100
                                        
                                        
                                        1,078
                                        
                                        
                                        22September
      30, 2009
                                        
                                        
                                        137,898
                                        
                                        
                                        138,505
                                        
                                        
                                        (607
                                        )
                                        
                                        —
                                        
                                        
                                        —
                                        
                                        
                                        —
                                        
                                        
                                        44,950
                                        
                                        
                                        39,095
                                        
                                        
                                        5,855Nine
      months ended September 30, 2009
                                        
                                        
                                        208,284
                                        
                                        
                                        196,376
                                        
                                        
                                        11,908
                                        
                                        
                                        1,750
                                        
                                        
                                        350
                                        
                                        
                                        1,400
                                        
                                        
                                        46,050
                                        
                                        
                                        40,173
                                        
                                        
                                        5,877Subsequent
      to September 30, 2009through
      November 9, 2009
                                        
                                        
                                        —
                                        
                                        
                                        —
                                        
                                        
                                        —
                                        
                                        
                                        —
                                        
                                        
                                        —
                                        
                                        
                                        —
                                        
                                        
                                        140,200
                                        
                                        
                                        126,159
                                        
                                        
                                        14,041Total
      debt repurchased
                                        
                                        $
                                        208,284
                                        
                                        
                                        196,376
                                        
                                        
                                        11,908
                                        
                                        
                                        1,750
                                        
                                        
                                        350
                                        
                                        
                                        1,400
                                        
                                        
                                        186,250
                                        
                                        
                                        166,332
                                        
                                        
                                        19,918Balance
      as of September 30, 2009
                                        
                                        $
                                        66,716
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        $
                                        198,250
  Legislation
 
 ECASLA
 
 In August
2008, the Department implemented the Loan Purchase Commitment Program and the
Loan Purchase Participation Program pursuant to ECASLA. During the three months
ended September 30, 2009, the Company sold $427.7 million of student loans to
the Department under the Purchase Program, resulting in a gain of $9.7 million.
As of September 30, 2009, the Company had $1.9 billion of FFELP loans funded
using the Participation Program, of which $1.6 billion are 2008-2009 academic
year loans and are classified as held for sale on the Company’s consolidated
balance sheet. These loans were sold to the Department under its Purchase
Program in October 2009. Upon selling the $1.6 billion of loans held for sale,
the Company recognized a gain of $26.9 million in October 2009. The Company
plans to continue to use the Participation Program to fund certain loans
originated for the 2009-2010 academic year. Gains recorded by the Company
related to loans sold to the Department under the Purchase Program will vary, as
with all loan sales, dependent upon the cost of acquisition and/or origination
and the amortization of such costs.
 
 Recent
Developments
 
 On
February 26, 2009, the President introduced a fiscal year 2010 Federal budget
proposal calling for the elimination of the FFEL Program and a recommendation
that all new student loan originations be funded through the Federal Direct Loan
Program. On September 17, 2009, the House of Representatives passed H.R. 3221,
the Student Aid and Fiscal Responsibility Act, which would eliminate the FFEL
Program and require that, after July 1, 2010, all new federal student loans be
made through the Federal Direct Loan Program. The Senate is expected to begin
its consideration of similar student loan reform legislation sometime in 2009;
however, the debate will likely continue into 2010. In addition to the
House-passed legislation, there are several other proposals for changes to the
education financing framework that may be considered that would maintain a role
for private lenders in the origination of federal student loans. These include a
possible extension of ECASLA, which expires on July 1, 2010, and the Student
Loan Community Proposal, a proposal endorsed by a cross-section of FFELP service
providers (including the Company) as an alternative to the 100% federal direct
lending proposal included in SAFRA.
 
 Elimination
of the FFEL Program would impact the Company’s operations and profitability by,
among other things, reducing the Company’s interest revenues as a result of the
inability to add new FFELP loans to the Company’s portfolio and reducing
guarantee and third-party FFELP servicing fees as a result of reduced FFELP loan
servicing and origination volume. Additionally, the elimination of the FFEL
Program could reduce education loan software sales and related consulting fees
received from lenders using the Company’s software products and services and
certain other products and services included in the Company’s Enrollment
Services operating segment. The fair value and/or ability to recover the
Company’s goodwill, intangible assets, and other long-lived assets related to
these activities could be adversely affected if the FFEL Program is eliminated.
However, as discussed previously, in recent years, the Company has expanded
products and services generated from businesses that are not dependent upon the
FFEL Program, thereby reducing legislative and political risk.
 
 36
 In June
2009, the Department of Education named the Company as one of four private
sector companies awarded a servicing contract to service student loans.
Beginning in August 2010, the contract will cover the servicing on new loans
originated under the Direct Loan Program. If legislation is passed that all new
student loan originations be funded through the Direct Loan Program, servicing
loans under this contract will partially offset the loss of revenue if the FFEL
Program is eliminated.
 
 RESULTS
OF OPERATIONS
 
 The
Company’s operating results are primarily driven by the performance of its
existing portfolio, the cost necessary to generate new assets, the revenues
generated by its fee based businesses, and the cost to provide those services.
The performance of the Company’s portfolio is driven by net interest income and
losses related to credit quality of the assets along with the cost to administer
and service the assets and related debt.
 
 Net
Interest Income
 
 The
Company generates a significant portion of its earnings from the spread,
referred to as its student loan spread, between the yield the Company receives
on its student loan portfolio and the cost of funding these loans. This spread
income is reported on the Company’s consolidated statements of operations as net
interest income. The amortization of loan premiums, including capitalized costs
of origination, the 1.05% per year consolidation loan rebate fee paid to the
Department, and yield adjustments from borrower benefit programs, are netted
against loan interest income on the Company’s statements of operations. The
amortization of debt issuance costs is included in interest expense on the
Company’s statements of operations.
 
 The
Company’s portfolio of FFELP loans originated prior to April 1, 2006 earns
interest at the higher of a variable rate based on the special allowance payment
or SAP formula set by the Department of Education and the borrower rate. The SAP
formula is based on an applicable index plus a fixed spread that is dependent
upon when the loan was originated, the loan’s repayment status, and funding
sources for the loan. As a result of one of the provisions of the Higher
Education Reconciliation Act of 2005 (“HERA”), the Company’s portfolio of FFELP
loans originated on or after April 1, 2006 earns interest at a variable rate
based on the SAP formula. For the portfolio of loans originated on or after
April 1, 2006, when the borrower rate exceeds the variable rate based on the SAP
formula, the Company must return the excess to the Department.
 
 In
September 2007, the College Cost Reduction and Access Act of 2007 (the “College
Cost Reduction Act”) was enacted into law. This legislation reduced the annual
yield on FFELP loans originated after October 1, 2007 and should be considered
when reviewing the Company’s results of operations. The Company has mitigated
some of the reduction in annual yield by creating efficiencies and lowering
costs, modifying borrower benefits, and reducing loan acquisition
costs.
 
 Because
the Company generates a significant portion of its earnings from its student
loan spread, the interest rate sensitivity of the Company’s balance sheet is
very important to its operations. The current and future interest rate
environment can and will affect the Company’s interest earnings, net interest
income, and net income. The effects of changing interest rate environments are
further outlined in Item 3, “Quantitative and Qualitative Disclosures about
Market Risk — Interest Rate Risk.”
 
 Investment
interest income, which is a component of net interest income, includes income
from unrestricted interest-earning deposits and funds in the Company’s special
purpose entities which are utilized for its asset-backed
securitizations.
 
 Net
interest income also includes interest expense on unsecured debt offerings. The
proceeds from these unsecured debt offerings were used by the Company to fund
general business operations, certain asset and business acquisitions, and the
repurchase of stock under the Company’s stock repurchase plan.
 
 Provision
for Loan Losses
 
 Management
estimates and establishes an allowance for loan losses through a provision
charged to expense. Losses are charged against the allowance when management
believes the collection of the loan principal is unlikely. Recovery of amounts
previously charged off is credited to the allowance for loan losses. Management
maintains the allowance for federally insured and non-federally insured loans at
a level believed to be adequate to provide for estimated probable credit losses
inherent in the loan portfolio. This evaluation is inherently subjective because
it requires estimates that may be susceptible to significant changes. The
Company analyzes the allowance separately for its federally insured loans and
its non-federally insured loans.
 
 37
 The
allowance for the federally insured loan portfolio is based on periodic
evaluations of the Company’s loan portfolios considering past experience, trends
in student loan claims rejected for payment by guarantors, changes to federal
student loan programs, current economic conditions, and other relevant factors.
The federal government currently guarantees 97% of the principal of and the
interest on federally insured student loans disbursed on and after July 1, 2006
(and 98% for those loans disbursed prior to July 1, 2006), which limits the
Company’s loss exposure on the outstanding balance of the Company’s federally
insured portfolio. Also, in accordance with the Student Loan Reform Act of 1993,
student loans disbursed prior to October 1, 1993 are fully insured.
 
 In
determining the adequacy of the allowance for loan losses on the non-federally
insured loans, the Company considers several factors including: loans in
repayment versus those in a nonpaying status, months in repayment, delinquency
status, type of program, and trends in defaults in the portfolio based on
Company and industry data. The Company places a non-federally insured loan on
nonaccrual status when the collection of principal and interest is 30 days past
due and charges off the loan when the collection of principal and interest is
120 days past due.
 
 Other
Income
 
 The
Company also earns fees and generates revenue from other sources, including loan
and guaranty servicing, payment management activities, enrollment services, and
fees from providing software and technical services.
 
 Student Loan and Guaranty Servicing
Revenue– Loan servicing fees are determined according to individual
agreements with customers and are calculated based on the dollar value of loans,
number of loans, or number of borrowers serviced for each customer. Guaranty
servicing fees, generally, are calculated based on the number of loans serviced,
volume of loans serviced, or amounts collected. Revenue is recognized when
earned pursuant to applicable agreements, and when ultimate collection is
assured.
 
 Tuition Payment Processing and
Campus Commerce Revenue – Tuition payment processing and campus commerce
revenue includes actively managed tuition payment solutions, online payment
processing, detailed information reporting, and data integration services. Fees
for these payment management services are recognized over the period in which
services are provided to customers.
 
 Enrollment Services Revenue–
Enrollment services revenue includes the sale of lists and print products,
subscription-based products and services, and multiple deliverable arrangements.
Revenue from the sale of lists and printed products is generally earned and
recognized, net of estimated returns, upon shipment or delivery. Revenues from
the sales of subscription-based products and services are recognized ratably
over the term of the subscription. Subscription revenue received or receivable
in advance of the delivery of services is included in deferred revenue. Revenue
from multiple deliverable arrangements is recognized separately for separate
units of accounting based on the units’ relative fair value.
 
 Software Services Revenue–
Software services revenue is determined from individual agreements with
customers and includes license and maintenance fees associated with student loan
software products. Computer and software consulting services are recognized over
the period in which services are provided to customers.
 
 Operating
Expenses
 
 Operating
expenses includes indirect costs incurred to generate and acquire student loans,
costs incurred to manage and administer the Company’s student loan portfolio and
its financing transactions, costs incurred to service the Company’s student loan
portfolio and the portfolios of third parties, the cost to provide enrollment
services, costs incurred to provide tuition payment processing, campus commerce,
content management, recruitment, software and technical services to third
parties, the depreciation and amortization of capital assets and intangible
assets, investments in products, services, and technology to meet customer needs
and support continued revenue growth, and other general and administrative
expenses. The cost to provide enrollment services consists of costs incurred to
provide lead generation and publishing and editing services in the Company’s
Enrollment Services operating segment. Operating expenses also includes employee
termination benefits, lease termination costs, and the write-down of certain
assets related to the Company’s restructuring initiatives.
 
 38
 Three
and nine months ended September 30, 2009 compared to the three and nine months
ended September 30, 2008
 
 Net
Interest Income (Net of settlements on derivatives)
 
 Three
      months ended September 30,
                    
                    
                    Nine
      months ended September 30,Change
                    
                    
                    
                    
                    
                    
                    
                    
                    Change2009
                    
                    
                    2008
                    
                    
                    $
                    
                    
                    
                    %
                    
                    
                    2009
                    
                    
                    2008
                    
                    
                    $
                    
                    
                    
                    %Interest
      income:Loan
      interest
                    
                    $
                    143,255
                    
                    
                    
                    284,468
                    
                    
                    
                    (141,213
                    )
                    
                    
                    (49.6
                    )%
                    
                    $
                    474,587
                    
                    
                    
                    911,140
                    
                    
                    
                    (436,553
                    )
                    
                    
                    (47.9
                    )%Investment
      interest
                    
                    
                    1,943
                    
                    
                    
                    9,118
                    
                    
                    
                    (7,175
                    )
                    
                    
                    (78.7
                    )
                    
                    
                    8,810
                    
                    
                    
                    29,914
                    
                    
                    
                    (21,104
                    )
                    
                    
                    (70.5
                    )Total
      interest income
                    
                    
                    145,198
                    
                    
                    
                    293,586
                    
                    
                    
                    (148,388
                    )
                    
                    
                    (50.5
                    )
                    
                    
                    483,397
                    
                    
                    
                    941,054
                    
                    
                    
                    (457,657
                    )
                    
                    
                    (48.6
                    )Interest
      expense:Interest
      on bonds and notes payable
                    
                    
                    76,016
                    
                    
                    
                    234,016
                    
                    
                    
                    (158,000
                    )
                    
                    
                    (67.5
                    )
                    
                    
                    328,600
                    
                    
                    
                    791,621
                    
                    
                    
                    (463,021
                    )
                    
                    
                    (58.5
                    )Net
      interest income
                    
                    
                    69,182
                    
                    
                    
                    59,570
                    
                    
                    
                    9,612
                    
                    
                    
                    16.1
                    
                    
                    
                    154,797
                    
                    
                    
                    149,433
                    
                    
                    
                    5,364
                    
                    
                    
                    3.6Provision
      for loan losses
                    
                    
                    7,500
                    
                    
                    
                    7,000
                    
                    
                    
                    500
                    
                    
                    
                    7.1
                    
                    
                    
                    23,000
                    
                    
                    
                    18,000
                    
                    
                    
                    5,000
                    
                    
                    
                    27.8Net
      interest income afterprovision
      for loan losses
                    
                    
                    61,682
                    
                    
                    
                    52,570
                    
                    
                    
                    9,112
                    
                    
                    
                    17.3
                    
                    
                    
                    131,797
                    
                    
                    
                    131,433
                    
                    
                    
                    364
                    
                    
                    
                    0.3Derivative
      settlements, net (a)
                    
                    
                    4,914
                    
                    
                    
                    789
                    
                    
                    
                    4,125
                    
                    
                    
                    522.8
                    
                    
                    
                    38,807
                    
                    
                    
                    45,989
                    
                    
                    
                    (7,182
                    )
                    
                    
                    (15.6
                    )Net
      interest income afterprovision
      for loan losses (netof
      settlements on derivatives)
                    
                    $
                    66,596
                    
                    
                    
                    53,359
                    
                    
                    
                    13,237
                    
                    
                    
                    24.8
                    %
                    
                    $
                    170,604
                    
                    
                    
                    177,422
                    
                    
                    
                    (6,818
                    )
                    
                    
                    (3.8
                    )%
 
 (a)
              The
      Company maintains an overall risk management strategy that incorporates
      the use of derivative instruments to reduce the economic effect of
      interest rate volatility. Management has structured all of the Company’s
      derivative transactions with the intent that each is economically
      effective; however, the Company’s derivative instruments do not qualify
      for hedge accounting. Derivative settlements for each applicable period
      should be evaluated with the Company’s net interest income, as discussed
      below.
 
 Net
interest income after provision for loan losses, net of settlements on
derivatives, changed for the three and nine months ended September 30, 2009
compared to same periods in 2008 as follows:
 
 Three
      months ended September 30,
                    
                    
                    Nine
      months ended September 30,Change
                    
                    
                    
                    
                    
                    
                    
                    
                    Change2009
                    
                    
                    2008
                    
                    
                    $
                    
                    
                    
                    %
                    
                    
                    2009
                    
                    
                    2008
                    
                    
                    $
                    
                    
                    
                    %Student
      loan interest margin, netof
      settlements on derivatives (a)
                    
                    $
                    39,749
                    
                    
                    
                    54,955
                    
                    
                    
                    (15,206
                    )
                    
                    
                    (27.7
                    )%
                    
                    $
                    101,685
                    
                    
                    
                    170,638
                    
                    
                    
                    (68,953
                    )
                    
                    
                    (40.4
                    )%Fixed
      rate floor income, net ofsettlements
      on derivatives (b)
                    
                    
                    38,848
                    
                    
                    
                    6,778
                    
                    
                    
                    32,070
                    
                    
                    
                    473.1
                    
                    
                    
                    106,187
                    
                    
                    
                    25,188
                    
                    
                    
                    80,999
                    
                    
                    
                    321.6Investment
      interest (c)
                    
                    
                    1,943
                    
                    
                    
                    9,118
                    
                    
                    
                    (7,175
                    )
                    
                    
                    (78.7
                    )
                    
                    
                    8,810
                    
                    
                    
                    29,914
                    
                    
                    
                    (21,104
                    )
                    
                    
                    (70.5
                    )Corporate
      debt interest expense (d)
                    (6,444
                    )
                    
                    
                    (10,492
                    )
                    
                    
                    4,048
                    
                    
                    
                    (38.6
                    )
                    
                    
                    (23,078
                    )
                    
                    
                    (30,318
                    )
                    
                    
                    7,240
                    
                    
                    
                    (23.9
                    )Provision
      for loan losses (e)
                    
                    
                    (7,500
                    )
                    
                    
                    (7,000
                    )
                    
                    
                    (500
                    )
                    
                    
                    7.1
                    
                    
                    
                    (23,000
                    )
                    
                    
                    (18,000
                    )
                    
                    
                    (5,000
                    )
                    
                    
                    27.8Net
      interest income afterprovision
      for loan losses (net ofsettlements
      on derivatives)
                    
                    $
                    66,596
                    
                    
                    
                    53,359
                    
                    
                    
                    13,237
                    
                    
                    
                    24.8
                    %
                    
                    $
                    170,604
                    
                    
                    
                    177,422
                    
                    
                    
                    (6,818
                    )
                    
                    
                    (3.8
                    )%
 
 (a)
              Student
      loan interest margin decreased for the three and nine months ended
      September 30, 2009 compared to the same periods in 2008 as a result of a
      decrease in the Company’s variable student loan spread as discussed in
      this Item 2 under “Asset Generation and Management Operating Segment –
      Results of Operations – Student Loan Spread Analysis.” For the three
      months ended September 30, 2009 and 2008, variable student loan spread was
      0.66% and 0.94%, respectively. For the nine months ended September 30,
      2009 and 2008, variable student loan spread was 0.54% and 0.89%,
      respectively.
 
 (b)
              The
      Company has a portfolio of student loans that are earning interest at a
      fixed borrower rate which exceeds the statutorily defined variable lender
      rate creating fixed rate floor income. Due to lower interest rates in the
      three and nine months ended September 30, 2009 compared to the same
      periods in 2008, the Company received additional fixed rate floor income
      on a portion of its student loan portfolio. See Item 3, “Quantitative and
      Qualitative Disclosures about Market Risk – Interest Rate Risk” for
      additional information.
 
 (c)
              Investment
      interest decreased for the three and nine months ended September 30, 2009
      compared to the same period in 2008 due to lower interest rates in
      2009.
 
 39
 (d)
              Corporate
      debt interest expense decreased for the three and nine months ended
      September 30, 2009 compared to the same periods in 2008 as a result of a
      decrease in interest rates, as well as a reduction in debt outstanding due
      to the purchase of unsecured fixed rate debt. The weighted average
      interest rate and notes outstanding on the Company’s unsecured line of
      credit was 0.77% and $691.5 million, respectively, as of September 30,
      2009 compared to 3.44% and $645.0 million, respectively, as of September
      30, 2008. During the first, second, and third quarters of 2009, the
      Company purchased $34.9 million, $35.5 million, and $137.9 million,
      respectively, of its 5.125% Senior Notes due
  2010.
 
 (e)
              The
      provision for loan losses increased for the three and nine months ended
      September 30, 2009 compared to 2008 primarily due to increases in
      delinquencies.
 
 Other
Income
 
 Three
      months ended September 30,
                                
                                
                                Nine
      months ended September 30,Change
                                
                                
                                
                                
                                
                                
                                Change2009
                                
                                2008
                                
                                $
                                
                                
                                %
                                
                                
                                2009
                                
                                2008
                                
                                $
                                
                                
                                %Loan
      and guaranty servicing revenue (a)
                                
                                $
                                26,006
                                
                                
                                29,691
                                
                                
                                (3,685
                                )
                                
                                (12.4
                                )%
                                
                                $
                                81,280
                                
                                
                                78,173
                                
                                
                                3,107
                                
                                
                                4.0
                                %Tuition
      payment processing and campus commerce revenue (b)
                                
                                
                                12,987
                                
                                
                                11,863
                                
                                
                                1,124
                                
                                
                                9.5
                                
                                
                                
                                40,373
                                
                                
                                35,980
                                
                                
                                4,393
                                
                                
                                12.2Enrollment
      services revenue (c)
                                
                                
                                30,670
                                
                                
                                29,858
                                
                                
                                812
                                
                                
                                2.7
                                
                                
                                
                                88,188
                                
                                
                                83,148
                                
                                
                                5,040
                                
                                
                                6.1Software
      services revenue (d)
                                
                                
                                4,600
                                
                                
                                5,159
                                
                                
                                (559
                                )
                                
                                (10.8
                                )
                                
                                
                                16,424
                                
                                
                                19,342
                                
                                
                                (2,918
                                )
                                
                                (15.1
                                )Other
      income (e)
                                
                                
                                11,094
                                
                                
                                5,408
                                
                                
                                5,686
                                
                                
                                105.1
                                
                                
                                
                                39,483
                                
                                
                                17,787
                                
                                
                                21,696
                                
                                
                                122.0Gain
      (loss) on sale of loans, net (f)
                                
                                
                                8,788
                                
                                
                                —
                                
                                
                                8,788
                                
                                
                                100.0
                                
                                
                                
                                8,386
                                
                                
                                (47,426
                                )
                                
                                55,812
                                
                                
                                (117.7
                                )Derivative
      market value, foreign currency,and
      put option adjustments (g)
                                
                                
                                2,826
                                
                                
                                6,085
                                
                                
                                (3,259
                                )
                                
                                (53.6
                                )
                                
                                
                                (36,067
                                )
                                
                                (35,521
                                )
                                
                                (546
                                )
                                
                                1.5Derivative
      settlements, net (h)
                                
                                
                                4,914
                                
                                
                                789
                                
                                
                                4,125
                                
                                
                                522.8
                                
                                
                                
                                38,807
                                
                                
                                45,989
                                
                                
                                (7,182
                                )
                                
                                (15.6
                                )Total
      other income
                                
                                $
                                101,885
                                
                                
                                88,853
                                
                                
                                13,032
                                
                                
                                14.7
                                %
                                
                                $
                                276,874
                                
                                
                                197,472
                                
                                
                                79,402
                                
                                
                                40.2
                                %
  (a)
              “Loan
      and guaranty servicing revenue” increased for the nine months ended
      September 30, 2009 compared to the same period in 2008 due to an increase
      in FFELP loan servicing revenue. This increase was offset by a decrease in
      rehabilitation collections on defaulted loan assets. “Loan and guaranty
      servicing revenue” decreased for the three months ended September 30, 2009
      compared to the same period in 2008 due to a decrease in rehabilitation
      collections on defaulted loan assets. This decrease was offset by an
      increase in FFELP loan servicing revenue. See Item 2 under “Student Loan
      and Guaranty Servicing Operating Segment – Results of Operations” for
      additional information.
 
 (b)
              “Tuition
      payment processing and campus commerce revenue” increased due to an
      increase in the number of managed tuition payment plans and an increase in
      campus commerce transactions processed as discussed in this Item 2 under
      “Tuition Payment Processing and Campus Commerce Operating Segment –
      Results of Operations.”
 
 (c)
              “Enrollment
      services revenue” increased due to an increase in the number of lead
      generation transactions processed offset by a reduction in other
      enrollment products and services offered as further discussed in this Item
      2 under “Enrollment Services Operating Segment – Results of
      Operations.”
 
 (d)
              “Software
      and technical services revenue” decreased in 2009 compared to the same
      periods in 2008 as the result of a reduction in the number of projects for
      existing customers and the loss of customers due to the legislative
      developments in the student loan industry throughout 2008 as further
      discussed in this Item 2 under “Software and Technical Services Operating
      Segment – Results of Operations.”
 
 (e)
              The
      following table summarizes the components of “other
    income”.
  Three
      months ended
                        September
      30,
                      
                      
                      Nine
      months ended
                        September
      30,2009
                      
                      
                      2008
                      
                      
                      2009
                      
                      
                      2008Gains
      on debt repurchases
                      
                      $
                      5,248
                      
                      
                      
                      —
                      
                      
                      
                      19,185
                      
                      
                      
                      —Borrower
      late fee income
                      
                      
                      2,859
                      
                      
                      
                      2,748
                      
                      
                      
                      8,648
                      
                      
                      
                      8,907Gain
      on sale of equity method investment
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      3,500
                      
                      
                      
                      —Other
                      
                      
                      2,987
                      
                      
                      
                      2,660
                      
                      
                      
                      8,150
                      
                      
                      
                      8,880Other
      income
                      
                      $
                      11,094
                      
                      
                      
                      5,408
                      
                      
                      
                      39,483
                      
                      
                      
                      17,787
 
 The
      change in other income over all the periods presented is primarily the
      result of gains on debt repurchases. In addition, during the first quarter
      of 2009, the Company earned $3.5 million in additional consideration from
      the sale of an equity method
investment.
 
 40
 (f)
              “Gain
      (loss) on sale of loans” includes a gain of $9.7 million related to the
      sale of $427.7 million of student loans to the Department under the
      Purchase Program during the three months ended September 30, 2009. In
      addition, the Company recognized a loss of $47.5 million during the first
      quarter of 2008 as a result of the sale of $1.3 billion of student loans
      as further discussed in this Item 2 under “Asset Generation and Management
      Operating Segment – Results of
Operations.”
 
 (g)
              The
      change in “derivative market value, foreign currency, and put option
      adjustments” was caused by the change in the fair value of the Company’s
      derivative portfolio and foreign currency rate fluctuations which are
      further discussed in Item 3, “Quantitative and Qualitative Disclosures
      about Market Risk.”
 
 (h)
              Further
      detail of the components of derivative settlements is included in Item 3,
      “Quantitative and Qualitative Disclosures about Market Risk.” The Company
      maintains an overall risk management strategy that incorporates the use of
      derivative instruments to reduce the economic effect of interest rate
      volatility. Management has structured all of the Company’s derivative
      transactions with the intent that each is economically effective; however,
      the Company’s derivative instruments do not qualify for hedge accounting.
      Derivative settlements for each applicable period should be evaluated with
      the Company’s net interest income, as discussed
  previously.
 
 Operating
Expenses
 
 Three
      months ended September 30,
                                            
                                            
                                            Nine
      months ended September 30,2009
                                            
                                            2008
                                            
                                            $
      Change
                                            
                                            %
      Change
                                            
                                            
                                            2009
                                            
                                            2008
                                            
                                            $
      Change
                                            
                                            %
      ChangeSalaries
      and benefits
                                            $
                                            36,398
                                            
                                            
                                            44,739
                                            
                                            
                                            (8,341
                                            )
                                            
                                            (18.6
                                            )
      %
                                            
                                            $
                                            113,323
                                            
                                            
                                            136,422
                                            
                                            
                                            (23,099
                                            )
                                            
                                            (16.9
                                            )
      %Other
      expenses
                                            
                                            32,601
                                            
                                            
                                            41,026
                                            
                                            
                                            (8,425
                                            )
                                            
                                            (20.5
                                            )
                                            
                                            
                                            106,430
                                            
                                            
                                            120,003
                                            
                                            
                                            (13,573
                                            )
                                            
                                            (11.3
                                            )Operating
      expenses, excluding the costto
      provide enrollment services andrestructure
      and impairment expenses
                                            
                                            68,999
                                            
                                            
                                            85,765
                                            
                                            $
                                            (16,766
                                            )
                                            
                                            (19.5
                                            )
      %
                                            
                                            
                                            219,753
                                            
                                            
                                            256,425
                                            
                                            $
                                            (36,672
                                            )
                                            
                                            (14.3
                                            )
      %Cost
      to provide enrollment services
                                            
                                            20,323
                                            
                                            
                                            17,904
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            56,208
                                            
                                            
                                            48,062Restructure
      expense
                                            
                                            3,340
                                            
                                            
                                            —
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            6,628
                                            
                                            
                                            7,107Impairment
      expense
                                            
                                            —
                                            
                                            
                                            —
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            —
                                            
                                            
                                            18,834Total
      operating expenses
                                            $
                                            92,662
                                            
                                            
                                            103,669
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            $
                                            282,589
                                            
                                            
                                            330,428
  Excluding
the cost to provide enrollment services and restructuring and impairment
charges, operating expenses decreased $16.8 million (19.5%) and $36.7 million
(14.3%) for the three and nine months ended September 30, 2009 compared to the
same periods in 2008. These decreases were the result of continued focus by the
Company on managing costs and gaining efficiencies and continued benefits from
prior restructuring activities.
 
 Income
Taxes
 
 The
Company’s effective tax rate was 34.5% and 36.5% for the three and nine months
ended September 30, 2009. The Company’s effective tax rate for the year ended
December 31, 2008 was 40%. The effective tax rate during 2009 has decreased as
compared to 2008 due to various state tax law changes, expenses incurred in 2008
that were not deductible for tax purposes, and a net decrease in the Company’s
gross unrecognized tax benefits liability.
 
 Additional
information on the Company’s results of operations is included with the
discussion of the Company’s operating segments in this Item 2 under “Operating
Segments”.
 
 41
 Financial
Condition as of September 30, 2009 compared to December 31,
2008
 
 As
      of
                        
                        
                        As
      ofSeptember
      30,
                        
                        
                        December
      31,
                        
                        
                        Change2009
                        
                        
                        2008
                        
                        
                        Dollars
                        
                        
                        PercentAssets:Student
      loans receivable, net
                        
                        $
                        23,764,263
                        
                        
                        
                        25,413,008
                        
                        
                        
                        (1,648,745
                        )
                        
                        
                        (6.5
                        )
      %Student
      loans receivable - held for sale
                        
                        
                        1,627,794
                        
                        
                        
                        —
                        
                        
                        
                        1,627,794
                        
                        
                        
                        100.0Cash,
      cash equivalents, and investments
                        
                        
                        1,183,712
                        
                        
                        
                        1,348,104
                        
                        
                        
                        (164,392
                        )
                        
                        
                        (12.2
                        )Goodwill
                        
                        
                        175,178
                        
                        
                        
                        175,178
                        
                        
                        
                        —
                        
                        
                        
                        —Intangible
      assets, net
                        
                        
                        59,803
                        
                        
                        
                        77,054
                        
                        
                        
                        (17,251
                        )
                        
                        
                        (22.4
                        )Fair
      value of derivative instruments
                        
                        
                        210,157
                        
                        
                        
                        175,174
                        
                        
                        
                        34,983
                        
                        
                        
                        20.0Other
      assets
                        
                        
                        570,955
                        
                        
                        
                        666,379
                        
                        
                        
                        (95,424
                        )
                        
                        
                        (14.3
                        )Total
      assets
                        
                        $
                        27,591,862
                        
                        
                        
                        27,854,897
                        
                        
                        
                        (263,035
                        )
                        
                        
                        (0.9
                        )
      %Liabilities:Bonds
      and notes payable
                        
                        $
                        26,586,093
                        
                        
                        
                        26,787,959
                        
                        
                        
                        (201,866
                        )
                        
                        
                        (0.8
                        )
      %Fair
      value of derivative instruments
                        
                        
                        8,998
                        
                        
                        
                        1,815
                        
                        
                        
                        7,183
                        
                        
                        
                        395.8Other
      liabilities
                        
                        
                        268,697
                        
                        
                        
                        421,897
                        
                        
                        
                        (153,200
                        )
                        
                        
                        (36.3
                        )Total
      liabilities
                        
                        
                        26,863,788
                        
                        
                        
                        27,211,671
                        
                        
                        
                        (347,883
                        )
                        
                        
                        (1.3
                        )Shareholders'
      equity
                        
                        
                        728,074
                        
                        
                        
                        643,226
                        
                        
                        
                        84,848
                        
                        
                        
                        13.2Total
      liabilities and shareholders' equity
                        
                        $
                        27,591,862
                        
                        
                        
                        27,854,897
                        
                        
                        
                        (263,035
                        )
                        
                        
                        (0.9
                        )
      %
 
 Total
assets and total liabilities decreased during 2009 primarily due to decreases in
restricted cash and investments and bonds and notes payable, respectively, as a
result of payments on debt and debt repurchases.
 
 OPERATING
SEGMENTS
 
 The
Company has five operating segments as follows: Student Loan and Guaranty
Servicing, Tuition Payment Processing and Campus Commerce, Enrollment Services,
Software and Technical Services, and Asset Generation and Management. The
Company’s operating segments are defined by the products and services they offer
or the types of customers they serve, and they reflect the manner in which
financial information is currently evaluated by management. The accounting
policies of the Company’s operating segments are the same as those described in
the summary of significant accounting policies included in the Company’s
consolidated financial statements included in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2008. Intersegment revenues are
charged by a segment to another segment that provides the product or service.
Intersegment revenues and expenses are included within each segment consistent
with the income statement presentation provided to management. Changes in
management structure or allocation methodologies and procedures may result in
changes in reported segment financial information.
 
 The
management reporting process measures the performance of the Company’s operating
segments based on the management structure of the Company as well as the
methodology used by management to evaluate performance and allocate resources.
Management, including the Company’s chief operating decision maker, evaluates
the performance of the Company’s operating segments based on their
profitability. As discussed further below, management measures the profitability
of the Company’s operating segments on the basis of “base net income.”
Accordingly, information regarding the Company’s operating segments is provided
based on “base net income.” The Company’s “base net income” is not a defined
term within GAAP and may not be comparable to similarly titled measures reported
by other companies. Unlike financial accounting, there is no comprehensive,
authoritative guidance for management reporting.
 
 Historically,
the Company generated the majority of its revenue from net interest income
earned in its Asset Generation and Management operating segment. In recent
years, the Company has made several acquisitions that have expanded the
Company’s products and services and has diversified its revenue – primarily from
fee-based businesses. The Company currently offers a broad range of pre-college,
in-college, and post-college products and services to students, families,
schools, and financial institutions. These products and services help students
and families plan and pay for their education and students plan their careers.
The Company’s products and services are designed to simplify the education
planning and financing process and are focused on providing value to students,
families, and schools throughout the education life cycle. The Company continues
to look for ways to diversify its sources of revenue, including those generated
from businesses that are not dependent upon government programs, reducing
legislative and political risk.
 
 “Base net
income” is the primary financial performance measure used by management to
develop the Company’s financial plans, track results, and establish corporate
performance targets and incentive compensation. While “base net income” is not a
substitute for reported results under GAAP, the Company relies on “base net
income” in operating its business because “base net income” permits management
to make meaningful period-to-period comparisons of the operational and
performance indicators that are most closely assessed by management. Management
believes this information provides additional insight into the financial
performance of the core business activities of the Company’s operating
segments.
 
 42
 Accordingly,
the tables presented below reflect “base net income” which is reviewed and
utilized by management to manage the business for each of the Company’s
operating segments. Reconciliation of the segment totals to the Company’s
consolidated operating results in accordance with GAAP are also included in the
tables below. Included below under “Non-GAAP Performance Measures” is further
discussion regarding “base net income” and its limitations, including a table
that details the differences between “base net income” and GAAP net income by
operating segment.
 
 Segment
Results and Reconciliations to GAAP
   Three
      months ended September 30, 2009Fee-BasedStudent
                                                            
                                                            Tuition
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            "Base
      netLoan
                                                            
                                                            Payment
                                                            
                                                            
                                                            
                                                            Software
                                                            
                                                            
                                                            
                                                            Asset
                                                            
                                                            Corporate
                                                            
                                                            
                                                            
                                                            income"and
                                                            
                                                            Processing
                                                            
                                                            
                                                            
                                                            and
                                                            
                                                            Total
                                                            
                                                            Generation
                                                            
                                                            Activity
                                                            
                                                            Eliminations
                                                            
                                                            Adjustments
                                                            
                                                            GAAPGuaranty
                                                            
                                                            and
      Campus
                                                            
                                                            Enrollment
                                                            
                                                            Technical
                                                            
                                                            Fee-
                                                            
                                                            and
                                                            
                                                            and
                                                            
                                                            and
                                                            
                                                            to
      GAAP
                                                            
                                                            Results
      ofServicing
                                                            
                                                            Commerce
                                                            
                                                            Services
                                                            
                                                            Services
                                                            
                                                            Based
                                                            
                                                            Management
                                                            
                                                            Overhead
                                                            
                                                            Reclassifications
                                                            
                                                            Results
                                                            
                                                            OperationsTotal
      interest income
                                                            $
                                                            23
                                                            
                                                            
                                                            16
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            39
                                                            
                                                            
                                                            144,310
                                                            
                                                            
                                                            1,191
                                                            
                                                            
                                                            (342
                                                            )
                                                            
                                                            —
                                                            
                                                            
                                                            145,198Interest
      expense
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            69,914
                                                            
                                                            
                                                            6,444
                                                            
                                                            
                                                            (342
                                                            )
                                                            
                                                            —
                                                            
                                                            
                                                            76,016Net
      interest income (loss)
                                                            
                                                            23
                                                            
                                                            
                                                            16
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            39
                                                            
                                                            
                                                            74,396
                                                            
                                                            
                                                            (5,253
                                                            )
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            69,182Less
      provision for loan losses
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            7,500
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            7,500Net
      interest income (loss) after provision for loan losses
                                                            
                                                            23
                                                            
                                                            
                                                            16
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            39
                                                            
                                                            
                                                            66,896
                                                            
                                                            
                                                            (5,253
                                                            )
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            61,682Other
      income (expense):Loan
      and guaranty servicing revenue
                                                            
                                                            26,387
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            26,387
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            (381
                                                            )
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            26,006Tuition
      payment processing and campus commerce revenue
                                                            
                                                            —
                                                            
                                                            
                                                            12,987
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            12,987
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            12,987Enrollment
      services revenue
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            30,670
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            30,670
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            30,670Software
      services revenue
                                                            
                                                            966
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            3,634
                                                            
                                                            
                                                            4,600
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            4,600Other
      income
                                                            
                                                            137
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            137
                                                            
                                                            
                                                            9,959
                                                            
                                                            
                                                            998
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            11,094Gain
      (loss) on sale of loans, net
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            8,788
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            8,788Intersegment
      revenue
                                                            
                                                            21,525
                                                            
                                                            
                                                            62
                                                            
                                                            
                                                            139
                                                            
                                                            
                                                            3,793
                                                            
                                                            
                                                            25,519
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            8,355
                                                            
                                                            
                                                            (33,874
                                                            )
                                                            
                                                            —
                                                            
                                                            
                                                            —Derivative
      market value, foreign currency, and put option adjustments
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            2,826
                                                            
                                                            
                                                            2,826Derivative
      settlements, net
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            4,914
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            4,914Total
      other income (expense)
                                                            
                                                            49,015
                                                            
                                                            
                                                            13,049
                                                            
                                                            
                                                            30,809
                                                            
                                                            
                                                            7,427
                                                            
                                                            
                                                            100,300
                                                            
                                                            
                                                            23,661
                                                            
                                                            
                                                            8,972
                                                            
                                                            
                                                            (33,874
                                                            )
                                                            
                                                            2,826
                                                            
                                                            
                                                            101,885Operating
      expenses:Salaries
      and benefits
                                                            
                                                            12,468
                                                            
                                                            
                                                            6,399
                                                            
                                                            
                                                            5,337
                                                            
                                                            
                                                            5,756
                                                            
                                                            
                                                            29,960
                                                            
                                                            
                                                            1,693
                                                            
                                                            
                                                            5,919
                                                            
                                                            
                                                            238
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            37,810Restructure
      expense- severance and contract terminination costs
                                                            
                                                            2,646
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            292
                                                            
                                                            
                                                            2,938
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            402
                                                            
                                                            
                                                            (3,340
                                                            )
                                                            
                                                            —
                                                            
                                                            
                                                            —Impairment
      expense
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —Cost
      to provide enrollment services
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            20,323
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            20,323
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            20,323Other
      expenses
                                                            
                                                            7,613
                                                            
                                                            
                                                            2,265
                                                            
                                                            
                                                            3,266
                                                            
                                                            
                                                            776
                                                            
                                                            
                                                            13,920
                                                            
                                                            
                                                            4,801
                                                            
                                                            
                                                            8,567
                                                            
                                                            
                                                            1,929
                                                            
                                                            
                                                            5,312
                                                            
                                                            
                                                            34,529Intersegment
      expenses
                                                            
                                                            9,398
                                                            
                                                            
                                                            670
                                                            
                                                            
                                                            550
                                                            
                                                            
                                                            786
                                                            
                                                            
                                                            11,404
                                                            
                                                            
                                                            20,764
                                                            
                                                            
                                                            533
                                                            
                                                            
                                                            (32,701
                                                            )
                                                            
                                                            —
                                                            
                                                            
                                                            —Total
      operating expenses
                                                            
                                                            32,125
                                                            
                                                            
                                                            9,334
                                                            
                                                            
                                                            29,476
                                                            
                                                            
                                                            7,610
                                                            
                                                            
                                                            78,545
                                                            
                                                            
                                                            27,258
                                                            
                                                            
                                                            15,421
                                                            
                                                            
                                                            (33,874
                                                            )
                                                            
                                                            5,312
                                                            
                                                            
                                                            92,662Income
      (loss) before income taxes
                                                            
                                                            16,913
                                                            
                                                            
                                                            3,731
                                                            
                                                            
                                                            1,333
                                                            
                                                            
                                                            (183
                                                            )
                                                            
                                                            21,794
                                                            
                                                            
                                                            63,299
                                                            
                                                            
                                                            (11,702
                                                            )
                                                            
                                                            —
                                                            
                                                            
                                                            (2,486
                                                            )
                                                            
                                                            70,905Income
      tax (expense) benefit (a)
                                                            
                                                            (6,427
                                                            )
                                                            
                                                            (1,418
                                                            )
                                                            
                                                            (507
                                                            )
                                                            
                                                            70
                                                            
                                                            
                                                            (8,282
                                                            )
                                                            
                                                            (24,054
                                                            )
                                                            
                                                            6,976
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            859
                                                            
                                                            
                                                            (24,501
                                                            )Net
      income (loss) from continuing operations
                                                            
                                                            10,486
                                                            
                                                            
                                                            2,313
                                                            
                                                            
                                                            826
                                                            
                                                            
                                                            (113
                                                            )
                                                            
                                                            13,512
                                                            
                                                            
                                                            39,245
                                                            
                                                            
                                                            (4,726
                                                            )
                                                            
                                                            —
                                                            
                                                            
                                                            (1,627
                                                            )
                                                            
                                                            46,404Income
      from discontinued operations, net of tax
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —
                                                            
                                                            
                                                            —Net
      income (loss)
                                                            $
                                                            10,486
                                                            
                                                            
                                                            2,313
                                                            
                                                            
                                                            826
                                                            
                                                            
                                                            (113
                                                            )
                                                            
                                                            13,512
                                                            
                                                            
                                                            39,245
                                                            
                                                            
                                                            (4,726
                                                            )
                                                            
                                                            —
                                                            
                                                            
                                                            (1,627
                                                            )
                                                            
                                                            46,404
  (a) Income
taxes are applied based on 38% of income (loss) before income taxes for the
individual operating segments.
 Three
      months ended September 30, 2009:Before
      Tax Operating Margin
                                                                    
                                                                    
                                                                    34.5
                                                                    %
                                                                    
                                                                    
                                                                    28.6
                                                                    %
                                                                    
                                                                    
                                                                    4.3
                                                                    %
                                                                    
                                                                    
                                                                    (2.5
                                                                    %)
                                                                    
                                                                    
                                                                    21.7
                                                                    %
                                                                    
                                                                    
                                                                    69.9
                                                                    %Before
      Tax Operating Margin -excluding
      net interest income forfee
      generating businesses andrestructure
      expense
                                                                    
                                                                    
                                                                    39.9
                                                                    %
                                                                    
                                                                    
                                                                    28.5
                                                                    %
                                                                    
                                                                    
                                                                    4.3
                                                                    %
                                                                    
                                                                    
                                                                    1.5
                                                                    %
                                                                    
                                                                    
                                                                    24.6
                                                                    %
                                                                    
                                                                    
                                                                    69.9
                                                                    %Three
      months ended September 30, 2008:Before
      Tax Operating Margin
                                                                    
                                                                    
                                                                    26.3
                                                                    %
                                                                    
                                                                    
                                                                    29.7
                                                                    %
                                                                    
                                                                    
                                                                    7.1
                                                                    %
                                                                    
                                                                    
                                                                    5.9
                                                                    %
                                                                    
                                                                    
                                                                    19.7
                                                                    %
                                                                    
                                                                    
                                                                    59.8
                                                                    %Before
      Tax Operating Margin -excluding
      net interest income forfee
      generating businesses
                                                                    
                                                                    
                                                                    25.9
                                                                    %
                                                                    
                                                                    
                                                                    27.4
                                                                    %
                                                                    
                                                                    
                                                                    7.1
                                                                    %
                                                                    
                                                                    
                                                                    5.9
                                                                    %
                                                                    
                                                                    
                                                                    19.1
                                                                    %
                                                                    
                                                                    
                                                                    59.8
                                                                    %
 43
 
 Three
      months ended September 30, 2008Fee-BasedTuitionStudent
                                                                              
                                                                              Payment
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              "Base
      netLoan
                                                                              
                                                                              Processing
                                                                              
                                                                              
                                                                              
                                                                              Software
                                                                              
                                                                              
                                                                              
                                                                              Asset
                                                                              
                                                                              Corporate
                                                                              
                                                                              
                                                                              
                                                                              income"and
                                                                              
                                                                              and
                                                                              
                                                                              
                                                                              
                                                                              and
                                                                              
                                                                              Total
                                                                              
                                                                              Generation
                                                                              
                                                                              Activity
                                                                              
                                                                              Eliminations
                                                                              
                                                                              Adjustments
                                                                              
                                                                              GAAPGuaranty
                                                                              
                                                                              Campus
                                                                              
                                                                              Enrollment
                                                                              
                                                                              Technical
                                                                              
                                                                              Fee-
                                                                              
                                                                              and
                                                                              
                                                                              and
                                                                              
                                                                              and
                                                                              
                                                                              to
      GAAP
                                                                              
                                                                              Results
      ofServicing
                                                                              
                                                                              Commerce
                                                                              
                                                                              Services
                                                                              
                                                                              Services
                                                                              
                                                                              Based
                                                                              
                                                                              Management
                                                                              
                                                                              Overhead
                                                                              
                                                                              Reclassifications
                                                                              
                                                                              Results
                                                                              
                                                                              OperationsTotal
      interest income
                                                                              
                                                                              $
                                                                              304
                                                                              
                                                                              
                                                                              396
                                                                              
                                                                              
                                                                              6
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              706
                                                                              
                                                                              
                                                                              290,039
                                                                              
                                                                              
                                                                              2,010
                                                                              
                                                                              
                                                                              (749
                                                                              )
                                                                              
                                                                              1,580
                                                                              
                                                                              
                                                                              293,586Interest
      expense
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              1
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              1
                                                                              
                                                                              
                                                                              224,272
                                                                              
                                                                              
                                                                              10,492
                                                                              
                                                                              
                                                                              (749
                                                                              )
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              234,016Net
      interest income (loss)
                                                                              
                                                                              
                                                                              304
                                                                              
                                                                              
                                                                              396
                                                                              
                                                                              
                                                                              5
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              705
                                                                              
                                                                              
                                                                              65,767
                                                                              
                                                                              
                                                                              (8,482
                                                                              )
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              1,580
                                                                              
                                                                              
                                                                              59,570Less
      provision for loan losses
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              7,000
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              7,000Net
      interest income (loss) after provisionfor
      loan losses
                                                                              
                                                                              
                                                                              304
                                                                              
                                                                              
                                                                              396
                                                                              
                                                                              
                                                                              5
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              705
                                                                              
                                                                              
                                                                              58,767
                                                                              
                                                                              
                                                                              (8,482
                                                                              )
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              1,580
                                                                              
                                                                              
                                                                              52,570Other
      income (expense):Loan
      and guaranty servicing revenue
                                                                              
                                                                              
                                                                              29,827
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              29,827
                                                                              
                                                                              
                                                                              (136
                                                                              )
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              29,691Tuition
      payment processing and campus commerce revenue
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              11,863
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              11,863
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              11,863Enrollment
      services revenue
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              29,858
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              29,858
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              29,858Software
      services revenue
                                                                              
                                                                              
                                                                              942
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              4,217
                                                                              
                                                                              
                                                                              5,159
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              5,159Other
      income
                                                                              
                                                                              
                                                                              6
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              6
                                                                              
                                                                              
                                                                              4,079
                                                                              
                                                                              
                                                                              1,323
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              5,408Intercompany
      revenue
                                                                              
                                                                              
                                                                              18,402
                                                                              
                                                                              
                                                                              58
                                                                              
                                                                              
                                                                              2
                                                                              
                                                                              
                                                                              1,660
                                                                              
                                                                              
                                                                              20,122
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              15,671
                                                                              
                                                                              
                                                                              (35,793
                                                                              )
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —Derivative
      market value, foreign currency,and
      put option adjustments
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              6,085
                                                                              
                                                                              
                                                                              6,085Derivative
      settlements, net
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              789
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              789Total
      other income (expense)
                                                                              
                                                                              
                                                                              49,177
                                                                              
                                                                              
                                                                              11,921
                                                                              
                                                                              
                                                                              29,860
                                                                              
                                                                              
                                                                              5,877
                                                                              
                                                                              
                                                                              96,835
                                                                              
                                                                              
                                                                              4,732
                                                                              
                                                                              
                                                                              16,994
                                                                              
                                                                              
                                                                              (35,793
                                                                              )
                                                                              
                                                                              6,085
                                                                              
                                                                              
                                                                              88,853Operating
      expenses:Salaries
      and benefits
                                                                              
                                                                              
                                                                              13,876
                                                                              
                                                                              
                                                                              6,236
                                                                              
                                                                              
                                                                              5,805
                                                                              
                                                                              
                                                                              4,138
                                                                              
                                                                              
                                                                              30,055
                                                                              
                                                                              
                                                                              1,980
                                                                              
                                                                              
                                                                              14,179
                                                                              
                                                                              
                                                                              (1,952
                                                                              )
                                                                              
                                                                              477
                                                                              
                                                                              
                                                                              44,739Restructure
      expense- severance andcontract
      terminination costs
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —Impairment
      expense
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —Cost
      to provide enrollment services
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              17,904
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              17,904
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              17,904Other
      expenses
                                                                              
                                                                              
                                                                              10,632
                                                                              
                                                                              
                                                                              2,132
                                                                              
                                                                              
                                                                              2,512
                                                                              
                                                                              
                                                                              568
                                                                              
                                                                              
                                                                              15,844
                                                                              
                                                                              
                                                                              5,354
                                                                              
                                                                              
                                                                              13,477
                                                                              
                                                                              
                                                                              (247
                                                                              )
                                                                              
                                                                              6,598
                                                                              
                                                                              
                                                                              41,026Intersegment
      expenses
                                                                              
                                                                              
                                                                              11,940
                                                                              
                                                                              
                                                                              288
                                                                              
                                                                              
                                                                              1,509
                                                                              
                                                                              
                                                                              826
                                                                              
                                                                              
                                                                              14,563
                                                                              
                                                                              
                                                                              18,200
                                                                              
                                                                              
                                                                              831
                                                                              
                                                                              
                                                                              (33,594
                                                                              )
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —Total
      operating expenses
                                                                              
                                                                              
                                                                              36,448
                                                                              
                                                                              
                                                                              8,656
                                                                              
                                                                              
                                                                              27,730
                                                                              
                                                                              
                                                                              5,532
                                                                              
                                                                              
                                                                              78,366
                                                                              
                                                                              
                                                                              25,534
                                                                              
                                                                              
                                                                              28,487
                                                                              
                                                                              
                                                                              (35,793
                                                                              )
                                                                              
                                                                              7,075
                                                                              
                                                                              
                                                                              103,669Income
      (loss) before income taxes
                                                                              
                                                                              
                                                                              13,033
                                                                              
                                                                              
                                                                              3,661
                                                                              
                                                                              
                                                                              2,135
                                                                              
                                                                              
                                                                              345
                                                                              
                                                                              
                                                                              19,174
                                                                              
                                                                              
                                                                              37,965
                                                                              
                                                                              
                                                                              (19,975
                                                                              )
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              590
                                                                              
                                                                              
                                                                              37,754Income
      tax (expense) benefit (a)
                                                                              
                                                                              
                                                                              (4,823
                                                                              )
                                                                              
                                                                              (1,354
                                                                              
                                                                              
                                                                              (790
                                                                              )
                                                                              
                                                                              (128
                                                                              )
                                                                              
                                                                              (7,095
                                                                              )
                                                                              
                                                                              (14,047
                                                                              )
                                                                              
                                                                              7,391
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              (218
                                                                              )
                                                                              
                                                                              (13,969
                                                                              )Net
      income (loss) from continuing operations
                                                                              
                                                                              
                                                                              8,210
                                                                              
                                                                              
                                                                              2,307
                                                                              
                                                                              
                                                                              1,345
                                                                              
                                                                              
                                                                              217
                                                                              
                                                                              
                                                                              12,079
                                                                              
                                                                              
                                                                              23,918
                                                                              
                                                                              
                                                                              (12,584
                                                                              )
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              372
                                                                              
                                                                              
                                                                              23,785Income
      from discontinued operations, net of tax
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              —Net
      income (loss)
                                                                              
                                                                              $
                                                                              8,210
                                                                              
                                                                              
                                                                              2,307
                                                                              
                                                                              
                                                                              1,345
                                                                              
                                                                              
                                                                              217
                                                                              
                                                                              
                                                                              12,079
                                                                              
                                                                              
                                                                              23,918
                                                                              
                                                                              
                                                                              (12,584
                                                                              )
                                                                              
                                                                              —
                                                                              
                                                                              
                                                                              372
                                                                              
                                                                              
                                                                              23,785(a)
      Income taxes are applied based on the consolidated effective tax rate to
      income (loss) before income taxes.
 
 44
  Nine
      months ended September 30, 2009Fee-BasedTuitionStudent
                                                  
                                                  Payment
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  "Base
      netLoan
                                                  
                                                  Processing
                                                  
                                                  
                                                  
                                                  Software
                                                  
                                                  
                                                  
                                                  Asset
                                                  
                                                  Corporate
                                                  
                                                  
                                                  
                                                  income"and
                                                  
                                                  and
                                                  
                                                  
                                                  
                                                  and
                                                  
                                                  Total
                                                  
                                                  Generation
                                                  
                                                  Activity
                                                  
                                                  Eliminations
                                                  
                                                  Adjustments
                                                  
                                                  GAAPGuaranty
                                                  
                                                  Campus
                                                  
                                                  Enrollment
                                                  
                                                  Technical
                                                  
                                                  Fee-
                                                  
                                                  and
                                                  
                                                  and
                                                  
                                                  and
                                                  
                                                  to
      GAAP
                                                  
                                                  Results
      ofServicing
                                                  
                                                  Commerce
                                                  
                                                  Services
                                                  
                                                  Services
                                                  
                                                  Based
                                                  
                                                  Management
                                                  
                                                  Overhead
                                                  
                                                  Reclassifications
                                                  
                                                  Results
                                                  
                                                  OperationsTotal
      interest income
                                                  
                                                  $
                                                  102
                                                  
                                                  
                                                  57
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  159
                                                  
                                                  
                                                  473,130
                                                  
                                                  
                                                  3,930
                                                  
                                                  
                                                  (1,324
                                                  )
                                                  
                                                  7,502
                                                  
                                                  
                                                  483,397Interest
      expense
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  306,846
                                                  
                                                  
                                                  23,078
                                                  
                                                  
                                                  (1,324
                                                  )
                                                  
                                                  —
                                                  
                                                  
                                                  328,600Net
      interest income (loss)
                                                  
                                                  
                                                  102
                                                  
                                                  
                                                  57
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  159
                                                  
                                                  
                                                  166,284
                                                  
                                                  
                                                  (19,148
                                                  )
                                                  
                                                  —
                                                  
                                                  
                                                  7,502
                                                  
                                                  
                                                  154,797Less
      provision for loan losses
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  23,000
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  23,000Net
      interest income (loss) after provision for loan
    losses
                                                  
                                                  
                                                  102
                                                  
                                                  
                                                  57
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  159
                                                  
                                                  
                                                  143,284
                                                  
                                                  
                                                  (19,148
                                                  )
                                                  
                                                  —
                                                  
                                                  
                                                  7,502
                                                  
                                                  
                                                  131,797Other
      income (expense):Loan
      and guaranty servicing revenue
                                                  
                                                  
                                                  82,424
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  82,424
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  (1,144
                                                  )
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  81,280Tuition
      payment processing and campus commerce revenue
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  40,373
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  40,373
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  40,373Enrollment
      services revenue
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  88,188
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  88,188
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  88,188Software
      services revenue
                                                  
                                                  
                                                  2,766
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  13,658
                                                  
                                                  
                                                  16,424
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  16,424Other
      income
                                                  
                                                  
                                                  498
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  498
                                                  
                                                  
                                                  18,851
                                                  
                                                  
                                                  20,134
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  39,483Gain
      (loss) on sale of loans, net
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  8,386
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  8,386Intersegment
      revenue
                                                  
                                                  
                                                  62,291
                                                  
                                                  
                                                  172
                                                  
                                                  
                                                  416
                                                  
                                                  
                                                  10,813
                                                  
                                                  
                                                  73,692
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  25,739
                                                  
                                                  
                                                  (99,431
                                                  )
                                                  
                                                  —
                                                  
                                                  
                                                  —Derivative
      market value, foreign currency,and
      put option adjustments
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  (36,067
                                                  )
                                                  
                                                  (36,067
                                                  )Derivative
      settlements, net
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  38,807
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  38,807Total
      other income (expense)
                                                  
                                                  
                                                  147,979
                                                  
                                                  
                                                  40,545
                                                  
                                                  
                                                  88,604
                                                  
                                                  
                                                  24,471
                                                  
                                                  
                                                  301,599
                                                  
                                                  
                                                  66,044
                                                  
                                                  
                                                  44,729
                                                  
                                                  
                                                  (99,431
                                                  )
                                                  
                                                  (36,067
                                                  )
                                                  
                                                  276,874Operating
      expenses:Salaries
      and benefits
                                                  
                                                  
                                                  40,527
                                                  
                                                  
                                                  19,346
                                                  
                                                  
                                                  17,295
                                                  
                                                  
                                                  16,656
                                                  
                                                  
                                                  93,824
                                                  
                                                  
                                                  5,203
                                                  
                                                  
                                                  18,420
                                                  
                                                  
                                                  (1,390
                                                  )
                                                  
                                                  159
                                                  
                                                  
                                                  116,216Restructure
      expense- severance and contracttermination
      costs
                                                  
                                                  
                                                  5,159
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  714
                                                  
                                                  
                                                  5,873
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  755
                                                  
                                                  
                                                  (6,628
                                                  )
                                                  
                                                  —
                                                  
                                                  
                                                  —Impairment
      expense
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —Cost
      to provide enrollment services
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  56,208
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  56,208
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  56,208Other
      expenses
                                                  
                                                  
                                                  27,350
                                                  
                                                  
                                                  7,012
                                                  
                                                  
                                                  9,602
                                                  
                                                  
                                                  2,292
                                                  
                                                  
                                                  46,256
                                                  
                                                  
                                                  15,635
                                                  
                                                  
                                                  27,287
                                                  
                                                  
                                                  3,736
                                                  
                                                  
                                                  17,251
                                                  
                                                  
                                                  110,165Intersegment
      expenses
                                                  
                                                  
                                                  28,352
                                                  
                                                  
                                                  1,962
                                                  
                                                  
                                                  1,604
                                                  
                                                  
                                                  2,195
                                                  
                                                  
                                                  34,113
                                                  
                                                  
                                                  59,372
                                                  
                                                  
                                                  1,664
                                                  
                                                  
                                                  (95,149
                                                  )
                                                  
                                                  —
                                                  
                                                  
                                                  —Total
      operating expenses
                                                  
                                                  
                                                  101,388
                                                  
                                                  
                                                  28,320
                                                  
                                                  
                                                  84,709
                                                  
                                                  
                                                  21,857
                                                  
                                                  
                                                  236,274
                                                  
                                                  
                                                  80,210
                                                  
                                                  
                                                  48,126
                                                  
                                                  
                                                  (99,431
                                                  )
                                                  
                                                  17,410
                                                  
                                                  
                                                  282,589Income
      (loss) before income taxes
                                                  
                                                  
                                                  46,693
                                                  
                                                  
                                                  12,282
                                                  
                                                  
                                                  3,895
                                                  
                                                  
                                                  2,614
                                                  
                                                  
                                                  65,484
                                                  
                                                  
                                                  129,118
                                                  
                                                  
                                                  (22,545
                                                  )
                                                  
                                                  —
                                                  
                                                  
                                                  (45,975
                                                  )
                                                  
                                                  126,082Income
      tax (expense) benefit (a)
                                                  
                                                  
                                                  (17,744
                                                  )
                                                  
                                                  (4,667
                                                  )
                                                  
                                                  (1,480
                                                  )
                                                  
                                                  (994
                                                  )
                                                  
                                                  (24,885
                                                  )
                                                  
                                                  (49,066
                                                  )
                                                  
                                                  11,150
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  16,781
                                                  
                                                  
                                                  (46,020
                                                  )Net
      income (loss) from continuing operations
                                                  
                                                  
                                                  28,949
                                                  
                                                  
                                                  7,615
                                                  
                                                  
                                                  2,415
                                                  
                                                  
                                                  1,620
                                                  
                                                  
                                                  40,599
                                                  
                                                  
                                                  80,052
                                                  
                                                  
                                                  (11,395
                                                  )
                                                  
                                                  —
                                                  
                                                  
                                                  (29,194
                                                  )
                                                  
                                                  80,062Income
      from discontinued operations, net of tax
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —
                                                  
                                                  
                                                  —Net
      income (loss)
                                                  
                                                  $
                                                  28,949
                                                  
                                                  
                                                  7,615
                                                  
                                                  
                                                  2,415
                                                  
                                                  
                                                  1,620
                                                  
                                                  
                                                  40,599
                                                  
                                                  
                                                  80,052
                                                  
                                                  
                                                  (11,395
                                                  )
                                                  
                                                  —
                                                  
                                                  
                                                  (29,194
                                                  )
                                                  
                                                  80,062




(a) Income
taxes are applied based on 38% of income (loss) before taxes for the individual
operating segments.


Nine
      months ended September 30, 2009:Before
      Tax Operating Margin
                    
                    
                    31.5
                    %
                    
                    
                    30.2
                    %
                    
                    
                    4.4
                    %
                    
                    
                    10.7
                    %
                    
                    
                    21.7
                    %
                    
                    
                    61.7
                    %Before
      Tax Operating Margin -excluding
      net interest income for fee generatingbusinesses
      and restructure expense
                    
                    
                    35.0
                    %
                    
                    
                    30.2
                    %
                    
                    
                    4.4
                    %
                    
                    
                    13.6
                    %
                    
                    
                    23.6
                    %
                    
                    
                    61.7
                    %Nine
      months ended September 30, 2008:Before
      Tax Operating Margin
                    
                    
                    22.5
                    %
                    
                    
                    33.0
                    %
                    
                    
                    4.1
                    %
                    
                    
                    13.6
                    %
                    
                    
                    17.8
                    %
                    
                    
                    32.6
                    %Before
      Tax Operating Margin -excluding
      net interest income for fee generatingbusinesses,
      restructure expense, impairment expense,and
      the loss on sale of loans in the first quarterof
      2008
                    
                    
                    26.1
                    %
                    
                    
                    30.3
                    %
                    
                    
                    4.4
                    %
                    
                    
                    16.0
                    %
                    
                    
                    19.4
                    %
                    
                    
                    56.3
                    %


45
  Nine
      months ended September 30, 2008Fee-BasedTuitionStudent
                                                
                                                Payment
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                "Base
      netLoan
                                                
                                                Processing
                                                
                                                
                                                
                                                Software
                                                
                                                
                                                
                                                Asset
                                                
                                                Corporate
                                                
                                                
                                                
                                                income"and
                                                
                                                and
                                                
                                                
                                                
                                                and
                                                
                                                Total
                                                
                                                Generation
                                                
                                                Activity
                                                
                                                Eliminations
                                                
                                                Adjustments
                                                
                                                GAAPGuaranty
                                                
                                                Campus
                                                
                                                Enrollment
                                                
                                                Technical
                                                
                                                Fee-
                                                
                                                and
                                                
                                                and
                                                
                                                and
                                                
                                                to
      GAAP
                                                
                                                Results
      ofServicing
                                                
                                                Commerce
                                                
                                                Services
                                                
                                                Services
                                                
                                                Based
                                                
                                                Management
                                                
                                                Overhead
                                                
                                                Reclassifications
                                                
                                                Results
                                                
                                                OperationsTotal
      interest income
                                                
                                                $
                                                1,160
                                                
                                                
                                                1,471
                                                
                                                
                                                16
                                                
                                                
                                                —
                                                
                                                
                                                2,647
                                                
                                                
                                                892,690
                                                
                                                
                                                4,781
                                                
                                                
                                                (1,389
                                                )
                                                
                                                42,325
                                                
                                                
                                                941,054Interest
      expense
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                3
                                                
                                                
                                                —
                                                
                                                
                                                3
                                                
                                                
                                                762,689
                                                
                                                
                                                30,318
                                                
                                                
                                                (1,389
                                                )
                                                
                                                —
                                                
                                                
                                                791,621Net
      interest income (loss)
                                                
                                                
                                                1,160
                                                
                                                
                                                1,471
                                                
                                                
                                                13
                                                
                                                
                                                —
                                                
                                                
                                                2,644
                                                
                                                
                                                130,001
                                                
                                                
                                                (25,537
                                                )
                                                
                                                —
                                                
                                                
                                                42,325
                                                
                                                
                                                149,433Less
      provision for loan losses
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                18,000
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                18,000Net
      interest income (loss) after provisionfor
      loan losses
                                                
                                                
                                                1,160
                                                
                                                
                                                1,471
                                                
                                                
                                                13
                                                
                                                
                                                —
                                                
                                                
                                                2,644
                                                
                                                
                                                112,001
                                                
                                                
                                                (25,537
                                                )
                                                
                                                —
                                                
                                                
                                                42,325
                                                
                                                
                                                131,433Other
      income (expense):Loan
      and guaranty servicing revenue
                                                
                                                
                                                78,147
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                78,147
                                                
                                                
                                                26
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                78,173Tuition
      payment processing and campus commerce revenue
                                                
                                                
                                                —
                                                
                                                
                                                35,980
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                35,980
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                35,980Enrollment
      services revenue
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                83,148
                                                
                                                
                                                —
                                                
                                                
                                                83,148
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                83,148Software
      services revenue
                                                
                                                
                                                3,477
                                                
                                                
                                                —
                                                
                                                
                                                37
                                                
                                                
                                                15,828
                                                
                                                
                                                19,342
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                19,342Other
      income
                                                
                                                
                                                44
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                44
                                                
                                                
                                                13,787
                                                
                                                
                                                3,956
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                17,787Gain
      (loss) on sale of loans, net
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                (47,426
                                                )
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                (47,426
                                                )Intersegment
      revenue
                                                
                                                
                                                57,008
                                                
                                                
                                                242
                                                
                                                
                                                2
                                                
                                                
                                                4,993
                                                
                                                
                                                62,245
                                                
                                                
                                                —
                                                
                                                
                                                46,843
                                                
                                                
                                                (109,088
                                                )
                                                
                                                —
                                                
                                                
                                                —Derivative
      market value, foreign currency,and
      put option adjustments
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                466
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                (35,987
                                                )
                                                
                                                (35,521
                                                )Derivative
      settlements, net
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                55,954
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                (9,965
                                                )
                                                
                                                45,989Total
      other income (expense)
                                                
                                                
                                                138,676
                                                
                                                
                                                36,222
                                                
                                                
                                                83,187
                                                
                                                
                                                20,821
                                                
                                                
                                                278,906
                                                
                                                
                                                22,807
                                                
                                                
                                                50,799
                                                
                                                
                                                (109,088
                                                )
                                                
                                                (45,952
                                                )
                                                
                                                197,472Operating
      expenses:Salaries
      and benefits
                                                
                                                
                                                40,365
                                                
                                                
                                                17,450
                                                
                                                
                                                18,701
                                                
                                                
                                                14,031
                                                
                                                
                                                90,547
                                                
                                                
                                                6,157
                                                
                                                
                                                41,581
                                                
                                                
                                                1,323
                                                
                                                
                                                2,523
                                                
                                                
                                                142,131Restructure
      expense- severence andcontract
      terminination costs
                                                
                                                
                                                747
                                                
                                                
                                                —
                                                
                                                
                                                282
                                                
                                                
                                                487
                                                
                                                
                                                1,516
                                                
                                                
                                                1,845
                                                
                                                
                                                3,746
                                                
                                                
                                                (7,107
                                                )
                                                
                                                —
                                                
                                                
                                                —Impairment
      expense
                                                
                                                
                                                5,074
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                5,074
                                                
                                                
                                                9,351
                                                
                                                
                                                4,409
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                18,834Cost
      to provide enrollment services
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                48,062
                                                
                                                
                                                —
                                                
                                                
                                                48,062
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                48,062Other
      expenses
                                                
                                                
                                                27,130
                                                
                                                
                                                6,743
                                                
                                                
                                                7,801
                                                
                                                
                                                1,901
                                                
                                                
                                                43,575
                                                
                                                
                                                15,793
                                                
                                                
                                                42,263
                                                
                                                
                                                51
                                                
                                                
                                                19,719
                                                
                                                
                                                121,401Intersegment
      expenses
                                                
                                                
                                                35,040
                                                
                                                
                                                1,045
                                                
                                                
                                                4,936
                                                
                                                
                                                1,562
                                                
                                                
                                                42,583
                                                
                                                
                                                57,754
                                                
                                                
                                                3,018
                                                
                                                
                                                (103,355
                                                )
                                                
                                                —
                                                
                                                
                                                —Total
      operating expenses
                                                
                                                
                                                108,356
                                                
                                                
                                                25,238
                                                
                                                
                                                79,782
                                                
                                                
                                                17,981
                                                
                                                
                                                231,357
                                                
                                                
                                                90,900
                                                
                                                
                                                95,017
                                                
                                                
                                                (109,088
                                                )
                                                
                                                22,242
                                                
                                                
                                                330,428Income
      (loss) before income taxes
                                                
                                                
                                                31,480
                                                
                                                
                                                12,455
                                                
                                                
                                                3,418
                                                
                                                
                                                2,840
                                                
                                                
                                                50,193
                                                
                                                
                                                43,908
                                                
                                                
                                                (69,755
                                                )
                                                
                                                —
                                                
                                                
                                                (25,869
                                                )
                                                
                                                (1,523
                                                )Income
      tax (expense) benefit (a)
                                                
                                                
                                                (10,542
                                                )
                                                
                                                (4,081
                                                )
                                                
                                                (1,187
                                                )
                                                
                                                (902
                                                )
                                                
                                                (16,712
                                                )
                                                
                                                (15,889
                                                )
                                                
                                                22,824
                                                
                                                
                                                —
                                                
                                                
                                                7,984
                                                
                                                
                                                (1,793
                                                )Net
      income (loss) from continuing operations
                                                
                                                
                                                20,938
                                                
                                                
                                                8,374
                                                
                                                
                                                2,231
                                                
                                                
                                                1,938
                                                
                                                
                                                33,481
                                                
                                                
                                                28,019
                                                
                                                
                                                (46,931
                                                )
                                                
                                                —
                                                
                                                
                                                (17,885
                                                )
                                                
                                                (3,316
                                                )Income
      from discontinued operations, net of tax
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                —
                                                
                                                
                                                981
                                                
                                                
                                                981Net
      income (loss)
                                                
                                                $
                                                20,938
                                                
                                                
                                                8,374
                                                
                                                
                                                2,231
                                                
                                                
                                                1,938
                                                
                                                
                                                33,481
                                                
                                                
                                                28,019
                                                
                                                
                                                (46,931
                                                )
                                                
                                                —
                                                
                                                
                                                (16,904
                                                )
                                                
                                                (2,335
                                                )(a)
      Income taxes are applied based on the consolidated effective tax rate to
      income (loss) before income taxes.
 
 Non-GAAP
Performance Measures
 
 In
accordance with the rules and regulations of the Securities and Exchange
Commission, the Company prepares financial statements in accordance with
generally accepted accounting principles. In addition to evaluating the
Company’s GAAP-based financial information, management also evaluates the
Company’s operating segments on a non-GAAP performance measure referred to as
“base net income” for each operating segment. While “base net income” is not a
substitute for reported results under GAAP, the Company relies on “base net
income” to manage each operating segment because management believes these
measures provide additional information regarding the operational and
performance indicators that are most closely assessed by
management.
 
 “Base net
income” is the primary financial performance measure used by management to
develop financial plans, establish corporate performance targets, allocate
resources, track results, evaluate performance, and determine incentive
compensation. Accordingly, financial information is reported to management on a
“base net income” basis by operating segment, as these are the measures used
regularly by the Company’s chief operating decision maker. The Company’s board
of directors utilizes “base net income” to set performance targets and evaluate
management’s performance. The Company also believes analysts, rating agencies,
and creditors use “base net income” in their evaluation of the Company’s results
of operations. While “base net income” is not a substitute for reported results
under GAAP, the Company utilizes “base net income” in operating its business
because “base net income” permits management to make meaningful period-to-period
comparisons by eliminating the temporary volatility in the Company’s performance
that arises from certain items that are primarily affected by factors beyond the
control of management. Management believes “base net income” provides additional
insight into the financial performance of the core business activities of the
Company’s operations.
 
 Limitations
of “Base Net Income”
 
 While
GAAP provides a uniform, comprehensive basis of accounting, for the reasons
discussed above, management believes that “base net income” is an important
additional tool for providing a more complete understanding of the Company’s
results of operations. Nevertheless, “base net income” is subject to certain
general and specific limitations that investors should carefully consider. For
example, as stated above, unlike financial accounting, there is no
comprehensive, authoritative guidance for management reporting. The Company’s
“base net income” is not a defined term within GAAP and may not be comparable to
similarly titled measures reported by other companies. Investors, therefore, may
not be able to compare the Company’s performance with that of other companies
based upon “base net income”. “Base net income” results are only meant to
supplement GAAP results by providing additional information regarding the
operational and performance indicators that are most closely monitored and used
by the Company’s management and board of directors to assess performance and
information which the Company believes is important to analysts, rating
agencies, and creditors.
 
 46
 Other
limitations of “base net income” arise from the specific adjustments that
management makes to GAAP results to derive “base net income” results. These
differences are described below.
 
 The
adjustments required to reconcile from the Company’s “base net income” measure
to its GAAP results of operations relate to differing treatments for
derivatives, foreign currency transaction adjustments, and certain other items
that management does not consider in evaluating the Company’s operating results.
The following table reflects adjustments associated with these areas by
operating segment and Corporate Activity and Overhead:
 
 Student
                                    
                                    TuitionLoan
                                    
                                    Payment
                                    
                                    
                                    
                                    Software
                                    
                                    Asset
                                    
                                    Corporateand
                                    
                                    Processing
                                    
                                    
                                    
                                    and
                                    
                                    Generation
                                    
                                    ActivityGuaranty
                                    
                                    and
      Campus
                                    
                                    Enrollment
                                    
                                    Technical
                                    
                                    and
                                    
                                    andServicing
                                    
                                    Commerce
                                    
                                    Services
                                    
                                    Services
                                    
                                    Management
                                    
                                    Overhead
                                    
                                    TotalThree
      months ended September 30, 2009Derivative
      market value, foreign currency, andput
      option adjustments
                                    $
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    (2,826)
                                    
                                    —
                                    
                                    (2,826)Amortization
      of intangible assets
                                    
                                    1,078
                                    
                                    1,842
                                    
                                    2,251
                                    
                                    141
                                    
                                    —
                                    
                                    —
                                    
                                    5,312Compensation
      related to business combinations
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    —Variable-rate
      floor income, net of settlements on derivatives
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    —Income
      from discontinued operations, net of tax
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    —Net
      tax effect (a)
                                    
                                    (410)
                                    
                                    (700)
                                    
                                    (855)
                                    
                                    (54)
                                    
                                    1,074
                                    
                                    86
                                    
                                    (859)Total
      adjustments to GAAP
                                    $
                                    668
                                    
                                    1,142
                                    
                                    1,396
                                    
                                    87
                                    
                                    (1,752)
                                    
                                    86
                                    
                                    1,627Three
      months ended September 30, 2008Derivative
      market value, foreign currency, andput
      option adjustments
                                    $
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    (9,030)
                                    
                                    2,945
                                    
                                    (6,085)Amortization
      of intangible assets
                                    
                                    1,165
                                    
                                    1,889
                                    
                                    3,258
                                    
                                    286
                                    
                                    —
                                    
                                    —
                                    
                                    6,598Compensation
      related to business combinations
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    477
                                    
                                    477Variable-rate
      floor income, net of settlements on derivatives
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    (1,580)
                                    
                                    —
                                    
                                    (1,580)Income
      from discontinued operations, net of tax
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    —Net
      tax effect (a)
                                    
                                    (432)
                                    
                                    (699)
                                    
                                    (1,205)
                                    
                                    (106)
                                    
                                    3,926
                                    
                                    (1,266)
                                    
                                    218Total
      adjustments to GAAP
                                    $
                                    733
                                    
                                    1,190
                                    
                                    2,053
                                    
                                    180
                                    
                                    (6,684)
                                    
                                    2,156
                                    
                                    (372)Nine
      months ended September 30, 2009Derivative
      market value, foreign currency, andput
      option adjustments
                                    $
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    37,499
                                    
                                    (1,432)
                                    
                                    36,067Amortization
      of intangible assets
                                    
                                    3,236
                                    
                                    5,598
                                    
                                    7,994
                                    
                                    423
                                    
                                    —
                                    
                                    —
                                    
                                    17,251Compensation
      related to business combinations
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    159
                                    
                                    159Variable-rate
      floor income, net of settlements on derivatives
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    (7,502)
                                    
                                    —
                                    
                                    (7,502)Income
      (loss) from discontinued operations, net of tax
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    —Net
      tax effect (a)
                                    
                                    (1,230)
                                    
                                    (2,127)
                                    
                                    (3,037)
                                    
                                    (161)
                                    
                                    (11,399)
                                    
                                    1,173
                                    
                                    (16,781)Total
      adjustments to GAAP
                                    $
                                    2,006
                                    
                                    3,471
                                    
                                    4,957
                                    
                                    262
                                    
                                    18,598
                                    
                                    (100)
                                    
                                    29,194Nine
      months ended September 30, 2008Derivative
      market value, foreign currency, andput
      option adjustments
                                    $
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    32,504
                                    
                                    3,483
                                    
                                    35,987Amortization
      of intangible assets
                                    
                                    3,586
                                    
                                    5,937
                                    
                                    9,193
                                    
                                    858
                                    
                                    145
                                    
                                    —
                                    
                                    19,719Compensation
      related to business combinations
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    2,523
                                    
                                    2,523Variable-rate
      floor income, net of settlements on derivatives
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    (32,360)
                                    
                                    —
                                    
                                    (32,360)Loss
      from discontinued operations, net of tax
                                    
                                    (981)
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    —
                                    
                                    (981)Net
      tax effect (a)
                                    
                                    (1,182)
                                    
                                    (1,954)
                                    
                                    (3,045)
                                    
                                    (284)
                                    
                                    548
                                    
                                    (2,067)
                                    
                                    (7,984)Total
      adjustments to GAAP
                                    $
                                    1,423
                                    
                                    3,983
                                    
                                    6,148
                                    
                                    574
                                    
                                    837
                                    
                                    3,939
                                    
                                    16,904
  (a)
              For
      2009, income taxes are applied based on 38% of income (loss) before income
      taxes for the individual operating segments. For 2008, income taxes for
      each individual operating segment are applied based on the consolidated
      effective tax rate.
 
 47
 Differences
between GAAP and “Base Net Income”
 
 Management’s
financial planning and evaluation of operating results does not take into
account the following items because their volatility and/or inherent uncertainty
affect the period-to-period comparability of the Company’s results of
operations. A more detailed discussion of the differences between GAAP and “base
net income” follows.
 
 Derivative market
value, foreign currency, and put option adjustments: “Base net income”
excludes the periodic unrealized gains and losses that are caused by the change
in fair value on derivatives used in the Company’s risk management strategy in
which the Company does not qualify for “hedge treatment” under GAAP. As such,
the Company recognizes changes in fair value of derivative instruments currently
in earnings. The Company maintains an overall interest rate risk management
strategy that incorporates the use of derivative instruments to reduce the
economic effect of interest rate volatility. Derivative instruments primarily
used by the Company include interest rate swaps, basis swaps, and cross-currency
interest rate swaps. Management has structured all of the Company's derivative
transactions with the intent that each is economically effective. However, the
Company does not qualify its derivatives for “hedge treatment”, and the
stand-alone derivative must be marked-to-market in the income statement with no
consideration for the corresponding change in fair value of the hedged item. The
Company believes these point-in-time estimates of asset and liability values
that are subject to interest rate fluctuations make it difficult to evaluate the
ongoing results of operations against its business plan and affect the
period-to-period comparability of the results of operations. Included in “base
net income” are the economic effects of the Company’s derivative instruments,
which includes any cash paid or received being recognized as an expense or
revenue upon actual derivative settlements. These settlements are included in
“Derivative market value, foreign currency, and put option adjustments and
derivative settlements, net” on the Company’s consolidated statements of
operations.
 
 “Base net
income” excludes the foreign currency transaction gains or losses caused by the
re-measurement of the Company’s Euro-denominated bonds to U.S. dollars. In
connection with the issuance of the Euro-denominated bonds, the Company has
entered into cross-currency interest rate swaps. Under the terms of these
agreements, the principal payments on the Euro-denominated notes will
effectively be paid at the exchange rate in effect at the issuance date of the
bonds. The cross-currency interest rate swaps also convert the floating rate
paid on the Euro-denominated bonds (EURIBOR index) to an index based on LIBOR.
Included in “base net income” are the economic effects of any cash paid or
received being recognized as an expense or revenue upon actual settlements of
the cross-currency interest rate swaps. These settlements are included in
“Derivative market value, foreign currency, and put option adjustments and
derivative settlements, net” on the Company’s consolidated statements of
operations. However, the gains or losses caused by the re-measurement of the
Euro-denominated bonds to U.S. dollars and the change in market value of the
cross-currency interest rate swaps are excluded from “base net income” as the
Company believes the point-in-time estimates of value that are subject to
currency rate fluctuations related to these financial instruments make it
difficult to evaluate the ongoing results of operations against the Company’s
business plan and affect the period-to-period comparability of the results of
operations. The re-measurement of the Euro-denominated bonds generally
correlates with the change in fair value of the cross-currency interest rate
swaps. However, the Company will experience unrealized gains or losses related
to the cross-currency interest rate swaps if the two underlying indices (and
related forward curve) do not move in parallel.
 
 In 2008,
“base net income” also excluded the change in fair value of put options issued
by the Company for certain business acquisitions. The put options were valued by
the Company each reporting period using a Black-Scholes pricing model.
Therefore, the fair value of those options were primarily affected by the strike
price and term of the underlying option, the Company’s stock price, and the
dividend yield and volatility of the Company’s stock. The Company believed those
point-in-time estimates of value that were subject to fluctuations made it
difficult to evaluate the ongoing results of operations against the Company’s
business plans and affected the period-to-period comparability of the results of
operations. In 2008, the Company settled all of its obligations related to these
put options.
 
 The gains
and/or losses included in “Derivative market value, foreign currency, and put
option adjustments and derivative settlements, net” on the Company’s
consolidated statements of operations are primarily caused by interest rate and
currency volatility, changes in the value of put options based on the inputs
used in the Black-Scholes pricing model, as well as the volume and terms of put
options and of derivatives not receiving hedge treatment. “Base net income”
excludes these unrealized gains and losses and isolates the effect of interest
rate, currency, and put option volatility on the fair value of such instruments
during the period. Under GAAP, the effects of these factors on the fair value of
the put options and the derivative instruments (but not the underlying hedged
item) tend to show more volatility in the short term.
 
 Amortization of
intangible assets:“Base net income” excludes the amortization of
acquired intangibles, which arises primarily from the acquisition of definite
life intangible assets in connection with the Company’s acquisitions, since the
Company feels that such charges do not drive the Company’s operating performance
on a long-term basis and can affect the period-to-period comparability of the
results of operations.
 
 Compensation
related to business combinations: The Company has structured certain
business combinations in which the consideration paid has been dependent on the
sellers’ continued employment with the Company. As such, the value of the
consideration paid is recognized as compensation expense by the Company over the
term of the applicable employment agreement. “Base net income” excludes this
expense because the Company believes such charges do not drive its operating
performance on a long-term basis and can affect the period-to-period
comparability of the results of operations. If the Company did not enter into
the employment agreements in connection with the acquisition, the amount paid to
these former shareholders of the acquired entity would have been recorded by the
Company as additional consideration of the acquired entity, thus, not having an
effect on the Company’s results of operations.
 
 48
 Variable-rate
floor income, net of settlements on derivatives:Loans that reset annually on
July 1 can generate excess spread income compared with the rate based on the
special allowance payment formula in declining interest rate environments. The
Company refers to this additional income as variable-rate floor income. The
Company excludes variable-rate floor income, net of settlements paid on
derivatives used to hedge student loan assets earning variable-rate floor
income, from its “base net income” since the timing and amount of variable-rate
floor income (if any) is uncertain, it has been eliminated by legislation for
all loans originated on and after April 1, 2006, and it is in excess of expected
spreads. In addition, because variable-rate floor income is subject to the
underlying rate for the subject loans being reset annually on July 1, it is a
factor beyond the Company’s control which can affect the period-to-period
comparability of results of operations.
 
 Prior to
October 1, 2008, variable rate floor income was calculated by the Company on a
statutory maximum basis. However, as a result of the disruption in the capital
markets beginning in August 2007, the full benefit of variable rate floor income
calculated on a statutory maximum basis has not been realized by the Company due
to the widening of the spread between short term interest rate indices and the
Company’s actual cost of funds. As a result of the ongoing volatility of
interest rates, effective October 1, 2008, the Company changed its calculation
of variable rate floor income to better reflect the economic benefit received by
the Company. The economic benefit received by the Company related to variable
rate floor income was $0.1 million for the three months ended September 30, 2008
and $7.5 million and $25.7 million for the nine months ended September 30, 2009
and 2008, respectively. There was no economic benefit received by the Company
related to variable rate floor income for the three months ended September 30,
2009. Variable rate floor income calculated on a statutory maximum basis was
$0.1 million and $1.6 million for the three months ended September 30, 2009 and
2008, respectively, and $23.9 million and $42.3
million for the nine months ended September 30, 2009 and 2008, respectively.
Beginning October 1, 2008, the economic benefit received by the Company has been
used to determine base net income.
 
 The
Company has used derivative instruments to hedge variable rate floor income
during certain periods. During the nine months ended September 30, 2008, the
Company made payments (settlements) of $10.0 million on such derivatives. These
settlements are netted with variable-rate floor income and are excluded from
“base net income.”
 
 Discontinued
operations: In May 2007, the Company sold EDULINX. As a result of this
transaction, the results of operations for EDULINX are reported as discontinued
operations for all periods presented. The Company presents “base net income”
excluding discontinued operations since the operations and cash flows of EDULINX
have been eliminated from the ongoing operations of the Company.
 
 STUDENT
LOAN AND GUARANTY SERVICING OPERATING SEGMENT – RESULTS OF
OPERATIONS
 
 The
Student Loan and Guaranty Servicing operating segment provides for the servicing
of the Company’s student loan portfolio and the portfolios of third parties and
servicing provided to guaranty agencies. The servicing and business process
outsourcing activities include loan origination activities, loan conversion
activities, application processing, borrower updates, payment processing, due
diligence procedures, and claim processing. These activities are performed
internally for the Company’s portfolio in addition to generating fee revenue
when performed for third-party clients. The guaranty servicing, servicing
support, and business process outsourcing activities include providing software
and data center services, borrower and loan updates, default aversion tracking
services, claim processing services, and post-default collection services to
guaranty agencies.
 
 Loan
servicing fees are determined according to individual agreements with customers
and are calculated based on the dollar value of loans, number of loans, or
number of borrowers serviced for each customer. In addition, the Company earns
servicing revenue for the origination of loans, conversion and deconversion of
loan portfolios. Guaranty servicing fees, generally, are calculated based on the
number of loans serviced, volume of loans serviced, or amounts
collected.
 
 In June
2009, the Department of Education named the Company as one of four private
sector companies awarded a servicing contract to service all federally-owned
student loans, including FFELP loans purchased by the Department pursuant to
ECASLA. Beginning in August 2010, the contract will also cover the servicing on
new loans originated under the Direct Loan Program. Servicing volume will
initially be allocated by the Department to servicers awarded a contract,
however, performance factors such as customer satisfaction levels and default
rates will determine volume allocations over time. The contract spans five years
with one, five-year renewal option. Servicing loans under this contract will
increase revenue earned by this segment. However, operating margins under this
contract are expected to be lower than historical levels achieved.
 
 The
Company began servicing loans and recognized approximately $30,000 of revenue
under this contract in September 2009. As of September 30, 2009 and October 31,
2009, the Company was servicing approximately $177 million and $2.5 billion,
respectively, of loans under the Department’s servicing contract, which includes
approximately $12 million and $740 million, respectively, of loans not
previously serviced by the Company that were sold by third parties to the
Department as part of the ECASLA Purchase Program.
  49
 Student
Loan Servicing Volumes (dollars in millions)
   
 
 (a)
              As
      of September 30, 2009, the Company was servicing $1.9 billion of
      loans owned by the Company and approximately $1.5 billion of loans for
      third parties that were disbursed on or after May 1, 2008 and may be
      eligible to be sold to the Department of Education pursuant to its Loan
      Purchase Commitment Program. The Company expects to retain servicing
      rights on all loans sold to the Department which are currently being
      serviced by the Company.
 
 (b)
              Includes
      loans that are accounted for as participation interests sold under an
      agreement with Union Bank.
 
 50
 Three
and nine months ended September 30, 2009 compared to the three and nine months
ended September 30, 2008
 
 Three
      months ended September 30,
                                  
                                  
                                  Nine
      months ended September 30,Change
                                  
                                  
                                  
                                  
                                  
                                  
                                  Change2009
                                  
                                  2008
                                  
                                  $
                                  
                                  
                                  %
                                  
                                  
                                  2009
                                  
                                  2008
                                  
                                  $
                                  
                                  
                                  %Net
      interest income
                                  
                                  $
                                  23
                                  
                                  
                                  304
                                  
                                  
                                  (281
                                  )
                                  
                                  (92.4
                                  )%
                                  
                                  $
                                  102
                                  
                                  
                                  1,160
                                  
                                  
                                  (1,058
                                  )
                                  
                                  (91.2
                                  )%Loan
      and guaranty servicing revenue
                                  
                                  
                                  26,387
                                  
                                  
                                  29,827
                                  
                                  
                                  (3,440
                                  )
                                  
                                  (11.5
                                  )
                                  
                                  
                                  82,424
                                  
                                  
                                  78,147
                                  
                                  
                                  4,277
                                  
                                  
                                  5.5Software
      services revenue
                                  
                                  
                                  966
                                  
                                  
                                  942
                                  
                                  
                                  24
                                  
                                  
                                  2.5
                                  
                                  
                                  
                                  2,766
                                  
                                  
                                  3,477
                                  
                                  
                                  (711
                                  )
                                  
                                  (20.4
                                  )Other
      income
                                  
                                  
                                  137
                                  
                                  
                                  6
                                  
                                  
                                  131
                                  
                                  
                                  2,183.3
                                  
                                  
                                  
                                  498
                                  
                                  
                                  44
                                  
                                  
                                  454
                                  
                                  
                                  1,031.8Intersegment
      revenue
                                  
                                  
                                  21,525
                                  
                                  
                                  18,402
                                  
                                  
                                  3,123
                                  
                                  
                                  17.0
                                  
                                  
                                  
                                  62,291
                                  
                                  
                                  57,008
                                  
                                  
                                  5,283
                                  
                                  
                                  9.3Total
      other income
                                  
                                  
                                  49,015
                                  
                                  
                                  49,177
                                  
                                  
                                  (162
                                  )
                                  
                                  (0.3
                                  )
                                  
                                  
                                  147,979
                                  
                                  
                                  138,676
                                  
                                  
                                  9,303
                                  
                                  
                                  6.7Salaries
      and benefits
                                  
                                  
                                  12,468
                                  
                                  
                                  13,876
                                  
                                  
                                  (1,408
                                  )
                                  
                                  (10.1
                                  )
                                  
                                  
                                  40,527
                                  
                                  
                                  40,365
                                  
                                  
                                  162
                                  
                                  
                                  0.4Restructure
      expense
                                  
                                  
                                  2,646
                                  
                                  
                                  —
                                  
                                  
                                  2,646
                                  
                                  
                                  100.0
                                  
                                  
                                  
                                  5,159
                                  
                                  
                                  747
                                  
                                  
                                  4,412
                                  
                                  
                                  590.6Impairment
      expense
                                  
                                  
                                  —
                                  
                                  
                                  —
                                  
                                  
                                  —
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —
                                  
                                  
                                  5,074
                                  
                                  
                                  (5,074
                                  )
                                  
                                  (100.0
                                  )Other
      expenses
                                  
                                  
                                  7,613
                                  
                                  
                                  10,632
                                  
                                  
                                  (3,019
                                  )
                                  
                                  (28.4
                                  )
                                  
                                  
                                  27,350
                                  
                                  
                                  27,130
                                  
                                  
                                  220
                                  
                                  
                                  0.8Intersegment
      expenses
                                  
                                  
                                  9,398
                                  
                                  
                                  11,940
                                  
                                  
                                  (2,542
                                  )
                                  
                                  (21.3
                                  )
                                  
                                  
                                  28,352
                                  
                                  
                                  35,040
                                  
                                  
                                  (6,688
                                  )
                                  
                                  (19.1
                                  )Total
      operating expenses
                                  
                                  
                                  32,125
                                  
                                  
                                  36,448
                                  
                                  
                                  (4,323
                                  )
                                  
                                  (11.9
                                  )
                                  
                                  
                                  101,388
                                  
                                  
                                  108,356
                                  
                                  
                                  (6,968
                                  )
                                  
                                  (6.4
                                  )"Base
      net income" before income taxes
                                  
                                  
                                  16,913
                                  
                                  
                                  13,033
                                  
                                  
                                  3,880
                                  
                                  
                                  29.8
                                  
                                  
                                  
                                  46,693
                                  
                                  
                                  31,480
                                  
                                  
                                  15,213
                                  
                                  
                                  48.3Income
      tax expense
                                  
                                  
                                  (6,427
                                  )
                                  
                                  (4,823
                                  )
                                  
                                  (1,604
                                  )
                                  
                                  33.3
                                  
                                  
                                  
                                  (17,744
                                  )
                                  
                                  (10,542
                                  )
                                  
                                  (7,202
                                  )
                                  
                                  68.3"Base
      net income"
                                  
                                  $
                                  10,486
                                  
                                  
                                  8,210
                                  
                                  
                                  2,276
                                  
                                  
                                  27.7
                                  %
                                  
                                  $
                                  28,949
                                  
                                  
                                  20,938
                                  
                                  
                                  8,011
                                  
                                  
                                  38.3
                                  %Before
      Tax Operating Margin
                                  
                                  
                                  34.5
                                  %
                                  
                                  26.3
                                  %
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  31.5
                                  %
                                  
                                  22.5
                                  %Before
      Tax Operating Margin -excluding
      net interest income, restructure expenseand
      impairment expense
                                  
                                  
                                  39.9
                                  %
                                  
                                  25.9
                                  %
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  35.0
                                  %
                                  
                                  26.1
                                  %
  Net
interest income.Investment income decreased as a result of decreases in interest rates on
cash held in 2009 compared to 2008.
 
 Loan and
guaranty servicing revenue and intersegment revenue.
 
 Three
      months ended September 30,2009
                                
                                2008Origination
                                
                                Servicing
                                
                                Total
                                
                                Origination
                                
                                Servicing
                                
                                Totalrevenue
                                
                                revenue
                                
                                revenue
                                
                                revenue
                                
                                revenue
                                
                                revenueFFELP
      servicing (a)
                                
                                $
                                857
                                
                                
                                13,556
                                
                                
                                14,413
                                
                                
                                1,678
                                
                                
                                12,362
                                
                                
                                14,040Private
      servicing
                                
                                
                                514
                                
                                
                                1,760
                                
                                
                                2,274
                                
                                
                                240
                                
                                
                                1,776
                                
                                
                                2,016Government
      servicing
                                
                                
                                —
                                
                                
                                31
                                
                                
                                31
                                
                                
                                —
                                
                                
                                —
                                
                                
                                —Guaranty
      servicing (b)
                                
                                
                                82
                                
                                
                                9,587
                                
                                
                                9,669
                                
                                
                                131
                                
                                
                                13,640
                                
                                
                                13,771Loan
      and guaranty servicing revenue
                                
                                
                                1,453
                                
                                
                                24,934
                                
                                
                                26,387
                                
                                
                                2,049
                                
                                
                                27,778
                                
                                
                                29,827Intersegment
      revenue (c)
                                
                                
                                2,364
                                
                                
                                19,161
                                
                                
                                21,525
                                
                                
                                1,730
                                
                                
                                16,672
                                
                                
                                18,402Total
      servicing revenue
                                
                                $
                                3,817
                                
                                
                                44,095
                                
                                
                                47,912
                                
                                
                                3,779
                                
                                
                                44,450
                                
                                
                                48,229
 
 (a)
              FFELP
      origination revenue decreased in 2009 compared to 2008 due to lenders
      exiting the FFELP marketplace as a result of legislative changes and
      disruptions in the capital markets. FFELP servicing revenue increased in
      2009 due to the receipt of $1.7 million in conversion fees associated with
      the loss of life of loan servicing and transfer related activities for
      third party clients that sold loans to the Department of Education under
      the Purchase Program.
 
 (b)
              Guaranty
      servicing revenue decreased in 2009 due to the receipt of $6.1 million in
      fees received from rehabilitation collections on defaulted loan assets in
      the third quarter of 2008. In the third quarter of 2009, revenue from
      rehabilitation collections on defaulted loans was $0.6
      million.
 
 (c)
              Intersegment
      origination revenue increased in 2009 compared to the same period in 2008
      due to an increase in the Company’s disbursement volume. Intersegment
      servicing revenue increased in 2009 compared to the same period in 2008
      due to an increase in the number of loans transferred between various
      financings as the Company was executing certain financing strategies and
      conversion fees received upon the Company selling $427.7 million of
      student loans to the Department under the Purchase
  Program.
 
 51
 
 Nine
      months ended September 30,2009
                                                      
                                                      2008Origination
                                                      
                                                      Servicing
                                                      
                                                      Total
                                                      
                                                      Origination
                                                      
                                                      Servicing
                                                      
                                                      Totalrevenue
                                                      
                                                      revenue
                                                      
                                                      revenue
                                                      
                                                      revenue
                                                      
                                                      revenue
                                                      
                                                      revenueFFELP
      servicing (a)
                                                      
                                                      $
                                                      1,632
                                                      
                                                      
                                                      42,878
                                                      
                                                      
                                                      44,510
                                                      
                                                      
                                                      3,234
                                                      
                                                      
                                                      35,620
                                                      
                                                      38,854Private
      servicing
                                                      
                                                      
                                                      618
                                                      
                                                      
                                                      5,523
                                                      
                                                      
                                                      6,141
                                                      
                                                      
                                                      421
                                                      
                                                      
                                                      5,737
                                                      
                                                      6,158Government
      servicing
                                                      
                                                      
                                                      —
                                                      
                                                      
                                                      31
                                                      
                                                      
                                                      31
                                                      
                                                      
                                                      —
                                                      
                                                      
                                                      —
                                                      
                                                      -Guaranty
      servicing (b)
                                                      
                                                      
                                                      296
                                                      
                                                      
                                                      31,446
                                                      
                                                      
                                                      31,742
                                                      
                                                      
                                                      400
                                                      
                                                      
                                                      32,735
                                                      
                                                      33,135Loan
      and guaranty servicing revenue
                                                      
                                                      
                                                      2,546
                                                      
                                                      
                                                      79,878
                                                      
                                                      
                                                      82,424
                                                      
                                                      
                                                      4,055
                                                      
                                                      
                                                      74,092
                                                      
                                                      78,147Intersegment
      revenue (c)
                                                      
                                                      
                                                      6,531
                                                      
                                                      
                                                      55,760
                                                      
                                                      
                                                      62,291
                                                      
                                                      
                                                      3,906
                                                      
                                                      
                                                      53,102
                                                      
                                                      57,008Total
      servicing revenue
                                                      
                                                      $
                                                      9,077
                                                      
                                                      
                                                      135,638
                                                      
                                                      
                                                      144,715
                                                      
                                                      
                                                      7,961
                                                      
                                                      
                                                      127,194
                                                      
                                                      135,155
  (a)
              FFELP
      origination revenue decreased in 2009 compared to 2008 due to lenders
      exiting the FFELP marketplace as a result of legislative changes and
      disruptions in the capital markets. FFELP servicing revenue increased in
      2009 due to the receipt of $3.8 million in conversion fees associated with
      the loss of life of loan servicing and transfer related activities for
      third party clients that sold loans to the Department of Education under
      the Purchase Program.
 
 (b)
              Guaranty
      servicing revenue decreased in 2009 due to the receipt of $11.7 million in
      fees received from rehabilitation collections on defaulted loan assets in
      2008. In 2009, the revenue from rehabilitation collections on defaulted
      loans was $6.9 million. This decrease was offset by an increase in
      consolidation collection revenue in
2009.
 
 (c)
              Intersegment
      origination revenue increased in 2009 compared to the same period in 2008
      due to an increase in the Company’s disbursement volume. Intersegment
      servicing revenue increased in 2009 compared to the same period in 2008
      due to an increase in the number of loans transferred between various
      financings as the Company was executing certain financing strategies and
      conversion fees received upon the Company selling $427.7 million of
      student loans to the Department under the Purchase
  Program.
 
 Operating
expenses.
Excluding restructure and impairment charges and collection fees paid related to
rehabilitation sales, operating expenses decreased $4.8 million (14.3%) and $3.2
million (3.3%) for the three and nine months ended September 30, 2009 compared
to the same periods in 2008. These decreases were a result of cost savings from
the Company’s restructuring plans.
 
 52
 TUITION
PAYMENT PROCESSING AND CAMPUS COMMERCE OPERATING SEGMENT – RESULTS OF
OPERATIONS
 
 The
Tuition Payment Processing and Campus Commerce operating segment provides
products and services to help institutions and education seeking families manage
the payment of education costs during the pre-college and college stages of the
education life cycle. The Company provides actively managed tuition payment
solutions, online payment processing, detailed information reporting, financial
needs analysis, and data integration services to K-12 and higher educational
institutions, families, and students. In addition, the Company provides
customer-focused electronic transactions, information sharing, and account and
bill presentment to colleges and universities.
 
 This
segment of the Company’s business is subject to seasonal fluctuations which
correspond, or are related to, the traditional school year. Tuition management
revenue is recognized over the course of the academic term, but the peak
operational activities take place in summer and early fall. Revenue associated
with providing electronic commerce subscription services is recognized over the
service period with the highest revenue months being July through September and
December and January. The Company’s operating expenses do not follow the
seasonality of the revenues. This is primarily due to fixed year-round personnel
costs and seasonal marketing costs.
 
 Three
and nine months ended September 30, 2009 compared to the three and nine months
ended September 30, 2008
 
 Three
      months ended September 30,
                                  
                                  
                                  Nine
      months ended September 30,Change
                                  
                                  
                                  
                                  
                                  
                                  
                                  Change2009
                                  
                                  2008
                                  
                                  $
                                  
                                  
                                  %
                                  
                                  
                                  2009
                                  
                                  2008
                                  
                                  $
                                  
                                  
                                  %Net
      interest income
                                  
                                  $
                                  16
                                  
                                  
                                  396
                                  
                                  
                                  (380
                                  )
                                  
                                  (96.0
                                  )%
                                  
                                  $
                                  57
                                  
                                  
                                  1,471
                                  
                                  
                                  (1,414
                                  )
                                  
                                  (96.1
                                  )%Tuition
      payment processing and campus commerce revenue
                                  
                                  
                                  12,987
                                  
                                  
                                  11,863
                                  
                                  
                                  1,124
                                  
                                  
                                  9.5
                                  
                                  
                                  
                                  40,373
                                  
                                  
                                  35,980
                                  
                                  
                                  4,393
                                  
                                  
                                  12.2Intersegment
      revenue
                                  
                                  
                                  62
                                  
                                  
                                  58
                                  
                                  
                                  4
                                  
                                  
                                  6.9
                                  
                                  
                                  
                                  172
                                  
                                  
                                  242
                                  
                                  
                                  (70
                                  )
                                  
                                  (28.9
                                  )Total
      other income
                                  
                                  
                                  13,049
                                  
                                  
                                  11,921
                                  
                                  
                                  1,128
                                  
                                  
                                  9.5
                                  
                                  
                                  
                                  40,545
                                  
                                  
                                  36,222
                                  
                                  
                                  4,323
                                  
                                  
                                  11.9Salaries
      and benefits
                                  
                                  
                                  6,399
                                  
                                  
                                  6,236
                                  
                                  
                                  163
                                  
                                  
                                  2.6
                                  
                                  
                                  
                                  19,346
                                  
                                  
                                  17,450
                                  
                                  
                                  1,896
                                  
                                  
                                  10.9Other
      expenses
                                  
                                  
                                  2,265
                                  
                                  
                                  2,132
                                  
                                  
                                  133
                                  
                                  
                                  6.2
                                  
                                  
                                  
                                  7,012
                                  
                                  
                                  6,743
                                  
                                  
                                  269
                                  
                                  
                                  4.0Intersegment
      expenses
                                  
                                  
                                  670
                                  
                                  
                                  288
                                  
                                  
                                  382
                                  
                                  
                                  132.6
                                  
                                  
                                  
                                  1,962
                                  
                                  
                                  1,045
                                  
                                  
                                  917
                                  
                                  
                                  87.8Total
      operating expenses
                                  
                                  
                                  9,334
                                  
                                  
                                  8,656
                                  
                                  
                                  678
                                  
                                  
                                  7.8
                                  
                                  
                                  
                                  28,320
                                  
                                  
                                  25,238
                                  
                                  
                                  3,082
                                  
                                  
                                  12.2"Base
      net income" before income taxes
                                  
                                  
                                  3,731
                                  
                                  
                                  3,661
                                  
                                  
                                  70
                                  
                                  
                                  1.9
                                  
                                  
                                  
                                  12,282
                                  
                                  
                                  12,455
                                  
                                  
                                  (173
                                  )
                                  
                                  (1.4
                                  )Income
      tax expense
                                  
                                  
                                  (1,418
                                  )
                                  
                                  (1,354
                                  )
                                  
                                  (64
                                  )
                                  
                                  4.7
                                  
                                  
                                  
                                  (4,667
                                  )
                                  
                                  (4,081
                                  )
                                  
                                  (586
                                  )
                                  
                                  14.4"Base
      net income"
                                  
                                  $
                                  2,313
                                  
                                  
                                  2,307
                                  
                                  
                                  6
                                  
                                  
                                  0.3
                                  %
                                  
                                  $
                                  7,615
                                  
                                  
                                  8,374
                                  
                                  
                                  (759
                                  )
                                  
                                  (9.1
                                  )%Before
      Tax Operating Margin
                                  
                                  
                                  28.6
                                  %
                                  
                                  29.7
                                  %
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  30.2
                                  %
                                  
                                  33.0
                                  %Before
      Tax Operating Margin, excluding net interest income
                                  
                                  
                                  28.5
                                  %
                                  
                                  27.4
                                  %
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  30.2
                                  %
                                  
                                  30.3
                                  %
  Net
interest income.Investment income decreased as a result of decreases in interest rates on
cash held in 2009 compared to 2008.
 
 Tuition
payment processing and campus commerce revenue. Tuition payment
processing and campus commerce revenue increased in 2009 compared to the same
periods in 2008 as a result of an increase in the number of managed tuition
payment plans as well as an increase in campus commerce transactions
processed.
 
 Operating
expenses.Operating expenses increased for the three and nine months ended
September 30, 2009 compared to the same periods in 2008 as a result of incurring
additional costs associated with salaries and benefits to support the increase
in the number of managed tuition payment plans and campus commerce transactions.
In addition, the Company continues to invest in new products and services to
meet customer needs and expand product and service offerings. These investments
increased operating expenses for the three and nine months ended September 30,
2009 compared to the same period in 2008.
 
 Before
tax operating margin, excluding net interest income.The Company evaluates the
results of this segment based on operating margins excluding net interest
income. Net interest income earned by the Company during any given period is
subject to the underlying interest rate earned on cash and is a factor beyond
the Company’s control which can affect the period-to-period comparability of
results of operations.
 
 53
 ENROLLMENT
SERVICES OPERATING SEGMENT – RESULTS OF OPERATIONS
 
 The
Enrollment Services segment offers products and services that are focused on
helping students plan and prepare for life after high school (content management
and publishing and editing services) and helping colleges recruit and retain
students (lead generation and recruitment services). Content management products
and services include online courses and related services. Publishing and editing
services include test preparation study guides and essay and resume editing
services. Lead generation products and services include vendor lead management
services and admissions lead generation. Recruitment services include pay per
click marketing management, email marketing, list marketing services, and
admissions consulting.
 
 Three
and nine months ended September 30, 2009 compared to the three and nine months
ended September 30, 2008
 
 Three
      months ended September 30,
                                    
                                    
                                    Nine
      months ended September 30,Change
                                    
                                    
                                    
                                    
                                    
                                    
                                    Change2009
                                    
                                    2008
                                    
                                    $
                                    
                                    
                                    %
                                    
                                    
                                    2009
                                    
                                    2008
                                    
                                    $
                                    
                                    
                                    %Net
      interest income
                                    
                                    $
                                    —
                                    
                                    
                                    5
                                    
                                    
                                    (5
                                    )
                                    
                                    (100.0
                                    )%
                                    
                                    $
                                    —
                                    
                                    
                                    13
                                    
                                    
                                    (13
                                    )
                                    
                                    (100.0
                                    )%Enrollment
      services revenue
                                    
                                    
                                    30,670
                                    
                                    
                                    29,858
                                    
                                    
                                    812
                                    
                                    
                                    2.7
                                    
                                    
                                    
                                    88,188
                                    
                                    
                                    83,148
                                    
                                    
                                    5,040
                                    
                                    
                                    6.1Software
      services revenue
                                    
                                    
                                    —
                                    
                                    
                                    —
                                    
                                    
                                    —
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    37
                                    
                                    
                                    (37
                                    )
                                    
                                    (100.0
                                    )Intersegment
      revenue
                                    
                                    
                                    139
                                    
                                    
                                    2
                                    
                                    
                                    137
                                    
                                    
                                    6,850.0
                                    
                                    
                                    
                                    416
                                    
                                    
                                    2
                                    
                                    
                                    414
                                    
                                    
                                    20,700.0Total
      other income
                                    
                                    
                                    30,809
                                    
                                    
                                    29,860
                                    
                                    
                                    949
                                    
                                    
                                    3.2
                                    
                                    
                                    
                                    88,604
                                    
                                    
                                    83,187
                                    
                                    
                                    5,417
                                    
                                    
                                    6.5Salaries
      and benefits
                                    
                                    
                                    5,337
                                    
                                    
                                    5,805
                                    
                                    
                                    (468
                                    )
                                    
                                    (8.1
                                    )
                                    
                                    
                                    17,295
                                    
                                    
                                    18,701
                                    
                                    
                                    (1,406
                                    )
                                    
                                    (7.5
                                    )Restructure
      expense - severance andcontract
      termination costs
                                    
                                    
                                    —
                                    
                                    
                                    —
                                    
                                    
                                    —
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    282
                                    
                                    
                                    (282
                                    )
                                    
                                    (100.0
                                    )Cost
      to provide enrollment services
                                    
                                    
                                    20,323
                                    
                                    
                                    17,904
                                    
                                    
                                    2,419
                                    
                                    
                                    13.5
                                    
                                    
                                    
                                    56,208
                                    
                                    
                                    48,062
                                    
                                    
                                    8,146
                                    
                                    
                                    16.9Other
      expenses
                                    
                                    
                                    3,266
                                    
                                    
                                    2,512
                                    
                                    
                                    754
                                    
                                    
                                    30.0
                                    
                                    
                                    
                                    9,602
                                    
                                    
                                    7,801
                                    
                                    
                                    1,801
                                    
                                    
                                    23.1Intersegment
      expenses
                                    
                                    
                                    550
                                    
                                    
                                    1,509
                                    
                                    
                                    (959
                                    )
                                    
                                    (63.6
                                    )
                                    
                                    
                                    1,604
                                    
                                    
                                    4,936
                                    
                                    
                                    (3,332
                                    )
                                    
                                    (67.5
                                    )Total
      operating expenses
                                    
                                    
                                    29,476
                                    
                                    
                                    27,730
                                    
                                    
                                    1,746
                                    
                                    
                                    6.3
                                    
                                    
                                    
                                    84,709
                                    
                                    
                                    79,782
                                    
                                    
                                    4,927
                                    
                                    
                                    6.2"Base
      net income" before income taxes
                                    
                                    
                                    1,333
                                    
                                    
                                    2,135
                                    
                                    
                                    (802
                                    )
                                    
                                    (37.6
                                    )
                                    
                                    
                                    3,895
                                    
                                    
                                    3,418
                                    
                                    
                                    477
                                    
                                    
                                    14.0Income
      tax expense
                                    
                                    
                                    (507
                                    )
                                    
                                    (790
                                    )
                                    
                                    283
                                    
                                    
                                    (35.8
                                    )
                                    
                                    
                                    (1,480
                                    )
                                    
                                    (1,187
                                    )
                                    
                                    (293
                                    )
                                    
                                    24.7"Base
      net income"
                                    
                                    $
                                    826
                                    
                                    
                                    1,345
                                    
                                    
                                    (519
                                    )
                                    
                                    (38.6
                                    )%
                                    
                                    $
                                    2,415
                                    
                                    
                                    2,231
                                    
                                    
                                    184
                                    
                                    
                                    8.2
                                    %Before
      Tax Operating Margin
                                    
                                    
                                    4.3
                                    %
                                    
                                    7.1
                                    %
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    4.4
                                    %
                                    
                                    4.1
                                    %Before
      Tax Operating Margin -excluding
      net interest income andrestructure
      expense
                                    
                                    
                                    4.3
                                    %
                                    
                                    7.1
                                    %
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    4.4
                                    %
                                    
                                    4.4
                                    %
 
 54
 
 Enrollment
services revenue, cost to provide enrollment services, and gross
profit.
 
 Three
      months ended September 30, 2009Publishing
                                          
                                          
                                          
                                          
                                          
                                          Contentand
                                          
                                          
                                          
                                          
                                          
                                          managementLead
                                          
                                          
                                          editing
                                          
                                          
                                          
                                          
                                          
                                          and
      recruitmentgeneration
      (a)
                                          
                                          
                                          services
      (b)
                                          
                                          
                                          Subtotal
                                          
                                          
                                          services
      (c)
                                          
                                          
                                          TotalEnrollment
      services revenue
                                          
                                          $
                                          23,595
                                          
                                          
                                          
                                          3,148
                                          
                                          
                                          
                                          26,743
                                          
                                          
                                          
                                          3,927
                                          
                                          
                                          
                                          30,670Cost
      to provide enrollment services
                                          
                                          
                                          19,085
                                          
                                          
                                          
                                          1,238
                                          
                                          
                                          
                                          20,323Gross
      profit
                                          
                                          $
                                          4,510
                                          
                                          
                                          
                                          1,910
                                          
                                          
                                          
                                          6,420Gross
      profit %
                                          
                                          
                                          19.1%
                                          
                                          
                                          
                                          60.7%
                                          
                                          
                                          
                                          24.0%Three
      months ended September 30, 2008Publishing
                                          
                                          
                                          
                                          
                                          
                                          
                                          Contentand
                                          
                                          
                                          
                                          
                                          
                                          
                                          managementLead
                                          
                                          
                                          editing
                                          
                                          
                                          
                                          
                                          
                                          
                                          and
      recruitmentgeneration
      (a)
                                          
                                          
                                          services
      (b)
                                          
                                          
                                          Subtotal
                                          
                                          
                                          services
      (c)
                                          
                                          
                                          TotalEnrollment
      services revenue
                                          
                                          $
                                          19,313
                                          
                                          
                                          
                                          5,018
                                          
                                          
                                          
                                          24,331
                                          
                                          
                                          
                                          5,527
                                          
                                          
                                          
                                          29,858Cost
      to provide enrollment services
                                          
                                          
                                          15,985
                                          
                                          
                                          
                                          1,919
                                          
                                          
                                          
                                          17,904Gross
      profit
                                          
                                          $
                                          3,328
                                          
                                          
                                          
                                          3,099
                                          
                                          
                                          
                                          6,427Gross
      profit %
                                          
                                          
                                          17.2%
                                          
                                          
                                          
                                          61.8%
                                          
                                          
                                          
                                          26.4%Nine
      months ended September 30, 2009Publishing
                                          
                                          
                                          
                                          
                                          
                                          
                                          Contentand
                                          
                                          
                                          
                                          
                                          
                                          
                                          managementLead
                                          
                                          
                                          editing
                                          
                                          
                                          
                                          
                                          
                                          
                                          and
      recruitmentgeneration
      (a)
                                          
                                          
                                          services
      (b)
                                          
                                          
                                          Subtotal
                                          
                                          
                                          services
      (c)
                                          
                                          
                                          TotalEnrollment
      services revenue
                                          
                                          $
                                          66,374
                                          
                                          
                                          
                                          8,100
                                          
                                          
                                          
                                          74,474
                                          
                                          
                                          
                                          13,714
                                          
                                          
                                          
                                          88,188Cost
      to provide enrollment services
                                          
                                          
                                          52,735
                                          
                                          
                                          
                                          3,473
                                          
                                          
                                          
                                          56,208Gross
      profit
                                          
                                          $
                                          13,639
                                          
                                          
                                          
                                          4,627
                                          
                                          
                                          
                                          18,266Gross
      profit %
                                          
                                          
                                          20.5%
                                          
                                          
                                          
                                          57.1%
                                          
                                          
                                          
                                          24.5%Nine
      months ended September 30, 2008Publishing
                                          
                                          
                                          
                                          
                                          
                                          
                                          Contentand
                                          
                                          
                                          
                                          
                                          
                                          
                                          managementLead
                                          
                                          
                                          editing
                                          
                                          
                                          
                                          
                                          
                                          
                                          and
      recruitmentgeneration
      (a)
                                          
                                          
                                          services
      (b)
                                          
                                          
                                          Subtotal
                                          
                                          
                                          services
      (c)
                                          
                                          
                                          TotalEnrollment
      services revenue
                                          
                                          $
                                          53,719
                                          
                                          
                                          
                                          11,291
                                          
                                          
                                          
                                          65,010
                                          
                                          
                                          
                                          18,138
                                          
                                          
                                          
                                          83,148Cost
      to provide enrollment services
                                          
                                          
                                          43,459
                                          
                                          
                                          
                                          4,603
                                          
                                          
                                          
                                          48,062Gross
      profit
                                          
                                          $
                                          10,260
                                          
                                          
                                          
                                          6,688
                                          
                                          
                                          
                                          16,948Gross
      profit %
                                          
                                          
                                          19.1%
                                          
                                          
                                          
                                          59.2%
                                          
                                          
                                          
                                          26.1%
  (a)
              Lead
      generation revenue increased $4.3 million (22.2%) and $12.7 million
      (23.6%) for the three and nine months ended September 30, 2009 compared to
      the same periods in 2008 as a result of an increase in lead generation
      services volume. The gross profit for lead generation services increased
      due to the Company’s focus on eliminating lower margin sales and creating
      cost efficiencies.
 
 (b)
              Publishing
      and editing services revenue decreased $1.9 million (37.3%) and $3.2
      million (28.3%) for the three and nine months ended September 30, 2009
      compared to the same periods in 2008 due to competition related to online
      delivery of similar products, as well as a general downturn in economic
      conditions. The gross profit for publishing and editing services decreased
      as a result of a shift in the mix of products
  sold.
 
 (c)
              Content
      management and recruitment services revenue decreased $1.6 million (28.9%)
      and $4.4 million (24.4%) for the three and nine months ended September 30,
      2009 compared to the same periods in 2008. These decreases were the result
      of decreases of $1.1 million and $3.1 million for the three and nine
      months ended September 30, 2009 compared to the same periods in 2008
      associated with the Company’s pay per click marketing management, email
      marketing, and admissions consulting services and a decrease of $0.5
      million and $1.4 million associated with the Company’s list marketing
      services for the three and nine months ended September 30, 2009 compared
      to the same periods in 2008 as a result of legislative developments in the
      student loan industry.
 
 55
 Operating
expenses. Excluding
restructure charges and the cost to provide enrollment services, operating
expenses decreased $0.7 million (6.8%) and $2.9 million (9.3%), respectively,
for the three and nine months ended September 30, 2009 compared to the same
period in 2008 as a result of continued focus on cost efficiencies.
 
 SOFTWARE
AND TECHNICAL SERVICES OPERATING SEGMENT – RESULTS OF OPERATIONS
 
 The
Software and Technical Services operating segment develops student loan
servicing software, which is used internally by the Company and also licensed to
third-party student loan holders and servicers. This segment also provides
information technology products and services, with core areas of business in
educational loan software solutions, business intelligence, technical consulting
services, and Enterprise Content Management solutions.
 
 Many of
the Company’s external customers receiving services in this segment have been
negatively impacted as a result of the passage of the College Cost Reduction Act
and disruptions in the capital markets. These events could decrease the demand
for products and services and affect this segment’s future revenue and profit
margins.
 
 Three
and nine months ended September 30, 2009 compared to the three and nine months
ended September 30, 2008
   Three
      months ended September 30,
                              
                              
                              Nine
      months ended September 30,Change
                              
                              
                              
                              
                              
                              
                              Change2009
                              
                              2008
                              
                              $
                              
                              
                              
                              %
                              
                              
                              2009
                              
                              2008
                              
                              $
                              
                              
                              %Software
      services revenue
                              
                              $
                              3,634
                              
                              
                              4,217
                              
                              
                              (583
                              )
                              
                              
                              (13.8
                              )%
                              
                              $
                              13,658
                              
                              
                              15,828
                              
                              
                              (2,170
                              )
                              
                              (13.7
                              )%Intersegment
      revenue
                              
                              
                              3,793
                              
                              
                              1,660
                              
                              
                              2,133
                              
                              
                              
                              128.5
                              
                              
                              
                              10,813
                              
                              
                              4,993
                              
                              
                              5,820
                              
                              
                              116.6Total
      other income
                              
                              
                              7,427
                              
                              
                              5,877
                              
                              
                              1,550
                              
                              
                              
                              26.4
                              
                              
                              
                              24,471
                              
                              
                              20,821
                              
                              
                              3,650
                              
                              
                              17.5Salaries
      and benefits
                              
                              
                              5,756
                              
                              
                              4,138
                              
                              
                              1,618
                              
                              
                              
                              39.1
                              
                              
                              
                              16,656
                              
                              
                              14,031
                              
                              
                              2,625
                              
                              
                              18.7Restructure
      expense - severance andcontract
      termination costs
                              
                              
                              292
                              
                              
                              —
                              
                              
                              292
                              
                              
                              
                              100.0
                              
                              
                              
                              714
                              
                              
                              487
                              
                              
                              227
                              
                              
                              46.6Other
      expenses
                              
                              
                              776
                              
                              
                              568
                              
                              
                              208
                              
                              
                              
                              36.6
                              
                              
                              
                              2,292
                              
                              
                              1,901
                              
                              
                              391
                              
                              
                              20.6Intersegment
      expenses
                              
                              
                              786
                              
                              
                              826
                              
                              
                              (40
                              )
                              
                              
                              (4.8
                              )
                              
                              
                              2,195
                              
                              
                              1,562
                              
                              
                              633
                              
                              
                              40.5Total
      operating expenses
                              
                              
                              7,610
                              
                              
                              5,532
                              
                              
                              2,078
                              
                              
                              
                              37.6
                              
                              
                              
                              21,857
                              
                              
                              17,981
                              
                              
                              3,876
                              
                              
                              21.6"Base
      net income" before income taxes
                              
                              
                              (183
                              )
                              
                              345
                              
                              
                              (528
                              )
                              
                              
                              (153.0
                              )
                              
                              
                              2,614
                              
                              
                              2,840
                              
                              
                              (226
                              )
                              
                              (8.0
                              )Income
      tax expense
                              
                              
                              70
                              
                              
                              (128
                              )
                              
                              198
                              
                              
                              
                              (154.7
                              )
                              
                              
                              (994
                              )
                              
                              (902
                              )
                              
                              (92
                              )
                              
                              10.2"Base
      net income"
                              
                              $
                              (113
                              )
                              
                              217
                              
                              
                              (330
                              )
                              
                              
                              (152.1
                              )%
                              
                              $
                              1,620
                              
                              
                              1,938
                              
                              
                              (318
                              )
                              
                              (16.4
                              )%Before
      Tax Operating Margin
                              
                              
                              (2.5
                              %)
                              
                              5.9
                              %
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              10.7
                              %
                              
                              13.6
                              %Before
      Tax Operating Margin -excluding
      restructure expense
                              
                              
                              1.5
                              %
                              
                              5.9
                              %
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              13.6
                              %
                              
                              16.0
                              %
  Software
services revenue. Software services revenue
decreased in 2009 compared to 2008 as the result of a reduction in the number of
projects for existing external customers and the loss of external customers due
to the legislative developments in the student loan industry throughout 2008 and
2009.
 
 Intersegment
revenue.Intersegment revenue increased in 2009 compared to the same periods in
2008 as a result of an increase in the number of projects for internal
customers.
 
 Operating
expenses.
Operating expenses increased in 2009 compared to the same periods in 2008 as a
result of costs associated with salaries and benefits to support the increase in
intersegment revenue.
 
 56
 ASSET
GENERATION AND MANAGEMENT OPERATING SEGMENT – RESULTS OF OPERATIONS
 
 The Asset
Generation and Management Operating Segment includes the origination,
acquisition, management, and ownership of the Company’s student loan assets,
which has historically been the Company’s largest product and service offering.
The Company generates a substantial portion of its earnings from the spread,
referred to as the Company’s student loan spread, between the yield it receives
on its student loan portfolio and the costs associated with originating,
acquiring, and financing its portfolio. The Company generates student loan
assets through direct origination or through acquisitions. The student loan
assets are held in a series of education lending subsidiaries designed
specifically for this purpose.
 
 In
addition to the student loan portfolio, all costs and activity associated with
the generation of assets, funding of those assets, and maintenance of the debt
transactions are included in this segment. The Company is also able to leverage
its capital market expertise by providing investment advisory services and other
related services to third parties through a licensed broker-dealer subsidiary.
Revenues and expenses for those functions are also included in the Asset
Generation and Management segment.
 
 Student
Loan Portfolio
 
 The
tables below outline the components of the Company’s student loan
portfolio:
   As
      of September 30, 20092008-2009Originated
                                    
                                    
                                    Originated
                                    
                                    
                                    Academic
      Year
                                    
                                    2009-2010prior
      to
                                    
                                    
                                    between
      10/1/07
                                    
                                    
                                    Loans - held
                                    
                                    
                                    Academic
      YearTotal
                                    
                                    
                                    10/1/07
                                    
                                    
                                    and
      6/3/08 (a)
                                    
                                    
                                    for
      sale (b)
                                    
                                    
                                    Loans
      (b)Federally
      insured:Stafford
                                    
                                    $
                                    8,321,669
                                    
                                    
                                    
                                    32.8
                                    %
                                    
                                    $
                                    6,140,869
                                    
                                    
                                    
                                    452,558
                                    
                                    
                                    
                                    1,445,080
                                    
                                    
                                    
                                    283,162PLUS/SLS
                                    
                                    
                                    615,513
                                    
                                    
                                    
                                    2.4
                                    %
                                    
                                    
                                    369,335
                                    
                                    
                                    
                                    47,585
                                    
                                    
                                    
                                    162,089
                                    
                                    
                                    
                                    36,504Consolidation
                                    
                                    
                                    15,965,190
                                    
                                    
                                    
                                    62.9
                                    %
                                    
                                    
                                    15,778,158
                                    
                                    
                                    
                                    187,032
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —Total
      federally insured
                                    
                                    
                                    24,902,372
                                    
                                    
                                    
                                    98.1
                                    %
                                    
                                    $
                                    22,288,362
                                    
                                    
                                    
                                    687,175
                                    
                                    
                                    
                                    1,607,169
                                    
                                    
                                    
                                    319,666100.0
                                    %
                                    
                                    
                                    
                                    
                                    
                                    
                                    89.4
                                    %
                                    
                                    
                                    2.8
                                    %
                                    
                                    
                                    6.5
                                    %
                                    
                                    
                                    1.3
                                    %Non-federally
      insured
                                    
                                    
                                    167,114
                                    
                                    
                                    
                                    0.6
                                    %Total
      student loans receivable (gross)
                                    
                                    
                                    25,069,486
                                    
                                    
                                    
                                    98.7
                                    %Unamortized
      premiums and deferredorigination
      costs - held for investment
                                    
                                    
                                    352,066
                                    
                                    
                                    
                                    1.4
                                    %Unamortized
      premiums and deferredorigination
      costs - held for sale
                                    
                                    
                                    20,625
                                    
                                    
                                    
                                    0.1
                                    %Allowance
      for loan losses:Federally
      insured
                                    
                                    
                                    (29,015
                                    )
                                    
                                    
                                    (0.1
                                    %)Non-federally
      insured
                                    
                                    
                                    (21,105
                                    )
                                    
                                    
                                    (0.1
                                    %)Total
      student loans receivable (net)
                                    
                                    $
                                    25,392,057
                                    
                                    
                                    
                                    100.0
                                    %
  57
 
 As
      of December 31, 2008Originated
                      
                      
                      Originated
                      
                      
                      2008-2009prior
      to
                      
                      
                      between
      10/1/07
                      
                      
                      Academic
      YearTotal
                      
                      
                      10/1/07
                      
                      
                      and
      6/3/08 (a)
                      
                      
                      Loans
      (b)Federally
      insured:Stafford
                      
                      $
                      7,602,568
                      
                      
                      
                      29.9
                      %
                      
                      $
                      6,641,817
                      
                      
                      
                      390,658
                      
                      
                      
                      570,093PLUS/SLS
                      
                      
                      527,670
                      
                      
                      
                      2.1
                      %
                      
                      
                      412,142
                      
                      
                      
                      48,346
                      
                      
                      
                      67,182Consolidation
                      
                      
                      16,657,703
                      
                      
                      
                      65.5
                      %
                      
                      
                      16,614,950
                      
                      
                      
                      42,753
                      
                      
                      
                      —Total
      federally insured
                      
                      
                      24,787,941
                      
                      
                      
                      97.5
                      %
                      
                      $
                      23,668,909
                      
                      
                      
                      481,757
                      
                      
                      
                      637,275100.0
                      %
                      
                      
                      
                      
                      
                      
                      95.5
                      %
                      
                      
                      1.9
                      %
                      
                      
                      2.6
                      %Non-federally
      insured
                      
                      
                      273,108
                      
                      
                      
                      1.1
                      %Total
      student loans receivable (gross)
                      
                      
                      25,061,049
                      
                      
                      
                      98.6
                      %Unamortized
      premiums and deferredorigination
      costs
                      
                      
                      402,881
                      
                      
                      
                      1.6
                      %Allowance
      for loan losses:Federally
      insured
                      
                      
                      (25,577
                      )
                      
                      
                      (0.1
                      %)Non-federally
      insured
                      
                      
                      (25,345
                      )
                      
                      
                      (0.1
                      %)Total
      student loans receivable (net)
                      
                      $
                      25,413,008
                      
                      
                      
                      100.0
                      %
 
 (a)
              Federally
      insured student loans originated on or after October 1, 2007 earn a
      reduced annual yield as a result of the enactment of the College Cost
      Reduction Act in September 2007.
 
 (b)
              2008-2009
      and 2009-2010 Academic Year loans are eligible to be participated and sold
      to the Department under the Department’s Participation and Purchase
      Programs. As of September 30, 2009, the 2008-2009 Academic Year loans
      classified as held for sale were sold to the Department under the
      Department’s Purchase Program in October 2009. As of September 30, 2009,
      the 2009-2010 Academic Year loans are classified as loans held for
      investment in the Company’s consolidated balance
  sheet.
 
 Origination
and Acquisition
 
 The
Company has historically originated and acquired loans through various methods
and channels including: (i) direct-to-consumer channel (in which the Company
originates student loans directly with student and parent borrowers), (ii)
campus based origination channels, and (iii) spot purchases.
 
 The
Company will originate or acquire loans through its campus based channel either
directly under one of its brand names or through other originating lenders. In
addition to its brands, the Company acquires student loans from lenders to whom
the Company provides marketing and/or origination services established through
various contracts. Branding partners are lenders for which the Company acts as a
marketing agent in specified geographic areas. A forward flow lender is one for
whom the Company provides origination services but provides no marketing
services or whom simply agrees to sell loans to the Company under forward sale
commitments.
 
 58
 The
following table sets forth the activity of loans originated or acquired through
each of the Company’s channels:
 
 Three
      months ended September 30,
                    
                    
                    Nine
      months ended September 30,2009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008Beginning
      balance
                    
                    $
                    25,299,539
                    
                    
                    
                    25,612,126
                    
                    
                    
                    25,061,049
                    
                    
                    
                    26,329,213Direct
      channel:Consolidation
      loan originations
                    
                    
                    —
                    
                    
                    
                    44
                    
                    
                    
                    —
                    
                    
                    
                    69,073Less
      consolidation of existing portfolio
                    
                    
                    —
                    
                    
                    
                    (27
                    )
                    
                    
                    —
                    
                    
                    
                    (28,474
                    )Net
      consolidation loan originations
                    
                    
                    —
                    
                    
                    
                    17
                    
                    
                    
                    —
                    
                    
                    
                    40,599Stafford/PLUS
      loan originations
                    
                    
                    496,720
                    
                    
                    
                    416,721
                    
                    
                    
                    1,295,156
                    
                    
                    
                    952,050Branding
      partner channel
                    
                    
                    70,217
                    
                    
                    
                    334,685
                    
                    
                    
                    665,788
                    
                    
                    
                    935,992Forward
      flow channel
                    
                    
                    75,260
                    
                    
                    
                    114,488
                    
                    
                    
                    126,304
                    
                    
                    
                    517,548Other
      channels
                    
                    
                    19,257
                    
                    
                    
                    —
                    
                    
                    
                    39,627
                    
                    
                    
                    55,922Total
      channel acquisitions
                    
                    
                    661,454
                    
                    
                    
                    865,911
                    
                    
                    
                    2,126,875
                    
                    
                    
                    2,502,111Repayments,
      claims, capitalized interest, participations, and other
                    
                    
                    (261,922
                    )
                    
                    
                    (369,940
                    )
                    
                    
                    (1,198,890
                    )
                    
                    
                    (1,255,183
                    )Consolidation
      loans lost to external parties
                    
                    
                    (149,984
                    )
                    
                    
                    (106,684
                    )
                    
                    
                    (322,573
                    )
                    
                    
                    (282,951
                    )Loans
      sold
                    
                    
                    (479,601
                    )
                    
                    
                    —
                    
                    
                    
                    (596,975
                    )
                    
                    
                    (1,291,777
                    )Ending
      balance
                    
                    $
                    25,069,486
                    
                    
                    
                    26,001,413
                    
                    
                    
                    25,069,486
                    
                    
                    
                    26,001,413
 The
Company has significant financing needs that it meets through the capital
markets. Since August 2007, the capital markets have experienced unprecedented
disruptions. Since the Company could not determine nor control the length of
time or extent to which the capital markets would remain disrupted, it reduced
its direct and indirect costs related to its asset generation activities and was
more selective in pursuing origination activity in the direct to consumer
channel. Accordingly, beginning in January 2008, the Company suspended
Consolidation and private student loan originations and exercised contractual
rights to discontinue, suspend, or defer the acquisition of student loans in
connection with substantially all of its branding and forward flow
relationships. Prior to and in conjunction with exercising this right, during
the first quarter of 2008, the Company accelerated the purchase of loans from
certain branding partner and forward flow lenders of approximately $511 million.
 
 Historically,
the Company funded new loan originations using loan warehouse facilities and
asset-backed securitizations. Student loan warehousing has historically allowed
the Company to buy and manage student loans prior to transferring them into more
permanent financing arrangements. In July 2008, the Company did not renew its
liquidity provisions on its FFELP warehouse facility. Accordingly, the facility
became a term facility and no new loan originations could be funded with this
facility. In August 2008, the Company began funding FFELP Stafford and PLUS
student loan originations for the 2008-2009 academic year pursuant to the
Department’s Participation Program.
 
 On
October 7, 2008, legislation was enacted to extend the Department’s authority to
address FFELP student loans made for the 2009-2010 academic year and allowing
for the extension of the Participation Program from September 30, 2009 to
September 30, 2010. The Company plans to continue to use the Participation
Program and a participation agreement with Union Bank to fund loans for the
2009-2010 academic year. These facilities are allowing the Company to continue
originating new federal student loans to all students regardless of the school
they attend.
 
 59
 Activity
in the Allowance for Loan Losses
 
 The
provision for loan losses represents the periodic expense of maintaining an
allowance sufficient to absorb losses, net of recoveries, inherent in the
portfolio of student loans. An analysis of the Company’s allowance for loan
losses is presented in the following table:
   Three
      months ended September 30,
                    
                    
                    Nine
      months ended September 30,2009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008Balance
      at beginning of period
                    
                    $
                    50,000
                    
                    
                    
                    47,909
                    
                    
                    
                    50,922
                    
                    
                    
                    45,592Provision
      for loan losses:Federally
      insured loans
                    
                    
                    4,500
                    
                    
                    
                    4,500
                    
                    
                    
                    15,000
                    
                    
                    
                    12,000Non-federally
      insured loans
                    
                    
                    3,000
                    
                    
                    
                    2,500
                    
                    
                    
                    8,000
                    
                    
                    
                    6,000Total
      provision for loan losses
                    
                    
                    7,500
                    
                    
                    
                    7,000
                    
                    
                    
                    23,000
                    
                    
                    
                    18,000Charge-offs,
      net of recoveries:Federally
      insured loans
                    
                    
                    (3,578
                    )
                    
                    
                    (4,218
                    )
                    
                    
                    (11,042
                    )
                    
                    
                    (11,418
                    )Non-federally
      insured loans
                    
                    
                    (802
                    )
                    
                    
                    (1,621
                    )
                    
                    
                    (2,440
                    )
                    
                    
                    (2,354
                    )Net
      charge-offs
                    
                    
                    (4,380
                    )
                    
                    
                    (5,839
                    )
                    
                    
                    (13,482
                    )
                    
                    
                    (13,772
                    )Sale
      of federally insured loans
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    (520
                    )
                    
                    
                    (750
                    )Sale
      of non-federally insured loans
                    
                    
                    (3,000
                    )
                    
                    
                    —
                    
                    
                    
                    (9,800
                    )
                    
                    
                    —Balance
      at end of period
                    
                    $
                    50,120
                    
                    
                    
                    49,070
                    
                    
                    
                    50,120
                    
                    
                    
                    49,070Allocation
      of the allowance for loan losses:Federally
      insured loans
                    
                    $
                    29,015
                    
                    
                    
                    24,366
                    
                    
                    
                    29,015
                    
                    
                    
                    24,366Non-federally
      insured loans
                    
                    
                    21,105
                    
                    
                    
                    24,704
                    
                    
                    
                    21,105
                    
                    
                    
                    24,704Total
      allowance for loan losses
                    
                    $
                    50,120
                    
                    
                    
                    49,070
                    
                    
                    
                    50,120
                    
                    
                    
                    49,070Net
      loan charge-offs as a percentage of average student loans
                    
                    
                    0.070
                    %
                    
                    
                    0.090
                    %
                    
                    
                    0.070
                    %
                    
                    
                    0.070
                    %Total
      allowance as a percentage of the ending balance of studentloans
      (excluding loans held-for-sale)
                    
                    
                    0.214
                    %
                    
                    
                    0.189
                    %
                    
                    
                    0.214
                    %
                    
                    
                    0.189
                    %Allowance
      for non-federally insured loans as a percentage such loans
                    
                    
                    12.629
                    %
                    
                    
                    8.966
                    %
                    
                    
                    12.629
                    %
                    
                    
                    8.966
                    %Average
      student loans
                    
                    $
                    25,056,836
                    
                    
                    
                    26,035,006
                    
                    
                    
                    25,148,707
                    
                    
                    
                    26,220,486Ending
      balance of student loans (excluding loans held-for-sale)
                    
                    
                    23,462,317
                    
                    
                    
                    26,001,413
                    
                    
                    
                    23,462,317
                    
                    
                    
                    26,001,413Ending
      balance of non-federally insured loans
                    
                    
                    167,114
                    
                    
                    
                    275,520
                    
                    
                    
                    167,114
                    
                    
                    
                    275,520
 
 Delinquencies
have the potential to adversely impact the Company’s earnings through increased
servicing and collection costs and account charge-offs. The table below shows
the Company’s student loan delinquency amounts:
   As
      of September 30, 2009
                  
                  
                  As
      of December 31, 2008Dollars
                  
                  
                  Percent
                  
                  
                  Dollars
                  
                  
                  PercentFederally
      Insured Loans:Loans
      in-school/grace/deferment(1)
                  
                  $
                  8,042,550
                  
                  
                  
                  
                  
                  $
                  7,374,602Loans
      in forebearance(2)
                  
                  
                  2,412,644
                  
                  
                  
                  
                  
                  
                  2,484,478Loans
      in repayment status:Loans
      current
                  
                  
                  12,464,768
                  
                  
                  
                  86.2
                  %
                  
                  
                  13,169,101
                  
                  
                  
                  88.2
                  %Loans
      delinquent 31-60 days(3)
                  
                  
                  629,064
                  
                  
                  
                  4.4
                  
                  
                  
                  536,112
                  
                  
                  
                  3.6Loans
      delinquent 61-90 days(3)
                  
                  
                  325,522
                  
                  
                  
                  2.3
                  
                  
                  
                  240,549
                  
                  
                  
                  1.6Loans
      delinquent 91 days or greater(4)
                  
                  
                  1,027,824
                  
                  
                  
                  7.1
                  
                  
                  
                  983,099
                  
                  
                  
                  6.6Total
      loans in repayment
                  
                  
                  14,447,178
                  
                  
                  
                  100.0
                  %
                  
                  
                  14,928,861
                  
                  
                  
                  100.0
                  %Total
      federally insured loans
                  
                  $
                  24,902,372
                  
                  
                  
                  
                  
                  
                  $
                  24,787,941Non-Federally
      Insured Loans:Loans
      in-school/grace/deferment(1)
                  
                  $
                  45,022
                  
                  
                  
                  
                  
                  
                  $
                  84,237Loans
      in forebearance(2)
                  
                  
                  1,722
                  
                  
                  
                  
                  
                  
                  
                  9,540Loans
      in repayment status:Loans
      current
                  
                  
                  112,063
                  
                  
                  
                  93.1
                  %
                  
                  
                  169,865
                  
                  
                  
                  94.7
                  %Loans
      delinquent 31-60 days(3)
                  
                  
                  3,165
                  
                  
                  
                  2.6
                  
                  
                  
                  3,315
                  
                  
                  
                  1.8Loans
      delinquent 61-90 days(3)
                  
                  
                  1,871
                  
                  
                  
                  1.6
                  
                  
                  
                  1,743
                  
                  
                  
                  1.0Loans
      delinquent 91 days or greater(4)
                  
                  
                  3,271
                  
                  
                  
                  2.7
                  
                  
                  
                  4,408
                  
                  
                  
                  2.5Total
      loans in repayment
                  
                  
                  120,370
                  
                  
                  
                  100.0
                  %
                  
                  
                  179,331
                  
                  
                  
                  100.0
                  %Total
      non-federally insured loans
                  
                  $
                  167,114
                  
                  
                  
                  
                  
                  
                  $
                  273,108
  (1)
              Loans
      for borrowers who still may be attending school or engaging in other
      permitted educational activities and are not yet required to make payments
      on the loans, e.g., residency periods
      for medical students or a grace period for bar exam preparation for law
      students.
 
 60
 (2)
              Loans
      for borrowers who have temporarily ceased making full payments due to
      hardship or other factors, according to a schedule approved by the
      servicer consistent with the established loan program servicing procedures
      and policies.
 
 (3)
              The
      period of delinquency is based on the number of days scheduled payments
      are contractually past due and relate to repayment loans, that is,
      receivables not charged off, and not in school, grace, deferment, or
      forbearance.
 
 (4)
              Loans
      delinquent 91 days or greater include loans in claim status, which are
      loans that have gone into default and have been submitted to the guaranty
      agency for FFELP loans, or, if applicable, the insurer for non-federally
      insured loans, to process the claim for
payment.
 
 Student Loan Spread
Analysis
 
 The
following table analyzes the student loan spread on the Company’s portfolio of
student loans and represents the spread on assets earned in conjunction with the
liabilities and derivative instruments used to fund the assets:
 
 Three
      months ended September 30,
                    
                    
                    Nine
      months ended September 30,2009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008Variable
      student loan yield
                    
                    
                    2.64
                    %
                    
                    
                    5.23
                    %
                    
                    
                    2.95
                    %
                    
                    
                    5.54
                    %Consolidation
      rebate fees
                    
                    
                    (0.68
                    )
                    
                    
                    (0.72
                    )
                    
                    
                    (0.70
                    )
                    
                    
                    (0.74
                    )Premium
      and deferred origination costs amortization
                    
                    
                    (0.31
                    )
                    
                    
                    (0.33
                    )
                    
                    
                    (0.29
                    )
                    
                    
                    (0.35
                    )Variable
      student loan net yield
                    
                    
                    1.65
                    
                    
                    
                    4.18
                    
                    
                    
                    1.96
                    
                    
                    
                    4.45Student
      loan cost of funds - interest expense
                    
                    
                    (1.07
                    )
                    
                    
                    (3.30
                    )
                    
                    
                    (1.58
                    )
                    
                    
                    (3.73
                    )Student
      loan cost of funds - derivative settlements
                    
                    
                    0.08
                    
                    
                    
                    0.06
                    
                    
                    
                    0.20
                    
                    
                    
                    0.25Variable
      student loan spread
                    
                    
                    0.66
                    
                    
                    
                    0.94
                    
                    
                    
                    0.58
                    
                    
                    
                    0.97Variable
      rate floor income,net
      of settlements on derivatives (a)
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    (0.04
                    )
                    
                    
                    (0.08
                    )Fixed
      rate floor income,net
      of settlements on derivatives
                    
                    
                    0.61
                    
                    
                    
                    0.10
                    
                    
                    
                    0.56
                    
                    
                    
                    0.13Core
      student loan spread
                    
                    
                    1.27
                    %
                    
                    
                    1.04
                    %
                    
                    
                    1.10
                    %
                    
                    
                    1.02
                    %Average
      balance of student loans
                    
                    $
                    25,056,836
                    
                    
                    
                    26,035,006
                    
                    
                    
                    25,148,707
                    
                    
                    
                    26,220,486Average
      balance of debt outstanding
                    
                    
                    25,677,213
                    
                    
                    
                    26,769,955
                    
                    
                    
                    25,704,825
                    
                    
                    
                    27,120,342
 
 (a)
                As
      a result of the ongoing volatility of interest rates, effective October 1,
      2008, the Company changed its calculation of variable rate floor income to
      better reflect the economic benefit received by the Company. The economic
      benefit received by the Company related to variable rate floor income was
      $0.1 million for the three months ended September 30, 2008 and $7.5
      million and $25.7 million for the nine months ended September 30, 2009 and
      2008, respectively. There was no economic benefit received by the Company
      related to variable rate floor income for the three months ended September
      30, 2009. Variable rate floor income calculated on a statutory maximum
      basis was $0.1 million and $1.6 million for the three months ended
      September 30, 2009 and 2008, respectively, and $23.9 million
      and $42.3 million for the nine months ended September 30, 2009 and 2008,
      respectively. Beginning October 1, 2008, and for presentation of prior
      periods, the economic benefit received by the Company has been used to
      determine core student loan spread. For the student loan spread analysis
      shown above, variable-rate floor income for prior periods was changed to
      reflect the economic benefit to conform to the current period
      presentation.
 
 The
Company’s core student loan spread during the three and nine months ended
September 30, 2009 compared to 2008 was impacted by the following
items:
 
 Increases
 
 ·
              The
      amortization of loan premiums and deferred origination costs, which is a
      reduction to core student loan spread, decreased as a result of reduced
      costs to acquire or originate loans and a decrease in the yield earned on
      student loans.
 
 ·
              The
      Company has a portfolio of student loans that are earning interest at a
      fixed borrower rate which exceeds the statutorily defined variable lender
      rate creating fixed rate floor income which is included in its core
      student loan spread. Due to lower interest rates in the three and nine
      month period ended September 30, 2009 compared to the same period in 2008,
      the Company received additional fixed rate floor income on a portion of
      its student loan portfolio. See Item 3, “Quantitative and Qualitative
      Disclosures about Market Risk – Interest Rate Risk” for additional
      information.
 
 ·
              The
      Company has used derivative instruments to hedge the repricing risk due to
      the timing of the interest rate resets on its assets and liabilities. The
      Company has entered into basis swaps in which the Company receives
      three-month LIBOR and pays one-month LIBOR plus or minus a spread as
      defined in the agreements. During the three and nine months ended
      September 30, 2009, the Company received $3.1 million and $20.5 million,
      respectively, of settlements on its 1/3 Basis Swaps. During the first
      quarter of 2008, the Company received $0.9 million of settlements on its
      1/3 Basis Swaps. No 1/3 Basis Swaps were outstanding during the three
      months ended September 30, 2008.
  61
  Decreases
 
 ·
              The
      passage of the College Cost Reduction Act has reduced the yield on all
      FFELP loans originated after October 1, 2007. As of September 30, 2009,
      10.6% of the Company’s federally insured student loan portfolio was
      originated after October 1, 2007 as compared to 4.1% as of
      September 30, 2008.
 
 ·
              Historically,
      the movement of the various interest rate indices received on the
      Company’s student loan assets and paid on the debt to fund such loans was
      highly correlated. The short term movement of the indices was dislocated
      beginning in August 2007. Due to the unintended consequences of government
      intervention in the commercial paper markets and limited issuances of
      qualifying financial commercial paper, the relationship between the
      three-month financial CP and LIBOR rates has widened from historical
      levels. To address this issue, the Department announced that for purposes
      of calculating the FFELP loan index from October 27, 2008 to December 31,
      2008, the Federal Reserve’s Commercial Paper Funding Facility rate was
      used for those days in which no three-month financial commercial paper
      rate was available. This action partially mitigated the volatility between
      CP and LIBOR for the three-month period ended on December 31, 2008.
      However, the Department of Education did not make a similar adjustment for
      2009, which negatively impacted the Company’s net interest income for the
      three and nine months ended September 30,
2009.
 
 ·
              The
      spread to LIBOR on asset-backed securities transactions has increased
      significantly since August 2007. The Company issued $4.4 billion of notes
      in asset-backed securities transactions in 2008 ($1.2 billion in March
      2008, $1.9 billion in April 2008, and $1.3 billion in May 2008) and an
      additional $0.3 billion in March 2009. Prior to completing these
      asset-backed securities transactions, these loans were funded in the
      Company’s FFELP warehouse facility in which the cost of funds were lower
      than the asset-backed securities
transactions.
 
 ·
              The
      Company has used derivative instruments to hedge the repricing risk due to
      the timing of the interest rate resets on its assets and liabilities. The
      Company has entered into basis swaps in which the Company receives
      three-month LIBOR set discretely in advance and pays a daily weighted
      average three-month LIBOR less a spread as defined in the individual
      agreements (“the Average/Discrete Basis Swaps”). The Company received less
      settlements on its Average/Discrete Basis Swaps in the first and second
      quarters of 2009 compared to the same periods in 2008 due to the
      significant drop in interest rates in 2008 which triggered larger
      settlements during the first and second quarters of
  2008.
 
 62
 
 Three
and nine months ended September 30, 2009 compared to the three and nine months
ended September 30, 2008
   Three
      months ended September 30,
                                
                                
                                Nine
      months ended September 30,Change
                                
                                
                                
                                
                                
                                
                                Change2009
                                
                                2008
                                
                                $
                                
                                
                                %
                                
                                
                                2009
                                
                                2008
                                
                                $
                                
                                
                                %Net
      interest income after provisionfor
      loan losses
                                
                                $
                                66,896
                                
                                
                                58,767
                                
                                
                                8,129
                                
                                
                                13.8
                                %
                                
                                $
                                143,284
                                
                                
                                112,001
                                
                                
                                31,283
                                
                                
                                27.9
                                %Loan
      and guaranty servicing revenue
                                
                                
                                —
                                
                                
                                (136
                                )
                                
                                136
                                
                                
                                (100.0
                                )
                                
                                
                                —
                                
                                
                                26
                                
                                
                                (26
                                )
                                
                                (100.0
                                )Other
      income
                                
                                
                                9,959
                                
                                
                                4,079
                                
                                
                                5,880
                                
                                
                                144.2
                                
                                
                                
                                18,851
                                
                                
                                13,787
                                
                                
                                5,064
                                
                                
                                36.7Gain
      (loss) on sale of loans, net
                                
                                
                                8,788
                                
                                
                                —
                                
                                
                                8,788
                                
                                
                                100.0
                                
                                
                                
                                8,386
                                
                                
                                (47,426
                                )
                                
                                55,812
                                
                                
                                (117.7
                                )Derivative
      market value, foreign currency,and
      put option adjustments
                                
                                
                                —
                                
                                
                                —
                                
                                
                                —
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                466
                                
                                
                                (466
                                )
                                
                                (100.0
                                )Derivative
      settlements, net
                                
                                
                                4,914
                                
                                
                                789
                                
                                
                                4,125
                                
                                
                                522.8
                                
                                
                                
                                38,807
                                
                                
                                55,954
                                
                                
                                (17,147
                                )
                                
                                (30.6
                                )Total
      other income
                                
                                
                                23,661
                                
                                
                                4,732
                                
                                
                                18,929
                                
                                
                                400.0
                                
                                
                                
                                66,044
                                
                                
                                22,807
                                
                                
                                43,237
                                
                                
                                189.6Salaries
      and benefits
                                
                                
                                1,693
                                
                                
                                1,980
                                
                                
                                (287
                                )
                                
                                (14.5
                                )
                                
                                
                                5,203
                                
                                
                                6,157
                                
                                
                                (954
                                )
                                
                                (15.5
                                )Restructure
      expense - severance and contracttermination
      costs
                                
                                
                                —
                                
                                
                                —
                                
                                
                                —
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                1,845
                                
                                
                                (1,845
                                )
                                
                                (100.0
                                )Impairment
      expense
                                
                                
                                —
                                
                                
                                —
                                
                                
                                —
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                9,351
                                
                                
                                (9,351
                                )
                                
                                (100.0
                                )Other
      expenses
                                
                                
                                4,801
                                
                                
                                5,354
                                
                                
                                (553
                                )
                                
                                (10.3
                                )
                                
                                
                                15,635
                                
                                
                                15,793
                                
                                
                                (158
                                )
                                
                                (1.0
                                )Intersegment
      expenses
                                
                                
                                20,764
                                
                                
                                18,200
                                
                                
                                2,564
                                
                                
                                14.1
                                
                                
                                
                                59,372
                                
                                
                                57,754
                                
                                
                                1,618
                                
                                
                                2.8Total
      operating expenses
                                
                                
                                27,258
                                
                                
                                25,534
                                
                                
                                1,724
                                
                                
                                6.8
                                
                                
                                
                                80,210
                                
                                
                                90,900
                                
                                
                                (10,690
                                )
                                
                                (11.8
                                )"Base
      net income" before income taxes
                                
                                
                                63,299
                                
                                
                                37,965
                                
                                
                                25,334
                                
                                
                                66.7
                                
                                
                                
                                129,118
                                
                                
                                43,908
                                
                                
                                85,210
                                
                                
                                194.1Income
      tax expense
                                
                                
                                (24,054
                                )
                                
                                (14,047
                                )
                                
                                (10,007
                                )
                                
                                71.2
                                
                                
                                
                                (49,066
                                )
                                
                                (15,889
                                )
                                
                                (33,177
                                )
                                
                                208.8"Base
      net income"
                                
                                $
                                39,245
                                
                                
                                23,918
                                
                                
                                15,327
                                
                                
                                64.1
                                %
                                
                                $
                                80,052
                                
                                
                                28,019
                                
                                
                                52,033
                                
                                
                                185.7
                                %Before
      Tax Operating Margin
                                
                                
                                69.9
                                %
                                
                                59.8
                                %
                                
                                
                                
                                
                                
                                
                                
                                
                                61.7
                                %
                                
                                32.6
                                %Before
      Tax Operating Margin -excluding
      restructure expense,impairment
      expense, and loss on saleof
      loans during the first quarter of 2008
                                
                                
                                69.9
                                %
                                
                                59.8
                                %
                                
                                
                                
                                
                                
                                
                                
                                
                                61.7
                                %
                                
                                56.3
                                %
 
 Net
interest income after provision for loan losses.
  Three
      months ended September 30,
                  
                  
                  Change2009
                  
                  
                  2008
                  
                  
                  Dollars
                  
                  
                  PercentLoan
      interest
                  
                  $
                  205,978
                  
                  
                  
                  351,331
                  
                  
                  
                  (145,353
                  )
                  
                  
                  (41.4
                  )%Consolidation
      rebate fees
                  
                  
                  (43,191
                  )
                  
                  
                  (47,105
                  )
                  
                  
                  3,914
                  
                  
                  
                  8.3Amortization
      of loan premiums anddeferred
      origination costs
                  
                  
                  (19,532
                  )
                  
                  
                  (21,338
                  )
                  
                  
                  1,806
                  
                  
                  
                  8.5Total
      loan interest
                  
                  
                  143,255
                  
                  
                  
                  282,888
                  
                  
                  
                  (139,633
                  )
                  
                  
                  (49.4
                  )Investment
      interest
                  
                  
                  1,055
                  
                  
                  
                  7,151
                  
                  
                  
                  (6,096
                  )
                  
                  
                  (85.2
                  )Total
      interest income
                  
                  
                  144,310
                  
                  
                  
                  290,039
                  
                  
                  
                  (145,729
                  )
                  
                  
                  (50.2
                  )Interest
      on bonds and notes payable
                  
                  
                  69,572
                  
                  
                  
                  223,523
                  
                  
                  
                  (153,951
                  )
                  
                  
                  (68.9
                  )Intercompany
      interest
                  
                  
                  342
                  
                  
                  
                  749
                  
                  
                  
                  (407
                  )
                  
                  
                  (54.3
                  )Provision
      for loan losses
                  
                  
                  7,500
                  
                  
                  
                  7,000
                  
                  
                  
                  500
                  
                  
                  
                  7.1Net
      interest income after provisionfor
      loan losses
                  
                  $
                  66,896
                  
                  
                  
                  58,767
                  
                  
                  
                  8,129
                  
                  
                  
                  13.8
                  %
 `
 ·
              Loan
      interest income decreased $145.4 million as a result of a decrease in the
      average student loan portfolio of $1.0 billion (3.8%) and a decrease in
      the yield earned on student loans due to a decrease in interest rates for
      the three months ended September 30, 2009 compared to the same period in
      2008. In addition, the passage of the College Cost Reduction Act has
      reduced the yield on all FFELP loans originated after October 1, 2007. As
      of September 30, 2009, 10.6% of the Company’s federally insured student
      loan portfolio was originated after October 1, 2007 as compared to 4.2% as
      of September 30, 2008. These decreases were
      offset by an increase of $29.3 million due to an increase in fixed rate
      floor income.
 
 ·
              Consolidation
      rebate fees decreased due to the $1.7 billion (9.7%) decrease in the
      average consolidation portfolio.
 
 ·
              The
      amortization of loan premiums and deferred origination costs decreased as
      a result of reduced costs to acquire or originate loans and a decrease in
      the yield earned on student loans.
 
 63
 ·
              Investment
      income decreased as a result of lower interest rates in the second quarter
      of 2009 as compared to the same period in
2008.
 
 ·
              Interest
      expense decreased as a result of a decrease in interest rates on the
      Company’s variable rate debt which lowered the Company’s cost of funds
      (excluding net derivative settlements) to 1.07% for the three months ended
      September 30, 2009 compared to 3.30% for the same period a year ago. In
      addition, average debt decreased by $1.1 billion (4.1%) for the three
      months ended September 30, 2009 compared to the same period in
      2008.
 
 ·
              The
      provision for loan losses increased for the three months ended September
      30, 2009 compared to the same period in 2008 primarily due to increases in
      delinquencies.
  Nine
      months ended September 30,
                  
                  
                  Change2009
                  
                  
                  2008
                  
                  
                  Dollars
                  
                  
                  PercentLoan
      interest
                  
                  $
                  653,553
                  
                  
                  
                  1,083,078
                  
                  
                  
                  (429,525
                  )
                  
                  
                  (39.7
                  )%Consolidation
      rebate fees
                  
                  
                  (131,496
                  )
                  
                  
                  (144,680
                  )
                  
                  
                  13,184
                  
                  
                  
                  9.1Amortization
      of loan premiums anddeferred
      origination costs
                  
                  
                  (54,972
                  )
                  
                  
                  (69,583
                  )
                  
                  
                  14,611
                  
                  
                  
                  21.0Total
      loan interest
                  
                  
                  467,085
                  
                  
                  
                  868,815
                  
                  
                  
                  (401,730
                  )
                  
                  
                  (46.2
                  )Investment
      interest
                  
                  
                  6,045
                  
                  
                  
                  23,875
                  
                  
                  
                  (17,830
                  )
                  
                  
                  (74.7
                  )Total
      interest income
                  
                  
                  473,130
                  
                  
                  
                  892,690
                  
                  
                  
                  (419,560
                  )
                  
                  
                  (47.0
                  )Interest
      on bonds and notes payable
                  
                  
                  305,522
                  
                  
                  
                  761,300
                  
                  
                  
                  (455,778
                  )
                  
                  
                  (59.9
                  )Intercompany
      interest
                  
                  
                  1,324
                  
                  
                  
                  1,389
                  
                  
                  
                  (65
                  )
                  
                  
                  (4.7
                  )Provision
      for loan losses
                  
                  
                  23,000
                  
                  
                  
                  18,000
                  
                  
                  
                  5,000
                  
                  
                  
                  27.8Net
      interest income (loss) after provisionfor
      loan losses
                  
                  $
                  143,284
                  
                  
                  
                  112,001
                  
                  
                  
                  31,283
                  
                  
                  
                  (27.9
                  )%
 
 ·
              Loan
      interest income decreased $429.5 million as a result of a decrease in the
      average student loan portfolio of $1.1 billion (4.1%) and a decrease in
      the yield earned on student loans due to a decrease in interest rates for
      the nine months ended September 30, 2009 compared to the same period in
      2008. In addition, the passage of the College Cost Reduction Act has
      reduced the yield on all FFELP loans originated after October 1, 2007. As
      of September 30, 2009, 10.6% of the Company’s federally insured student
      loan portfolio was originated after October 1, 2007 as compared to 4.2% as
      of September 30, 2008.These
      decreases were offset by an increase of $77.2 million due to an increase
      in fixed rate floor income.
 
 ·
              Consolidation
      rebate fees decreased due to the $2.2 billion (12.1%) decrease in the
      average consolidation portfolio.
 
 ·
              The
      amortization of loan premiums and deferred origination costs decreased as
      a result of reduced costs to acquire or originate loans and a decrease in
      the yield earned on student loans.
 
 ·
              Investment
      income decreased as a result of lower interest rates for the nine months
      ended September 30, 2009 as compared to the same period in
      2008.
 
 ·
              Interest
      expense decreased as a result of a decrease in interest rates on the
      Company’s variable rate debt which lowered the Company’s cost of funds
      (excluding net derivative settlements) to 1.58% for the nine months ended
      September 30, 2009 compared to 3.73% for the same period a year ago. In
      addition, average debt decreased by $1.4 billion (5.2%) for the nine
      months ended September 30, 2009 compared to the same period in
      2008.
 
 ·
              The
      provision for loan losses increased for the nine months ended September
      30, 2009 compared to the same period in 2008 primarily due to increases in
      delinquencies.
 
 Other
income. The increase in other income is due to the Company purchasing
certain asset-backed securities resulting in the recognition of a gain of $5.9
million during the three months ended September 30, 2009.
 
 64
  Gain
(loss) on sale of loans, net.
 
 A summary
of gains (losses) from the sale of student loan assets during 2008 and 2009
follows:
   Three
      months ended September 30,
                                                                
                                                                Nine
      months ended September 30,2009
                                                                
                                                                
                                                                2008
                                                                
                                                                2009
                                                                
                                                                
                                                                2008Department's
      Purchase Program (a)
                                                                
                                                                $
                                                                9,689
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                9,689
                                                                
                                                                
                                                                
                                                                —Private
      loan participations (b)
                                                                
                                                                
                                                                (695
                                                                )
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                (695
                                                                )
                                                                
                                                                
                                                                —FFELP
      loan sales to a related party (c)
                                                                
                                                                
                                                                (206
                                                                )
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                (608
                                                                )
                                                                
                                                                
                                                                —FFELP
      loan sales to a third party (d)
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                
                                                                (47,426
                                                                )Gain
      (loss) on sale of loans, net
                                                                
                                                                $
                                                                8,788
                                                                
                                                                
                                                                
                                                                —
                                                                
                                                                
                                                                8,386
                                                                
                                                                
                                                                
                                                                (47,426
                                                                )
 
 (a)
              During
      the three months ended September 30, 2009, the Company sold $427.7 million
      of student loans to the Department under the Purchase
    Program.
 
 (b)
              During
      the three and nine months ended September 30, 2009, the Company
      participated $­­­­30.5 million and $95.5 million,
      respectively, of non-federally insured loans to third parties, which
      resulted in the recognition of a net loss on the sale of these loans for
      both periods.
 
 (c)
              During
      the three and nine months ended September 30, 2009, the Company sold $21.4
      million (par value) and$61.5
      million (par value), respectively, of federally insured student
      loans.
 
 (d)
              The
      Company sold $1.3 billion (par value) of student loans to third parties in
      2008 in order to reduce the amount of student loans remaining under the
      Company’s multi-year committed financing facility for FFELP loans, which
      reduced the Company’s exposure related to certain equity support
      provisions included in this
facility.
 
 Derivative
settlements, net.The Company maintains an overall risk management strategy that
incorporates the use of derivative instruments to reduce the economic effect of
interest rate volatility. Management has structured all of the Company’s
derivative transactions with the intent that each is economically effective;
however, the Company’s derivative instruments do not qualify for hedge
accounting. Derivative settlements for each applicable period should be
evaluated with the Company’s net interest income as shown in this Item 2,
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations – Asset Generation and Management Operating Segment – Results of
Operations – Student Loan Spread Analysis.”
 
 Intersegment
expenses.Intersegment expenses increased in 2009 compared to the same periods in
2008 due to additional fees paid to the Student Loan and Guaranty Servicing
operating segment. These additional fees relate to an increase in origination
fees due to an increase in disbursement volume, an increase in fees related to
the number of loans transferred between various financings as the Company was
executing financing strategies, and incurring conversion fees as a result of the
Company selling $427.7 million of student loans to the Department under the
Purchase Program.
 
 LIQUIDITY
AND CAPITAL RESOURCES
 
 The
Company’s fee generating businesses are non-capital intensive and all produce
positive operating cash flows. As such, a minimal amount of debt and equity
capital is allocated to the fee-based segments and any liquidity or capital
needs are satisfied using cash flow from operations. Therefore, the Liquidity
and Capital Resources discussion is concentrated on the Company’s liquidity and
capital needs to fund new FFELP student loan originations and meet existing debt
obligations, primarily related to debt facilities in the Asset Generation and
Management operating segment and unsecured corporate debt.
 
 The
Company has historically utilized operating cash flow, secured financing
transactions (which include warehouse facilities and asset-backed
securitizations), operating lines of credit, and other borrowing arrangements to
fund its Asset Generation and Management operations and student loan
acquisitions. In addition, the Company has used operating cash flow, borrowings
on its unsecured line of credit, and unsecured debt offerings to fund corporate
activities, business acquisitions, and repurchases of common stock.
  The
Company may issue equity and debt securities in the future in order to improve
capital, increase liquidity, refinance upcoming maturities, or provide for
general corporate purposes. Moreover, the Company may from time-to-time
repurchase certain amounts of its outstanding secured and unsecured debt
securities, including debt securities which the Company may issue in the future,
for cash and/or through exchanges for other securities. Such repurchases or
exchanges may be made in open market transactions, privately negotiated
transactions, or otherwise. Any such repurchases or exchanges will depend on
prevailing market conditions, the Company’s liquidity requirements, contractual
restrictions, compliance with securities laws, and other factors. The amounts
involved in any such transactions may be material.
 65
 Liquidity
Needs
 The
Company has two primary liquidity needs:
 
 ·
                Fund
      new FFELP Stafford and PLUS loan originations for the 2009-2010 academic
      year
 ·
                Satisfy
      debt obligations, specifically its unsecured senior notes and unsecured
      line of credit
 The
following table summarizes the Company’s debt obligations as of September 30,
2009.
  Carrying
                            
                            
                            Interest
      rateamount
                            
                            
                            range
                            
                            Final
      maturityAsset
      Generation and Management:Bonds
      and notes issued in asset-backed securitizations
                            
                            $
                            22,183,537
                            
                            
                            
                            0.30%
      - 6.90%
                            
                            11/01/09
      - 07/01/43DOE
      Participation
                            
                            
                            1,902,909
                            
                            
                            
                            0.91%
                            
                            10/15/2009
      and 09/30/10FFELP
      warehouse facility
                            
                            
                            361,279
                            
                            
                            
                            0.22%
      - 0.38%
                            
                            08/03/12DOE
      Conduit
                            
                            
                            1,155,351
                            
                            
                            
                            0.37%
                            
                            05/08/1425,603,076Unsecured
      Corporate Debt and other:Senior
      notes
                            
                            
                            66,716
                            
                            
                            
                            5.125%
                            
                            06/01/10Unsecured
      line of credit
                            
                            
                            691,500
                            
                            
                            
                            0.73%
      - 0.79%
                            
                            05/08/12Junior
      Subordinated Hybrid securities
                            
                            
                            198,250
                            
                            
                            
                            7.40%
                            
                            09/15/61Other
      borrowings
                            
                            
                            26,551
                            
                            
                            
                            0.26%
      - 5.10%
                            
                            01/10/10
      - 11/01/15983,017$
                            26,586,093
  Bonds and notes issued in
asset backed securitizations are structured to substantially match the maturity
of the funded assets and there are minimal liquidity issues related to these
facilities. Other secured bonds and notes included under Asset Generation and
Management in the above table are limited obligation borrowings which are
secured by student loan assets and related collateral.
 Sources
of Liquidity
 
 Sources
of Liquidity Available for New FFELP Stafford and PLUS Loans
 
 The
Company has unlimited sources of liquidity available for new FFELP Stafford and
PLUS loan originations for the 2009-2010 academic year under the Department’s
Participation and Purchase Programs. In addition, the Company maintains an
agreement with Union Bank, as trustee for various grantor trusts, under which
Union Bank has agreed to purchase from the Company participation interests in
student loans, and in August 2009, the Company entered into a FFELP warehouse
facility that has a maximum financing amount of $500.0 million with a revolving
financing structure.
 
 The
Company plans to fund all 2009-2010 academic year loans using the Participation
Program, the agreement with Union Bank, and the new FFELP warehouse facility.
These facilities are described in further detail below.
 
 Department of Education’s
Loan Participation and Purchase Commitment Programs
 
 In August
2008, the Department implemented the Purchase and Participation Programs
pursuant to ECASLA. Under the Department’s Purchase Program, the Department will
purchase loans at a price equal to the sum of (i) par value, (ii) accrued
interest, (iii) the one percent origination fee paid to the Department, and (iv)
a fixed amount of $75 per loan. Under the Participation Program, the Department
provides interim short term liquidity to FFELP lenders by purchasing
participation interests in pools of FFELP loans. FFELP lenders are charged a
rate of commercial paper plus 50 basis points on the principal amount of
participation interests outstanding. Loans funded under the Participation
Program for the 2008-2009 academic year were required to be either refinanced by
the lender or sold to the Department pursuant to the Purchase Program prior to
its expiration on October 15, 2009. To be eligible for purchase or participation
under the Department’s programs, loans were originally limited to FFELP Stafford
or PLUS loans made for the academic year 2008-2009, first disbursed between May
1, 2008 and July 1, 2009, with eligible borrower benefits.
 
 On
October 7, 2008, legislation was enacted to extend the Department’s authority to
address FFELP student loans made for the 2009-2010 academic year and allowing
for the extension of the Participation Program and Purchase Program from
September 30, 2009 to September 30, 2010. The Department indicated that loans
for the 2008-2009 academic year funded under the Department's Participation
Program were required to be refinanced or sold to the Department prior to
October 15, 2009. On November 8, 2008, the Department announced the replication
of the terms of the Participation and Purchase Programs, in accordance with the
October 7, 2008 legislation, which will include FFELP student loans made for the
2009-2010 academic year.
 
 As of
September 30, 2009, the Company had $1.9 billion of FFELP loans funded using the
Participation Program, of which $1.6 billion were 2008-2009 academic year loans
and are classified as held for sale on the Company’s consolidated balance sheet.
These loans were sold to the Department under its Purchase Program in October
2009. Upon selling the $1.6 billion of loans, the Company recognized a gain of
$26.9 million.
 
 Union Bank Participation
Agreement
 
 The
Company maintains an agreement with Union Bank, as trustee for various grantor
trusts, under which Union Bank has agreed to purchase from the Company
participation interests in student loans (the “FFELP Participation Agreement”).
The Company has the option to purchase the participation interests from the
grantor trusts at the end of a 364-day period upon termination of the
participation certificate. As of September 30, 2009, $681.9 million of loans
were subject to outstanding participation interests held by Union Bank, as
trustee, under this agreement. The agreement automatically renews annually and
is terminable by either party upon five business days notice. This agreement
provides beneficiaries of Union Bank’s grantor trusts with access to investments
in interests in student loans, while providing liquidity to the Company on a
short term basis. The Company can participate loans to Union Bank to the extent
of availability under the grantor trusts, up to $750 million or an amount in
excess of $750 million if mutually agreed to by both parties. Loans participated
under this agreement have been accounted for by the Company as loan sales.
Accordingly, the participation interests sold are not included on the Company’s
consolidated balance sheet.
 66
 FFELP Warehouse
Facility
 
 On August
3, 2009, the Company entered into a FFELP warehouse facility (the “2009 FFELP
Warehouse Facility”). The 2009 FFELP Warehouse Facility has a maximum financing
amount of $500.0 million, with a revolving financing structure supported by
364-day liquidity provisions, which expire on August 2, 2010. The final maturity
date of the facility is August 3, 2012. In the event the Company is unable to
renew the liquidity provisions by August 2, 2010, the facility would become a
term facility at a stepped-up cost, with no additional student loans being
eligible for financing, and the Company would be required to refinance the
existing loans in the facility by August 3, 2012.
 
 The 2009
FFELP Warehouse Facility provides for formula based advance rates depending on
FFELP loan type up to a maximum of 92 percent to 98 percent of the principal and
interest financed. The advance rates for collateral may increase or decrease
based on market conditions. The facility contains financial covenants relating
to levels of the Company’s consolidated net worth, ratio of adjusted EBITDA to
corporate debt interest, and unencumbered cash. Any violation of these covenants
could result in a requirement for the immediate repayment of any outstanding
borrowings under the facility. Unlike the Company’s prior FFELP warehouse
facility, the new facility does not require the Company to refinance or remove a
percentage of the pledged student loan collateral on an annual basis. As of
November 6, 2009, $179.1 million was outstanding under this facility and $320.9
million was available for future use. Upon termination or expiration
of the facility, the company would expect to access the securitization market,
use operating cash, rely on sale of assets, or transfer collateral to satisfy
any remaining obligations.
  Asset-backed
securities
transactions
  Depending
on market conditions, the Company anticipates continuing to access the
asset-backed securities market. Asset-backed securities transactions would be
used to refinance student loans included in the FFELP warehouse facility, the
DOE Conduit facility for certain loans disbursed before September 30, 2009,
and/or existing asset-backed security transactions. The FFELP warehouse facility
and DOE Conduit facility have advance rates that are less than par. As of
November 9, 2009, the Company has approximately $13 million and $60 million,
respectively, advanced in operating cash in these facilities. Depending on the
terms of asset-backed security transactions, refinancing loans included in these
facilities could produce positive cash flow to the Company and are contemplated
by management when making student loan financing decisions.
  On
October 22, 2009, the Company completed an asset-backed securities transaction
of $434.0 million. The Company used the proceeds from the sale of these notes to
purchase student loans previously financed in other asset-backed securitizations
and the FFELP warehouse facility.
 Sources
of Liquidity Available to Satisfy Debt Obligations
 The
sources of liquidity available to satisfy debt obligations include:
 ·
                Sources
      of liquidity currently
available
 ·
                Cash
      generated from operations
 ·
                Cash
      generated from existing
portfolio
 
 67
 Sources of liquidity
currently available
 
 The
following table details the Company’s sources of liquidity currently available
(as of November 9, 2009):
 
 Sources
      of primary liquidity: (a)Cash
      and cash equivalents (b)
                                $
                                375,000Unencumbered
      FFELP student loan assets
                                
                                22,000Unencumbered
      private student loan assets
                                
                                136,000Unused
      unsecured line of credit (c)
                                
                                51,000Total
      sources of primary liquidity
                                $
                                584,000
 (a)
              The
      sources of primary liquidity table above does not include asset-backed
      security investments. As part of the Company’s issuance of asset-backed
      securitizations in March 2008 and May 2008, due to credit market
      conditions when these notes were issued, the Company purchased the Class B
      subordinated notes of $36 million (par value) and $41 million (par value),
      respectively. These notes are not included on the Company’s consolidated
      balance sheet. If the credit market conditions improve, the Company
      anticipates selling these notes to third parties. Upon a sale to third
      parties, the Company would obtain cash proceeds equal to the market value
      of the notes on the date of such sale. Upon sale, these notes would be
      shown as “bonds and notes payable” on the Company’s consolidated balance
      sheet. Unless there is a significant market improvement, the Company
      believes the market value of such notes will be less than par value. The
      difference between the par value and market value would be recognized by
      the Company as interest expense over the life of the
  bonds.
 
 (b)
              The
      Company also has restricted cash and investments; however, the Company is
      limited in the amounts of funds that can be transferred from its
      subsidiaries through intercompany loans, advances, or cash dividends.
      These limitations result from the restrictions contained in trust
      indentures under debt financing arrangements to which the Company’s
      education lending subsidiaries are parties. The Company does not believe
      these limitations will significantly affect its operating cash needs. The
      amounts of cash and investments restricted in the respective reserve
      accounts of the education lending subsidiaries are shown on the balance
      sheets as restricted cash and
investments.
 
 (c)
              The
      lending commitment under the Company’s unsecured line of credit is
      provided by a total of thirteen banks, with no individual bank
      representing more than 11% of the total lending commitment. The bank
      lending group includes Lehman Brothers Bank, a subsidiary of Lehman
      Brothers Holdings Inc., which represents approximately 7% of the lending
      commitment under the line of credit. On September 15, 2008, Lehman
      Brothers Holdings Inc. filed a voluntary petition for relief under Chapter
      11 of the United States Bankruptcy Code. The Company does not expect
      Lehman to fund future borrowing requests. The amount included in the table
      above excludes Lehman’s commitment.
 
 Cash generated from
operations
 
 The
Company has historically generated positive cash flow from operations. For the
nine months ended September 30, 2009, the Company has net cash flow from
operating activities of $214.7
million.
 
 68
 Cash generated from existing
portfolio
 
 Of the
$26.6 billion of debt outstanding as of September 30, 2009, $19.7 billion was
issued under asset-backed securitizations that primarily reprice at a fixed
spread to three month LIBOR and are structured to substantially match the
maturity of the funded assets. These notes fund FFELP student loans that are
predominantly set based on a spread to three month commercial paper. Based on
cash flow models developed to reflect management’s current estimate of, among
other factors, prepayments, defaults, deferment, forbearance, and interest
rates, the Company currently expects future undiscounted cash flows from these
transactions will be approximately $1.35 billion as detailed below. These cash
flows consist of net spread and servicing and administrative revenue in excess
of estimated cost.
The Company expects the future cash flow would correspond to earnings when
excluding the amortization of loan premiums and deferred origination
costs, potential derivative activity used by the Company to hedge the portfolio,
and other portfolio management and administrative costs. Because the Company
does not use gain-on-sale accounting when issuing asset-backed securitizations,
the future earnings of these transactions are not yet reflected in the Company’s
consolidated financial statements.
  
 
 Unsecured
Line of Credit
 
 The
Company has a $750.0 million unsecured line of credit that terminates in May
2012. As of September 30, 2009, there was $691.5 million outstanding on this
line. The weighted average interest rate on this line of credit was 0.77% as of
September 30, 2009. Upon termination in 2012, there can be no assurance that the
Company will be able to maintain this line of credit, find alternative funding,
or increase the amount outstanding under the line, if necessary. The lending
commitment under the Company’s unsecured line of credit is provided by a total
of thirteen banks, with no individual bank representing more than 11% of the
total lending commitment. The bank lending group includes Lehman Brothers Bank,
a subsidiary of Lehman Brothers Holdings Inc., which represents approximately 7%
of the lending commitment under the line of credit. On September 15, 2008,
Lehman Brothers Holdings Inc. filed a voluntary petition for relief under
Chapter 11 of the United States Bankruptcy Code. The Company does not expect
Lehman to fund future borrowing requests. As of November 9, 2009, excluding
Lehman’s lending commitment, the Company had $51.2 million available for future
use under its unsecured line of credit.
 
 69
 The line
of credit agreement contains certain financial covenants that, if not met, lead
to an event of default under the agreement. The covenants include
maintaining:
 ·
                    A
      minimum consolidated net
worth
 
 ·
                    A
      minimum adjusted EBITDA to corporate debt interest (over the last four
      rolling quarters)
 
 ·
                    A
      limitation on subsidiary
indebtedness
 
 ·
                    A
      limitation on the percentage of non-guaranteed loans in the Company’s
      portfolio
 
 As of
September 30, 2009, the Company was in compliance with all of these
requirements. Many of these covenants are duplicated in the Company’s other
lending facilities, including its FFELP warehouse facilities.
 
 A default
on the 2009 FFELP Warehouse Facility would result in an event of default on the
Company’s unsecured line of credit that would result in the outstanding balance
on the line of credit becoming immediately due and payable.
 
 The
Company’s operating line of credit does not have any covenants related to
unsecured debt ratings. However, changes in the Company’s ratings (as well as
the amounts the Company borrows) have modest implications on the pricing level
at which the Company obtains funding.
 
 Debt
Repurchases
 
 Due to
the Company’s improved cash position, the Company repurchased debt during 2009
as summarized below. Any gains recorded by the Company from the purchase of debt
are included in “other income” on the Company’s consolidated statement of
operations.
 
 5.125%
      Senior Notes due 2010
                  
                  
                  Junior
      Subordinated
                    Hybrid
      Securities
                  
                  
                  Asset-backed
      securities (a)Notional
                  
                  
                  Purchase
                  
                  
                  Gain
                  
                  
                  Notional
                  
                  
                  Purchase
                  
                  
                  Gain
                  
                  
                  Notional
                  
                  
                  Purchase
                  
                  
                  Gainamount
                  
                  
                  price
                  
                  
                  (loss)
                  
                  
                  amount
                  
                  
                  price
                  
                  
                  (loss)
                  
                  
                  amount
                  
                  
                  price
                  
                  
                  (loss)Three
      months ended:March
      31, 2009
                  
                  $
                  34,866
                  
                  
                  
                  26,791
                  
                  
                  
                  8,075
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —June
      30, 2009
                  
                  
                  35,520
                  
                  
                  
                  31,080
                  
                  
                  
                  4,440
                  
                  
                  
                  1,750
                  
                  
                  
                  350
                  
                  
                  
                  1,400
                  
                  
                  
                  1,100
                  
                  
                  
                  1,078
                  
                  
                  
                  22September
      30, 2009
                  
                  
                  137,898
                  
                  
                  
                  138,505
                  
                  
                  
                  (607
                  )
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  44,950
                  
                  
                  
                  39,095
                  
                  
                  
                  5,855Nine
      months ended September 30, 2009
                  
                  
                  208,284
                  
                  
                  
                  196,376
                  
                  
                  
                  11,908
                  
                  
                  
                  1,750
                  
                  
                  
                  350
                  
                  
                  
                  1,400
                  
                  
                  
                  46,050
                  
                  
                  
                  40,173
                  
                  
                  
                  5,877Subsequent
      to September 30, 2009through
      November 9, 2009
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  140,200
                  
                  
                  
                  126,159
                  
                  
                  
                  14,041Total
      debt repurchased
                  
                  $
                  208,284
                  
                  
                  
                  196,376
                  
                  
                  
                  11,908
                  
                  
                  
                  1,750
                  
                  
                  
                  350
                  
                  
                  
                  1,400
                  
                  
                  
                  186,250
                  
                  
                  
                  166,332
                  
                  
                  
                  19,918Balance
      as of September 30, 2009
                  
                  $
                  66,716
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  198,250
 
 (a)
                  In
      accordance with the various indentures, the Company expects to continue to
      use funds available in the trust to purchase certain asset-backed
      securities for cash in open market transactions, privately negotiated
      transactions, or otherwise to redeem such securities. Under the terms of
      the indentures, the purchase price paid in any such transaction must be
      less than the par amount of securities acquired. Any redemptions in the
      normal course must be made at par. Any such transaction will depend on
      prevailing market conditions, liquidity requirements, contractual
      restrictions, compliance with securities laws, and other
      factors.
  The
Company's 5.125% Senior Notes due 2010 (the "Senior Notes") were previously
covered debt under a Replacement Capital Covenant dated September 27, 2006 (the
"RCC"). Under the RCC, if $100 million or more of the Senior Notes remained
outstanding, the Company was restricted in its ability to repurchase or redeem
its Junior Subordinated Hybrid Securities. On September 17, 2009, the Company
announced that less than $100 million of the Senior Notes remained outstanding,
and therefore the RCC no longer provided any benefit to the holders of the
Senior Notes. The Company has no other eligible senior debt or eligible
subordinated debt under the terms of the RCC, therefore the RCC and the
restrictions on repurchase or redemption of the Junior Subordinated Hybrid
Securities are of no further force and effect.
  Contractual
Obligations
 
 The Company is committed under
noncancelable operating leases for certain office and warehouse space and
equipment. The Company’s contractual obligations as of September 30, 2009 were
as follows:
   Total
                    
                    
                    Less
      than 1 year
                    
                    
                    1
      to 3 years
                    
                    
                    3
      to 5 years
                    
                    
                    More
      than
                      5
      yearsBonds
      and notes payable
                    
                    $
                    26,586,093
                    
                    
                    
                    2,384,286
                    
                    
                    
                    803,338
                    
                    
                    
                    1,436,564
                    
                    
                    
                    21,961,905Operating
      lease obligations (a)
                    
                    
                    29,476
                    
                    
                    
                    8,483
                    
                    
                    
                    11,999
                    
                    
                    
                    7,799
                    
                    
                    
                    1,195Other
                    
                    
                    31,764
                    
                    
                    
                    31,764
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —Total
                    
                    $
                    26,647,333
                    
                    
                    
                    2,424,533
                    
                    
                    
                    815,337
                    
                    
                    
                    1,444,363
                    
                    
                    
                    21,963,100
  (a)
                  Operating
      lease obligations are presented net of approximately $1.9 million in
      sublease arrangements.
 
 70
 As of
September 30, 2009, the Company had a reserve of $5.7 million for uncertain
income tax positions (including the federal benefit received from state
positions and accrued interest). This obligation is not included in the above
table as the timing and resolution of the income tax positions cannot be
reasonably estimated at this time.
 
 The
Company has an obligation to purchase $31.8 million of private loans from an
unrelated financial institution in quarterly installments of approximately $5.0
million through the third quarter of 2010 with any remaining amount to be
purchased at that time. This obligation is included in “other” in the above
table.
 
 During
the three and nine month periods ended September 30, 2009, the Company
participated $30.5 million and $95.5 million, respectively, of non-federally
insured loans to third parties. The Company has accounted for these
participations as loan sales. Accordingly, the participation interests sold are
not included on the Company’s consolidated balance sheet. Per the terms of the
servicing agreements, the Company’s servicing operations are obligated to
repurchase loans subject to the participation interests when such loans become
60 or 90 days delinquent. As of September 30, 2009, the Company has $10.6
million accrued related to this obligation which is included in “other
liabilities” in the Company’s consolidated balance sheet. This obligation is not
included in the above table.
 
 The
Company has commitments with its branding partners and forward flow lenders
which obligate the Company to purchase loans originated under specific criteria,
although the branding partners and forward flow lenders are typically not
obligated to provide the Company with a minimum amount of loans. These
commitments generally run for periods ranging from one to five years and are
generally renewable. Commitments to purchase loans under these arrangements are
not included in the table above.
 
 As a
result of the Company’s previous acquisitions, the Company has certain
contractual obligations or commitments as follows:
 
 ·
                  LoanSTAR
      Funding Group, Inc. (“LoanSTAR”) – As part of the agreement for the
      acquisition of the capital stock of LoanSTAR from the Greater Texas
      Foundation (“Texas Foundation”), the Company agreed to sell student loans
      in an aggregate amount sufficient to permit the Texas Foundation to
      maintain a portfolio of loans equal to no less than $200 million through
      October 2010. The sales price for such loans is the fair value mutually
      agreed upon between the Company and the Texas Foundation. To satisfy this
      obligation, the Company is obligated to sell loans to the Texas Foundation
      on a quarterly basis; however, the Foundation recently has chosen not to
      purchase such loans.
 
 ·
                  infiNET
      Integrated Solutions, Inc. (“infiNET”) – Stock price guarantee of
      $104.8375 per share on 95,380 shares of Class A Common Stock (less the
      greater of $41.9335 or the gross sales price such seller obtains from a
      sale of the shares occurring prior to February 28, 2011 as defined in the
      agreement) issued as part of the original purchase price. The obligation
      to pay this guaranteed stock price is due February 28, 2011 and is not
      included in the table above. Based upon the closing sale price of the
      Company’s Class A Common Stock as of September 30, 2009 of $12.44 per
      share, the Company’s obligation under this stock price guarantee would
      have been $6.0 million (($104.8375 - $41.9335) x 95,380 shares). Any cash
      paid by the Company in consideration of satisfying the guaranteed value of
      stock issued for this acquisition would be recorded by the Company as a
      reduction to additional paid-in
capital.
 
 Dividends
  In the first quarter of
2007, the Company began paying dividends of $0.07 per share on the Company's
Class A and Class B Common Stock which were paid quarterly through the first
quarter of 2008. On May 21, 2008, the Company announced that it was temporarily
suspending its quarterly dividend program. On November 5, 2009, the Company's
Board of Directors voted to reinstate the quarterly dividend program.
Accordingly, a dividend of $0.07 per share on the Company's Class A and Class B
Common Stock will be paid on December 15, 2009 to all holders of record as of
December 1, 2009.
  CRITICAL
ACCOUNTING POLICIES
 
 This
Management’s Discussion and Analysis of Financial Condition and Results of
Operations discusses the Company’s consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and the reported amounts of income and expenses during the reporting
periods. The Company bases its estimates and judgments on historical experience
and on various other factors that the Company believes are reasonable under the
circumstances. Actual results may differ from these estimates under varying
assumptions or conditions. Note 3 of the consolidated financial statements,
which are included in the Company’s Annual Report on Form 10-K for the year
ended December 31, 2008, includes a summary of the significant accounting
policies and methods used in the preparation of the consolidated financial
statements.
 
 On an
on-going basis, management evaluates its estimates and judgments, particularly
as they relate to accounting policies that management believes are most
“critical” — that is, they are most important to the portrayal of the Company’s
financial condition and results of operations and they require management’s most
difficult, subjective, or complex judgments, often as a result of the need to
make estimates about the effect of matters that are inherently uncertain.
Management has identified the following critical accounting policies that are
discussed in more detail below: allowance for loan losses, revenue recognition,
impairment assessments related to goodwill and intangible assets, income taxes,
and accounting for derivatives.
 
 71
 Allowance
for Loan Losses
 
 The
allowance for loan losses represents management’s estimate of probable losses on
student loans. This evaluation process is subject to numerous estimates and
judgments. The Company evaluates the adequacy of the allowance for loan losses
on its federally insured loan portfolio separately from its non-federally
insured loan portfolio.
 
 The
allowance for the federally insured loan portfolio is based on periodic
evaluations of the Company’s loan portfolios considering past experience, trends
in student loan claims rejected for payment by guarantors, changes to federal
student loan programs, current economic conditions, and other relevant factors.
Should any of these factors change, the estimates made by management would also
change, which in turn would impact the level of the Company’s future provision
for loan losses.
 
 In
determining the adequacy of the allowance for loan losses on the non-federally
insured loans, the Company considers several factors including: loans in
repayment versus those in a nonpaying status, months in repayment, delinquency
status, type of program, and trends in defaults in the portfolio based on
Company and industry data. Should any of these factors change, the estimates
made by management would also change, which in turn would impact the level of
the Company’s future provision for loan losses. The Company places a
non-federally insured loan on nonaccrual status when the collection of principal
and interest is 30 days past due and charges off the loan when the collection of
principal and interest is 120 days past due.
 
 The
allowance for federally insured and non-federally insured loans is maintained at
a level management believes is adequate to provide for estimated probable credit
losses inherent in the loan portfolio. This evaluation is inherently subjective
because it requires estimates that may be susceptible to significant
changes.
 
 Revenue
Recognition
 
 Student Loan Income– The
Company recognizes student loan income as earned, net of amortization of loan
premiums and deferred origination costs. Loan income is recognized based upon
the expected yield of the loan after giving effect to borrower utilization of
incentives such as principal reductions for timely payments (“borrower
benefits”) and other yield adjustments. The estimate of the borrower benefits
discount is dependent on the estimate of the number of borrowers who will
eventually qualify for these benefits. For competitive and liquidity purposes,
the Company frequently changes the borrower benefit programs in both amount and
qualification factors. These programmatic changes must be reflected in the
estimate of the borrower benefit discount. Loan premiums, deferred origination
costs, and borrower benefits are included in the carrying value of the student
loan on the consolidated balance sheet and are amortized over the estimated life
of the loan. The most sensitive estimate for loan premiums, deferred origination
costs, and borrower benefits is the estimate of the constant prepayment rate
(“CPR”). CPR is a variable in the life of loan estimate that measures the rate
at which loans in a portfolio pay before their stated maturity. The CPR is
directly correlated to the average life of the portfolio. CPR equals the
percentage of loans that prepay annually as a percentage of the beginning of
period balance. A number of factors can affect the CPR estimate such as the rate
of consolidation activity and default rates. Should any of these factors change,
the estimates made by management would also change, which in turn would impact
the amount of loan premium and deferred origination cost amortization recognized
by the Company in a particular period.
 
 Other Income– Other income
is primarily attributable to fees for providing services and the sale of lists
and print products. Fees associated with services are recognized in the period
services are rendered and earned under service arrangements with clients where
service fees are fixed or determinable and collectability is reasonably assured.
The Company’s service fees are determined based on written price quotations or
service agreements having stipulated terms and conditions that do not require
management to make any significant judgments or assumptions regarding any
potential uncertainties. Revenue from the sale of lists and print products is
generally earned and recognized, net of estimated returns, upon shipment or
delivery.
 
 The
Company assesses collectability of revenues and its allowance for doubtful
accounts based on a number of factors, including past transaction history with
the customer and the credit-worthiness of the customer. An allowance for
doubtful accounts is established to record accounts receivable at estimated net
realizable value. If the Company determines that collection of revenues is not
reasonably assured at or prior to delivery of the Company’s services, revenue is
recognized upon the receipt of cash.
 
 Goodwill
and Intangible Assets – Impairment Assessments
 
 The
Company reviews goodwill for impairment annually and whenever triggering events
or changes in circumstances indicate its carrying value may not be recoverable.
The Company performs a two-step impairment test on goodwill. In the first step,
the Company compares the fair value of each reporting unit to its carrying
value. If the fair value of the reporting unit exceeds the carrying value of the
net assets assigned to that unit, goodwill is considered not impaired and the
Company is not required to perform further testing. If the carrying value of the
net assets assigned to the reporting unit exceeds the fair value of the
reporting unit, then the Company must perform the second step of the impairment
test in order to determine the implied fair value of the reporting unit’s
goodwill. If the carrying value of a reporting unit’s goodwill exceeds its
implied fair value, then the Company would record an impairment loss equal to
the difference.
 72
 Determining
the fair value of a reporting unit involves the use of significant estimates and
assumptions. These estimates and assumptions include revenue growth rates and
operating margins used to calculate projected future cash flows, risk-adjusted
discount rates, future economic and market conditions, and determination of
appropriate market comparables. Actual future results may differ from those
estimates.
 
 The
Company makes judgments about the recoverability of purchased intangible assets
annually and whenever triggering events or changes in circumstances indicate
that an other than temporary impairment may exist. Each quarter the Company
evaluates the estimated remaining useful lives of purchased intangible assets
and whether events or changes in circumstances warrant a revision to the
remaining periods of amortization. Recoverability of these assets is measured by
comparison of the carrying amount of the asset to the future undiscounted cash
flows the asset is expected to generate. If the asset is considered to be
impaired, the amount of any impairment is measured as the difference between the
carrying value and the fair value of the impaired asset.
 
 Assumptions
and estimates about future values and remaining useful lives of the Company’s
intangible and other long-lived assets are complex and subjective. They can be
affected by a variety of factors, including external factors such as industry
and economic trends, and internal factors such as changes in the Company’s
business strategy and internal forecasts. Although the Company believes the
historical assumptions and estimates used are reasonable and appropriate,
different assumptions and estimates could materially impact the reported
financial results.
 
 Income
Taxes
 
 The
Company is subject to the income tax laws of the U.S and its states and
municipalities in which the Company operates. These tax laws are complex and
subject to different interpretations by the taxpayer and the relevant government
taxing authorities. In establishing a provision for income tax expense, the
Company must make judgments and interpretations about the application of these
inherently complex tax laws. The Company must also make estimates about when in
the future certain items will affect taxable income in the various tax
jurisdictions. Disputes over interpretations of the tax laws may be subject to
review/adjudication by the court systems of the various tax jurisdictions or may
be settled with the taxing authority upon examination or audit. The Company
reviews these balances quarterly and as new information becomes available, the
balances are adjusted, as appropriate.
 
 Derivative
Accounting
 
 The
Company records every derivative instrument, including certain derivative
instruments embedded in other contracts, at fair value on the balance sheet as
either an asset or liability. The Company determines the fair value for its
derivative contracts using either (i) pricing models that consider current
market conditions and the contractual terms of the derivative contract or (ii)
counterparty valuations. These factors include interest rates, time value,
forward interest rate curve, and volatility factors, as well as foreign exchange
rates. Pricing models and their underlying assumptions impact the amount and
timing of unrealized gains and losses recognized, and the use of different
pricing models or assumptions could produce different financial results.
Management has structured all of the Company’s derivative transactions with the
intent that each is economically effective. However, the Company’s derivative
instruments do not qualify for hedge accounting. Accordingly, changes in the
fair value of derivative instruments are reported in current period earnings.
Net settlements on derivatives are included in “derivative market value, foreign
currency, and put option adjustments and derivative settlements, net” on the
consolidated statements of operations.
 
 RECENT
ACCOUNTING PRONOUNCEMENTS
 
 In
September 2006, the FASB issued authoritative guidance on fair value
measurements. The guidance defines fair value, establishes a framework for
measuring fair value, and expands disclosures about fair value measurements. The
Company expanded disclosures about fair value measurements as of January 1,
2008, the effective date for the Company.
 
 In
February 2008, the FASB delayed issuing guidance to expand disclosure
requirements about fair value measurements on nonfinancial assets and
nonfinancial liabilities to fiscal years beginning after November 15, 2008, and
interim periods within those fiscal years (January 1, 2009 for the Company).
Effective January 1, 2009, the Company expanded disclosures about fair value
measurements on certain nonfinancial assets and nonfinancial liabilities, which
are recorded at fair value only upon impairment.
 
 In light
of the economic turmoil occurring in the United States, the FASB issued
authoritative guidance on October 10, 2008 in regards to determining the fair
value of a financial asset when the market for that asset is not active. The
guidance clarified, among other things, that quotes and other market inputs need
not be solely used to determine fair value if they do not relate to an active
market. The guidance points out that when relevant observable market information
is not available, an approach that incorporates management’s judgments about the
assumptions that market participants would use in pricing the asset in a current
sale transaction would be acceptable (such as a discounted cash flow analysis).
Regardless of the valuation technique applied, entities must include appropriate
risk adjustments that market participants would make, including adjustments for
nonperformance risk (credit risk) and liquidity risk.
 73
 In April
2009, the FASB released guidance on determining fair value when volume and level
of activity for the asset or liability have significantly decreased and
identifying transactions that are not orderly. The guidance requires disclosure
in interim and annual periods of the inputs and valuation techniques used to
measure fair value and a discussion of changes in valuation techniques. The
guidance became effective for the Company for the interim period ended June 30,
2009 and will be applied prospectively. The guidance does not have a material
impact on the preparation of and disclosures in the Company’s consolidated
financial statements.
 
 In
December 2007, the FASB issued authoritative guidance, which establishes new
standards governing the accounting for and reporting of noncontrolling interests
(“NCIs”) in partially owned consolidated subsidiaries and the loss of control of
subsidiaries. Certain provisions of this standard indicate, among other things,
that NCIs (previously referred to as minority interests) be treated as a
separate component of equity, not as a liability; that increases and decreases
in the parent’s ownership interest that leave control intact be treated as
equity transactions, rather than as step acquisitions or dilution gains or
losses; and that losses of a partially owned consolidated subsidiary be
allocated to the NCI even when such allocation might result in a deficit
balance. The guidance also requires changes to certain presentation and
disclosure requirements. For the Company, the guidance was effective January 1,
2009 and does not have a material impact on the preparation of the Company’s
consolidated financial statements. The guidance is to be applied to all NCIs
prospectively, except for the presentation and disclosure requirements, which
are to be applied retrospectively to all periods presented.
 
 In March
2008, the FASB issued authoritative guidance on disclosures about derivative
instruments and hedging activities, which is intended to improve financial
reporting about derivative instruments and hedging activities by requiring
enhanced disclosures to enable investors to better understand the effects of
derivative instruments and hedging activities on an entity’s financial position,
financial performance, and cash flows. The guidance also improves transparency
about the location and amounts of derivative instruments in an entity’s
financial statements, how derivative instruments and related hedged items are
accounted for, and how derivative instruments and related hedged items affect
its financial position, financial performance, and cash flows. The guidance was
effective for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008, with early application encouraged. The
Company adopted the guidance as of January 1, 2009, the effective date for the
Company (see note 5 in the notes to the consolidated financial statements
included in this Quarterly Report on Form 10-Q).
 
 In April
2009, the FASB issued authoritative guidance on the recognition and presentation
of other-than-temporary impairment. The guidance amends the requirements for the
recognition and measurement of other-than-temporary impairments for debt
securities by modifying the pre-existing "intent and ability" indicator. Under
the new guidance, an other-than-temporary impairment is triggered when there is
an intent to sell the security, it is more likely than not that the security
will be required to be sold before recovery, or the security is not expected to
recover the entire amortized cost basis of the security. Additionally, the
guidance changes the presentation of an other-than-temporary impairment in the
income statement for those impairments involving credit losses. The credit loss
component will be recognized in earnings and the remainder of the impairment
will be recorded in other comprehensive income. The guidance was effective for
the Company for the interim period ended June 30, 2009. The guidance does not
have a material impact on the preparation of and disclosures in the Company’s
consolidated financial statements.
 
 In April
2009, the FASB issued authoritative guidance on interim disclosure about fair
value of financial instruments. The guidance requires interim disclosures
regarding the fair values of financial instruments. Additionally, the guidance
requires disclosure of the methods and significant assumptions used to estimate
the fair value of financial instruments on an interim basis as well as changes
of the methods and significant assumptions from prior periods. The guidance does
not change the accounting treatment for these financial instruments and was
effective for the Company for the interim period ended June 30, 2009 (see note 8
in the notes to the consolidated financial statements included in this Quarterly
Report on Form 10-Q).
 
 In May
2009, the FASB issued authoritative guidance establishing general standards of
accounting for and disclosing events that occur after the balance sheet date but
before financial statements are issued or are available to be issued. It
requires entities to disclose the date through which it has evaluated subsequent
events and the basis for that date. The guidance was effective for interim and
annual periods ending after June 15, 2009. The Company adopted the guidance on
June 30, 2009, the effective date for the Company (see note 1 in the notes to
the financial statements included in this Quarterly Report on Form
10-Q).
 
 In June
2009, the FASB issued authoritative guidance on improving the relevance,
representational faithfulness, and comparability of the information that a
reporting entity provides in its financial statements about a transfer of
financial assets; the effects of a transfer on its financial position, financial
performance, and cash flows; and a transferor’s continuing involvement, if any,
in transferred financial assets. The guidance removes the concept of a
qualifying special-purpose entity. Additionally, the guidance defines the term
participating interest
to establish specific conditions for reporting a transfer of a portion of a
financial asset as a sale, and also requires that a transferor recognize and
initially measure at fair value all assets obtained (including a transferor’s
beneficial interest) and liabilities incurred as a result of a transfer of
financial assets accounted for as a sale. The guidance is effective for fiscal
periods ending after November 15, 2009 (January 1, 2010 for the Company). The
Company is currently evaluating the impacts and disclosures related to this
guidance.
 
 74
 In June
2009, the FASB issued authoritative guidance for determining whether an entity
is a variable interest entity in addition to subjecting enterprises to a number
of other requirements including, among other things: (i) requiring an enterprise
to perform an analysis to determine whether the enterprise’s variable interest
or interests give it a controlling financial interest in a variable interest
entity and specifies the characteristics the primary beneficiary of a variable
interest entity must have to be designated as such; (ii) requiring an enterprise
to assess whether it has an implicit financial responsibility to ensure that a
variable interest entity operates as designed when determining whether it has
the power to direct the activities of the variable interest entity that most
significantly impact the entity’s economic performance; (iii) requiring the
ongoing reassessments of whether an enterprise is the primary beneficiary of a
variable interest entity; (iv) the elimination of the quantitative approach
previously required for determining the primary beneficiary of a variable
interest entity, and (v) adding an additional reconsideration event for
determining whether an entity is a variable interest entity when any changes in
facts and circumstances occur such that investors of the equity investment at
risk, as a group, lose the power from voting or similar rights of the investment
to direct the activities of the entity that have the most significant impact on
the entity’s economic performance. The guidance is effective for fiscal and
interim periods ending after November 15, 2009 (January 1, 2010 for the
Company). The Company is currently evaluating the impacts and disclosures
related to this guidance.
 
 In June
2009, the FASB issued authoritative guidance on the FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles. The
guidance establishes the FASB Accounting Standards Codification as the source of
authoritative accounting principles recognized by FASB to be applied by
nongovernmental entities in the preparation of financial statements in
conformity with GAAP. The Company adopted the guidance on September 30, 2009,
the effective date for the Company.
 
 In August
2009, the FASB issued authoritative guidance allowing companies to determine the
fair value of a liability by using the perspective of an investor that holds the
related obligation as an asset. The guidance is effective for interim and annual
periods beginning after August 27, 2009 and applies to all fair-value
measurements of liabilities required by GAAP. The guidance does not have a
material impact on the preparation of and disclosures in the Company’s
consolidated financial statements.
 
 In
October 2009, the FASB issued authoritative guidance on revenue recognition.
Under the new guidance on arrangements that include software elements, tangible
products that have software components that are essential to the functionality
of the tangible product will no longer be within the scope of the software
revenue recognition guidance, and software-enabled products will now be subject
to other relevant revenue recognition guidance. The guidance will be effective
prospectively for revenue arrangements entered into or materially modified in
fiscal years beginning on or after June 15, 2010 (January 1, 2011 for the
Company), with early adoption permitted. The Company is currently evaluating the
impacts and disclosures related to this new guidance.
 
 In
October 2009, the FASB issued authoritative guidance on revenue arrangements
with multiple deliverables that are outside the scope of the software revenue
recognition guidance. Under the new guidance, when vendor specific objective
evidence or third party evidence for deliverables in an arrangement cannot be
determined, a best estimate of the selling price is required to separate
deliverables and allocate arrangement consideration using the relative selling
price method. The new guidance includes new disclosure requirements on how the
application of the relative selling price method affects the timing and amount
of revenue recognition. The guidance is effective prospectively for revenue
arrangements entered into or materially modified in fiscal years beginning on or
after June 15, 2010 (January 1, 2011 for the Company), with early adoption
permitted. The Company is currently evaluating the impacts and disclosures
related to this new guidance.
 
 75
 ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 (All
dollars are in thousands, except share amounts, unless otherwise
noted)
 
 Interest
Rate Risk
 
 The
Company’s primary market risk exposure arises from fluctuations in its borrowing
and lending rates, the spread between which could impact the Company due to
shifts in market interest rates. Because the Company generates a significant
portion of its earnings from its student loan spread, the interest sensitivity
of the balance sheet is a key profitability driver.
 
 The
following table sets forth the Company’s loan assets and debt instruments by
rate characteristics:
   As
      of September 30, 2009
                    
                    
                    As
      of December 31, 2008Dollars
                    
                    
                    Percent
                    
                    
                    Dollars
                    
                    
                    PercentFixed-rate
      loan assets
                    
                    $
                    8,858,739
                    
                    
                    
                    35.3
                    %
                    
                    $
                    2,532,609
                    
                    
                    
                    10.1
                    %Variable-rate
      loan assets
                    
                    
                    16,210,747
                    
                    
                    
                    64.7
                    
                    
                    
                    22,528,440
                    
                    
                    
                    89.9Total
                    
                    $
                    25,069,486
                    
                    
                    
                    100.0
                    %
                    
                    $
                    25,061,049
                    
                    
                    
                    100.0
                    %Fixed-rate
      debt instruments
                    
                    $
                    451,240
                    
                    
                    
                    1.7
                    %
                    
                    $
                    677,096
                    
                    
                    
                    2.5
                    %Variable-rate
      debt instruments
                    
                    
                    26,134,853
                    
                    
                    
                    98.3
                    
                    
                    
                    26,110,863
                    
                    
                    
                    97.5Total
                    
                    $
                    26,586,093
                    
                    
                    
                    100.0
                    %
                    
                    $
                    26,787,959
                    
                    
                    
                    100.0
                    %
  Loans
originated prior to April 1, 2006 generally earn interest at the higher of a
floating rate based on the Special Allowance Payment or SAP formula set by the
Department and the borrower rate, which is fixed over a period of time. The SAP
formula is based on an applicable index plus a fixed spread that is dependent
upon when the loan was originated, the loan’s repayment status, and funding
sources for the loan. The Company generally finances its student loan portfolio
with variable rate debt. In low and/or declining interest rate environments,
when the fixed borrower rate is higher than the rate produced by the SAP
formula, the Company’s student loans earn at a fixed rate while the interest on
the variable rate debt typically continues to decline. In these interest rate
environments, the Company may earn additional spread income that it refers to as
floor income.
 
 Depending
on the type of loan and when it was originated, the borrower rate is either
fixed to term or is reset to an annual rate each July 1. As a result, for loans
where the borrower rate is fixed to term, the Company may earn floor income for
an extended period of time, which the Company refers to as fixed rate floor
income, and for those loans where the borrower rate is reset annually on July 1,
the Company may earn floor income to the next reset date, which the Company
refers to as variable rate floor income. In accordance with new legislation
enacted in 2006, lenders are required to rebate fixed rate floor income and
variable rate floor income to the Department for all new FFELP loans first
originated on or after April 1, 2006.
 
 For the
three months ended September 30, 2009 and 2008, loan interest income includes
approximately $39.3 million and $6.8 million, respectively, of fixed rate floor
income. For the nine months ended September 30, 2009 and 2008, loan interest
income includes approximately $106.6 million and $25.2 million, respectively, of
fixed rate floor income.
 
 As a
result of the ongoing volatility of interest rates, effective October 1, 2008,
the Company changed its calculation of variable rate floor income to better
reflect the economic benefit received by the Company related to this income
taking into consideration the volatility of certain rate indices which offset
the value received. The economic benefit received by the Company related to
variable rate floor income was $0.1 million for the three months ended September
30, 2008 and $7.5 million and $25.7 million for the nine months ended September
30, 2009 and 2008, respectively. There was no economic benefit received by the
Company related to variable rate floor income for the three months ended
September 30, 2009. Variable rate floor income calculated on a statutory maximum
basis was $0.1 million and $1.6 million for the three months ended September 30,
2009 and 2008, respectively, and $23.9 million
and $42.3 million for the nine months ended September 30, 2009 and 2008,
respectively.
 
 Absent
the use of derivative instruments, a rise in interest rates may reduce the
amount of floor income received and this may have an impact on earnings due to
interest margin compression caused by increasing financing costs, until such
time as the federally insured loans earn interest at a variable rate in
accordance with their special allowance payment formulas. In higher interest
rate environments, where the interest rate rises above the borrower rate and
fixed rate loans effectively become variable rate loans, the impact of the rate
fluctuations is reduced.
 
 76
 The
following graph depicts fixed rate floor income for a borrower with a fixed rate
of 6.75% and a SAP rate of 2.64%:
  
  The
following table shows the Company’s student loan assets that are earning fixed
rate floor income as of September 30, 2009:
 
 Borrower/
                  
                  
                  Estimated
                  
                  
                  Balance
      ofFixed
                  
                  lender
                  
                  
                  variable
                  
                  
                  assets
      earning fixed-rateinterest
                  
                  weighted
                  
                  
                  conversion
                  
                  
                  floor
      income as ofrate
      range
                  
                  average
      yield
                  
                  
                  rate
      (a)
                  
                  
                  September
      30, 20093.0
      - 3.49%
                  
                  
                  3.21
                  %
                  
                  
                  
                  0.57
                  %
                  
                  
                  $
                  1,873,3403.5
      - 3.99%
                  
                  
                  3.65
                  %
                  
                  
                  
                  1.01
                  %
                  
                  
                  
                  1,936,9104.0
      - 4.49%
                  
                  
                  4.20
                  %
                  
                  
                  
                  1.56
                  %
                  
                  
                  
                  1,536,0504.5
      - 4.99%
                  
                  
                  4.72
                  %
                  
                  
                  
                  2.08
                  %
                  
                  
                  
                  845,8015.0
      - 5.49%
                  
                  
                  5.25
                  %
                  
                  
                  
                  2.61
                  %
                  
                  
                  
                  550,0185.5
      - 5.99%
                  
                  
                  5.67
                  %
                  
                  
                  
                  3.03
                  %
                  
                  
                  
                  328,8946.0
      - 6.49%
                  
                  
                  6.19
                  %
                  
                  
                  
                  3.55
                  %
                  
                  
                  
                  387,8126.5
      - 6.99%
                  
                  
                  6.70
                  %
                  
                  
                  
                  4.06
                  %
                  
                  
                  
                  343,5237.0
      - 7.49%
                  
                  
                  7.17
                  %
                  
                  
                  
                  4.53
                  %
                  
                  
                  
                  119,2457.5
      - 7.99%
                  
                  
                  7.71
                  %
                  
                  
                  
                  5.07
                  %
                  
                  
                  
                  202,4738.0
      - 8.99%
                  
                  
                  8.16
                  %
                  
                  
                  
                  5.52
                  %
                  
                  
                  
                  460,447>
      9.0%
                  
                  
                  9.04
                  %
                  
                  
                  
                  6.40
                  %
                  
                  
                  
                  274,226$
                  8,858,739  (a)
                    The
      estimated variable conversion rate is the estimated short-term interest
      rate at which loans would convert to variable rate. As of September 30,
      2009, the short-term interest rate was 29 basis
  points.
  The
following table summarizes the outstanding derivatives instruments as of
September 30, 2009 used by the Company to hedge fixed-rate student loan
assets.
   Weightedaverage
      fixedNotional
                    
                    
                    rate
      paid byMaturity
                    
                    Amount
                    
                    
                    the
      Company (a)2010
                    
                    $
                    1,000,000
                    
                    
                    
                    0.76
                    %  (a)
                      For
      all interest rate derivatives for which the Company pays a fixed rate, the
      Company receives discrete three-month
LIBOR.
 
 77
 As of
September 30, 2009, the Company had $3.3 billion of student loan assets that
were eligible to earn variable-rate floor income.
 
 The
Company is exposed to interest rate risk in the form of basis risk and repricing
risk because the interest rate characteristics of the Company’s assets do not
match the interest rate characteristics of the funding. The Company attempts to
match the interest rate characteristics of certain pools of loan assets with
debt instruments of substantially similar characteristics. Due to the
variability in duration of the Company’s assets and varying market conditions,
the Company does not attempt to perfectly match the interest rate
characteristics of the entire loan portfolio with the underlying debt
instruments. The Company has adopted a policy of periodically reviewing the
mismatch related to the interest rate characteristics of its assets and
liabilities together with the Company's outlook as to current and future market
conditions. Based on those factors, the Company uses derivative instruments as
part of its overall risk management strategy. Derivative instruments used as
part of the Company's interest rate risk management strategy currently include
interest rate swaps, basis swaps, and cross-currency swaps.
 
 The
following table presents the Company’s FFELP student loan assets and related
funding arranged by underlying indices as of September 30, 2009:
   Index
      (f)
                    
                    Frequency
      of Variable Resets
                    
                    Assets
                    
                    
                    Debt
      outstanding that funded student loan assets (a)3
      month H15 financial commercial paper (b)
                    
                    Daily
                    
                    $
                    23,823,346
                    
                    
                    
                    1,902,9093
      month Treasury bill
                    
                    Varies
                    
                    
                    1,079,026
                    
                    
                    
                    —3
      month LIBOR (c)
                    
                    Quarterly
                    
                    
                    —
                    
                    
                    
                    19,749,843Auction-rate
      or remarketing
                    
                    Varies
                    
                    
                    —
                    
                    
                    
                    2,247,420Asset-backed
      commercial paper (d)
                    
                    Varies
                    
                    
                    —
                    
                    
                    
                    1,516,630Fixed
      rate
                    
                    
                    
                    
                    —
                    
                    
                    
                    186,274Other
      (e)
                    
                    
                    
                    
                    700,704
                    
                    
                    
                    —$
                    25,603,076
                    
                    
                    
                    25,603,076
  (a)
                  The
      Company has certain basis swaps outstanding in which the Company (i)
      receives three-month LIBOR set discretely in advance and pays a daily
      weighted average three-month LIBOR less a spread as defined in the
      individual agreements (the “Average/Discrete Basis Swaps”); and (ii)
      receives three-month LIBOR and pays one-month LIBOR plus or minus a spread
      as defined in the agreements (the "1/3 Basis
      Swaps"). The Company entered into these derivative instruments to
      better match the interest rate characteristics on its student loan assets
      and the debt funding such assets. The following table summarizes these
      derivatives as of September 30,
2009:
 
 Notional
      AmountMaturity
                    
                    Average/Discrete
      Basis Swaps
                    
                    
                    1/3
      Basis Swaps2010
                    
                    $
                    —
                    
                    
                    
                    1,000,0002011
      (a)
                    
                    
                    6,000,000
                    
                    
                    
                    —2013
                    
                    
                    —
                    
                    
                    
                    500,0002014
                    
                    
                    —
                    
                    
                    
                    500,0002018
                    
                    
                    —
                    
                    
                    
                    1,300,0002019
                    
                    
                    —
                    
                    
                    
                    500,0002021
                    
                    
                    —
                    
                    
                    
                    250,0002023
                    
                    
                    —
                    
                    
                    
                    1,250,0002024
                    
                    
                    —
                    
                    
                    
                    250,0002028
                    
                    
                    —
                    
                    
                    
                    100,0002039
                    
                    
                    —
                    
                    
                    
                    150,000$
                    6,000,000
                    
                    
                    
                    5,800,000  (a)
                      Certain
      of these derivatives have forward effective start dates of January 2010
      ($1.5 billion), February 2010 ($1.5 billion), and March 2010 ($1.5
      billion).
  78
 (b)
                  The
      Company’s FFELP student loans earn interest based on the daily average H15
      financial commercial paper index calculated on a fiscal quarter. The
      Company’s funding includes FFELP student loans under the Department’s
      Participation Program. The interest rate on the principal amount of
      participation interests outstanding under the Department’s Participation
      Program is based on a rate of commercial paper plus 50 basis points, which
      is set a quarter in arrears, while the earnings on the student loans is
      based primarily on the daily average H15 financial commercial paper index
      calculated on the current fiscal
quarter.
 
 (c)
                  The
      Company has Euro-denominated notes that reprice on the EURIBOR index. The
      Company has entered into derivative instruments (cross-currency interest
      rate swaps) that convert the EURIBOR index to 3 month LIBOR. As a result,
      these notes are reflected in the 3 month LIBOR category in the above
      table. See “Foreign Currency Exchange
Risk.”
 
 (d)
                  Asset-backed
      commercial paper consists of $361 million funded in the Company’s FFELP
      warehouse facility and $1.2 billion funded through the Department’s
      Conduit Program. Funding for the Conduit Program is provided by the
      capital markets at a cost based on market
rates.
 
 (e)
                  Assets
      include restricted cash and investments and other
  assets.
 
 (f)
                  Historically,
      the movement of the various interest rate indices received on the
      Company’s student loan assets and paid on the debt to fund such loans was
      highly correlated. The short term movement of the indices was dislocated
      beginning in August 2007. This dislocation has had a negative impact on
      the Company’s student loan net interest income as compared to historical
      periods.
 
 Financial
Statement Impact of Derivative Instruments
 
 The
Company recognizes changes in the fair value of derivative instruments currently
in earnings unless specific hedge accounting criteria are met. Management has
structured all of the Company’s derivative transactions with the intent that
each is economically effective. However, the Company’s derivative instruments do
not qualify for hedge accounting; consequently, the change in fair value of
these derivative instruments is included in the Company’s operating results.
Changes or shifts in the forward yield curve and fluctuations in currency rates
can significantly impact the valuation of the Company’s derivatives.
Accordingly, changes or shifts to the forward yield curve and fluctuations in
currency rates will impact the financial position and results of operations of
the Company. The change in fair value of the
Company’s derivatives are included in “derivative market value, foreign
currency, and put option adjustments and derivative settlements, net” in the
Company’s consolidated statements of operations and resulted in income of $42.2
million and $19.9 million for the three and nine months ended September 30,
2009, respectively, and expense of $119.9 million and $72.4 million for the
three and nine months ended September 30, 2008, respectively.
 
 The
following summarizes the derivative settlements included in “derivative market
value, foreign currency, and put option adjustments and derivative settlements,
net” on the consolidated statements of operations:
   Three
      months ended September 30
                    
                    
                    Nine
      months ended September 302009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008Settlements:Interest
      rate swaps
                    
                    $
                    (436
                    )
                    
                    
                    (3,175
                    )
                    
                    $
                    (447
                    )
                    
                    
                    (14,194
                    )Average/discrete
      basis swaps
                    
                    
                    646
                    
                    
                    
                    (3,999
                    )
                    
                    
                    11,707
                    
                    
                    
                    40,7111/3
      basis swaps
                    
                    
                    3,071
                    
                    
                    
                    —
                    
                    
                    
                    20,473
                    
                    
                    
                    894Cross-currency
      interest rate swaps
                    
                    
                    1,633
                    
                    
                    
                    7,963
                    
                    
                    
                    7,074
                    
                    
                    
                    18,578Total
      settlements
                    
                    $
                    4,914
                    
                    
                    
                    789
                    
                    
                    $
                    38,807
                    
                    
                    
                    45,989
  79
 Sensitivity
Analysis
 
 The
following tables summarize the effect on the Company’s earnings, based upon a
sensitivity analysis performed by the Company assuming hypothetical increases in
interest rates of 100 basis points and 300 basis points while funding spreads
remain constant. In addition, as it relates to the effect on earnings, a
sensitivity analysis was performed assuming the funding index increases 10 basis
points and 30 basis points while holding the asset index constant, if the
funding index is different than the asset index. The effect on earnings was
performed on the Company’s variable rate assets and liabilities. The analysis
includes the effects of the Company’s interest rate and basis swaps in existence
during these periods.
  Three
      months ended September 30, 2009Interest
      RatesChange from
      increase
                      
                      
                      Change from
      increase
                      
                      
                      Asset
      and funding index mismatchesof
      100 basis points
                      
                      
                      of
      300 basis points
                      
                      
                      Increase
      of 10 basis points
                      
                      
                      Increase
      of 30 basis pointsDollar
                      
                      
                      Percent
                      
                      
                      Dollar
                      
                      
                      Percent
                      
                      
                      Dollar
                      
                      
                      Percent
                      
                      
                      Dollar
                      
                      
                      PercentEffect
      on earnings:Increase
      (decrease) in pre-tax net incomebefore
      impact of derivative settlements
                      
                      $
                      (17,600
                      )
                      
                      
                      (24.8
                      )%
                      
                      
                      (30,431
                      )
                      
                      
                      (42.9
                      )%
                      
                      
                      (6,472
                      )
                      
                      
                      (9.1
                      )%
                      
                      
                      (19,416
                      )
                      
                      
                      (27.4
                      )%Impact
      of derivative settlements
                      
                      
                      1,377
                      
                      
                      
                      1.9
                      
                      
                      
                      4,130
                      
                      
                      
                      5.8
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —Increase
      (decrease) in net income before taxes
                      
                      $
                      (16,223
                      )
                      
                      
                      (22.9
                      )%
                      
                      
                      (26,301
                      )
                      
                      
                      (37.1
                      )%
                      
                      
                      (6,472
                      )
                      
                      
                      (9.1
                      )%
                      
                      
                      (19,416
                      )
                      
                      
                      (27.4
                      )%Increase
      (decrease) in basic and dilutedearnings
      per share
                      
                      $
                      (0.21
                      )
                      
                      
                      
                      
                      
                      
                      (0.35
                      )
                      
                      
                      
                      
                      
                      
                      (0.09
                      )
                      
                      
                      
                      
                      
                      
                      (0.26
                      )
  Three
      months ended September 30, 2008Interest
      RatesChange
      from increase
                      
                      
                      Change
      from increase
                      
                      
                      Asset
      and funding index mismatchesof
      100 basis points
                      
                      
                      of
      300 basis points
                      
                      
                      Increase
      of 10 basis points
                      
                      
                      Increase
      of 30 basis pointsDollar
                      
                      
                      Percent
                      
                      
                      Dollar
                      
                      
                      Percent
                      
                      
                      Dollar
                      
                      
                      Percent
                      
                      
                      Dollar
                      
                      
                      PercentEffect
      on earnings:Increase
      (decrease) in pre-tax net incomebefore
      impact of derivative settlements
                      
                      $
                      (2,299
                      )
                      
                      
                      (6.1
                      )%
                      
                      
                      (3,931
                      )
                      
                      
                      (10.4
                      )%
                      
                      
                      (6,743
                      )
                      
                      
                      (17.9
                      )%
                      
                      
                      (20,229
                      )
                      
                      
                      (53.6
                      )%Impact
      of derivative settlements
                      
                      
                      3,101
                      
                      
                      
                      8.2
                      
                      
                      
                      4,650
                      
                      
                      
                      12.3
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —Increase
      (decrease) in net income before taxes
                      
                      $
                      802
                      
                      
                      
                      2.1
                      %
                      
                      
                      719
                      
                      
                      
                      1.9
                      %
                      
                      
                      (6,743
                      )
                      
                      
                      (17.9
                      )%
                      
                      
                      (20,229
                      )
                      
                      
                      (53.6
                      )%Increase
      (decrease) in basic and dilutedearnings
      per share
                      
                      $
                      0.01
                      
                      
                      
                      
                      
                      
                      
                      0.01
                      
                      
                      
                      
                      
                      
                      
                      (0.09
                      )
                      
                      
                      
                      
                      
                      
                      (0.26
                      )
  Nine
      months ended September 30, 2009Change
      from increase of 100 basis points
                      
                      
                      Change
      from increase of 300 basis points
                      
                      
                      Asset
      and funding index mismatchesDollar
                      
                      
                      Percent
                      
                      
                      Dollar
                      
                      
                      Percent
                      
                      
                      Increase
      of 10 basis points
                      
                      
                      Increase
      of 30 basis pointsEffect
      on earnings:Increase
      (decrease) in pre-tax net incomebefore
      impact of derivative settlements
                      
                      $
                      (80,676
                      )
                      
                      
                      (63.0
                      )%
                      
                      
                      (102,677
                      )
                      
                      
                      (80.2
                      )%
                      
                      
                      (19,229
                      )
                      
                      
                      (15.0
                      )%
                      
                      
                      (57,685
                      )
                      
                      
                      (45.0
                      )%Impact
      of derivative settlements
                      
                      
                      1,418
                      
                      
                      
                      1.1
                      
                      
                      
                      4,212
                      
                      
                      
                      3.3
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —Increase
      (decrease) in net income before taxes
                      
                      $
                      (79,258
                      )
                      
                      
                      (61.9
                      )%
                      
                      
                      (98,465
                      )
                      
                      
                      (76.9
                      )%
                      
                      
                      (19,229
                      )
                      
                      
                      (15.0
                      )%
                      
                      
                      (57,685
                      )
                      
                      
                      (45.0
                      )%Increase
      (decrease) in basic and dilutedearning
      per share
                      
                      $
                      (1.02
                      )
                      
                      
                      
                      
                      
                      
                      (1.26
                      )
                      
                      
                      
                      
                      
                      
                      (0.25
                      )
                      
                      
                      
                      
                      
                      
                      (0.74
                      )
  Nine
      months ended September 30, 2008Change
      from increase of 100 basis points
                      
                      
                      Change
      from increase of 300 basis points
                      
                      
                      Asset
      and funding index mismatchesDollar
                      
                      
                      Percent
                      
                      
                      Dollar
                      
                      
                      Percent
                      
                      
                      Increase
      of 10 basis points
                      
                      
                      Increase
      of 30 basis pointsEffect
      on earnings:Increase
      (decrease) in pre-tax net incomebefore
      impact of derivative settlements
                      
                      $
                      (24,704
                      )
                      
                      
                      (1,622.1
                      )%
                      
                      
                      (51,031
                      )
                      
                      
                      (3,350.7
                      )%
                      
                      
                      (20,239
                      )
                      
                      
                      (1,328.9
                      )%
                      
                      
                      (60,719
                      )
                      
                      
                      (3,986.8
                      )%Impact
      of derivative settlements
                      
                      
                      17,818
                      
                      
                      
                      1,169.9
                      
                      
                      
                      48,799
                      
                      
                      
                      3,204.1
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —Increase
      (decrease) in net income before taxes
                      
                      $
                      (6,886
                      )
                      
                      
                      (452.2
                      )%
                      
                      
                      (2,232
                      )
                      
                      
                      (146.6
                      )%
                      
                      
                      (20,239
                      )
                      
                      
                      (1,328.9
                      )%
                      
                      
                      (60,719
                      )
                      
                      
                      (3,986.8
                      )%Increase
      in basic and dilutedearning
      per share
                      
                      $
                      (0.09
                      )
                      
                      
                      
                      
                      
                      
                      (0.03
                      )
                      
                      
                      
                      
                      
                      
                      (0.26
                      )
                      
                      
                      
                      
                      
                      
                      (0.78
                      )
   Foreign
Currency Exchange Risk
 
 During
2006, the Company completed separate debt offerings of student loan asset-backed
securities that included 420.5 million and 352.7 million Euro-denominated notes
with interest rates based on a spread to the EURIBOR index. As a result of this
transaction, the Company is exposed to market risk related to fluctuations in
foreign currency exchange rates between the U.S. dollar and Euro. The principal
and accrued interest on these notes is re-measured at each reporting period and
recorded on the Company’s balance sheet in U.S. dollars based on the foreign
currency exchange rate on that date. Changes in the principal and accrued
interest amounts as a result of foreign currency exchange rate fluctuations are
included in the “derivative market value, foreign currency, and put option
adjustments and derivative settlements, net” in the Company’s consolidated
statements of operations.
 
 80
 The
Company entered into cross-currency interest rate swaps in connection with the
issuance of the Euro Notes. Under the terms of these derivative instrument
agreements, the Company receives from a counterparty a spread to the EURIBOR
index based on notional amounts of €420.5 million and €352.7 million and pays a
spread to the LIBOR index based on notional amounts of $500.0 million and $450.0
million, respectively. In addition, under the terms of these agreements, all
principal payments on the Euro Notes will effectively be paid at the exchange
rate in effect as of the issuance of the notes. The Company did not qualify
these derivative instruments as hedges under accounting authoritative guidance;
consequently, the change in fair value is included in the Company’s operating
results.
 
 For the
three and nine months ended September 30, 2009, the Company recorded an expense
of $39.4 million and $56.0 million, respectively, as a result of re-measurement
of the Euro Notes and income of $44.8 million and $28.9 million, respectively,
for the change in the fair value of the related derivative instruments. For the
three and nine months ended September 30, 2008, the Company recorded income of
$128.9 million and $40.4 million, respectively, as a result of the
re-measurement of the Euro Notes and losses of $129.0 million and $37.3 million,
respectively, for the change in the fair value of the related derivative
instruments. These amounts are included in “derivative market value, foreign
currency, and put option adjustments and derivative settlements, net” on the
Company’s consolidated statements of operations.
 
 The
re-measurement of the Euro-denominated bonds generally correlates with the
change in fair value of the cross-currency interest rate swaps. However, the
Company will experience unrealized gains or losses related to the cross-currency
interest rate swaps if the two underlying indices (and related forward curve) do
not move in parallel. Management intends to hold the cross-currency interest
rate swaps through the maturity of the Euro-denominated bonds.
 
 ITEM
4. CONTROLS AND PROCEDURES
 
 Disclosure
Controls and Procedures
 
 Under
supervision and with the participation of certain members of the Company’s
management, including the chief executive and the chief financial officers, the
Company completed an evaluation of the effectiveness of the design and operation
of its disclosure controls and procedures (as defined in SEC Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934). Based on this evaluation,
the Company’s chief executive and chief financial officers believe that the
disclosure controls and procedures were effective as of the end of the period
covered by this Quarterly Report on Form 10-Q with respect to timely
communication to them and other members of management responsible for preparing
periodic reports and material information required to be disclosed in this
Quarterly Report on Form 10-Q as it relates to the Company and its consolidated
subsidiaries.
 
 The
effectiveness of the Company’s or any system of disclosure controls and
procedures is subject to certain limitations, including the exercise of judgment
in designing, implementing, and evaluating the controls and procedures, the
assumptions used in identifying the likelihood of future events, and the
inability to eliminate misconduct completely. As a result, there can be no
assurance that the Company’s disclosure controls and procedures will prevent all
errors or fraud or ensure that all material information will be made known to
appropriate management in a timely fashion. By their nature, the Company’s or
any system of disclosure controls and procedures can provide only reasonable
assurance regarding management’s control objectives.
 
 Changes
in Internal Control over Financial Reporting
 
 There was
no change in the Company’s internal control over financial reporting during the
Company’s last fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the Company’s internal control over financial
reporting.
 
 PART
II. OTHER INFORMATION
 
 ITEM
1. LEGAL PROCEEDINGS
 
 General
 
 The
Company is subject to various claims, lawsuits, and proceedings that arise in
the normal course of business. These matters principally consist of claims by
student loan borrowers disputing the manner in which their student loans have
been processed and disputes with other business entities. In addition, from time
to time the Company receives information and document requests from state or
federal regulators concerning its business practices. The Company cooperates
with these inquiries and responds to the requests. While the Company cannot
predict the ultimate outcome of any inquiry or investigation, the Company
believes its activities have materially complied with applicable law, including
the Higher Education Act, the rules and regulations adopted by the Department of
Education thereunder, and the Department’s guidance regarding those rules and
regulations. On the basis of present information, anticipated insurance
coverage, and advice received from counsel, it is the opinion of the Company’s
management that the disposition or ultimate determination of these claims,
lawsuits, and proceedings will not have a material adverse effect on the
Company’s business, financial position, or results of operations.
 
 81
 Regulatory
Reviews
   The
Department of Education periodically reviews participants in the FFELP for
compliance with program provisions. On June 28, 2007, the Department notified
the Company that it would be conducting a review of the Company’s practices in
connection with the prohibited inducement provisions of the Higher Education Act
and the associated regulations that allow borrowers to have a choice of lenders.
The Company understands that the Department selected several schools and lenders
for review. The Company responded to the Department’s requests for information
and documentation and cooperated with their review. On May 1, 2009, the Company
received the Department’s preliminary program review report, which covered the
Department’s review of the period from October 1, 2002 to September 30, 2007.
The preliminary program review report contained certain initial findings of
noncompliance with the Higher Education Act’s prohibited inducement provisions
and required that the Company provide an explanation for the basis of the
arrangements noted in the preliminary program review report. The Company has
responded and provided an explanation of the arrangements noted in the
Department of Education’s initial findings, and the Department of Education is
expected to issue a final program review determination letter and advise the
Company whether it intends to take any additional action. To the extent any
findings are contained in a final letter, the additional action may include the
assessment of fines or penalties, or the limitation, suspension, and termination
of the Company’s participation in the FFELP.
 
 In
connection with the Company’s settlement agreement with the Department of
Education in January 2007 to resolve the Office of Inspector General of the
Department of Education (the “OIG”) audit report with respect to the Company’s
student loan portfolio receiving special allowance payments at a minimum 9.5%
interest rate (the “Settlement Agreement”), the Company was informed in February
2007 by the Department of Education that a civil attorney with the Department of
Justice had opened a file regarding the issues set forth in the OIG report,
which the Company understands is common procedure following an OIG audit report.
The Company has engaged in discussions with and provided information to the
Department of Justice in connection with the review.
 
 While the
Company is unable to predict the ultimate outcome of these reviews, the Company
believes its practices complied with applicable law, including the provisions of
the Higher Education Act, the rules and regulations adopted by the Department of
Education thereunder, and the Department’s guidance regarding those rules and
regulations.
 
 United
States ex rel Oberg v. Nelnet, Inc. et al
 
 On
September 28, 2009, the Company was served with a Summons and First Amended
Complaint naming the Company as one of ten defendants in a “qui tam” action
brought by Jon H. Oberg on behalf of the United States of America. Qui tam
actions assert claims by an individual on behalf of the federal government, and
are filed under seal until the government decides, if at all, to intervene in
the case.
 
 An
original complaint in the action was filed under seal in the U.S. District Court
for the Eastern District of Virginia on September 21, 2007, and was unsealed on
August 26, 2009 upon the government’s filing of a Notice of Election to Decline
Intervention in the matter. The First Amended Complaint (the “Oberg Complaint”)
was filed on August 24, 2009 and alleges the defendant student loan lenders
submitted false claims for payment to the Department of Education in order to
obtain special allowance payments on certain student loans at a rate of 9.5%,
which the Oberg Complaint alleges is in excess of amounts permitted by law.
The Oberg Complaint seeks the imposition of civil penalties and treble the
amount of damages sustained by the government in connection with the alleged
overbilling by the defendants for special allowance payments. The Oberg
Complaint alleges that approximately $407 million in unlawful 9.5% special
allowance payment claims were submitted by the Company to the Department of
Education.
 
 The 9.5%
special allowance payments received by the Company were disclosed by the Company
on multiple occasions beginning in 2003. In January, 2007, the Company entered
into the Settlement Agreement. The Settlement Agreement resolved the issues now
raised by the Oberg Complaint, and contains an acknowledgment by the Department
of Education that the Company acted in good faith in connection with its
billings for 9.5% special allowance payments.
 
 United
States ex rel Vigil v. Nelnet, Inc. et al
 
 OnNovember 4, 2009,
the Company was served with a Summons and Third Amended Complaint
naming the Company as one of three defendants in an unrelated qui tam action
brought by Rudy Vigil (the “Vigil Complaint”). This matter was filed under seal
in the U.S. District Court for the District of Nebraska on July 11, 2007 and was
unsealed on October 15, 2009 following the government’s notice that it declined
to intervene in the matter. The Vigil Complaint, filed by a former employee of
the Company, appears to allege that the Company engaged in false advertising and
offered prohibited inducements to student loan borrowers in order to increase
the Company’s loan holdings, and subsequently submitted false claims to the
Department of Education in order to obtain special allowance payments and
default claim payments on such loans.
 
 The
Company believes the allegations in both of the above matters to be frivolous
and without merit and intends to vigorously defend the claims. However, the
Company cannot currently predict the ultimate outcome of this matter or any
liability which may result, which could have a material adverse effect on the
Company's results of operations and financial condition.
 82
 ITEM 1A. RISK FACTORS
 
 There
have been no material changes from the risk factors described in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2008 in response to
Item 1A of Part I of such Form 10-K.
 
 ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
 Stock
Repurchases
 
 The
following table summarizes the repurchases of Class A common stock during the
third quarter of 2009 by the Company or any “affiliated purchaser” of the
Company, as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of
1934.
   Total
      number of
                    
                    
                    Maximum
      numbershares
      purchased
                    
                    
                    of
      shares that mayTotal
      number
                    
                    
                    Average
                    
                    
                    as
      part of publicly
                    
                    
                    yet
      be purchasedof
      shares
                    
                    
                    price
      paid
                    
                    
                    announced
      plans
                    
                    
                    under
      the plansPeriod
                    
                    purchased
      (1)
                    
                    
                    per
      share
                    
                    
                    or
      programs (2) (3)
                    
                    
                    or
      programs (4)July
      1 - July 31, 2009
                    
                    
                    776
                    
                    
                    $
                    14.41
                    
                    
                    
                    776
                    
                    
                    
                    7,394,184August
      1 - August 31, 2009
                    
                    
                    3,346
                    
                    
                    
                    14.66
                    
                    
                    
                    3,346
                    
                    
                    
                    7,309,615September
      1 - September 30, 2009
                    
                    
                    3,312
                    
                    
                    
                    14.14
                    
                    
                    
                    3,312
                    
                    
                    
                    7,766,855Total
                    
                    
                    7,434
                    
                    
                    $
                    14.40
                    
                    
                    
                    7,434
  (1)
                  The
      total number of shares includes: (i) shares purchased pursuant to the 2006
      Plan discussed in footnote (2) below; and (ii) shares purchased pursuant
      to the 2006 ESLP discussed in footnote (3) below, of which there were none
      for the months of July, August, or September 2009. Shares of Class A
      common stock purchased pursuant to the 2006 Plan included 776 shares,
      3,346 shares, and 3,312 shares in July, August, and September,
      respectively, that had been issued to the Company’s 401(k) plan and
      allocated to employee participant accounts pursuant to the plan’s
      provisions for Company matching contributions in shares of Company stock,
      and were purchased by the Company from the plan pursuant to employee
      participant instructions to dispose of such
  shares.
 
 (2)
                  On
      May 25, 2006, the Company publicly announced that its Board of Directors
      had authorized a stock repurchase program to repurchase up to a total of
      five million shares of the Company’s Class A common stock (the “2006
      Plan”). On February 7, 2007, the Company’s Board of Directors increased
      the total shares the Company is allowed to repurchase to 10 million. The
      2006 Plan had an initial expiration date of May 24, 2008, which was
      extended until May 24, 2010 by the Company’s Board of Directors on January
      30, 2008.
 
 (3)
                  On
      May 25, 2006, the Company publicly announced that the shareholders of the
      Company approved an Employee Stock Purchase Loan Plan (the “2006 ESLP”) to
      allow the Company to make loans to employees for the purchase of shares of
      the Company's Class A common stock either in the open market or directly
      from the Company. A total of $40 million in loans may be made under the
      2006 ESLP, and a total of one million shares of Class A common stock are
      reserved for issuance under the 2006 ESLP. Shares may be purchased
      directly from the Company or in the open market through a broker at
      prevailing market prices at the time of purchase, subject to any
      conditions or restrictions on the timing, volume, or prices of purchases
      as determined by the Compensation Committee of the Board of Directors and
      set forth in the Stock Purchase Loan Agreement with the participant. The
      2006 ESLP shall terminate May 25,
2016.
 
 (4)
                  The
      maximum number of shares that may yet be purchased under the plans is
      calculated below. There are no assurances that any additional shares will
      be repurchased under either the 2006 Plan or the 2006 ESLP. Shares under
      the 2006 ESLP may be issued by the Company rather than purchased in open
      market transactions.
 
 83
 As
      of
                    
                    Maximum
      number of shares that may yet be purchased under the 2006
Plan
                      (A)
                    
                    
                    Approximate
      dollar value of shares that may yet be purchased under the 2006
      ESLP
                      (B)
                    
                    
                    Closing
      price on the last trading day of the Company's Class A Common
      Stock
                      (C)
                    
                    
                    (B
      / C)
                      Approximate
      number of shares that may yet be purchased under the 2006
ESLP
                      (D)
                    
                    
                    (A
      + D)
                      Approximate
      number of shares that may yet be purchased under the 2006 Plan and 2006
      ESLPJuly
      31, 2009
                    
                    
                    4,843,449
                    
                    
                    
                    36,450,000
                    
                    
                    
                    14.29
                    
                    
                    
                    2,550,735
                    
                    
                    
                    7,394,184August
      31, 2009
                    
                    
                    4,840,103
                    
                    
                    
                    36,450,000
                    
                    
                    
                    14.76
                    
                    
                    
                    2,469,512
                    
                    
                    
                    7,309,615September
      30, 2009
                    
                    
                    4,836,791
                    
                    
                    
                    36,450,000
                    
                    
                    
                    12.44
                    
                    
                    
                    2,930,064
                    
                    
                    
                    7,766,855
  Working
capital and dividend restrictions/limitations
 
 The
Company’s credit facilities, including its revolving line of credit which is
available through May of 2012, impose restrictions on the Company’s minimum
consolidated net worth, the ratio of the Company’s Adjusted EBITDA to corporate
debt interest, the indebtedness of the Company's subsidiaries, and the ratio of
Non-FFELP loans to all loans in the Company's portfolio. In addition, trust
indentures and other financing agreements governing debt issued by the Company's
education lending subsidiaries may have general limitations on the amounts of
funds that can be transferred to the Company by its subsidiaries through cash
dividends.
 
 On
September 27, 2006 the Company consummated a debt offering of $200.0 million
aggregate principal amount of Hybrid Securities. So long as any Hybrid
Securities remain outstanding, if the Company gives notice of its election to
defer interest payments but the related deferral period has not yet commenced or
a deferral period is continuing, then the Company will not, and will not permit
any of its subsidiaries to:
 
 ·
                  declare
      or pay any dividends or distributions on, or redeem, purchase, acquire or
      make a liquidation payment regarding, any of the Company’s capital
      stock
 ·
                  except
      as required in connection with the repayment of principal, and except for
      any partial payments of deferred interest that may be made through the
      alternative payment mechanism described in the Hybrid Securities
      indenture, make any payment of principal of, or interest or premium, if
      any, on, or repay, repurchase, or redeem any of the Company’s debt
      securities that rank pari passu with or
      junior to the Hybrid Securities
 ·
                  make
      any guarantee payments regarding any guarantee by the Company of the
      subordinated debt securities of any of the Company’s subsidiaries if the
      guarantee ranks pari
      passu with or junior in interest to the Hybrid
      Securities
 
 In
addition, if any deferral period lasts longer than one year, the limitation on
the Company’s ability to redeem or repurchase any of its securities that rank
pari passu with or
junior in interest to the Hybrid Securities will continue until the first
anniversary of the date on which all deferred interest has been paid or
cancelled.
 
 If the
Company is involved in a business combination where immediately after its
consummation more than 50% of the surviving entity’s voting stock is owned by
the shareholders of the other party to the business combination, then the
immediately preceding sentence will not apply to any deferral period that is
terminated on the next interest payment date following the date of consummation
of the business combination.
 
 However,
at any time, including during a deferral period, the Company will be permitted
to:
 
 ·
                  pay
      dividends or distributions in additional shares of the Company’s capital
      stock
 ·
                  declare
      or pay a dividend in connection with the implementation of a shareholders’
      rights plan, or issue stock under such a plan, or redeem or repurchase any
      rights distributed pursuant to such a
plan
 ·
                  purchase
      common stock for issuance pursuant to any employee benefit
      plans
 
 84
 ITEM
6. EXHIBITS
 
 31.1*
                  Certification
      Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Chief
      Executive Officer Michael S. Dunlap.31.2*
                  Certification
      Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Chief
      Financial Officer Terry J. Heimes.32**
                  Certification
      Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002.
  *Filed herewith
 ** Furnished herewith
 
 85
 SIGNATURES
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
   NELNET,
      INC.Date:
      November 9, 2009
                    By:
                    /s/
      MICHAEL S. DUNLAPName:
      Michael S. Dunlap
                      Title:
      Chairman and Chief Executive OfficerBy:
                    /s/
      TERRY J. HEIMESName:
      Terry J. Heimes
                      Title:
      Chief Financial Officer
     86